<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
(Amendment No. 1)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ____ to ____
Commission File Number 0-20421
TELE-COMMUNICATIONS, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of Delaware 84-1260157
- ------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5619 DTC Parkway
Englewood, Colorado 80111
- -------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Tele-Communications, Inc. Series A TCI Group common stock,
par value $1.00 per share
Tele-Communications, Inc. Series B TCI Group common stock,
par value $1.00 per share
Tele-Communications, Inc. Series A Liberty Media Group
common stock, par value $1.00 per share
Tele-Communications, Inc. Series B Liberty Media Group
common stock, par value $1.00 per share
Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock, par value $.01 per share
Indicate by check mark whether the Registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
-----
The aggregate market value of the voting stock held by nonaffiliates
of Tele-Communications, Inc., computed by reference to the last sales price of
such stock, as of the close of trading on January 31, 1997, was
$12,415,086,846.
The number of shares outstanding of Tele-Communications, Inc.'s common
stock (net of shares held by subsidiaries), as of January 31, 1997, was:
Tele-Communications, Inc. Series A TCI Group common stock - 597,497,573 shares,
Tele-Communications, Inc. Series B TCI Group common stock - 84,647,065 shares,
Tele-Communications, Inc. Series A Liberty Media Group common stock -
228,558,926 shares, and
Tele-Communications, Inc. Series B Liberty Media Group common stock -
21,187,969 shares.
<PAGE> 2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: April 30, 1997
TELE-COMMUNICATIONS, INC.
(Registrant)
By /s/ Stephen M. Brett
--------------------------------
Stephen M. Brett
Executive Vice President and Secretary
<PAGE> 3
PART III.
Item 10. Directors and Executive Officers of the Registrant.
The following lists the directors and executive officers of
Tele-Communications, Inc. ("TCI" or the "Company"), their birth dates, a
description of their business experience and positions held with the Company as
of April 15, 1997. Directors of TCI are elected to staggered three-year terms
with one-third elected annually. The date the present term of office expires
for each director is the date of the Annual Meeting of the Company's
stockholders held during the year footnoted opposite their names. All officers
are appointed for an indefinite term, serving at the pleasure of the Board of
Directors.
<TABLE>
<CAPTION>
Name Positions
- ---------------------------- ------------------------------------------------------------------
<S> <C>
John C. Malone (3) TCI director since June of 1994; Chairman of the Board of TCI from
Born March 7, 1941 November 1996; Chief Executive Officer of TCI from January of 1994;
President of TCI from January of 1994 through March of 1997; Chief
Executive Officer of TCI Communications, Inc. ("TCIC") from March of
1992 to October of 1994 and President of TCIC from 1973 to October of
1994; Chairman of the Board and director of Tele-Communications
International, Inc. ("International") since May 1995; director of TCI
Pacific Communications, Inc. ("TPAC") since July 1996; is President and
a director of many of the Company's subsidiaries; director of BET
Holdings, Inc., The Bank of New York and TCI Satellite Entertainment,
Inc. ("Satellite"); TCIC director since 1973.
Donne F. Fisher (1) Executive Vice President of TCI from January of 1994 through January 1,
Born May 24, 1938 1996; on January 1, 1996, Mr. Fisher resigned his position as Executive
Vice President of TCI; Mr. Fisher has provided consulting services to
TCI since January, 1996; Executive Vice President of TCIC from December
of 1991 to October of 1994; was previously Senior Vice President of
TCIC since 1982 and Treasurer since 1970; TCI director since June of
1994; TCIC director since 1980; also a director of TPAC, General
Communication, Inc., DMX Inc. and United Video Satellite Group, Inc.
John W. Gallivan (2) Chairman of the Board of Kearns-Tribune Corporation ("Kearns"), a
Born June 28, 1915 newspaper publishing concern; also a director of Silver King Mining
Company; TCI director since June of 1994; TCIC director from 1980 to
August of 1994 and since January of 1996.
Kim Magness (1) TCI director since June of 1994; TCIC director from 1985 to August of
Born May 17, 1952 1994 and since January of 1996. Manages numerous personal and business
investments, and is Chairman and President of a company developing
liners for irrigation canals.
Robert A. Naify (3) TCI director since June of 1994; TCIC director from 1987 to August of
Born February 17, 1922 1994; also Co-Chairman and a director of The Todd-AO Corporation.
</TABLE>
(continued)
III-1
<PAGE> 4
<TABLE>
<CAPTION>
Name Positions
- ---------------------------- ------------------------------------------------------------------
<S> <C>
Jerome H. Kern (2) TCI director since June of 1994; TCIC director from December of 1993 to
Born June 1, 1937 August of 1994; director of Tele-Communications International, Inc.
("International"), a subsidiary of TCI, since May, 1995; also is
Special Counsel with the law firm of Baker & Botts, L.L.P., since July,
1996; was a senior partner with Baker & Botts, L.L.P. since September
of 1992. Prior to joining Baker & Botts, L.L.P., was senior partner
with the Law Offices of Jerome H. Kern from January 1, 1992 to
September 1, 1992.
Tony Coelho (3) TCI director since June, 1994; Appointed TCIC director from March of
Born June 14, 1942 1994 to August of 1994; is chairman of the board and chief executive
officer of ETC w/tci, Inc. (TCI's newly formed education subsidiary)
since October 1995; Chairman and Chief Executive Officer of Coelho
Associates, LLC since July of 1995; President and Chief Executive
Officer of Wertheim Schroder Investment Services from 1990 to June of
1995 and Managing Director of Wertheim Schroder & Co., Incorporated
from 1989 to June of 1995; also a director of AutoLend Group, Inc.,
Cyberonics, Inc., ICF Kaiser International, Inc., International
Thoroughbred Breeders, Inc., Service Corporation International and
Tanknology Environ-mental, Inc.
Paul A. Gould (2) Director of the Company since December, 1996. Director of
Born September 27, 1945 International since July 1995. Managing Director and Executive Vice
President of Allen & Company Incorporated for more than the last five
years. Also a director of National Patent Development Corporation,
Choice International and United Video Satellite Group, Inc.
J. C. Sparkman (1) TCI director since December, 1996; Executive Vice President of TCI from
Born September 12, 1932 January of 1994 through March of 1995. Mr. Sparkman retired in March
of 1995. Mr. Sparkman has provided consulting services to TCI since
March of 1995. TCIC Executive Vice President from 1987 to October of 1994.
Also a director of Shaw Communications, Inc., DMX Inc. and United Video
Satellite Group, Inc.
Leo J. Hindery, Jr. In March of 1997, Mr. Hindery joined TCI as its President and Chief
Born October 31, 1947 Operating Officer. Mr. Hindery was previously founder, Managing
General Partner and Chief Executive Officer of InterMedia Partners and
its affiliated entities since 1988. Mr. Hindery was also named
President and a director of TCIC in March of 1997.
Stephen M. Brett Executive Vice President, General Counsel and Secretary of TCI since
Born September 20, 1940 January of 1994. Appointed TCIC Senior Vice President and General
Counsel of TCIC as of December of 1991. Vice President and Secretary
and a director of most of TCI's subsidiaries.
</TABLE>
(continued)
III-2
<PAGE> 5
<TABLE>
<CAPTION>
Name Positions
- ---------------------------- ------------------------------------------------------------------
<S> <C>
Fred A. Vierra Executive Vice President of TCI since January of 1994. Chief Executive
Born November 9, 1931 Officer and director of International since October of 1994. Vice
Chairman of the Board of International since May of 1995. From October
1994 through May 1995, Mr. Vierra served as Chairman of the Board of
International. Executive Vice President of TCIC from December of 1991
to October of 1994.
Robert R. Bennett President and Chief Executive Officer of Liberty Media Corporation
Born April 19, 1958 ("Liberty") since April of 1997. From June 1995 through March 1997,
was Executive Vice President, Chief Financial Officer, Secretary and
Treasurer of Liberty. Prior to June 1995, was Senior Vice President of
Liberty since September 1991 and Vice President of TCIC from 1990
through March 1991 while also holding the titles of Treasurer,
Secretary and Chief Financial Officer of Liberty.
Brendan R. Clouston Executive Vice President of TCI since January of 1994; Chief Financial
Born April 28, 1953 Officer of TCI from March 1997 to April 1997; President and Chief
Executive Officer of TCIC from October of 1994 to March of 1997;
Executive Vice President and Chief Operating Officer of TCIC from March
of 1992 to October of 1994; previously Senior Vice President of TCIC
since December of 1991.
Larry E. Romrell Executive Vice President of TCI since January of 1994. President of TCI
Born December 30, 1939 Technology Ventures, Inc., a wholly-owned subsidiary of TCI, since
September of 1994 and a director of same since December of 1994; Senior
Vice President of TCIC from 1991 to October of 1994; previously held
various executive positions with WestMarc Communications, Inc.
("WestMarc"), a wholly-owned subsidiary of TCI.
Marvin Jones Appointed TCIC Executive Vice President and Chief Operating Officer in
Born September 11, 1937 March 1997. Named TCIC director in 1997. President of one of TCIC's
three cable units since November 1, 1996. Consultant since December
1991 in the cable television industry.
Gary K. Bracken Controller of TCIC since 1969. Appointed Senior Vice President of TCIC
Born July 29, 1939 in December of 1991. Was named Vice President and Principal Accounting
Officer of TCIC in 1982. Senior Vice President of TPAC.
Bernard W. Schotters Appointed Senior Vice President-Finance and Treasurer of TCIC in
Born November 25, 1944 December of 1991. Was appointed Vice President-Finance of TCIC in
1984. Vice President and Treasurer of most of TCI's subsidiaries.
Robert N. Thomson Appointed Senior Vice President of TCIC in February of 1995. Senior
Born December 19, 1943 Vice President of Communications and Policy Planning for TCIC from 1991
to October of 1994.
</TABLE>
_______________________________
(continued)
III-3
<PAGE> 6
(1) Director's term expires in 1997.
(2) Director's term expires in 1998.
(3) Director's term expires in 1999.
Mr. Bob Magness, founder and Chairman of the Board of TCI, died in
November of 1996. Mr. Magness had been Chairman of the Board and director of
TCI since June of 1994 and of TCIC (predecessor company to TCI) since 1973. He
had been a TCIC director since 1968. On November 25, 1996, the Board of
Directors named John C. Malone to the position of Chairman of the Board to
replace Bob Magness. On December 13, 1996, the Board of Directors named Paul
A. Gould as director to fill the unexpired term on the Board of Directors held
by Bob Magness.
Mr. Peter R. Barton was Executive Vice President of TCI since January
of 1994 and was President and Chief Executive Officer of Liberty since June of
1990. In April of 1997, Mr. Barton resigned his positions with the Company.
Mr. Barry P. Marshall was Executive Vice President and Chief Operating
Officer of TCIC from October of 1994 through March of 1997. In March of 1997,
Mr. Marshall resigned his positions as Executive Vice President and Chief
Operating Officer of TCIC. Mr. Marshall was Executive Vice President and Chief
Operating Officer of TCI Cable Management Corporation, TCIC's primary operating
subsidiary, from March of 1992 through January 1, 1994, where he directly
oversaw all of TCIC's regional operating divisions. From 1986 to March of
1992, Mr. Marshall was Vice President and Chief Operating Officer of TCIC's
largest regional operating division.
There are no family relations, of first cousin or closer, among the
above named individuals, by blood, marriage or adoption, except that Bob
Magness and Kim Magness were father and son, respectively.
During the past five years, none of the above persons have had any
involvement in such legal proceedings as would be material to an evaluation of
his ability or integrity.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires TCI's executive officers and directors, and persons who own more than
ten percent of a registered class of TCI's equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish TCI with copies of all
Section 16(a) forms they file.
Based solely on review of the copies of such Forms 3, 4 and 5 and
amendments thereto furnished to TCI with respect to its most recent fiscal
year, or written representations that no Forms 5 were required, TCI believes
that, during the year ended December 31, 1996, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with except that one report, covering one
transaction, was filed late by Mr. Donne F. Fisher, a director of the Company,
one report, covering one transaction, was filed late by Mr. J.C. Sparkman,
another director of the Company, and one report, covering shares held by minors,
was filed late by Mr. Bernard W. Schotters, an officer of the Company.
Item 11. Executive Compensation.
(a) Summary Compensation Table of Tele-Communications, Inc.
The following table shows, for the three years ended December 31,
1996, all forms of compensation for the Chief Executive Officer and each of the
four most highly compensated executive officers of TCI, whose total annual
salary and bonus exceeded $100,000 for the year ended December 31, 1996.
Additionally, the following table includes disclosure of all forms of
compensation paid to Mr. Bob Magness during the year ended December 31, 1996.
(continued)
III-4
<PAGE> 7
On December 4, 1996, the Company distributed (the "Distribution") to
the holders of shares of TCI Group common stock all of the issued and
outstanding common stock of Satellite. Certain directors, officers and
employees of TCI and its subsidiaries have been granted options to purchase
shares of Series A TCI Group common stock ("TCI Options") and stock
appreciation rights with respect to shares of Series A TCI Group common stock
("TCI SARs"). The TCI Options and TCI SARs have been granted pursuant to
various stock plans of TCI (the "TCI Plans"). The TCI Plans give the Board of
Directors of TCI (the "TCI Board") the authority to make equitable adjustments
to outstanding TCI Options and TCI SARs in the event of certain transactions,
of which the Distribution of Satellite was one.
The TCI Board determined that, immediately prior to the Distribution,
each TCI Option would be divided into two separately exercisable options: (i)
an option to purchase TCI Satellite Entertainment, Inc. Series A common stock
("SATCo Option"), exercisable for the number of shares of TCI Satellite
Entertainment, Inc. Series A common stock ("SATCo Series A Stock") that would
have been issued in the Distribution in respect of the shares of Series A TCI
Group common stock ("TCI Group Series A Stock") subject to the applicable TCI
Option, if such TCI Option had been exercised in full immediately prior to the
record date of the Distribution, and containing substantially equivalent terms
as the existing TCI Option, and (ii) an option to purchase TCI Group Series A
Stock (a "TCI Group Series A Option"), exercisable for the same number of
shares of TCI Group Series A Stock as the corresponding TCI Option had been.
The aggregate exercise price of each TCI Option was allocated between the SATCo
Option and the TCI Group Series A Option into which it was divided, and all
other terms, including date of grant, of the SATCo Option and TCI Group Series
A Option are in all material respects the same as the terms of such TCI Option.
Similar adjustments were made to the outstanding TCI SARs, resulting in the
holders thereof holding TCI Group Series A SARs and SATCo SARs instead of TCI
SARs, and to outstanding restricted stock awards, resulting in the holders
thereof holding restricted shares of SATCo Series A Stock in addition to
restricted stock of TCI Group Series A Stock, effective immediately prior to
the Distribution. The foregoing adjustments were made pursuant to the
anti-dilution provisions of the TCI Plans pursuant to which the respective TCI
Group Series A Options and TCI Group Series A SARs were granted.
Prior to the Distribution, TCI and Satellite entered into an agreement
to sell to each other from time to time at the then current market price shares
of TCI Group Series A Stock and SATCo Series A Stock, respectively, as
necessary to satisfy their respective obligations under such securities.
TCI, in addition to the TCI Group Series A Stock, has shares of the
Tele-Communications, Inc. Series B TCI Group common stock ("TCI Group Series B
Stock") the Tele-Communications, Inc. Series A Liberty Media Group common stock
("Liberty Group Series A Stock"), and the Tele-Communications, Inc. Series B
Liberty Media Group common stock ("Liberty Group Series B Stock") outstanding.
Prior to the Distribution, Satellite was a member of the TCI Group and all of
the assets and businesses transferred to Satellite were included in the TCI
Group. Accordingly, the Distribution was made to the TCI Group Stockholders and
the holders of Liberty Media Group Common Stock did not participate in the
Distribution.
Effective January 14, 1997, the Company issued a stock dividend to
holders of Liberty Media Group common stock consisting of one share of Liberty
Group Series A Stock for every two shares of Liberty Group Series A Stock owned
and one share of Liberty Group Series A Stock for every two shares of Liberty
Group Series B Stock owned (the "Liberty Group Stock Dividend"). As a result
of the Liberty Group Stock Dividend, the number of options granted to purchase
Liberty Series A Stock and the price to purchase such options have been
adjusted.
(continued)
III-5
<PAGE> 8
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------
Annual Compensation Awards
------------------------------------- ------------------------------
Other Securities
Annual Restricted Underlying
Compen- Stock Options/ All Other
Name and Principal sation Award(s) SARs Compensation
Position Year Salary ($) ($) ($) (#) (17) ($)
- -------------------- ---- ----------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Bob Magness 1996 $863,462 $ 65,900(3)(4) --- --- $17,000(15)(16)
Formerly Chairman 1995 $850,000 $ --- --- 1,475,000(10) $17,500(15)(16)
of the Board 1994 $830,769 $ --- --- --- $ 2,500(16)
John C. Malone 1996 $900,000 $ 4,496(3) --- 50,000(12) $17,500(15)(16)
Chief Executive 1995 $850,000(1) $ 3,758(3) --- 1,475,000(10) $17,500(15)(16)
Officer 1994 $821,731(1) $ 2,610(3) --- --- $17,500(15)(16)
Fred A. Vierra 1996 $650,000(2) $ 4,231(3) --- --- $15,000(15)
Executive Vice 1995 $650,000(2) $ 3,207(3) $ 380,625(6) 400,000(10) $15,000(15)
President 1994 $669,613(2) $ 1,024(3) --- 295,000(11) $15,000(15)
Brendan R. Clouston 1996 $650,000 $244,147(3)(5) $1,999,500(7) 664,106(13) $15,000(15)
Executive Vice 1995 $550,000 $ 3,181(3) $2,062,500(8) 1,100,000(10) $15,000(15)
President 1994 $525,000 $ 1,000(3) --- 295,000(11) $15,000(15)
Peter R. Barton 1996 $503,846 $ 1,315(3) --- --- $ 9,500(15)
Executive Vice 1995 $400,000 $ 1,283(3) --- 1,500,000(10) $ 9,240(15)
President 1994 $350,000 $ --- --- 295,000(11) $ 9,240(15)
Larry E. Romrell 1996 $500,000 $ 4,910(3) --- 664,086(14) $15,000(15)
Executive Vice 1995 $408,654 $ 3,788(3) $1,087,500(9) 442,500(10) $15,000(15)
President 1994 $391,347 $ 1,659(3) --- 295,000(11) $15,000(15)
</TABLE>
____________________
(1) Includes deferred compensation of $320,000 in each of 1995 and 1994.
(2) Includes deferred compensation of $250,000 in each of the years
presented.
(3) Consists of amounts reimbursed during the year for the payment of
taxes. During 1996, a total of $4,207 was paid to Mr. Clouston and
$4,159 was paid to Mr. Magness.
(4) Includes $61,741 in 1996 representing the Company's allocated cost for
personal use of the Company's aircraft and flight crew.
(5) Includes $239,940 in 1996 of dividend income received on WestMarc
preferred stock which is subject to forfeiture (see note 7 below).
(6) International, a majority owned subsidiary of TCI, has a stock
incentive plan (the "International Plan"). On December 13, 1995,
pursuant to the International Plan, Mr. Vierra was granted 15,000
restricted shares of Series A Tele-Communications International, Inc.
common stock ("TINTA Series A Stock"). Such restricted shares vest as
to 50% of such shares on December 13, 1999 and as to the remaining 50%
of such shares on December 13, 2000. The value of such restricted
stock award was $198,750 at the end of 1996 based upon the closing
price of TINTA Series A Stock on December 31, 1996. International has
not paid cash dividends on TINTA Series A Stock and does not anticipate
declaring and paying cash dividends on the TINTA Series A Stock at any
time in the foreseeable future.
(continued)
III-6
<PAGE> 9
(7) On July 1, 1996, pursuant to a Restricted Stock Award Agreement, Mr.
Clouston was transferred all of the Company's right title and interest
in and to 62 shares of the 12% Series C Cumulative Compounding
Preferred Stock of WestMarc owned by the Company. Such preferred
stock is subject to forfeiture in the event of certain circumstances
from the date of grant through December 13, 2005.
(8) The Company has a stock incentive plan, the Tele-Communications, Inc.
1994 Stock Incentive Plan (the "1994 Plan"). On December 13, 1995,
pursuant to the 1994 Plan, Mr. Clouston was granted 100,000 restricted
shares of TCI Group Series A Stock and 10,000 restricted shares of
SATCo Series A Stock. Such restricted shares vest as to 50% of such
shares on December 13, 1999 and as to the remaining 50% of such shares
on December 13, 2000. The value of such restricted stock award was
$1,405,000 at the end of 1996 based upon the closing price of TCI Group
Series A Stock and SATCo Series A Stock on December 31, 1996. TCI has
not paid cash dividends on the TCI Group Series A Stock and does not
anticipate declaring and paying cash dividends on the TCI Group Series
A Stock at any time in the foreseeable future.
(9) On December 13, 1995, pursuant to the 1994 Plan, Mr. Romrell was
granted 40,000 restricted shares of TCI Group Series A Stock, 15,000
restricted shares of Liberty Group Series A Stock and 4,000 restricted
shares of SATCo Series A Stock. Such restricted shares vest as to 50%
of such shares on December 13, 1999 and as to the remaining 50% of
such shares on December 13, 2000. The value of such restricted stock
award was $847,630 at the end of 1996 based upon the closing prices
of TCI Group Series A Stock, Liberty Group Series A Stock and SATCo
Series A Stock on December 31, 1996. TCI has not paid cash dividends
on the Liberty Group Series A Stock and does not anticipate declaring
and paying cash dividends on the Liberty Group Series A Stock at any
time in the foreseeable future.
(10) On December 13, 1995, pursuant to an incentive plan (the "1996 Plan"),
certain executive officers of TCI were granted an aggregate of
2,000,000 Options in tandem with stock appreciation rights to acquire
shares of TCI Group Series A Stock, 1,650,000 Liberty Group Series A
Options in tandem with stock appreciation rights to acquire shares of
Liberty Series A Stock and 200,000 SATCo Series A Options in tandem
with stock appreciation rights to acquire shares of SATCo Series A
Stock at adjusted purchase prices of $14.62, $16.00 and $23.76 per
share, respectively. Each such grant of options with tandem stock
appreciation rights vests evenly over five years with such vesting
period beginning August 4, 1995, first becomes exercisable beginning
on August 4, 1996 and expires on August 4, 2005.
(continued)
III-7
<PAGE> 10
On December 13, 1995, pursuant to the 1994 Plan, certain executive
officers were granted an aggregate of 2,650,000 TCI Group Series A
Options in tandem with stock appreciation rights to acquire shares of
Series A Stock, an aggregate of 1,012,500 Liberty Group Series A
Options in tandem with stock appreciation rights to acquire shares of
Liberty Series A Stock and 265,000 SATCo Series A Options in tandem
with stock appreciation rights to acquire shares of SATCo Series A
Stock at adjusted purchase prices of $14.62, $16.00 and $23.76 per
share, respectively. Additionally, the Company has a stock incentive
plan, the Tele-Communications, Inc. 1995 Stock Incentive Plan (the
"1995 Plan"). On December 13, 1995, pursuant to the 1995 Plan,
certain key employees were granted an aggregate of 2,757,500 TCI Group
Series A Options in tandem with stock appreciation rights to acquire
shares of Series A Stock, an aggregate of 654,000 Liberty Group Series
A Options in tandem with stock appreciation rights to acquire shares
of Liberty Series A Stock and 275,750 SATCo Series A Options in tandem
with stock appreciation rights to acquire shares of SATCo Series A
Stock at adjusted purchase prices of $14.62, $16.00 and $23.76 per
share, respectively. Each such grant of options with tandem stock
appreciation rights vests evenly over five years with such vesting
period beginning August 4, 1995, first becomes exercisable beginning
on August 4, 1996 and expires on August 4, 2005.
Notwithstanding the vesting schedule as set forth in the option
agreement, the option shares shall become available for purchase if
grantee's employment with the Company (a) shall terminate by reason of
(i) termination by the Company without cause (ii) termination by the
grantee for good reason (as defined in the agreement) or (iii)
disability, (b) shall terminate pursuant to provisions of a written
employment agreement, if any, between the grantee and the Company
which expressly permits the grantee to terminate such employment upon
occurrence of specified events (other than the giving of notice and
passage of time), or (c) if grantee dies while employed by the
Company. Further, the option shares will become available for
purchase in the event of an Approved Transaction, Board Change, or
Control Purchase (each as defined in the applicable Plan), unless in
the case of an Approved Transaction, the Compensation Committee under
the circumstances specified in the Plan determines otherwise.
(11) On November 17, 1994, pursuant to the 1994 Plan, certain executive
officers and other key employees were granted an aggregate of
3,220,000 TCI Group Series A Options in tandem with stock appreciation
rights to acquire shares of Series A Stock at an adjusted purchase
price of $14.19 per share, an aggregate of 1,196,625 Liberty Group
Series A Options in tandem with stock appreciation rights to acquire
shares of Liberty Series A Stock at a purchase price of $14.67 per
share and 322,000 SATCo Series A Options in tandem with stock
appreciation rights at an adjusted purchase price of $23.06 per share.
Such options vest evenly over five years, became exercisable beginning
on November 17, 1995 and expire on November 17, 2004.
(12) On April 11, 1996, Dr. Malone was granted, pursuant to the
International Director Stock Option Plan, options to acquire 50,000
shares of TINTA Series A Stock. For additional information relating
to this grant, see note 4 to the table provided pursuant to Item
11(b).
(13) On December 1, 1996, Mr. Clouston was granted options to acquire 10
shares of TCI Telephony Services, Inc. common stock (the "Telephony
Options"), 10 shares of TCI Wireline, Inc. common stock (the "Wireline
Options") and 10 shares of TCI.NET, Inc. common stock (the "Internet
Options"). On December 4, 1996, Mr. Clouston was granted options to
acquire 664,076 shares of SATCo Series A Stock. For additional
information with respect to such grants, see the notes to the table
provided in Item 11(b).
(continued)
III-8
<PAGE> 11
(14) On December 1, 1996, Mr. Romrell was granted an option to acquire 10
shares of TCI.NET, Inc. On December 4, Mr. Romrell was granted
options to acquire 664,076 shares of SATCo Series A Stock. For
additional information with respect to such grants, see the notes to
the table provided in Item 11(b).
(15) Includes dollar value of annual TCI contributions to the TCI Employee
Stock Purchase Plan ("ESPP") in which all named executive officers are
fully vested. Directors who are not employees of TCI are ineligible
to participate in the ESPP. The ESPP, a defined contribution plan,
enables participating employees to acquire a proprietary interest in
TCI and benefits upon retirement. Under the terms of the ESPP,
employees are eligible for participation after one year of service.
The ESPP's normal retirement age is 65 years. Participants may
contribute up to 10% of their compensation and TCI (by annual
resolution of the Board of Directors) may contribute up to 100% of the
participants' contributions. The ESPP includes a salary deferral
feature in respect of employee contributions. Forfeitures (due to
participants' withdrawal prior to full vesting) are used to reduce
TCI's otherwise determined contributions. Generally, participants
acquire a vested right in TCI contributions as follows:
<TABLE>
<CAPTION>
Years of service Vesting Percentage
---------------- ------------------
<S> <C>
Less than 1 0
1-2 20
2-3 30
3-4 45
4-5 60
5-6 80
6 or more 100
</TABLE>
Participant contributions are fully vested. Although TCI has not
expressed an intent to terminate the ESPP, it may do so, at any time.
The ESPP provides for full and immediate vesting of all participants'
rights upon termination. In each of the years ending December 31,
1996, 1995 and 1994, TCI contributed $15,000 to the ESPP for Dr.
Malone. In each of the years ended December 31, 1996 and 1995, TCI
contributed $15,000 to the ESPP for Mr. Magness.
(16) Includes fees paid to directors for attendance at each meeting of the
Board of Directors ($500 per meeting). During each of the years
ending December 31, 1996, 1995 and 1994, a total of $2,500 of such
fees, respectively, were paid to Dr. Malone. During 1996, 1995 and
1994, $2,000, $2,500 and $2,500 was paid to Mr. Magness, respectively.
(17) Adjusted to reflect the effect of the Distribution and the Liberty
Group Stock Dividend.
(continued)
III-9
<PAGE> 12
(b) Option/SAR Grants Table of Tele-Communications, Inc. The
following table shows all individual grants of stock options and stock
appreciation rights ("SARs") granted to each of the named executive officers of
TCI during the year ended December 31, 1996:
<TABLE>
<CAPTION>
Number of
Securities
Underlying % of Total
Options/ Options/SARs
SARs Granted Exercise or Market Price Grant Date
Granted to Employees Base Price on Grant Expiration Present Value
Name (#) in Fiscal Year ($/Sh) Date ($/Sh) Date ($)
- ---- ----------- ---------- ---------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Brendan R. Clouston 10(1) 50% $ 855,631(1) $ 2,100,000(6) February 1, 2006 $ 13,477,000(9)
10(2) 50% $ 12,537(2) $ 12,537(6) February 1, 2006 $ 44,000(10)
10(3) 33 1/3% $ 55,246(3) $ 400,000(6) February 1, 2006 $ 3,468,000(11)
664,076(4) 28.6% $ 8.86 $ 12.625(7) February 1, 2006 $ 5,806,083(12)
Larry E. Romrell 10(3) 33 1/3% $ 55,246(3) $ 400,000(6) February 1, 2006 $ 3,468,000(11)
664,076(4) 28.6% $ 8.86 $ 12.625(7) February 1, 2006 $ 5,806,083(12)
John C. Malone 50,000(5) 25% $ 16.00 $ 20.25(8) April 11, 2006 $ 400,450(13)
</TABLE>
- -------------------------
(1) Effective December 1, 1996, Mr. Clouston and another employee of TCI
were each granted Telephony Options representing 1.0% of the Company's
common equity in TCI Telephony Services, Inc. ("TCI Telephony"). The
aggregate exercise price for each such option, which is payable to TCI
Telephony, is equal to 1.0% of (i) the Company's cumulative investment
in TCI Telephony as of December 1, 1996, adjusted for a 6% per annum
interest factor from the date each such investment was made to the
date of such exercise, less (ii) the sum of (x) $500 million
(representing the aggregate initial liquidation price of a TCI
Telephony preferred stock) and (y) the amount of the tax benefits
generated by the TCI Telephony (up to $500 million) as and when used
by TCI. The per share exercise price on the date of grant was
$850,029. Any exercise by one of such executive officers of all or
part of such options would need to be accompanied by the exercise by
such executive officer of a pro rata portion of the option described
in note 3 below. All of such options will vest and become exercisable
in five equal annual installments, with the first annual installment
vesting on February 1, 1997, and will expire on February 1, 2006.
(2) Effective December 1, 1996, Mr. Clouston and another employee of TCI
were each granted Wireline Options representing 1.0% of the Company's
common equity in TCI Wireline, Inc. ("TCI Wireline"). The aggregate
exercise price for each such option, which is payable to TCI Wireline,
is equal to 1.0% of the Company's cumulative investment in TCI
Wireline as of December 1, 1996, adjusted for a 6% per annum interest
factor from the date each such investment was made to the date of such
exercise. The per share exercise price on the date of grant was
$12,502. All of such options will vest and become exercisable in
five equal annual installments, with the first annual installment
vesting on February 1, 1997, and will expire on February 1, 2006.
Such options must be exercised on a pro rata basis with the Telephony
Options as discussed in note 2 above.
(continued)
III-10
<PAGE> 13
(3) Effective December 1, 1996, Mr. Clouston, Mr. Romrell and another
employee of TCI were each granted Internet Options representing 1.0%
of the Company's common equity in TCI.NET, Inc. ("TCI.NET"). The
aggregate exercise price for each such option, which is payable to
TCI.NET, is equal to 1.0% of the Company's cumulative investment in
TCI.NET as of December 1, 1996, adjusted for a 6% per annum interest
factor from the date each such investment was made to the date of such
exercise. The per share exercise price on the date of grant was
$55,070. All of such options will vest and become exercisable in
five equal annual installments, with the first annual installment
vesting on February 1, 1997, and will expire on February 1, 2006.
(4) On December 4, 1996, Mr. Clouston and Mr. Romrell were each was
granted an option to purchase 664,076 shares of SATCo Series A Stock
representing 1.0% of the number of shares of Satellite common stock
issued and outstanding on the date of the Distribution, determined
immediately after giving effect to the Distribution, but before giving
effect to the exercise of such option or the other options to be
evidenced by a stock option agreement. The aggregate exercise price
for such option is equal to 1.0% of TCI's net investment as of the
date of the Distribution, but excluding any portion of TCI's net
investment that as of such date is represented by a promissory note or
other evidence of indebtedness from Satellite to TCI. All of such
options will vest and become exercisable in five equal annual
installments, with the first annual installment vesting on February 1,
1997, and will expire on February 1, 2006. Another employee of TCI
received a 1.0% option and another employee received a 0.5% option.
(5) On April 11, 1996, pursuant to the International Director Stock Option
Plan, certain directors of International were granted an aggregate of
200,000 options to acquire shares of TINTA Series A Stock at a
purchase price of $16.00 per share. Such options vest evenly over
five years, first become exercisable on April 11, 1997 and expire on
April 11, 2006.
(6) Represents the market value on December 1, 1996 as determined by the
Board of Directors.
(7) Represents the closing market price per share of SATCo Series A Stock
on December 5, 1996, the first day of trading following the date of
grant.
(8) Represents the closing market price per share of TINTA Series A Stock
on April 11, 1996.
(9) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 6.87% discount rate; (b) a 50% volatility factor;
(c) the 10-year option term; (d) the market value of the Telephony
Option on December 1, 1996 as determined by the Board of Directors of
TCI; (e) a per share exercise price of $850,029 on December 1, 1996;
and (f) a 6% per annum interest adjustment to the exercise price. 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.
(10) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 6.87% discount rate; (b) a 55% volatility factor;
(c) the 10-year option term; (d) the market value of the Wireline
Option on December 1, 1996 as determined by the Board of Directors of
TCI; (e) a per share exercise price of $12,502 on December 1, 1996; and
(f) a 6% per annum adjustment to the exercise price. 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.
(continued)
III-11
<PAGE> 14
(11) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 6.87% discount rate; (b) a 60% volatility factor;
(c) the 10-year option term; (d) the market value of the Internet
Option on December 1, 1996 as determined by the Board of Directors of
TCI; (e) a per share exercise price of $55,070 on December 1, 1996;
and (f) a 6% per annum interest adjustment to the exercise price. 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.
(12) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 6.22% discount rate; (b) a 35% volatility factor;
(c) the 10-year option term; (d) the closing price of SATCo Series A
Stock on December 5, 1996; and (e) a per share exercise price of
$8.86. 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.
(13) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 6.25% discount rate; (b) a 35% volatility factor;
(c) the 10-year option term; (d) the closing price of TINTA Series A
Stock on February 14, 1997; and (e) a per share exercise price of
$16.00. The actual value an executive may realize will depend upon
the extent to which the stock price exceeds the exercise price on the
date the option is exercised. Accordingly, the value, if any,
realized by an executive will not necessarily be the value determined
by the model.
(c) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR
Value Table of Tele-Communications, Inc. The following table shows each
exercise of stock options and SARs during the year ended December 31, 1996 by
each of the named executive officers of TCI and the December 31, 1996 number
and year-end value of unexercised options and SARs on an aggregated basis:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at at
December 31, December 31,
1996 (#) 1996 ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- ---- ------------------ ----------------- ------------- -------------
<S> <C> <C> <C> <C>
John C. Malone
Exercisable
Series A -- -- 1,000,000 $1,850,000
Liberty Series A -- -- 375,000 $2,592,750
TINTA Series A -- -- -- --
SATCo Series A -- -- 100,000 --
Unexercisable
Series A -- -- 1,000,000 $ 462,500
Liberty Series A -- -- 375,000 $1,503,750
TINTA Series A -- -- 50,000 --
SATCo Series A -- -- 100,000 --
</TABLE>
(continued)
III-12
<PAGE> 15
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at at
December 31, December 31,
1996 (#) 1996 ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- ----- ------------------ ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Fred A. Vierra
Exercisable
Series A -- -- 235,000 $ 358,438
Liberty Series A -- -- 88,125 $ 589,301
TINTA Series A -- -- 80,000 --
SATCo Series A -- -- 23,500 --
Unexercisable
Series A -- -- 165,000 $ 104,063
Liberty Series A -- -- 61,875 $ 329,749
TINTA Series A -- -- 320,000 --
SATCo Series A -- -- 16,500 --
Brendan R. Clouston
Exercisable
Series A -- -- 730,000 $ 1,040,625
Liberty Series A -- -- 198,750 $ 1,461,248
SATCo Series A -- -- 80,125 --
Telephony -- -- -- --
Wireline -- -- -- --
Internet -- -- -- --
Unexercisable
Series A -- -- 1,145,000 $ 520,313
Liberty Series A -- -- 129,375 $ 861,784
SATCo Series A -- -- 771,451 $ 674,037
Telephony -- -- 10 $12,443,692
Wireline -- -- 10 --
Internet -- -- 10 $ 3,447,538
Peter R. Barton
Exercisable
Series A -- -- 719,321 $ 8,018,689
Liberty Series A -- -- 569,745 $ 5,479,514
SATCo Series A -- -- 71,933 $ 577,631
Unexercisable
Series A -- -- 226,554 $ 1,336,448
Liberty Series A -- -- 1,284,957 $ 4,586,432
SATCo Series A -- -- 22,655 $ 96,272
Larry E. Romrell
Exercisable
Series A -- -- 295,000 $ 358,438
Liberty Series A -- -- 110,625 $ 657,746
SATCo Series A -- -- 29,500 --
Internet -- -- -- --
Unexercisable
Series A -- -- 405,000 $ 104,063
Liberty Series A -- -- 151,875 $ 603,529
SATCo Series A -- -- 704,576 $ 674,037
Internet -- -- 10 $ 3,447,538
</TABLE>
(continued)
III-13
<PAGE> 16
(d) Compensation of directors. The standard arrangement by which
TCI's directors are compensated for all services (including any amounts payable
for committee participation or special assignments) as a director is as
follows: each director receives a fee of $500 plus travel expenses for
attendance at each meeting of the Board of Directors and each director who is
not a full-time employee of TCI receives additional compensation of $30,000 per
year. In addition, the Company's stockholders approved an option plan for its
directors (the "Director Stock Option Plan"). Each person who becomes a
director of the Company and is not an employee of the Company or any of its
subsidiaries will be automatically granted options upon such person's becoming
a director. The exercise price of each such subsequently granted option will
be equal to the fair market value of the Series A Stock on the date the option
is granted. In general, such fair market value will be 95% of the last sale
price for the shares of the Series A Stock as reported on the Nasdaq Stock
Market on the date of the grant, with the price resulting from such percentage
rounded down to the nearest quarter dollar.
The Company has a deferred compensation plan for all non-employee
directors. Each director may elect to defer receipt of all, but not less than
all, of the annual compensation (excluding meeting fees and reimbursable
expenses) payable to the director for serving on the Company's Board of
Directors for each calendar year for which such deferral is elected. An
election to defer may be made as to the compensation payable for a single
calendar year or period of years. Any compensation deferred shall be credited
to the director's account on the last day of the quarter for which compensation
has accrued. Such deferred compensation bears interest from the date credited
to the date of payment at a rate of 8% per annum in 1993 and 120% of the
applicable federal long-term rate thereafter, compounded annually.
A director may elect payment of deferred compensation to be made at a
specified year in the future or upon termination of the director's service as
director of the Company. Each director may elect payment in a lump sum, three
substantially equal consecutive annual installments or five substantially equal
consecutive annual installments. In the event that a director dies prior to
payment of all the amounts payable pursuant to the plan, any amounts remaining
in the director's deferred compensation account, together with accrued interest
thereon, shall be paid to the director's designated beneficiary.
There are no other arrangements whereby any of TCI's directors
received compensation for services as a director during 1996 in addition to or
in lieu of that specified by the aforedescribed standard arrangement.
(e) Employment Contracts and Termination of Employment and Change
of Control Arrangements. Effective November 1, 1992 the employment agreement
between TCIC and Dr. Malone, as amended, was further amended and restated.
Pursuant to an Assignment and Assumption Agreement, dated August 4, 1994, the
payment, performance and other obligations of such employment agreements were
assumed by TCI. The term of each agreement is extended daily so that the
remainder of the employment term shall at all times on and prior to the
effective date of the termination of employment as provided by each agreement
be five years. Dr. Malone's employment agreement provides for an annual salary
of $800,000, subject to increase upon approval of the board of directors.
During 1996, Dr. Malone was given a salary increase such that his annual salary
in 1996 was $900,000. Dr. Malone has elected to take a reduction in
compensation until certain financial goals are reached to the extent of 20% of
his compensation. Additionally, this employment agreement provide for personal
use of the Company's aircraft and flight crew, limited to an aggregate value of
$35,000 per year.
(continued)
III-14
<PAGE> 17
Prior to Mr. Bob Magness' death, he was party to an employment
agreement with comparable provisions to the previously described employment
agreement for Dr. Malone.
Dr. Malone's employment agreement provides, among other things, for
deferral of a portion (40% in 1993 and not in excess of 40% thereafter) of the
monthly compensation payable to him. Pursuant to a letter agreement entered
into between Dr. Malone and the Company subsequent to the date of his
employment agreement, Dr. Malone deferred $150,000 in 1993 in lieu of 40% of
his compensation for such year. The deferred amounts will be payable in
monthly installments over a 20-year period commencing on the termination of Dr.
Malone's employment, together with interest thereon at the rate of 8% per annum
compounded annually from the date of deferral to the date of payment. The
amendment also provides for the payment of certain benefits, discussed below.
Dr. Malone's agreement described above also provides that upon
termination of such executive's employment by the Company (other than for
cause, as defined in the agreement), or if Dr. Malone elects to terminate the
agreement because of a change in control of the Company, all remaining
compensation due under the agreement for the balance of the employment term
shall be immediately due and payable.
Dr. Malone's agreement provides that during his employment with the
Company and for a period of two years following the effective date of his
termination of employment with the Company, unless termination results from a
change in control of the Company, he will not be connected with any entity in
any manner specified in the agreement, which competes in a material respect
with the business of the Company. However, the agreement provides that such
executive may own securities of any corporation listed on a national securities
exchange or quoted in the Nasdaq Stock Market to the extent of an aggregate of
5% of the amount of such securities outstanding.
Dr. Malone's agreement also provides that in the event of termination
of his employment with the Company, he will be entitled to receive 240
consecutive monthly payments of $15,000 (increased at the rate of 12% per annum
compounded annually from January 1, 1988 to the date payment commences), the
first of which will be payable on the first day of the month succeeding the
termination of Dr. Malone's employment. In the event of Dr. Malone's death,
his beneficiaries will be entitled to receive the foregoing monthly payments.
The Company currently owns a whole-life insurance policy on Dr. Malone, the
face value of which is sufficient to meet its obligation under the salary
continuation arrangement. The premiums payable by the Company on such
insurance policy are currently being funded through earnings on the policy.
Dr. Malone has no interest in this policy.
The Company pays a portion of the annual premiums (equal to the
"PS-58" costs) on three whole-life insurance policies of which Dr. Malone is
the insured and trusts for the benefit of members of his family are the owners.
The Company is the designated beneficiary of the proceeds of such policies less
an amount equal to the greater of the cash surrender value thereof at the time
of Dr. Malone's death and the amount of the premiums paid by the policy owners.
Dr. Malone deferred a portion of his monthly compensation under his
previous employment agreement. Such deferred compensation (together with
interest thereon at the rate of 13% per annum compounded annually from the date
of deferral to the date of payment) will continue to be payable under the terms
of the previous agreement. The rate at which interest accrues on such
previously deferred compensation was established in 1983 pursuant to such
earlier agreement.
(continued)
III-15
<PAGE> 18
International and TCI have entered into an Amended and Restated
Employment Agreement with Mr. Vierra relating to Mr. Vierra's employment with
International as Vice Chairman and Chief Executive Officer, providing for a
base salary of $650,000 per year. Mr. Vierra's salary is subject to annual
review by the board of directors, which may in its sole discretion increase his
salary. Mr. Vierra's salary for 1996 is currently set at $650,00. Mr.
Vierra's employment agreement provides for the deferral of a portion of each
monthly salary payment so as to result in the deferral of salary at the rate of
$250,000 per annum. The deferred amounts are to be paid in monthly
installments over a 240-month period commencing on the later of December 31,
1998 and the termination of Mr. Vierra's full-time employment with
International, together with interest thereon at the rate of 8% per annum
compounded annually from the date of deferral to the payment date. In the
event of Mr. Vierra's death, all outstanding deferred amounts will be paid in a
lump sum to his beneficiaries.
While he is employed by International pursuant to his employment
agreement, Mr. Vierra is entitled to participate in all formal incentive
compensation plans, stock incentive plans, employee stock purchase plans,
retirement plans and insurance plans or policies adopted for the benefit of
TCI's or International's executive officers or employees generally.
Additionally, Mr. Vierra's employment agreement provides for personal use of
TCI's aircraft and flight crew, limited to an aggregate value of $35,000 per
year.
Mr. Vierra's employment agreement has a stated termination date of
December 31, 1998. It also provides that upon an earlier termination of Mr.
Vierra's employment by International without cause, all remaining compensation
due under such agreement for the balance of the employment term would become
immediately due and payable to Mr. Vierra. Upon his death during the
employment term, International would pay to Mr. Vierra's beneficiaries a lump
sum in an amount equal to the lesser of (i) the compensation due under his
employment agreement for the balance of the employment term and (ii) one year's
salary. In the event of his disability, International would continue to pay
Mr. Vierra his annual salary as and when it would have otherwise become due
until the first to occur of the end of the employment term or the date of his
death.
Mr. Vierra's agreement further provides that during his employment
with International and for the longer of a period of two years following the
effective date of his termination of employment or if Mr. Vierra terminates his
employment before the end of the term of his employment in breach of the
employment agreement, or if Mr. Vierra is terminated "for cause" (as defined in
the employment agreement) by International, until December 31, 1998, he will
not be connected with any entity in any manner specified in the agreement,
which competes in a material respect with the business of International or any
of International's or TCI's majority owned subsidiaries. However, the agreement
provides that Mr. Vierra may own securities of any corporation listed on a
national securities exchange or quoted in the Nasdaq National Market to the
extent of an aggregate of 5% of the amount of such securities outstanding.
Under the employment agreement, substantially all of Mr. Vierra's business
time, attention and efforts will be devoted to the affairs of International.
The Company and Mr. Romrell entered into an employment agreement on
January 1, 1993. Pursuant to an Assignment and Assumption Agreement, dated
August 4, 1994, the payment, performance and other obligations of such
employment agreement was assumed by TCI. The term of Mr. Romrell's agreement
extends through December 31, 1999. Mr. Romrell's employment agreement provides
for a base salary of $350,000 per year to be increased by the amount of $25,000
per annum in each succeeding year commencing January 1, 1994. Mr. Romrell's
salary is subject to annual review by the board of directors which may in its
sole discretion increase his salary. Mr. Romrell's salary for 1996 is
currently set at $500,000.
(continued)
III-16
<PAGE> 19
While he is employed by the Company pursuant to his employment
agreement, Mr. Romrell is entitled to participate in all formal incentive
compensation plans, stock incentive plans, employee stock purchase plans,
retirement plans and insurance plans or policies adopted for the benefit of
TCI's executive officers or employees generally.
Mr. Romrell's employment agreement also provides that upon an earlier
termination of Mr. Romrell's employment by the Company without cause, all
remaining compensation due under such agreement for the balance of the
employment term would become immediately due and payable to Mr. Romrell. Upon
his death during the employment term, the Company would pay to Mr. Romrell's
beneficiaries a lump sum in an amount equal to the lesser of (i) the
compensation due under his employment agreement for the balance of the
employment term and (ii) one year's salary. In the event of his disability,
the Company would continue to pay Mr. Romrell his annual salary as and when it
would have otherwise become due until the first to occur of the end of the
employment term or the date of his death.
Mr. Romrell's agreement further provides that during his employment
with the Company and for the longer of a period of two years following the
effective date of his termination of employment or if Mr. Romrell terminates
his employment before the end of the term of his employment in breach of the
employment agreement, or if Mr. Romrell is terminated "for cause" (as defined
in the employment agreement) by the Company, until December 31, 1999, he will
not be connected with any entity in any manner specified in the agreement,
which competes in a material respect with the business of TCI or TCI's majority
owned subsidiaries. However, the agreement provides that Mr. Romrell may own
securities of any corporation listed on a national securities exchange or
quoted in the Nasdaq National Market to the extent of an aggregate of 5% of the
amount of such securities outstanding. Under the employment agreement,
substantially all of Mr. Romrell's business time, attention and efforts will be
devoted to the affairs of the Company.
(f) Additional information with respect to Compensation Committee
Interlocks and Insider Participation in Compensation Decisions.
The members of the Company's compensation committee are Messrs. Robert
A. Naify, John W. Gallivan and Paul A. Gould, all directors of the Company.
None of the members of the compensation committee are or were officers of the
Company or any of its subsidiaries.
(continued)
III-17
<PAGE> 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security ownership of certain beneficial owners. The
following table sets forth, as of March 1, 1997, information with respect to
the ownership of TCI Group Series A Stock, TCI Group Series B Stock, Liberty
Group Series A Stock, Liberty Group Series B Stock, TCI Group Class B 6%
Cumulative Redeemable Exchangeable Junior Preferred Stock ("Class B Preferred
Stock"), Convertible Preferred Stock, Series C ("Series C Preferred Stock"),
Redeemable Convertible TCI Group Preferred Stock, Series G ("Series G Preferred
Stock") and Redeemable Convertible Liberty Media Group Preferred Stock, Series
H ("Series H Preferred Stock") by each person known to the Company to own
beneficially more than 5% of any such class outstanding on that date. Shares
issuable upon exercise or conversion of convertible securities are deemed to be
outstanding for the purpose of computing the percentage of ownership and
overall voting power of persons beneficially owning such convertible
securities, but have not been deemed to be outstanding for the purpose of
computing the percentage ownership or overall voting power of any other person.
Voting power in the table is computed with respect to a general election of
directors and, therefore, the TCI Class B Preferred Stock, the Series G
Preferred Stock and the Series H Preferred Stock are included in the
calculation. The number of shares of Dr. Malone includes interests of such
individual in shares held by the trustee of TCI's ESPP. So far as is known to
TCI, the persons indicated below have sole voting and investment power with
respect to the shares indicated as owned by them except as otherwise stated in
the notes to the table and except for the shares held by the trustee of the
ESPP for the benefit of Dr. Malone, which shares are voted at the discretion of
the trustee.
<TABLE>
<CAPTION>
Amount and
Title Nature of
of Name and Address Beneficial Percent Voting
Class of Beneficial Owner Ownership of Class(1) Power (1)
----- ------------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Series A Donne F. Fisher, Director, 4,110,681(2)(3) * 20.8%
Series B individually and as 31,034,936(2) 36.7%
Liberty Series A personal co-represent- 5,423,725(2)(3) 2.4%
Liberty Series B ative to the Estate of 7,758,734(2) 36.6%
Class B Pref. Bob Magness 129,299(2) 8.0%
Series C Pref. 5619 DTC Parkway -- --
Series G Pref. Englewood, Colorado -- --
Series H Pref. -- --
Series A Daniel Ritchie, as personal 3,524,315(2) * 20.6%
Series B co-representative of the 30,785,864(2) 36.4%
Liberty Series A Estate of Bob Magness 5,169,304(2) 2.3%
Liberty Series B 2199 South University 7,696,466(2) 36.3%
Class B Pref Denver, Colorado 125,000(2) 7.7%
Series C. Pref -- --
Series G Pref. -- --
Series H Pref. -- --
Series A John C. Malone, Chief 2,173,166(4) * 16.9%
Series B Executive Officer and 25,287,083(5)(6) 29.9%
Liberty Series A a Director 3,929,331(4)(5) 1.7%
Liberty Series B 5619 DTC Parkway 6,349,270(5)(6) 30.0%
Class B Pref. Englewood, Colorado 306,000(5) 18.9%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
</TABLE>
(continued)
III-18
<PAGE> 21
<TABLE>
<CAPTION>
Amount and
Title Nature of
of Name and Address Beneficial Percent Voting
Class of Beneficial Owner Ownership of Class(1) Power(1)
----- ------------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Series A Kearns-Tribune Corporation 8,792,514 1.5% 6.7%
Series B 400 Tribune Building 9,112,500(6) 10.8%
Liberty Series A Salt Lake City, Utah 4,436,254 1.9%
Liberty Series B 2,278,125(6) 0.8%
Class B Pref 67,536 4.2%
Series C. Pref -- --
Series G Pref. -- --
Series H Pref. -- --
Series A Kim Magness, Director, 2,155,332(7)(8) * 4.7%
Series B individually and as 6,864,212(7) 8.1%
Liberty Series A personal representative 1,666,275(7)(8) *
Liberty Series B of the Estate of 1,716,053(7) 8.1%
Class B Pref Betsy Magness -- --
Series C. Pref 5619 DTC Parkway -- --
Series G Pref. Englewood, Colorado -- --
Series H Pref. -- --
Series A The Associated Group, Inc. 12,479,976 2.1% 5.8%
Series B 200 Gateway Towers 7,071,852 8.4%
Liberty Series A Pittsburgh, Pennsylvania 9,102,436 4.0%
Liberty Series B 1,767,963 8.3%
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Series A The Equitable Companies 32,824,784(9) 5.5% 2.9%
Series B Incorporated -- --
Liberty Series A 787 Seventh Avenue 23,303,041(10) 0.2%
Liberty Series B New York, New York; and -- --
Class B Pref. The Mutuelles AXA and AXA -- --
Series C Pref. 101-100 Terrasse Boieldieu -- --
Series G Pref. 92042 Paris La Defense -- --
Series H Pref. France -- --
Series A The Capital Group 34,799,410(11) 5.8% 3.3%
Series B Companies, Inc. -- --
Liberty Series A 333 South Hope Street 28,902,435(12) 2.6%
Liberty Series B Los Angeles, California -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Series A J.P. Morgan & Co. 43,044,027(13) 7.2% 2.3%
Series B Incorporated -- --
Liberty Series A 60 Wall Street -- --
Liberty Series B New York, New York -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
</TABLE>
(continued)
III-19
<PAGE> 22
<TABLE>
<CAPTION>
Amount and
Title Nature of
of Name and Address Beneficial Percent Voting
Class of Beneficial Owner Ownership of Class(1) Power(1)
----- ------------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Series A Oppenheimer Capital 41,545,872(15) 7.0% 2.2%
Series B 200 Liberty Street -- --
Liberty Series A New York, New York -- --
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Series A Bill Daniels 259(14) * *
Series B c/o Daniels & Associates -- --
Liberty Series A 3200 Cherry Creek Drive 96(14) *
Liberty Series B South -- --
Class B Pref. Denver, Colorado -- --
Series C Pref. 70,575 00.0%
Series G Pref. -- --
Series H Pref. -- --
Series A Lawrence Flinn Jr. 1,102,344(14) * *
Series B 209 Taconic Road 24,000(14) *
Liberty Series A Greenwich, Connecticut 416,416(14) *
Liberty Series B 6,000(14) *
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. 6,186,647(14) 92.4%
Series H Pref. 6,186,647(14) 92.4%
</TABLE>
____________________
* Less than one percent.
(1) Based on 598,055,198 shares of TCI Group Series A Stock (after
elimination of shares held by subsidiaries of TCI), 84,647,065 shares
of TCI Group Series B Stock, 228,721,426 shares of Liberty Group
Series A Stock, 21,187,969 shares of Liberty Group Series B Stock,
1,620,026 shares of Class B Preferred Stock (after elimination of
shares held by subsidiaries of TCI), 70,575 shares of Series C
Preferred Stock, 6,693,177 shares of Series G Preferred Stock and
6,693,177 shares of Series H Preferred Stock outstanding on March 1,
1997.
(continued)
III-20
<PAGE> 23
(2) Messrs. Fisher and Ritchie, as co-personal representatives of the
Estate of Bob Magness, are each deemed the beneficial owner of all
shares of TCI Group Series A Stock, TCI Group Series B Stock, Liberty
Group Series A Stock Liberty Group Series B Stock and Class B
Preferred Stock held of record by the Estate of Bob Magness. The
number of shares held by Messrs. Fisher and Ritchie each includes
1,524,315 shares of TCI Group Series A, 30,785,864 shares of TCI Group
Series B, 4,419,304 shares of Liberty Group Series A, 7,696,466 shares
of Liberty Group Series B and 125,000 shares of Class B Preferred
Stock of which each Mr. Fisher and Mr. Ritchie are deemed beneficial
owner as co-personal representative. Additionally, assumes the
exercise in full by the Estate of Bob Magness of stock options
granted in tandem with stock appreciation rights to Mr. Bob Magness in
November of 1992 to acquire 1,000,000 shares of TCI Group Series A
Stock and 375,000 shares of Liberty Group Series A Stock.
Additionally assumes the exercise in full by the Estate of Bob Magness
of stock options granted in tandem with stock appreciation rights to
Mr. Bob Magness in December of 1995 to acquire 1,000,000 shares of
Series A Stock and 375,000 shares of Liberty Series A Stock. All such
options are currently exercisable.
(3) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights to Mr. Fisher in November of 1994 to acquire
200,000 shares of TCI Group Series A Stock and 75,000 shares Liberty
Group Series A Stock. Options to acquire 80,000 shares of TCI Group
Series A Stock and 30,000 shares of Liberty Group Series A Stock are
currently exercisable. Additionally assumes the exercise in full of
options granted to Mr. Fisher in January 1996, pursuant to the
Director Stock Option Plan, to acquire 50,000 shares of TCI Group
Series A Stock and 18,750 shares of Liberty Group Series A Stock.
Options to acquire 10,000 shares of Series A Stock and 3,750 shares of
Liberty Series A Stock are currently exercisable.
(4) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 1,000,000
shares of TCI Group Series A Stock and 375,000 shares of Liberty Group
Series A Stock. Options to acquire 800,000 and 300,000 shares of TCI
Group Series A Stock and Liberty Group Series A Stock, respectively,
are currently exercisable. Additionally assumes the exercise in full
of stock options granted in tandem with stock appreciation rights in
December of 1995 to acquire 1,000,000 shares of TCI Group Series A
Stock and 375,000 shares of Liberty Group Series A Stock. Options to
acquire 200,000 shares of TCI Group Series A Stock and 75,000 shares
of Liberty Group Series A Stock are currently exercisable.
(5) Includes 1,173,000 shares of TCI Group Series B Stock, 146,625 shares
of Liberty Group Series A Stock, 293,250 shares of Liberty Group
Series B Stock and 6,900 shares of Class B Preferred Stock held by Dr.
Malone's wife, Mrs. Leslie Malone, but Dr. Malone has disclaimed any
beneficial ownership of such shares.
(6) Pursuant to a letter agreement, dated June 17, 1988, the late Mr. Bob
Magness and Kearns each agreed with Dr. Malone that prior to making a
disposition of a significant portion of their respective holdings of
TCI Group Series B Stock or Liberty Group Series B Stock, he or it
would first offer Dr. Malone the opportunity to purchase such shares.
(continued)
III-21
<PAGE> 24
(7) Mr. Kim Magness, as executor of the Estate of Betsy Magness, is the
beneficial owner of all shares of TCI Group Series A Stock, TCI Group
Series B Stock, Liberty Group Series A Stock and Liberty Group Series
B Stock held of record by the Estate of Betsy Magness. The number of
shares held by Mr. Kim Magness includes 2,105,332 shares of TCI Group
Series A Stock, 6,346,212 shares of TCI Group Series B Stock,
1,582,775 shares of Liberty Group Series A Stock and 1,586,553 shares
of Liberty Group Series B Stock of which Mr. Magness is beneficial
owner as executor.
(8) Assumes the exercise in full of options granted to Mr. Kim Magness in
November, 1994, pursuant to the Director Stock Option Plan, to acquire
50,000 shares of TCI Group Series A Stock and 18,750 shares of Liberty
Group Series A Stock. Options to acquire 20,000 shares of TCI Group
Series A Stock and 7,500 shares of Liberty Group Series A Stock are
currently exercisable.
(9) The number of shares in the table is based upon a Schedule 13G, dated
February 12, 1997, filed by The Equitable Companies Incorporated which
Schedule 13G reflects that said corporation has sole voting power over
27,983,325 shares and shared voting power over 986,125 shares of TCI
Group Series A Stock. No information is given with respect to voting
power over the remaining shares.
(10) The number of shares in the table is based upon a Schedule 13G, dated
February 12, 1997, filed by the Equitable Companies Incorporated which
Schedule 13G reflects that said corporation has sole voting power over
17,960,232 shares and shared voting power over 515,709 shares of
Liberty Group Series A Stock, each as adjusted for the Liberty Group
Stock Dividend. No information is given with respect to voting power
over the remaining shares.
(11) The number of shares in the table is based upon a Schedule 13G, dated
February 14, 1997, filed by The Capital Group Companies, Inc. The
Capital Group Companies, Inc. is the parent holding company of a group
of investment management companies that hold investment power and, in
some cases, voting power over the securities reported in the Schedule
13G. The investment management companies, which include a bank and
several investment advisors provide investment advisory and management
services for their respective clients which include registered
investment companies and institutional accounts. The Capital Group
Companies, Inc. does not have investment power or voting power over
any of the securities reported herein; however, The Capital Group
Companies, Inc., may be deemed to beneficially own such securities.
Capital Research and Management Company, an investment adviser and
wholly owned subsidiary of The Capital Group Companies, Inc., is the
beneficial owner of 29,960,700 shares as a result of acting as
investment adviser to various investment companies. The remaining
shares reported as being beneficially owned by The Capital Group
Companies, Inc. are beneficially owned by other subsidiaries of The
Capital Group Companies, Inc. none of which by itself owns 5% or more
of the outstanding securities.
(continued)
III-22
<PAGE> 25
(12) The number of shares in the table is based upon a Schedule 13G, dated
February 14, 1997, filed by The Capital Group Companies, Inc. The
Capital Group Companies, Inc. is the parent holding company of a group
of investment management companies that hold investment power and, in
some cases, voting power over the securities reported in the Schedule
13G. The investment management companies, which include a bank and
several investment advisors provide investment advisory and management
services for their respective clients which include registered
investment companies and institutional accounts. The Capital Group
Companies, Inc. does not have investment power or voting power over
any of the securities reported herein; however, The Capital Group
Companies, Inc., may be deemed to beneficially own such securities.
Capital Research and Management Company, an investment adviser and
wholly owned subsidiary of The Capital Group Companies, Inc., is the
beneficial owner of 22,612,005 shares as a result of acting as
investment adviser to various investment companies. The remaining
shares reported as being beneficially owned by The Capital Group
Companies, Inc. are beneficially owned by other subsidiaries of The
Capital Group Companies, Inc. none of which by itself owns 5% or more
of the outstanding securities.
(13) The number of shares in the table is based upon a Schedule 13G, dated
as of December 31, 1996, filed by J.P. Morgan & Co. Incorporated
which Schedule 13G reflects that said corporation has sole voting
power over 28,128,668 shares and shared voting power over 525,866
shares of TCI Group Series A Stock. No information is given with
respect to the voting power over the remaining shares.
(14) Based upon the Company's review of the record of shareholders provided
by the Company's transfer agent, The Bank of New York.
(15) Based upon disclosure made by Oppenheimer Capital to the Company.
(b) Security ownership of management. The following table sets
forth, as of March 1, 1997, information with respect to the ownership of TCI
equity securities (TCI Group Series A Stock, TCI Group Series B Stock, Liberty
Group Series A Stock, Liberty Group Series B Stock (other than directors'
qualifying shares), Class B Preferred Stock, Series C Preferred Stock, Series G
Preferred Stock and Series H Preferred Stock), TCIC voting securities (Class A
common stock ("Class A Stock"), Class B common stock ("Class B Stock"), and
Cumulative Exchangeable Preferred Stock, Series A ("Series A Preferred Stock"))
and International voting securities (Series A Tele-Communications
International, Inc. common stock ("TINTA Series A Stock") and Series B
Tele-Communications International, Inc. common stock ("TINTA Series B Stock"))
by all directors and each of the named executive officers of TCI and by all
executive officers and directors of TCI as a group. Shares issuable upon
exercise or conversion of convertible securities 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 beneficially owning 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. The number of TCI Group Series A Stock, TCI Group Series B Stock,
Liberty Group Series A Stock and Liberty Group Series B Stock in the table
include interests of the named directors or executive officers or of members of
the group of directors and executive officers in shares held by the trustee of
TCI's ESPP and shares held by the trustee of UAE's Employee Stock Ownership
Plan for their respective accounts. So far as is known to TCI, the persons
indicated below have sole voting and investment power with respect to the
shares indicated as owned by them except as otherwise stated in the notes to
the table and except for the shares held by the trustee of TCI's ESPP for the
benefit of such person, which shares are voted at the discretion of the
trustee.
(continued)
III-23
<PAGE> 26
<TABLE>
<CAPTION>
Percent Voting
Name of Amount and Nature of Class Power
Title of Class Beneficial Owner of Beneficial Ownership (1)(2)(3) (1)(2)(3)
-------------- ---------------- ----------------------- --------- ---------
<S> <C> <C> <C> <C> <C>
TCI Group Series A Donne F. Fisher, 4,110,681(4) * 20.8%
TCI Group Series B individually and 31,034,936(4) 36.7%
Liberty Series A as co-personal 5,423,725(4) 2.4%
Liberty Series B representative of 7,758,734(4) 36.6%
Class B Pref. the Estate of 129,299(4) 8.0%
Series C Pref. Bob Magness -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 450,000 * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A John C. Malone 2,173,166(5) * 16.9%
TCI Group Series B 25,287,083(5) 29.9%
Liberty Series A 3,929,331(5) 1.7%
Liberty Series B 6,349,270(5) 30.0%
Class B Pref. 306,000(5) 18.9%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 50,000(14) * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A Kim Magness, 2,155,332(6) * 4.7%
TCI Group Series B individually and as 6,864,212(6) 8.1%
Liberty Series A personal represent- 1,666,275(6) *
Liberty Series B ative of the Estate 1,716,053(6) 8.1%
Class B Pref. of Betsy Magness -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 2,000 * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A John W. Gallivan 52,124(7)(8) * *
TCI Group Series B -- --
Liberty Series A 19,546(7)(8) *
Liberty Series B -- --
Class B Pref. 14(7) *
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A -- -- --
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
</TABLE>
(continued)
III-24
<PAGE> 27
<TABLE>
<CAPTION>
Percent Voting
Name of Amount and Nature of Class Power
Title of Class Beneficial Owner of Beneficial Ownership (1)(2)(3) (1)(2)(3)
-------------- ---------------- ----------------------- --------- ---------
<S> <C> <C> <C> <C>
TCI Group Series A Jerome H. Kern 2,050,000(9) * *
TCI Group Series B -- --
Liberty Series A 768,750(9) *
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 50,000(14) * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A Tony Coehlo 152,800(10) * *
TCI Group Series B -- --
Liberty Series A 19,050(10) *
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 1,000 * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A Robert A. Naify 23,688,859(11) 3.8% 1.7%
TCI Group Series B -- --
Liberty Series A 8,883,287(11) 3.7%
Liberty Series B -- --
Class B Pref. 1,000 *
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A -- -- --
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
</TABLE>
(continued)
III-25
<PAGE> 28
<TABLE>
<CAPTION>
Percent Voting
Name of Amount and Nature of Class Power
Title of Class Beneficial Owner of Beneficial Ownership (1)(2)(3) (1)(2)(3)
-------------- ---------------- ----------------------- --------- ---------
<S> <C> <C> <C> <C>
TCI Group Series A J. C. Sparkman 279,472(12) * *
TCI Group Series B -- --
Liberty Series A 112,001(12) *
Liberty Series B -- --
Class B Pref. -- --
Series C. Pref -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A -- -- --
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A Paul A. Gould 127,330(13) * *
TCI Group Series B 243,824 *
Liberty Series A 102,538(13) *
Liberty Series B 39,081 *
Class B Pref. 19,558 1.2%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 95,000(14) * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A Leo J. Hindery, Jr. 1,000,000(15) * *
TCI Group Series B -- --
Liberty Series A 250,000(15) *
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 50,000(15) * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A Fred A. Vierra 581,474(16) * *
TCI Group Series B -- --
Liberty Series A 211,889(16) *
Liberty Series B -- --
Class B Pref. 200 *
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 446,000(17) * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
</TABLE>
(continued)
III-26
<PAGE> 29
<TABLE>
<CAPTION>
Percent Voting
Name of Amount and Nature of Class Power
Title of Class Beneficial Owner of Beneficial Ownership (1)(2)(3) (1)(2)(3)
-------------- ---------------- ----------------------- --------- ---------
<S> <C> <C> <C> <C>
TCI Group Series A Brendan R. Clouston 1,986,498(18) * *
TCI Group Series B 230 *
Liberty Series A 332,463(18) *
Liberty Series B 57 *
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A -- -- --
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A Peter R. Barton 352,566(19) * *
TCI Group Series B 42 *
Liberty Series A 1,615,221(19)(20) *
Liberty Series B 10 *
Class B Pref. 1,374 *
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 1,000 * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A Larry E. Romrell 773,529(21) * *
TCI Group Series B 588 *
Liberty Series A 293,884(21) *
Liberty Series B 147 *
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A -- -- --
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
TCI Group Series A All directors and 42,264,117(4)(5)(6)(7)(8)(11)(22) 6.7% 43.9%
TCI Group Series B executive officers 63,435,631(4)(5)(6)(8) 74.9%
Liberty Series A as a group 24,479,261(4)(5)(6)(7)(8)(11)(22) 10.1%
Liberty Series B (20 persons) 15,864,531(4)(5)(6)(8) 74.9%
Class B Pref. 459,277(4)(5)(7) 28.4%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 1,252,200(23) 1.2% *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
</TABLE>
_________________________
(continued)
III-27
<PAGE> 30
* Less than one percent.
(1) See note 1 to the table in Item 12(a).
(2) Based on 106,740,873 shares of TINTA Series A Stock and 11,700,000
shares of TINTA Series B Stock outstanding on March 1, 1997.
(3) Based on 811,655 shares of Class A Stock, 94,447 shares of Class B
Stock and 4,600,000 shares of Series A Preferred Stock outstanding on
March 1, 1997.
(4) See notes (2) and (3) to the table in Item 12(a).
(5) See notes (4) through (6) to the table in Item 12(a).
(6) See notes (7) and (8) to the table in Item 12(a).
(7) Includes 1,524 shares of TCI Group Series A Stock, 571 shares of
Liberty Group Series A Stock and 14 Shares of Class B Preferred Stock
held by Mr. Gallivan's wife. Also, assumes the exercise in full of
options granted, pursuant to the Director Stock Option Plan, to
acquire 50,000 shares of TCI Group Series A Stock and 18,750 shares of
Liberty Group Series A Stock. Options to acquire 20,000 shares of TCI
Group Series A Stock and 7,500 shares of Liberty Group Series A Stock
are currently exercisable.
(8) The number of shares in the table does not include any shares held by
Kearns, of which Mr. Gallivan is an officer.
(9) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights to acquire 1,500,000 shares of TCI Group
Series A Stock and 562,500 shares of Liberty Group Series A Stock.
Options to acquire 1,100,000 shares and 412,500 shares of TCI Group
Series A Stock and Liberty Group Series A Stock, respectively, are
currently exercisable and the remainder vest and become exercisable
evenly over one year. The options expire on November 12, 1998.
Additionally, assumes the exercise in full of stock options granted in
tandem with stock appreciation rights to acquire 500,000 shares of TCI
Group Series A Stock and 187,500 shares of Liberty Group Series A
Stock. Options to acquire 100,000 shares of TCI Group Series A Stock
and 37,500 shares of Liberty Group Series A Stock are currently
exercisable. Also assumes the exercise in full of stock options
granted in November 1994, pursuant to the Director Stock Option Plan,
to acquire 50,000 shares of TCI Group Series A Stock and 18,750 shares
of Liberty Group Series A Stock. Options to acquire 20,000 shares of
TCI Group Series A Stock and 7,500 shares of Liberty Group Series A
Stock are currently exercisable.
(10) Assumes the exercise in full of stock options granted to acquire
50,000 shares of TCI Group Series A Stock and 18,750 shares of Liberty
Group Series A Stock. Options to acquire 20,000 shares of TCI Group
Series A Stock and 7,500 shares of Liberty Group Series A Stock are
currently exercisable. Additionally assumes the exercise in full of
stock options granted in tandem with stock appreciation rights granted
to acquire 100,000 shares of TCI Group Series A Stock. Options to
acquire 20,000 shares of TCI Group Series A Stock are currently
exercisable.
(continued)
III-28
<PAGE> 31
(11) Mr. Robert Naify received notes, which are currently convertible into
22,446,926 shares of TCI Group Series A Stock and 8,417,597 shares of
Liberty Group Series A Stock, as partial consideration for the sale to
TCI of the stock owned by him in UACI. Mr. Naify is also a
co-trustee, along with Mr. Naify's brother, Marshall, and their
sister, of a trust for the benefit of Marshall which holds additional
notes convertible into 341,606 shares of TCI Group Series A Stock and
128,102 shares of Liberty Group Series A Stock. The number of shares
indicated as held by Mr. Naify assumes the conversion of these notes.
Also, assumes the exercise in full of options granted on November
1994, pursuant to the Director Stock Option Plan, to acquire 50,000
shares of TCI Group Series A Stock and 18,750 shares of Liberty Group
Series A Stock. Options to acquire 20,000 shares of TCI Group Series
A Stock and 7,500 shares of Liberty Group Series A Stock are currently
exercisable.
(12) Assumes the exercise in full of options granted in tandem with stock
appreciation rights to acquire 100,000 shares of TCI Group Series A
Stock and 37,500 shares of Liberty Group Series A Stock. All such
options are currently exercisable. Also assumes the exercise in full
of options granted in December 1996, pursuant to the Director Stock
Option Plan, to acquire 50,000 shares of TCI Group Series A Stock and
18,750 shares of Liberty Group Series A Stock. None of these options
are exercisable until December 13, 1997.
(13) Assumes the exercise in full of options granted in December 1996,
pursuant to the Director Stock Option Plan, to acquire 50,000 shares
of TCI Group Series A Stock and 18,750 shares of Liberty Group Series
A Stock. None of these options are exercisable until December 13,
1997.
(14) Assumes the exercise in full of options granted in April, 1996,
pursuant to an International option plan for its directors who are not
employees, to acquire 50,000 shares of TINTA Series A Stock. None of
the options are exercisable until April 11, 1997.
(15) Assumes the exercise in full of options granted in tandem with stock
appreciation rights in February of 1997 to acquire 1,000,000 shares of
TCI Group Series A Stock and 250,000 shares of Liberty Group Series A
Stock. None of the options are exercisable until February of 1998.
Assumes the exercise in full of options granted in tandem with stock
appreciation rights in February of 1997 to acquire 50,000 shares of
TINTA Series A Stock. None of the options are exercisable until
February of 1998.
(16) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November 1992 to acquire 100,000 shares
of TCI Group Series A Stock and 37,500 shares of Liberty Group Series
A Stock. Options to acquire 80,000 shares of TCI Group Series A Stock
and 30,000 shares of Liberty Group Series A Stock are currently
exercisable. Also assumes the exercise in full of stock options
granted in tandem with stock appreciation rights in November of 1993
to acquire 100,000 shares of TCI Group Series A Stock and 37,500
shares of Liberty Group Series A Stock. Options to acquire 75,000
shares of TCI Group Series A Stock and 28,125 shares of Liberty Group
Series A Stock are currently exercisable. Additionally assumes the
exercise in full of stock options granted in tandem with stock
appreciation rights in November of 1994 to acquire 200,000 shares of
TCI Group Series A Stock and 75,000 shares of Liberty Group Series A
Stock. Options to acquire 80,000 shares of TCI Group Series A Stock
and 30,000 shares of Liberty Group Series A Stock are currently
exercisable.
(17) Assumes the exercise in full of options granted in tandem with stock
appreciation rights in December of 1995 to acquire 400,000 shares of
TINTA Series A Stock. Options to acquire 80,000 shares of TINTA
Series A Stock are currently exercisable. Additionally assumes the
vesting in full of 15,000 TINTA Series A restricted stock. None of the
stock is currently vested.
(continued)
III-29
<PAGE> 32
(18) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 300,000
shares of TCI Group Series A Stock and 112,500 shares of Liberty Group
Series A Stock. Options to acquire 200,000 shares of TCI Group Series
A Stock and 75,000 shares of Liberty Group Series A Stock are
currently exercisable. Additionally assumes the exercise in full of
stock options granted in tandem with stock appreciation rights in
November of 1993 to acquire 375,000 shares of TCI Group Series A Stock
and 140,625 shares of Liberty Group Series A Stock. Options to
acquire 250,000 shares of TCI Group Series A Stock and 93,750 shares
of Liberty Group Series A Stock are currently exercisable. Also
assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1994 to acquire 200,000
shares of TCI Group Series A Stock and 75,000 shares of Liberty Group
Series A Stock. Options to acquire 80,000 shares of TCI Group Series
A Stock and 30,000 shares of Liberty Group Series A Stock are
currently exercisable. Assumes the exercise in full of stock options
granted in tandem with stock appreciation rights in December of 1995
to purchase 1,000,000 shares of TCI Group Series A Stock. Options to
acquire 200,000 shares of TCI Group Series A Stock are currently
exercisable. Additionally assumes the vesting in full of 100,000 TCI
Group Series A restricted stock. None of the stock is currently
vested.
(19) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in December of 1995 to purchase 200,000
shares of TCI Group Series A Stock and 75,000 shares of Liberty Group
Series A Stock. Options to acquire 80,000 shares of TCI Group Series
A Stock and 30,000 shares of Liberty Group Series A Stock are
currently exercisable.
(20) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in December of 1995 to purchase 1,500,000
Liberty Group Series A Stock. Options to acquire 300,000 shares of
Liberty Group Series A Stock are currently exercisable.
(21) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 100,000
shares of TCI Group Series A Stock and 37,500 shares of Liberty Group
Series A Stock. Options to acquire 80,000 shares of TCI Group Series
A Stock and 30,000 shares of Liberty Group Series A Stock are
currently exercisable. Also assumes the exercise in full of stock
options granted in tandem with stock appreciation rights in October of
1993 to acquire 100,000 shares of TCI Group Series A Stock and 37,500
shares of Liberty Group Series A Stock. Options to purchase 75,000
shares of TCI Group Series A Stock and 28,125 shares of Liberty Group
Series A Stock are currently exercisable. Additionally assumes the
exercise in full of stock options granted in tandem with stock
appreciation rights in November of 1994 to acquire 200,000 shares of
TCI Group Series A Stock and 75,000 shares of Liberty Group Series A
Stock. Options to purchase 80,000 shares of TCI Group Series A Stock
and 30,000 shares of Liberty Group Series A Stock are currently
exercisable. Further assumes the exercise in full of options granted
in tandem with stock appreciation rights in December of 1995 to
acquire 300,000 shares of TCI Group Series A Stock and 112,500 shares
of Liberty Group Series A Stock. Options to purchase 60,000 shares of
TCI Group Series A Stock and 22,500 shares of Liberty Group Series A
Stock are currently exercisable. Additionally assumes the vesting in
full of 40,000 shares of TCI Group Series A restricted stock and
15,000 shares of Liberty Group Series A restricted stock. None of the
stock is currently vested.
(continued)
III-30
<PAGE> 33
(22) Certain executive officers and directors of TCI (10 persons, including
Messrs. Malone, Vierra, Romrell, Clouston and Fisher as co-personal
representative of the Estate of Bob Magness) hold options which were
granted in tandem with stock appreciation rights in November of 1992,
to acquire an aggregate of 3,025,000 shares of TCI Group Series A
Stock and an aggregate of 1,134,375 shares of Liberty Group Series A
Stock at purchase prices of $10.75 per shares and $11.16 per share,
respectively. Options to acquire 2,380,000 shares of TCI Group Series
A Stock and 892,500 shares of Liberty Group Series A Stock are
currently exercisable.
Additionally certain executive officers (8 persons including Messrs.
Vierra, Romrell and Clouston) hold stock options granted in tandem
with stock appreciation rights in October and November of 1993 to
acquire an aggregate of 1,100,000 shares of TCI Group Series A Stock
and an aggregate of 412,500 shares of Liberty Group Series A Stock at
purchase prices of $10.75 per share and $11.16 per share,
respectively. Options to acquire 793,750 shares of TCI Group Series A
Stock and 297,656 shares of Liberty Group Series A Stock are currently
exercisable.
Also, certain executive officers and directors (10 persons including
Messrs. Barton, Romrell, Fisher, Vierra and Clouston) hold stock
options which were granted in tandem with stock appreciation rights in
November of 1994 to acquire an aggregate of 1,450,000 shares of TCI
Group Series A Stock and an aggregate of 543,750 shares of Liberty
Group Series A Stock at purchase prices of $14.19 per share and $14.67
per share, respectively. Options to acquire 580,000 shares of TCI
Group Series A Stock and 217,500 shares of Liberty Group Series A
Stock are currently exercisable.
Additionally, certain executive officers and directors (11 persons,
including Messrs. Malone, Kern, Clouston, Coelho, Romrell and Fisher
as co-personal representative of the Estate of Bob Magness) hold stock
options which were granted, pursuant to the 1994 Plan and the 1996
Plan, in tandem with stock appreciation rights in December of 1995 to
acquire an aggregate of 4,650,000 shares of TCI Group Series A Stock
at $14.62 per share. Options to purchase 930,000 shares of TCI Group
Series A Stock are currently exercisable.
Additionally, certain executive officers and directors (6 persons,
including Messrs. Fisher (as co-personal representative of the Estate
of Bob Magness), Malone, Kern, Barton and Romrell) hold stock
options which were granted, pursuant to the 1994 Plan and the 1996
Plan, in tandem with stock appreciation rights in December of 1995 to
acquire an aggregate of 2,662,500 shares of Liberty Group Series A
Stock at a purchase price of $16.00 per share. Options to acquire
532,500 shares of Liberty Group Series A Stock are currently
exercisable.
Also, certain executive officers (7 persons, including Messrs.
Clouston and Romrell) hold an aggregate of 240,000 shares of TCI
Group Series A restricted stock. None of the shares are currently
vested. Certain executive officers (2 persons, including Mr. Romrell)
hold an aggregate of 30,000 shares of Liberty Group Series A
restricted stock. None of the shares are currently vested.
Mr. Kern holds options to acquire 1,500,000 shares of TCI Group Series
A Stock and 562,500 shares of Liberty Group Series A Stock as
described in note 9 above. Mr. Sparkman holds options to acquire
100,000 shares of TCI Group Series A Stock and 37,500 shares of
Liberty Group Series A Stock as described in note 12 above. Mr.
Hindery holds options to acquire 1,000,000 shares of TCI Group Series
A Stock and 250,000 Liberty Group Series A Stock as described in note
15 above.
(continued)
III-31
<PAGE> 34
Pursuant to the Director Stock Option Plan, Messrs. Gallivan, Kim
Magness, Kern, Coelho and Naify hold options to purchase an aggregate
of 250,000 shares of TCI Group Series A Stock and an aggregate of
93,750 shares of Liberty Group Series A Stock at purchase prices of
$14.19 per share and $14.67 per share, respectively. Options to
purchase 100,000 shares of TCI Group Series A Stock and 37,500 shares
of Liberty Group Series A Stock are currently exercisable. Mr. Fisher
holds an option to purchase 50,000 shares of TCI Group Series A Stock
and 18,750 shares of Liberty Group Series A Stock at purchase prices
of $16.99 and $16.83 per share, respectively. Options to purchase
10,000 shares of TCI Group Series A Stock and 3,750 shares of Liberty
Group Series A Stock are currently exercisable. Mr. Gould and Mr.
Sparkman hold options to purchase an aggregate of 100,000 shares of
TCI Group Series A Stock and 37,500 shares of Liberty Group Series A
Stock at purchase prices of $12.25 and $17.50 per share, respectively.
None of these options are exercisable until December 13, 1997.
All of the aforementioned options with tandem stock appreciation
rights, options and restricted stock are reflected in this table
assuming the exercise or vesting in full of such securities.
(23) Two executive officers, including Mr. Vierra, hold options which were
granted in tandem with stock appreciation rights in December of 1995
to acquire an aggregate of 450,000 shares of TINTA Series A Stock.
Options to acquire 90,000 shares of TINTA Series A Stock are currently
exercisable. Additionally Mr. Vierra holds 15,000 shares of TINTA
Series A restricted stock. None of the shares are currently vested.
Additionally, one executive officer holds options granted in tandem
with stock appreciation rights in December of 1995 by TCI to acquire
50,000 shares of its TINTA Series A Stock. Options to acquire 10,000
shares of TINTA Series A Stock are currently exercisable Messrs.
Malone, Kern and Gould hold options to purchase an aggregate 150,000
shares of TINTA Series A Stock. None of the options are exercisable
until April 11, 1997. Mr. Hindery holds an option to acquire 50,000
shares of TINTA Series A Stock as described in note 15 above.
No equity securities in any subsidiary of the Company, other than
directors' qualifying shares, are owned by any of the Company's executive
officers or directors, except for those shares of TINTA Series A Stock
reflected in the tables in Item 12 and except that Mr. Fisher, a director of
the Company, as co-personal representative of the Estate of Bob Magness, is
deemed to have beneficial ownership of 944 shares of WestMarc Series C
Cumulative Compounding Redeemable Preferred Stock; Mr. Kim Magness, a director
of the Company, owns 31 shares of WestMarc Series C Cumulative Compounding
Redeemable Preferred Stock; Dr. Malone, a director and an executive officer of
the Company, owns, as trustee for his children, 68 shares of WestMarc Series C
Cumulative Compounding Redeemable Preferred Stock; Mr. Larry Romrell, an
officer of the Company, owns 103 shares of WestMarc Series C Cumulative
Compounding Redeemable Preferred Stock and Mr. Jerome Kern, a director of the
Company, is deemed to have beneficial ownership over 116 shares of WestMarc
Series C Cumulative Compounding Redeemable Preferred Stock owned by his wife,
Diane D. Kern. Mr. Clouston, an executive officer of the Company, pursuant to
a Restricted Stock Award Agreement, owns 62 shares of WestMarc Series C
Cumulative Compounding Redeemable Preferred Stock. (See Item 11(a) for
additional information regarding Mr. Clouston's ownership of such preferred
stock.) Mr. Clouston was granted Telephony Options representing 1.0% of the
Company's common equity in TCI Telephony Services, Inc., Wireline Options
representing 1.0% of the Company's common equity in TCI Wireline, Inc. and
Internet Options representing 1.0% of the Company's common equity in TCI.NET,
Inc. Mr. Romrell was also granted Internet Options representing 1.0% of the
Company's common equity in TCI.NET, Inc. (See Item 11(b) for additional
information regarding these option grants). Mr. Coelho owns 1,500 shares of ETC
w/tci, Inc. (representing 15% of the common equity outstanding) and under
certain circumstances will be entitled to increase his percentage ownership to
up to 20% (see Item 13(a) for additional information).
(continued)
III-32
<PAGE> 35
(c) Change of control. The Company knows of no arrangements,
including any pledge by any person of securities of the Company, the operation
of which may at a subsequent date result in a change in control of the Company.
Item 13. Certain Relationships and Related Transactions.
(a) Transactions with management and others.
Pursuant to a Restricted Stock Award Agreement dated December 10,
1992, the Company transferred to Mr. Fisher, a director and until January 1,
1996, an officer of the Company, 124.03 shares (having a liquidation value of
$4 million) of WestMarc Series C Cumulative Compounding Preferred Stock owned
by the Company, subject to forfeiture in the event of certain circumstances
from the date of grant through February 1, 2002, with the number of shares
subject to forfeiture decreasing by 10% on February 1 of each year. Upon Mr.
Fisher's resignation as an officer of the Company effective January 1, 1996, he
acquired vested title to 37.209 of such shares of WestMarc Series C Cumulative
Compounding Preferred Stock and forfeited the balance of such shares. As
described below, effective as of January 31, 1996, the 37.209 vested shares of
WestMarc Series C Cumulative Compounding Preferred Stock owned by Mr. Fisher
were used by one of his affiliates as the consideration for the purchase of
certain partnership interests held by subsidiaries of the Company.
In 1989, ECP Holdings, Inc., a subsidiary of the Company ("ECP"), and
Halcyon Communications, Inc., an Oklahoma corporation which is not an affiliate
of the Company ("HCI"), formed Halcyon Communications Partners, an Oklahoma
general partnership ("HCP"), for the purpose of acquiring, owning and operating
cable television systems. In 1994, HCI and American Televenture of
Minersville, Inc., a subsidiary of the Company ("ATM"), as general partners,
and three other subsidiaries of the Company, TCI Cablevision of Nevada, Inc.
("TCINV"), TEMPO Cable, Inc. ("Tempo Cable"), and TCI Cablevision of Utah, Inc.
("TCIU") as limited partners, formed Halcyon Communications Limited
Partnership, an Oklahoma limited partnership ("HCLP"), for the purpose of
acquiring, owning and operating certain other cable television systems.
Effective as of January 31, 1996, Fisher Communication Associates, L.L.C., a
Colorado limited liability company ("Fisher Communications") controlled by Mr.
Donne F. Fisher, a director (and, until January 1, 1996, an executive officer)
of the Company purchased one-third of ECP's partnership interest in HCP and
one-third of the partnership interest of each of ATM, TCINV, TCIU and Tempo
Cable in HCLP, a ten-year option to purchase the balance of ECP's partnership
interest in HCP and ten-year options to purchase the balance of the partnership
interest in HCLP of each of ATM, TCINV, TCIU and Tempo Cable. The purchase
price for each such partnership interest purchased by Fisher Communications
consisted of shares of Series C Cumulative Compounding Preferred Stock of
WestMarc Communications, Inc., a subsidiary of the Company (the "WestMarc
Shares"). The purchase price for each such option acquired by Fisher
Communications was $100 in cash, and each such option is exercisable for cash
in a specified amount. The number of WestMarc Shares delivered to each of the
Company's subsidiaries named above as consideration for one-third of its
partnership interest in HCP or HCLP, and the cash exercise price which Fisher
Communications would be required to pay in order to exercise the options
granted by those subsidiaries, are as follows:
<TABLE>
<CAPTION>
Cash Exercise Price
Number of WestMarc Shares Of Option
------------------------- -------------------
<S> <C> <C>
ECP 14.8836 $1,200,000
ATM 0.5224 42,120
TCINV 2.8911 233,100
TCIU 4.3557 351,180
Tempo Cable 14.5562 1,173,600
------- ----------
37.2090 $3,000,000
======= ==========
</TABLE>
(continued)
III-33
<PAGE> 36
The WestMarc Shares are not publicly traded. The dividend,
liquidation, and redemption features of the WestMarc Shares are determined by
reference to "Liquidation Price," which is defined, per share, as the sum of
(i) $32,250 plus (ii) an amount equal to all dividends which accrued during any
quarterly dividend period and were not paid in full at the end of that period
or subsequently.
The Company has entered into an agreement in principle to acquire (i)
all of the partnership interests (other than a .001 percent general partner
interest) in InterMedia Capital Management, a California limited partnership
("ICM I"), (ii) all of the partnership interests (other than a .001 percent
general partner interest and a .001 percent special limited partner interest)
in InterMedia Capital Management III, L.P. ("ICM III"), and (iii) all of the
partnership interests (other than a .001 percent general partner interest and a
.001 percent special limited partner interest) in InterMedia Capital Management
IV, L.P. ("ICM IV") for total consideration of 2,545,455 shares (the "TCI
Shares") of the Company's TCI Group Series B Stock, $10,000,000 in cash
(subject to certain adjustments) and assumption of certain liabilities totaling
approximately $11,300,000. The partnership interests in ICM IV to be acquired
by the Company were acquired by the sellers of such interests in January and
July 1996 for $21,750. The other interests to be acquired by the Company were
acquired by the sellers of those interests before April 1995. Mr. Hindery, an
executive officer of the Company, is the beneficial owner of a 66.3% interest in
ICM I, a 94.0% interest in ICM III, and a 81.1% interest in ICM IV, and Mr.
Fisher, a director of the Company, is the beneficial owner of a 1.6% interest in
ICM IV. The Company also has agreed in principle that if InterMedia Partners
VI, L.P. ("IP-VI") is formed and fully funded on terms and conditions agreed by
the Company (the "IP-VI Effective Date"), the Company will acquire all of the
partnership interests (other than a .001 percent general partner interest) of
InterMedia Capital Management VI, L.P. ("ICM-VI") in exchange for a number of
shares of Tele-Communications, Inc. Series B common stock (the "Contingent TCI
Shares") determined by dividing $5,000,000 by the average of the closing prices
of the corresponding Tele-Communications, Inc. Series A common stock for the 20
trading days preceding the IP VI Effective Date and $1,000,000 in cash. Mr.
Hindery is the beneficial owner of 100% of ICM-VI and acquired his interest in
ICM-VI in July of 1996 for $10,000. Mr. Fisher will be entitled to a consulting
fee in the approximate amount of $400,000 in cash and 31,030 shares of TCI Group
Series B Stock upon completion of the aforementioned transactions involving ICM
I, ICM III and ICM IV and in connection with the formation of IP VI
(collectively, the "InterMedia Transactions"). Mr. Peter Kern, son of Mr.
Jerome H. Kern, a director of the Company, will be entitled to an advisory fee
in an amount to be determined upon completion of the InterMedia Transactions.
These fees will be paid by the entities receiving payments from the Company in
the InterMedia Transactions. Dr. Malone, an executive officer and director of
the Company, will have the power to direct the voting of the TCI Shares and, if
they are issued, the Contingent TCI Shares pursuant to a voting agreement, and
Dr. Malone also will have a right of first refusal with respect to any proposed
transfer of the TCI Shares and, if they are issued, the Contingent TCI Shares.
That right of first refusal may be exercised by Dr. Malone either by the payment
of cash or, subject to certain exceptions, by exchanging shares of TCI Group
Series A Stock for the TCI Shares or Contingent TCI Shares to be acquired by
him. If not exercised by Dr. Malone, the right of first refusal may be
exercised by the Company.
Completion of the InterMedia Transactions is subject to various
conditions, including execution of definitive agreements, receipt of consents
from governmental authorities and other third parties.
(continued)
III-34
<PAGE> 37
The interests of Messrs. Hindery, Fisher and Malone in the InterMedia
Transactions were disclosed to the Company's Board of Directors which approved
the InterMedia Transactions pursuant to a vote in which Messrs. Fisher, Kern
and Malone abstained from voting.
On April 1, 1996, Dr. Malone sold 450,000 shares of TINTA Series A
Stock to the Company for a total purchase price of $9,787,500. Such shares
were owned of record and beneficially by Dr. Malone. Dr. Malone purchased the
shares of TINTA Series A Stock in the initial public offering of the TINTA
Series A Stock at a price of $16.00 per share. Dr. Malone sold such shares to
the Company at a price of $21.75 per share, the market price for the TINTA
Series A Stock as of the close of business on April 1, 1996.
Effective January 1, 1996, Mr. Fisher resigned as an executive officer
of the Company and the Company and Mr. Fisher entered into a consulting
agreement. During the term of the consulting agreement, which extends until
January 1, 2006 unless sooner terminated as provided in the agreement, Mr.
Fisher is obligated to provide consulting services for up to 70 hours per month
and 700 hours during any period of twelve consecutive months as and if
requested by the Company's chief executive officer. Whether or not his
services are requested, Mr. Fisher will receive compensation as follows: (i)
during the period from January 1, 1996 through December 31, 2000, inclusive,
the rate of $475,000 per annum, increased annually by the amount of $25,000 per
annum in each successive year of such period commencing January 1, 1997 and
(ii) from and after January 1, 2001 throughout the balance of the Term, the
rate of $500,000 per annum. If he dies before the end of the term of his
consulting services, the Company is required to pay his designated
beneficiaries a lump sum equal to one year's compensation at the then-current
rate. During the term of the agreement, Mr. Fisher will continue to be
entitled to participate in, and to be accorded all rights and benefits under,
all group insurance policies (including, but not limited to, all disability,
life, health and medical insurance policies) maintained by the Company for the
benefit of its employees. The consulting agreement also provides for Mr.
Fisher's personal use of the Company's aircraft and flight crew, limited to an
aggregate value of $35,000 per year.
Under a prior employment agreement between Mr. Fisher and the Company,
a portion of Mr. Fisher's salary was deferred, and the deferred amounts, plus
interest at an annual rate of 13%, were to be paid to him in 240 monthly
installments which would have commenced on the date of termination of his
full-time employment with the Company. The consulting agreement provides for
such payment to be made to Mr. Fisher in 240 monthly installments of $21,425.92
each, without interest, commencing on January 1, 2001, with any remaining
payments due after Mr. Fisher's death being paid in a lump-sum to his
designated beneficiaries. Similarly, Mr. Fisher's 1992 employment agreement
with the Company provided for Mr. Fisher to receive, commencing on termination
of his employment, 240 consecutive monthly salary continuation payments of
$6,250, increased at the rate of 12% per annum, compounded annually from
January 1, 1988 to the date of such termination. The consulting agreement
provides that such salary continuation payments will be made in 240 consecutive
monthly payments of $27,271.84 each, without interest, commencing on January 1,
2001, with any remaining payments due after Mr. Fisher's death being made to
his designated beneficiaries.
(continued)
III-35
<PAGE> 38
Mr. Fisher's consulting agreement provides that during its term, Mr.
Fisher will not be connected in any manner specified with any entity which
competes in a material respect with the business of the Company; however, he
may own securities of any corporation listed on a national securities exchange
or quoted in the Nasdaq Stock Market to the extent of an aggregate of 5% of the
amount of such securities outstanding.
Effective March 11, 1995, Mr. Sparkman resigned as an executive
officer of the Company and the Company and Mr. Sparkman entered into a
consulting agreement. During the term of the consulting agreement, which
extends until September 30, 2002 unless sooner terminated as provided in the
agreement, Mr. Sparkman is required to provide consulting services for no more
than 700 hours per year as and if requested by the Company's chief executive
officer. Whether or not his services are requested, Mr. Sparkman will receive
compensation as follows: (i) during the period from March 11, 1995 through
December 31, 1997, a sum equal to the rate of $773,000 per annum and (ii) from
and after January 1, 1998 throughout the balance of the term, the rate of
$500,000 per annum. If he dies before the end of the term of his consulting
services, the Company is required to pay his designated beneficiaries a lump
sum equal to one year's compensation at the then-current rate. During the term
of the agreement, Mr. Sparkman will continue to be entitled to participate in,
and to be accorded all rights and benefits under, all group insurance policies
(including, but not limited to, all disability, life, health and medical
insurance policies) maintained by the Company for the benefit of its employees.
Under a prior employment agreement between Mr. Sparkman and the
Company, a portion of Mr. Sparkman's salary was deferred, and the deferred
amounts, plus interest at an annual rate of 8%, were to be paid to him in 120
monthly installments which would have commenced on the date of termination of
his full-time employment with the Company. The consulting agreement provides
for such payment to be made to Mr. Sparkman in 120 monthly installments of
$7,294.32 each, without interest, commencing on January 1, 1998, with any
remaining payments due after Mr. Sparkman's death being paid in a lump-sum to
his designated beneficiaries. Under Mr. Sparkman's 1993 employment agreement
with the Company, a portion of Mr. Sparkman's salary was deferred, and the
deferred amounts, plus interest at an annual rate of 13%, were to be paid to
him in 240 monthly installments which would have commenced on the date of
termination of his full-time employment with the Company. The consulting
agreement provides for such payment to be made to Mr. Sparkman in 240 monthly
payments of $15,116.03 each, without interest, commencing on January 1, 1998,
with any remaining payments due under Mr. Sparkman' death being paid in a
lump-sum to his designated beneficiaries. Similarly, Mr. Sparkman's 1993
employment agreement with the Company provided for Mr. Sparkman to receive,
commencing on termination of his employment, 240 consecutive monthly salary
continuation payments of $6,250, increased at the rate of 12% per annum,
compounded annually from January 1, 1988 to the date of such termination. The
consulting agreement provides that such salary continuation payments will be
made in 240 consecutive monthly payments of $19,411.55 each, without interest,
commencing on January 1, 1998, with any remaining payments due after Mr.
Sparkman's death being made to his designated beneficiaries.
Mr. Sparkman's consulting agreement provides that during its term, Mr.
Sparkman will not be connected in any manner specified with any entity which
competes in a material respect with the business of the Company; however, he
may own securities of any corporation listed on a national securities exchange
or quoted in the Nasdaq Stock Market to the extent of an aggregate of 5% of the
amount of such securities outstanding.
(continued)
III-36
<PAGE> 39
The Company entered into an employment agreement with Tony Coelho,
which was effective as of October 1, 1995, with respect to the terms of Mr.
Coelho's employment as the Chairman of the Board and Chief Executive Officer of
the education business which is now conducted by the Company's ETC w/tci, Inc.
subsidiary ("ETC w/tci"). The employment agreement runs through September 30,
2000. Under the terms of the employment agreement, Mr. Coelho is entitled to
an annual base salary of not less than $400,000 as well as benefits
commensurate with similarly situated executives of the Company. In the event
that Mr. Coelho's employment is terminated by the Company other than as a
result of death or for cause (as defined in the employment agreement), Mr.
Coelho will be entitled to receive all remaining compensation to which he would
have been entitled through the term of his employment agreement. In connection
with his employment, Mr. Coelho was granted options to acquire 100,000 shares
of TCI Group Series A Stock at an exercise price of $14.62 per share and 10,000
shares of SATCo Series A Stock at an exercise price of $23.76 per share subject
to customary terms and was granted 1,500 shares of common stock of ETC w/tci
(which at the time of such grant represented 15% of the common equity
outstanding of ETC w/tci) at a price of $0.10 per share. Under certain
circumstances, Mr. Coelho will be entitled to increase his percentage ownership
in ETC w/tci to up to 20%. The terms of the agreements under which Mr. Coelho
will acquire such additional equity interest in ETC w/tci will, among other
rights, afford him the right at any time after September 30, 2000 to require
the Company to purchase his equity interest at fair market value and require
the Company to purchase his entire equity interest at fair market value on
September 30, 2001.
The Company and Mr. Brendan Clouston have entered into a letter
agreement, as amended (the "Agreement"). Mr. Clouston has notified the Company
that a financial institution may lend him certain amounts of money (the
"Loan"), which Loan may be secured in whole or in part, by the Agreement.
Pursuant to the Agreement, TCI agrees to purchase from Mr. Clouston, at his
request or by the request of such financial institution upon a default as
provided under the relevant agreements evidencing the Loan, all, but not less
than all of Mr. Clouston's grants of options and restricted stock awards as of
April 7, 1997 (the "Grants") (as previously described in Items 11 and 12) at a
price of $10 million. The $10 million amount shall decrease upon the exercise of
any options included in the Grants, by the amount of the difference between the
exercise price and the fair market value of the exercised options at the
respective time of such exercise and by the fair market value of any of the
restricted stock awards that vest at the time of such vesting. Additionally, if
Mr. Clouston will apply the amounts referred to in the previous sentence, less
only applicable taxes, to prepay the Loan. The Agreement expires on March 31,
2002.
The Company believes that the foregoing business dealings with
management during 1996 were based upon terms no less advantageous to the
Company than those which would be available in dealing with unaffiliated
persons.
(b) Certain business relationships
John Malone is currently the Chief Executive Officer, Chairman of the
Board and a director of TCI and is also the Chairman of the Board and a
director of Satellite. Dr. Malone is also a principal stockholder of both TCI
and Satellite.
(continued)
III-37
<PAGE> 40
Since the consummation of the Distribution, Satellite and TCI have
operated independently, and neither has any stock ownership, beneficial or
otherwise, in the other. However, for the purposes of governing certain of the
ongoing relationships between Satellite and TCI after the Distribution, and to
provide mechanisms for an orderly transition, Satellite and TCI have entered
into various agreements, including the "Reorganization Agreement," the
"Transition Services Agreement," an amendment to TCI's existing "Tax Sharing
Agreement," the "Indemnification Agreements," the "Trade Name and Service Mark
Agreement" and the "Share Purchase Agreement," all of which are described
below. In addition, TCIC continues to provide installation, maintenance,
retrieval and other customer fulfillment services for certain customers of
Satellite, pursuant to the "Fulfillment Agreement," and entered into the "TCIC
Credit Facility" with Satellite, both of which are described below.
Reorganization Agreement. On the Distribution date, TCI,
TCIC and a number of other TCI subsidiaries, including Satellite, entered into
the Reorganization Agreement, which provided for, among other things, the
principal corporate transactions required to effect the Distribution, the
conditions thereto and certain provisions governing the relationship between
Satellite and TCI with respect to and resulting from the Distribution.
Certain of Satellite's assets relating to the digital satellite
business were historically owned by subsidiaries of TCI other than Satellite
and its predecessors. These assets include the capital stock of Tempo
Satellite, Inc. ("Tempo") and the 20.86% partnership interests in PRIMESTAR
Partners, L.P. ("PRIMESTAR Partners"). The Reorganization Agreement provided
for, among other things, the transfer of these assets to Satellite and for the
assumption by Satellite of related liabilities. No consideration was payable by
Satellite for these transfers, except that two subsidiaries of Satellite
purchased TCI's partnership interests in PRIMESTAR Partners for consideration
payable by delivery of promissory notes issued by such subsidiaries (the "K-1
Notes"), which promissory notes were assumed by TCI on the Distribution date in
the form of a capital contribution to Satellite. The Reorganization Agreement
also provides for certain cross-indemnities designed to make Satellite
financially responsible for all liabilities relating to the digital satellite
business prior to the Distribution, as well as for all liabilities incurred by
Satellite after the Distribution, and makes TCI financially responsible for all
potential liabilities of Satellite which are not related to the digital
satellite business, including, for example, liabilities arising as a result of
Satellite's having been a subsidiary of TCI. The Reorganization Agreement
further provided for each of Satellite and TCI to preserve the confidentiality
of all confidential or proprietary information of the other party, for five
years following the Distribution, subject to customary exceptions, including
disclosures required by law, court order or government regulation.
(continued)
III-38
<PAGE> 41
Pursuant to the Reorganization Agreement, on the Distribution date,
Satellite issued to TCIC a note in the principal amount of $250,000,000 (the
"Satellite Note") representing a portion of Satellite's intercompany balance
owed to TCIC on such date. See "-TCIC Credit Facility" below. Pursuant to the
Reorganization Agreement, the remainder of Satellite's intercompany balance
owed to TCIC on the Distribution date (other than certain advances to Satellite
made by TCIC in 1996 to fund certain construction and related costs associated
with TCI Satellite Entertainment, Inc.'s Satellites ("SATCo Satellites"), as
described below under "-Reimbursement of Certain Satellite Expenses"), and the
indebtedness represented by the K-1 Notes were assumed by TCI in the form of
(i) a $100 million capital contribution to Satellite, (ii) consideration for
Satellite's assumption of TCI's obligations under options granted to Brendan R.
Clouston, Larry E. Romrell and another employee of TCI to purchase shares of
SATCo Series A Stock representing 1.0%, 1.0% and 0.5%, respectively, of the
shares of Satellite common stock issued and outstanding on the Distribution
date, determined immediately after giving effect to the Distribution but before
giving effect to the issuance of the shares of SATCo Series A Stock issuable
upon exercise of such options, and (iii) consideration for Satellite's grant of
an option to TCI to purchase up to 4,765,000 shares of SATCo Series A Stock (as
such number may be adjusted to reflect stock dividends, stock splits and the
like), for a purchase price equal to the par value of such shares, as necessary
to satisfy TCI's obligations to deliver shares of SATCo Series A Stock upon
conversion of certain convertible securities of TCI as a result of the
Distribution. See "-Other Arrangements" below.
Transition Services Agreement. Pursuant to the Transition Services
Agreement between TCI and Satellite, TCI is obligated to provide to Satellite
certain services and other benefits, including certain administrative and other
services that were provided by TCI prior to the Distribution. Such services
include (i) tax reporting, financial reporting, payroll, employee benefit
administration, workers' compensation administration, telephone, fleet
management, package delivery, management information systems, billing, lock
box, remittance processing and risk management services, (ii) other services
typically performed by TCI's accounting, finance, treasury, corporate, legal,
tax, benefits, insurance, facilities, purchasing, fleet management and advanced
information technology department personnel, (iii) use of telecommunications
and data facilities and of systems and software developed, acquired or licensed
by TCI from time to time for financial forecasting, budgeting and similar
purposes, including without limitation any such software for use on personal
computers, in any case to the extent available under copyright law or any
applicable third-party contract, (iv) technology support and consulting
services, and (v) such other management, supervisory, strategic planning or
other services as Satellite and TCI may from time to time mutually determine to
be necessary or desirable.
Pursuant to the Transition Services Agreement, TCI has also agreed to
provide Satellite with certain most- favored-customer rights to programming
services that TCI or a wholly owned subsidiary of TCI may own in the future and
access to any volume discounts that may be available to TCI for purchase of
home satellite dishes, satellite receivers and other equipment.
As compensation for services rendered to Satellite and for the
benefits made available to Satellite pursuant to the Transition Services
Agreement, Satellite is required to pay TCI a fee of $1.50 per qualified
subscribing household or other residential or commercial unit (counted as one
subscriber regardless of the number of satellite receivers) per month,
commencing with the Distribution date, up to a maximum of $3 million per month,
and reimburse TCI quarterly for direct, out-of-pocket expenses incurred by TCI
to third parties in providing the services.
(continued)
III-39
<PAGE> 42
The Transition Services Agreement continues in effect until the close
of business on December 31, 1999 and will be renewed automatically for
successive one-year periods thereafter, unless earlier terminated by (i) either
party at the end of the initial term or the then current renewal term, as
applicable, on not less than 180 days' prior written notice to the other party,
(ii) TCI upon written notice to Satellite following certain changes in control
of Satellite, and (iii) either party if the other party is the subject of
certain bankruptcy or insolvency-related events. During the period commencing
with the Distribution date and ending on December 31, 1996, Satellite paid
$763,000 to TCIC pursuant to the Transition Services Agreement.
Tax Sharing Agreement. Through the Distribution date, Satellite's
results of operations were included in TCI's consolidated U.S. federal income
tax returns, in accordance with the existing tax sharing arrangements among TCI
and its consolidated subsidiaries. Effective July 1, 1995, TCI, TCIC and
certain other subsidiaries of TCI entered into the Tax Sharing Agreement, which
formalized such pre-existing tax sharing arrangements and implemented
additional procedures for the allocation of certain consolidated income tax
attributes and the settlement of certain intercompany tax allocations. The Tax
Sharing Agreement encompasses U.S. Federal, state, local and foreign tax
consequences and relies upon the Code and any applicable state, local and
foreign tax law and related regulations. Prior to the Distribution date, the
Tax Sharing Agreement was amended to provide that Satellite be treated as if it
had been a party to the Tax Sharing Agreement, effective July 1, 1995.
Pursuant to the Amended Tax Sharing Agreement, beginning on the July 1, 1995
effective date, Satellite is responsible to TCI for its share of current
consolidated income tax liabilities through the Distribution date; TCI is
responsible to the extent that Satellite's income tax attributes generated
after the effective date and through the Distribution date are utilized by TCI
to reduce its consolidated income tax liabilities.
Indemnification Agreements. On the Distribution date, Satellite
entered into the Indemnification Agreements with TCIC and TCI UA 1. The
Indemnification Agreement with TCIC provides for Satellite to reimburse TCIC
for any amounts drawn under an irrevocable transferable letter of credit issued
by the Bank of New York for the account of TCIC to support Satellite's share of
PRIMESTAR Partners' obligations under the Amended and Restated Memorandum of
Agreement between PRIMESTAR Partners and GE American Communications, Inc. ("GE
Americom"), with respect to PRIMESTAR Partners' use of transponders on the GE
Americom medium power satellite that was launched on January 30, 1997, and
which was declared commercially operational on March 6, 1997 ("GE-2"). At
December 31, 1996, the drawable amount of such letter of credit was
$25,000,000.
The Indemnification Agreement with TCI UA 1 provides for Satellite to
reimburse TCI UA 1 for any amounts drawn under the TCI UA 1 Letter of Credit,
which supports the PRIMESTAR Credit Facility that was obtained by PRIMESTAR
Partners to finance advances to Tempo for payments due in respect of the
construction of SATCo Satellites and that is supported by letters of credit
arranged for by affiliates of the partners of the PRIMESTAR Partners (other
than G.E. Americom Services, Inc.). The amount of the TCI UA 1 Letter of
Credit was $141,250,000 at December 31, 1996.
The Indemnification Agreements further provide for Satellite to
indemnify and hold harmless TCIC and TCI UA 1 and certain related persons from
and against any losses, claims, and liabilities arising out of the respective
letters of credit or any drawings thereunder. The payment obligations of
Satellite to TCIC and TCI UA 1, under such Indemnification Agreements are
subordinated in right of payment with respect to certain future obligations of
Satellite to financial institutions. During the year ended December 31, 1996,
the aggregate amount paid by Satellite to TCI under the Indemnification
Agreements was $1,623,000. Such amount represents the aggregate fees incurred
by TCI with respect to the TCI UA 1 Letter of Credit from the Distribution date
through December 31, 1996.
(continued)
III-40
<PAGE> 43
Trade Name and Service Mark License Agreement. Pursuant to the
Trade Name and Service Mark License Agreement (the "License Agreement"), TCI
granted to Satellite, for an initial term of three years following the
Distribution, a non-exclusive non-assignable license to use certain trade names
and service marks specifically identified in the License Agreement, including
the mark "TCI" in the context of the digital satellite business. The License
Agreement provides, among other things, that all advertising, promotion and use
of certain of TCI's trade names and service marks by Satellite shall be
consistent with TCI guidelines and standards, as well as subject to TCI
approval in certain circumstances.
Fulfillment Agreement. TCIC has historically provided Satellite with
certain customer fulfillment services for PRIMESTAR customers enrolled by
Satellite's direct sales force or the national call center maintained by
Satellite for orders, information and customer service. Charges for such
services have been allocated to Satellite by TCIC based on scheduled rates.
Pursuant to the Fulfillment Agreement entered into by TCIC and
Satellite, TCIC continues to provide fulfillment services to Satellite
following the Distribution with respect to customers of the PRIMESTAR medium
power service. Such services include installation, maintenance, retrieval,
inventory management and other customer fulfillment services. The Fulfillment
Agreement became effective on January 1, 1997. Among other matters, the
Fulfillment Agreement (i) sets forth the responsibilities of TCIC with respect
to fulfillment services, including performance standards and penalties for
nonperformance, (ii) provides for TCIC's fulfillment sites to be connected to
the billing and information systems used by Satellite, allowing for on-line
scheduling and dispatch of installation and other service calls, and (iii)
provides scheduled rates to be charged to Satellite for the various customer
fulfillment services to be provided by TCIC. Satellite retains sole control
under the Fulfillment Agreement to establish the retail prices and other terms
and conditions on which installation and other services are provided to
Satellite's customers. The Fulfillment Agreement also provides that, during the
term of the Fulfillment Agreement, TCIC will not provide fulfillment services
to any other Ku-band, Ka-band, direct broadcast satellite ("DBS"), broadcast
satellite service, fixed satellite service, C- band, wireless or other similar
or competitive provider or distributor of television programming services
(other than traditional cable). The Fulfillment Agreement has an initial term
of two years and is terminable, on 180 days notice to TCIC, by Satellite at any
time during the first six months following the Distribution date. The scheduled
rates for the services to be provided by TCIC under the Fulfillment Agreement
exceed the scheduled rates upon which charges historically have been allocated
to Satellite for such services, reflecting in part the value to Satellite, as
determined by Satellite's management, of the performance standards,
exclusivity, termination right and certain other provisions included in the
Fulfillment Agreement. Satellite and TCIC are currently discussing certain
proposed changes to the Fulfillment Agreement, but there can be no assurance
that any such changes will be agreed to or that Satellite will not exercise its
rights to terminate the Fulfillment Agreement if an acceptable amendment is not
agreed to prior to the end of Satellite's six-month termination window. There
can be no assurance that the terms of the Fulfillment Agreement are not more or
less favorable than those which could be obtained from unaffiliated third
parties, or that comparable services could be obtained by Satellite from third
parties on any terms if the Fulfillment Agreement is terminated. During the
year ended December 31, 1996, the aggregate amount paid by Satellite to TCIC
for fulfillment services was $74,049,000 (including $6,432,000 paid subsequent
to the Distribution date).
(continued)
III-41
<PAGE> 44
TCIC Credit Facility. In connection with the Distribution, Satellite
and TCIC entered into the TCIC Credit Facility to provide for the terms of the
Satellite Note and to provide for a revolving credit facility (the "TCIC
Revolving Loans"). The TCIC Credit Facility required Satellite to use its best
efforts to obtain external debt or equity financing after the Distribution date
and provided for mandatory prepayment of the TCIC Revolving Loans and the
Satellite Note from the proceeds thereof. The initial borrowings under the
Bank Credit Facility were used to repay the Satellite Note in full. In
connection with the February 1997 issuance of the Senior Subordinated Notes and
Senior Subordinated Discount Notes by Satellite and the March 1997
determination that GE-2 was commercially operational, borrowing availability
pursuant to the TCIC Credit Facility was terminated.
Borrowings under the TCIC Revolving Loans bore interest at 10% per
annum, compounded semi-annually. Commitment fees equal to 3/8% of the average
unborrowed availability under the TCIC Credit Facility were payable to TCIC
annually. Commitment fees paid to TCIC during the year ended December 31, 1996
aggregated $141,000. From the Distribution date through December 31, 1996, the
aggregate amount of interest paid by Satellite to TCIC pursuant to the TCIC
Credit Facility was $1,946,000.
Reimbursement of Certain Satellite Expenses. During
1996, TCIC made intercompany advances to Satellite to fund the majority of the
construction and related costs associated with the SATCo Satellites. Prior to
1996, PRIMESTAR Partners had funded substantially all of the construction and
related costs associated with SATCo Satellites. In connection with the
Distribution, a determination was made to provide that such 1996 advances from
TCIC would be repaid by Satellite to TCIC (notwithstanding the Reorganization
Agreement), to the extent (and only to the extent) that Tempo received
corresponding advances from PRIMESTAR Partners.
As a result of negotiations between Satellite and PRIMESTAR Partners,
PRIMESTAR Partners advanced $73,786,000 to Tempo in December 1996 to reimburse
Tempo for all the 1996 costs which previously had been funded by TCIC. Upon
receipt, such advance was paid to TCIC by Tempo in repayment of such 1996
advance by TCIC.
Call Center JV. In March 1997, Satellite and TCI agreed to form a
limited liability company (the "Call Center LLC") through which Satellite and
TCI are expected to conduct various customer call service operations. The
initial ownership interests of Satellite and TCI in the Call Center LLC are
expected to be 28% and 72%, respectively, subject to adjustment based on various
categories of operating data for the last three quarters of 1997, including call
center volume attributable to their customers. The Call Center LLC is expected
to be managed by a four-member board of directors, two members of which are to
be appointed by TCI and two members of which are to be appointed by Satellite.
Any decision by the board of directors is expected to require approval by all
four directors. Initially, the Call Center LLC is expected to provide customer
call services only for TCI cable subscribers and Satellite DBS subscribers, but
it is expected that those services in the future will be made available to third
parties, including, for example, unaffiliated cable companies. The hourly rates
for services provided by the Call Center LLC to Satellite and TCI through
December 31,1997, are expected to be fixed based on their respective expense
budgets for those services. Thereafter, Satellite and TCI expect that the rates
charged to them will be fair market rates, as established by agreement between
Satellite and TCI.
(continued)
III-42
<PAGE> 45
TCI has agreed to contribute assets comprising certain currently
operating call center facilities, as well as a facility under construction. The
assets to be contributed by TCI include two operating call centers and the
facility under construction. Satellite has agreed to contribute assets
comprising two currently operating call center facilities. Transfers of various
of the call center assets to the Call Center LLC will be subject to receipt of
consents of third parties, including governmental authorities. Pending receipt
of any required third-party consents and regulatory approvals, Satellite and TCI
have agreed to provide to the Call Center LLC the use of the call center assets
to be contributed under services agreements or similar arrangements to the
extent feasible. Operating obligations relating to the contributed assets,
including leases of real and personal property (but not including any
indebtedness for borrowed money), are expected to be assumed by the Call Center
LLC.
No definitive agreement has yet been reached regarding the
above-described transaction, and there can be no assurance that any such
transaction will be consummated.
Other Arrangements. On the Distribution date, TCI and Satellite
entered into the Share Purchase Agreement, which obligates TCI and Satellite to
sell to each other from time to time, at the then current market price, shares
of TCI Group Series A Stock and SATCo Series A Stock, respectively, as
necessary to satisfy their respective obligations under TCI Group Series A
Options and SATCo Series A Options held after the Distribution date by their
respective employees and non-employee directors.
Certain officers of Satellite who were officers or directors of TCI
and/or TCIC prior to the Distribution received undertakings of indemnification
from TCI and/or TCIC. Such undertakings survived the Distribution.
National Digital Television Center, Inc. ("NDTC"), an indirect
subsidiary of TCI, has obtained a nontransferable, nonexclusive license to use
certain proprietary technology of Imedia Corporation currently under
development ("Imedia Technology") to provide statistical multiplexing of
digitally compressed video signals. Although there can be no assurance that the
Imedia Technology will be successfully implemented, if successful, such
technology would increase the number of digital program signals that could be
transmitted simultaneously over a single satellite transponder, thus
effectively increasing the digital compression ratio. NDTC has agreed that if,
prior to September 1, 1997, Satellite engages NDTC to provide digitization,
compression and uplinking services for any high power DBS system operated by
Satellite, and NDTC is authorized to use Imedia Technology or other proprietary
technologies to provide multiplexing of digitally compressed video signals for
Satellite, NDTC shall provide such multiplexing services to Satellite for an
agreed fee, based on NDTC's incremental costs and other factors. Satellite's
rights to receive multiplexing services under its agreement with NDTC are
assignable by Satellite to any affiliate of Satellite, including for this
purpose PRIMESTAR Partners.
(c) Indebtedness of management
On March 4, 1997, Dr. Malone received an advance from a wholly-owned
subsidiary of the Company in the amount of $5,787,505. On March 5, 1997,
Dr. Malone received a second advance from a wholly-owned subsidiary of the
Company in the amount of $5,813,755. The terms of the advances were
memorialized by a promissory note entered into by Dr. Malone. The interest
rate on such loans is 1% over the one-month LIBOR rate compounded annually. As
of April 1, 1997, $58,451 of interest was accrued on the note. Principal
outstanding on the note is due March 31, 1999 and interest is payable annually
on March 1 of each year. The loan is secured by the pledge by Dr. Malone of
193,400 shares of Class B Preferred Stock owned beneficially and of record by
Dr. Malone. Dr. Malone used the proceeds of the advances to purchase shares of
SATCo Series A Stock.
III-43
