<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
TELE-COMMUNICATIONS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2), or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
TELE-COMMUNICATIONS INTERNATIONAL, INC.
TERRACE TOWER II
5619 DTC PARKWAY
ENGLEWOOD, COLORADO 80111
(303) 267-5500
August 15, 1996
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Tele-Communications International, Inc. (the "Company" or "International"),
which will be held at the Company's corporate offices, located at 5619 DTC
Parkway, Englewood, Colorado, on Monday, September 9, 1996, starting at 10:00
a.m. local time. A notice of the annual meeting, a proxy card and a proxy
statement containing important information about the matters to be acted upon at
the annual meeting are enclosed.
You will be asked at the annual meeting to consider and vote upon (i) the
election of three directors of the Company to hold office until the 1999 annual
meeting of stockholders or until their successors are elected and qualified,
(ii) the approval of the Tele-Communications International, Inc. 1995 Stock
Incentive Plan, (iii) the approval of the Tele-Communications International,
Inc. 1996 Nonemployee Director Stock Option Plan (the "Director Plan"), and (iv)
such other business as may properly come before the annual meeting.
The Board of Directors has approved the adoption of the Company's 1995
Stock Incentive Plan and the Director Plan and believes their adoption is in the
best interests of the Company and its stockholders. The Board of Directors
recommends that the stockholders vote in favor of the proposals presented in the
enclosed proxy statement.
Whether or not you are personally able to attend the annual meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
prepaid envelope as soon as possible. This action will not limit your right to
vote in person if you wish to attend the annual meeting and vote personally.
Sincerely yours,
/s/ DR. JOHN C. MALONE
Chairman of the Board
<PAGE> 3
TELE-COMMUNICATIONS INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 9, 1996
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (including
any adjournment or postponement thereof, the "Annual Meeting") of
Tele-Communications International, Inc., a Delaware corporation (the "Company"
or "International"), will be held at the Company's corporate offices located at
5619 DTC Parkway, Englewood, Colorado, starting at 10:00 a.m. local time, on
Monday, September 9, 1996, for the following purposes:
1. To elect three directors of the Company to hold office until the
1999 annual meeting of stockholders or until their successors are elected
and qualified (the "Election of Directors Proposal").
2. To consider and vote upon a proposal to approve the
Tele-Communications International, Inc. 1995 Stock Incentive Plan (the
"1995 Stock Plan Proposal").
3. To consider and vote upon a proposal to approve the
Tele-Communications International, Inc. 1996 Nonemployee Director Stock
Option Plan (the "Director Plan Proposal").
4. To transact such other business as may properly come before the
Annual Meeting.
Holders of record of: (i) Tele-Communications International, Inc. Series A
Common Stock ("International Series A Common Stock"), and (ii)
Tele-Communications International, Inc. Series B Common Stock ("International
Series B Common Stock") at the close of business on July 30, 1996, the record
date for the Annual Meeting, will be entitled to notice of and to vote at the
Annual Meeting. Holders of record of the International Series A Common Stock and
International Series B Common Stock at the close of business on the record date
will be entitled to vote together as a single class on the Election of Directors
Proposal, the 1995 Stock Plan Proposal and the Director Plan Proposal. Each
share of International Series A Common Stock is entitled to one vote per share
and each share of International Series B Common Stock is entitled to 10 votes
per share on each matter on which holders of shares of each such series are
entitled to vote at the Annual Meeting.
To ensure that your interests will be represented at the Annual Meeting,
regardless of whether you plan to attend in person, please complete, date and
sign the enclosed proxy card and return it promptly in the enclosed return
envelope, which requires no postage if mailed in the United States. This action
will not limit your right to vote in person if you wish to attend the Annual
Meeting and vote personally.
This Proxy Statement and the accompanying form of proxy are first being
mailed to the stockholders of the Company on or about August 15, 1996.
By Order of the Board of Directors
/s/ STEPHEN M. BRETT
Stephen M. Brett
Secretary
Englewood, Colorado
August 15, 1996
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY, WHETHER OR NOT YOU INTEND
TO BE PRESENT AT THE ANNUAL MEETING.
<PAGE> 4
TELE-COMMUNICATIONS INTERNATIONAL, INC.
TERRACE TOWER II
5619 DTC PARKWAY
ENGLEWOOD, COLORADO 80111
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING INFORMATION
This Proxy Statement is being furnished in connection with the solicitation
by the Board of Directors of Tele-Communications International, Inc. (the
"Company" or "International") of proxies for use at the annual meeting of the
stockholders of the Company, or at any adjournment or postponement thereof (the
"Annual Meeting"), for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. Proxies are being solicited from the holders of
Tele-Communications International, Inc. Series A Common Stock ("International
Series A Common Stock") and Tele-Communications International, Inc. Series B
Common Stock ("International Series B Common Stock"). The aforementioned
securities shall be collectively referred to in this Proxy Statement, from time
to time, as the "International Common Stock".
TIME AND PLACE; PURPOSES
The Annual Meeting will be held at the Company's corporate offices located
at 5619 DTC Parkway, Englewood, Colorado, on Monday, September 9, 1996, starting
at 10:00 a.m. local time. At the Annual Meeting, the stockholders of the Company
will be asked to consider and vote upon proposals: (i) to elect three directors
of the Company to hold office until the 1999 annual meeting of stockholders or
until their successors are elected and qualified (the "Election of Directors
Proposal"); (ii) to approve the Tele-Communications International, Inc. 1995
Stock Incentive Plan (the "1995 Stock Plan Proposal"); (iii) to approve the
Tele-Communications International, Inc. 1996 Nonemployee Director Stock Option
Plan (the "Director Plan Proposal"); and (iv) to transact such other business as
may properly come before the Annual Meeting.
This Proxy Statement and the accompanying form of proxy are first being
mailed to the stockholders of the Company on or about August 15, 1996.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
The Board of Directors has fixed the close of business on July 30, 1996
(the "Record Date") as the date for the determination of holders of the
International Common Stock entitled to notice of and to vote at the Annual
Meeting. Only holders of record of shares of the International Common Stock at
the close of business on the Record Date are entitled to notice of and to vote
at the Annual Meeting.
Holders of record of the International Series A Common Stock and
International Series B Common Stock at the close of business on the Record Date
will be entitled to vote together as a single class on the Election of Directors
Proposal, the 1995 Stock Plan Proposal and the Director Plan Proposal. Each
share of International Series A Common Stock is entitled to one vote per share
and each share of International Series B Common Stock is entitled to 10 votes
per share on each matter on which holders of shares of each such series are
entitled to vote at the Annual Meeting. At the close of business on the Record
Date, there were: (i) 106,960,873 shares of International Series A Common Stock
outstanding and entitled to vote at the Annual Meeting, and (ii) 11,700,000
shares of International Series B Common Stock outstanding and entitled to vote
at the Annual Meeting.
The presence, in person or by proxy, of the holders of a majority of the
combined voting power of the outstanding shares of the International Common
Stock entitled to vote is necessary to constitute a quorum at the Annual
Meeting. The Election of Directors Proposal must be approved by a plurality of
the votes of the shares of the International Common Stock represented in person
or by proxy and entitled to vote at the
<PAGE> 5
Annual Meeting, voting as a single class. The affirmative vote of a majority of
the combined voting power and a majority of the combined number of the shares of
the International Common Stock represented in person or by proxy and entitled to
vote at the Annual Meeting, voting as a single class, is required to approve the
1995 Stock Plan Proposal and the Director Plan Proposal.
As of the Record Date, Tele-Communications, Inc., a Delaware corporation
("TCI"), owned and had sole voting and investment power over 86,250,000 shares
of International Series A Common Stock and all of the 11,700,000 outstanding
shares of International Series B Common Stock. Such stock ownership by TCI
represents 83% of the shares of International Common Stock and 91% of the
combined voting power of the International Common Stock outstanding at that
date. Because TCI intends to vote all of its shares of International Common
Stock in favor of the Election of Directors Proposal, the 1995 Stock Plan
Proposal and the Director Plan Proposal, the adoption of these proposals will be
assured.
PROXIES
All shares of the International Common Stock represented by properly
executed proxies received prior to or at the Annual Meeting, and not revoked,
will be voted in accordance with the instructions indicated in such proxies. If
no instructions are indicated, such proxies will be voted FOR the Election of
Directors Proposal, FOR the 1995 Stock Plan Proposal and FOR the Director Plan
Proposal. So far as the Company's Board of Directors is aware, the Election of
Directors Proposal, the 1995 Stock Plan Proposal and the Director Plan Proposal
are the only matters to be acted upon at the Annual Meeting. As to any other
matter which may properly come before the Annual Meeting, the persons named in
the accompanying proxy card will vote thereon in accordance with their best
judgment. A properly executed proxy marked "ABSTAIN", although counted for
purposes of determining whether there is a quorum and for purposes of
determining the aggregate voting power and number of shares represented and
entitled to vote at the Annual Meeting, will not be voted and, therefore, except
in the case of the Election of Directors Proposal, will have the same effect as
a vote cast against the matter to which such instruction is indicated. Shares
represented by "broker non-votes" (i.e., shares held by brokers or nominees
which are represented at the Annual Meeting but with respect to which the broker
or nominee is not empowered to vote on a particular proposal) will also be
counted for purposes of determining whether there is a quorum at the Annual
Meeting and will be deemed shares not entitled to vote and will not be included
for purposes of determining the aggregate voting power and number of shares
represented and entitled to vote on such matter.
A stockholder may revoke his or her proxy at any time prior to its use by
delivering to the Secretary of the Company a signed notice of revocation or a
later dated signed proxy or by attending the Annual Meeting and voting in
person. Attendance at the Annual Meeting will not in itself constitute the
revocation of a proxy.
The cost of solicitation of proxies will be paid by the Company. In
addition to solicitation by mail, officers and regular employees of the Company
may solicit proxies by telephone, telegram, in person or by other means. Such
persons will receive no additional compensation for such services. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to forward
soliciting material to the beneficial owners of shares held of record by them
and will be reimbursed for their reasonable out-of-pocket expenses in connection
therewith.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
On April 30, 1996, TCI directly owned and had sole voting and investment
power over 86,250,000 shares of International Series A Common Stock and all of
the 11,700,000 outstanding shares of International Series B Common Stock, which
represented 83% of the shares of International Common Stock, 80.6% of the shares
of International Series A Common Stock, and 91% of the combined voting power of
the International Common Stock outstanding at that date. TCI's executive offices
are located at 5619 DTC Parkway, Englewood, Colorado 80111. TCI is the only
person known to the Company that beneficially owns 5% or more of either series
of International Common Stock.
2
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of shares of the International Series A Common Stock. In addition, the
table sets forth information with respect to the beneficial ownership of shares
of the following securities of TCI: (i) Series A TCI Group Common Stock, (ii)
Series B TCI Group Common Stock, (iii) Series A Liberty Group Common Stock, (iv)
Series B Liberty Group Common Stock, and (v) Tele-Communications, Inc. Class B
6% Cumulative Redeemable Exchangeable Junior Preferred Stock ("TCI Class B
Preferred Stock"), which are the only securities of TCI owned by any of the
persons who are required to be listed in the table. The information in the table
is dated as of April 30, 1996, and indicates securities beneficially owned by
each director of the Company, by each of the executive officers named in the
"Summary Compensation Table of International" and by the directors and all
executive officers of the Company as a group. Shares issuable upon exercise of
options 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 with the Series A TCI Group Common Stock, Series A Liberty Group
Common Stock, Series B TCI Group Common Stock, Series B Liberty Group Common
Stock and the TCI Class B Preferred Stock voting together as one class. The
number of shares of Series A TCI Group Common Stock and Series A Liberty Group
Common Stock in the table include interests of the named directors and executive
officers or of members of the group of directors and executive officers in
shares held by the trustee of TCI's Employee Stock Purchase Plan (the "TCI
ESPP") and by the trustee of the United Artists Entertainment Company ("United
Artists") Employee Stock Ownership Plan for their respective accounts. So far as
is known to the Company, the persons indicated below have sole voting and
investment power with respect to the shares indicated as owned by them, except
as otherwise stated in the notes to the table and except for the shares held by
the trustee of the TCI ESPP for the benefit of such persons, which shares are
voted at the discretion of the trustee.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL CLASS OR VOTING
BENEFICIAL OWNER TITLE OF CLASS OR SERIES OWNERSHIP SERIES(1) POWER(1)
- ------------------------ ---------------------------- ---------- ---------- --------
<S> <C> <C> <C> <C>
John C. Malone International Series A 50,000(2) * *
Common Stock
Series A TCI Group 2,171,776(3) *
Series B TCI Group 25,332,083(4)(5) 29.9%
Series A Liberty Group 542,849(3) * 17.7%
Series B Liberty Group 6,360,520(4)(5) 30.0%
TCI Class B Preferred Stock 306,000(4) 18.9%
Fred A. Vierra International Series A 442,000(6) * *
Common Stock
Series A TCI Group 580,320(7) *
Series A Liberty Group 140,994(7) * *
TCI Class B Preferred Stock 200 *
Adam N. Singer International Series A 415,500(8) * *
Common Stock
Series A TCI Group 147,242(9) * *
Series A Liberty Group 36,759(9) *
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL CLASS OR VOTING
BENEFICIAL OWNER TITLE OF CLASS OR SERIES OWNERSHIP SERIES(1) POWER(1)
- ------------------------ ---------------------------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Tomiichi Akiyama International Series A 50,000(2) * *
Common Stock
Paul A. Gould International Series A 85,000(2) * *
Common Stock
Series A TCI Group 32,330 *
Series B TCI Group 107,324 *
Series A Liberty Group 30,832 * *
Series B Liberty Group 24,081 *
TCI Class B Preferred Stock 19,558 1.2%
Jerome H. Kern International Series A 50,000(2) * *
Common Stock
Series A TCI Group 2,050,000(10) * *
Series A Liberty Group 512,500(10) *
Pierre Lescure International Series A 50,000(2) * *
Common Stock
Miranda Curtis International Series A 210,500(11) * *
Common Stock
Series A TCI Group 32,500(12) * *
Series A Liberty Group 8,125(12) *
Richard L. Rexroat, Jr. International Series A 50,000(13) * *
Common Stock
Series A TCI Group 38,828(14) *
Series A Liberty Group 9,595 * *
TCI Class B Preferred Stock 32 *
Graham E. Hollis International Series A 50,600(15) * *
Common Stock
Series A TCI Group 9,501(16) * *
Series A Liberty Group 2,312(16) *
All directors and International Series A 1,554,600(17)(18) 1.4% *
executive officers as
a Common Stock
group (12 persons) Series A TCI Group 5,825,912(19) 1.0%
Series B TCI Group 25,439,407 30.0%
Series A Liberty Group 1,474,756(19) 1.0% 17.9%
Series B Liberty Group 6,384,601 30.1%
TCI Class B Preferred Stock 325,790 20.1%
</TABLE>
- ---------------
* Less than one percent
(1) The figures for the percent of class and voting power calculations are
based on 106,960,873 shares of International Series A Common Stock and
11,700,000 shares of International Series B Common Stock outstanding on
April 30, 1996. In addition, the figures for the percent of class and
voting power calculations are based on 583,361,905 shares of Series A TCI
Group Common Stock, 84,682,729 shares of Series B TCI Group Common Stock,
145,815,385 shares of Series A Liberty Group Common Stock, 21,192,387
shares of Series B Liberty Group Common Stock, and 1,620,026 shares of TCI
Class B Preferred Stock outstanding on April 30, 1996 (after elimination of
shares held by subsidiaries of TCI).
(2) Assumes the exercise in full of stock options granted in April of 1996
pursuant to the Company's 1996 Nonemployee Director Stock Option Plan (the
"Director Plan") to acquire 50,000 shares of Interna-
4
<PAGE> 8
tional Series A Common Stock. None of these options are exercisable until
April of 1997. Such grant is subject to the approval by the stockholders of
the Director Plan Proposal. See "CONCERNING MANAGEMENT -- Executive
Compensation -- Compensation of Directors" and "THE DIRECTOR PLAN PROPOSAL"
for additional information concerning these grants.
(3) 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
Series A TCI Group Common Stock and 250,000 shares of Series A Liberty
Group Common Stock. Options to acquire 600,000 shares of Series A TCI Group
Common Stock and 150,000 shares of Series A Liberty Group Common Stock are
currently exercisable. Also 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 Series A TCI Group Common Stock and 250,000
shares of Series A Liberty Group Common Stock. Twenty percent of these
options became exercisable on August 4, 1996. The grant of such options is
subject to the approval by stockholders of TCI of a new stock incentive
plan.
(4) Includes 1,173,000 shares of Series B TCI Group Common Stock, 293,250
shares of Series B Liberty Group Common Stock and 6,900 shares of TCI Class
B Preferred Stock held by Dr. Malone's wife, Mrs. Leslie Malone, as to
which shares Dr. Malone has disclaimed beneficial ownership.
(5) Pursuant to a letter agreement, dated June 17, 1988, Bob Magness (the
Chairman of the Board of TCI) and Kearns-Tribune Corporation ("Kearns")
each agreed with Dr. Malone that prior to making a disposition of a
significant portion of their respective holdings of Series B TCI Group
Common Stock or Series B Liberty Group Common Stock, he or it would first
offer Dr. Malone the opportunity to purchase such shares. As of April 30,
1996, Mr. Magness and Kearns beneficially owned, respectively, 37,132,076
shares and 9,112,500 shares of Series B TCI Group Common Stock and
9,283,019 shares and 2,278,125 shares of Series B Liberty Group Common
Stock.
(6) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights in December of 1995 to acquire 400,000 shares of
International Series A Common Stock. Twenty percent of these options became
exercisable on August 4, 1996. Also assumes the vesting in full of 15,000
shares of restricted International Series A Common Stock granted in
December of 1995. Such shares vest as to 50% in December of 1999 and as to
the remaining 50% in December of 2000. Such grants are subject to the
approval by the stockholders of the 1995 Stock Plan Proposal. See notes 2
and 7 to the table in "CONCERNING MANAGEMENT -- Executive
Compensation -- Summary Compensation Table of International" for additional
information.
(7) Assumes the exercise in full of the following: (a) stock options granted in
tandem with stock appreciation rights in November of 1992 to acquire
100,000 shares of Series A TCI Group Common Stock and 25,000 shares of
Series A Liberty Group Common Stock of which options to acquire 60,000 and
15,000, respectively, of such shares are currently exercisable; (b) stock
options granted in tandem with stock appreciation rights in November of
1993 to acquire 100,000 shares of Series A TCI Group Common Stock and
25,000 shares of Series A Liberty Group Common Stock, of which options to
acquire 50,000 and 12,500, respectively, of such shares are currently
exercisable; (c) stock options granted in tandem with stock appreciation
rights in November of 1994 to acquire 200,000 shares of Series A TCI Group
Common Stock and 50,000 shares of Series A Liberty Group Common Stock, of
which options to acquire 40,000 and 10,000, respectively, of such shares
are currently exercisable. See note 4 to the table in "CONCERNING
MANAGEMENT -- Executive Compensation -- Summary Compensation Table of
International" for additional information.
(8) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights in December of 1995 to acquire 400,000 shares of
International Series A Common Stock. Twenty percent of these options became
exercisable on August 4, 1996. Also includes 15,000 shares of restricted
International Series A Common Stock granted in December of 1995. Such
shares vest as to 50% in December of 1999 and as to the remaining 50% in
December of 2000. Such grants are subject to the approval by the
stockholders of the 1995 Stock Plan Proposal. See notes 2 and 7 to the
table in "CONCERNING MANAGEMENT -- Executive Compensation -- Summary
Compensation Table of International" for additional information.
5
<PAGE> 9
(9) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights in November of 1992 to acquire 50,000 shares of Series
A TCI Group Common Stock and 12,500 shares of Series A Liberty Group Common
Stock. Options to acquire 30,000 and 7,500, respectively, of such shares
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 50,000 shares of Series A TCI Group Common Stock and 12,500
shares of Series A Liberty Group Common Stock. Options to acquire 25,000
and 6,250, respectively, of such shares 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 100,000 shares of Series
A TCI Group Common Stock and 25,000 shares of Series A Liberty Group Common
Stock, of which options to acquire 20,000 and 5,000, respectively, of such
shares are currently exercisable. See note 4 to the table in "CONCERNING
MANAGEMENT -- Executive Compensation -- Summary Compensation Table of
International" for additional information.
(10) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights to acquire 1,500,000 shares of Series A TCI Group
Common Stock at a purchase price of $12.50 per share and 375,000 shares of
Series A Liberty Group Common Stock at a purchase price of $16.75 per
share. Options to acquire 700,000 shares and 175,000 shares, respectively,
are currently exercisable and the remainder vest and become exercisable
evenly over two years. The options expire on October 12, 1998. Also assumes
the exercise in full of stock options granted pursuant to the TCI Director
Stock Option Plan to purchase 50,000 shares of Series A TCI Group Common
Stock and 12,500 shares of Series A Liberty Group Common Stock. Options to
acquire 10,000 and 2,500, respectively, of such shares are currently
exercisable. Also assumes the exercise in full of stock options granted in
tandem with stock appreciation rights in December of 1995 to acquire
500,000 shares of Series A TCI Group Common Stock and 125,000 shares of
Series A Liberty Group Common Stock. Twenty percent of these options became
exercisable on August 4, 1996.
(11) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights in December of 1995 to acquire 200,000 shares of
International Series A Common Stock. Twenty percent of these options became
exercisable on August 4, 1996. Also includes 10,000 shares of restricted
International Series A Common Stock granted in December of 1995. Such
shares vest as to 50% in December of 1999 and as to the remaining 50% in
December of 2000. Such grants are subject to the approval by the
stockholders of the 1995 Stock Plan Proposal. See notes 2 and 7 to the
table in "CONCERNING MANAGEMENT -- Executive Compensation -- Summary
Compensation Table of International" for additional information.
(12) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights in October of 1993 to acquire 7,500 shares of Series A
TCI Group Common Stock and 1,875 shares of Series A Liberty Group Common
Stock. Options to acquire 3,750 and 937, respectively, of such shares 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 25,000 shares of Series A TCI Group Common Stock and 6,250 shares
of Series A Liberty Group Common Stock, of which options to acquire 5,000
and 1,250, respectively, of such shares are currently exercisable. See note
4 to the table in "CONCERNING MANAGEMENT -- Executive
Compensation -- Summary Compensation Table of International" for additional
information.
(13) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights in December of 1995 to acquire 50,000 shares of
International Series A Common Stock. Twenty percent of these options became
exercisable on August 4, 1996. Such grant is subject to the approval by the
stockholders of the 1995 Stock Plan Proposal. See note 7 to the table in
"CONCERNING MANAGEMENT -- Executive Compensation -- Summary Compensation
Table of International" for additional information.
(14) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights in November of 1992 to acquire 10,000 shares of Series
A TCI Group Common Stock and 2,500 shares of Series A Liberty Group Common
Stock. Options to acquire 6,000 and 1,500, respectively, of such shares are
currently exercisable. Also assumes the exercise in full of stock options
granted in tandem with stock
6
<PAGE> 10
appreciation rights in October of 1993 to acquire 10,000 shares of Series A
TCI Group Common Stock and 2,500 shares of Series A Liberty Group Common
Stock. Options to acquire 5,000 and 1,250, respectively, of such shares are
currently exercisable.
(15) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights in December of 1995 to acquire 50,000 shares of
International Series A Common Stock. Twenty percent of these options became
exercisable on August 4, 1996. Such grant is subject to the approval by the
stockholders of the 1995 Stock Plan Proposal. See note 7 to the table in
"CONCERNING MANAGEMENT -- Executive Compensation -- Summary Compensation
Table of International" for additional information.
(16) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights in November of 1994 to acquire 9,000 shares of Series A
TCI Group Common Stock and 2,250 shares of Series A Liberty Group Common
Stock. Options to acquire 1,800 and 450, respectively, of such shares are
currently exercisable.
(17) Certain executive officers and directors (seven persons, including Messrs.
Vierra, Singer, Rexroat and Hollis and Ms. Curtis) hold options, which were
granted in tandem with stock appreciation rights in December of 1995, to
acquire 1,150,000 shares of International Series A Common Stock. Twenty
percent of these options became exercisable on August 4, 1996.
Additionally, Messrs. Vierra and Singer and Ms. Curtis hold in the
aggregate 40,000 shares of restricted International Series A Common Stock.
Such shares vest as to 50% in December of 1999 and as to the remaining 50%
in December of 2000.
(18) Assumes the exercise in full of stock options granted in April of 1996
pursuant to the Director Plan to acquire 200,000 shares of International
Series A Common Stock. None of these options are exercisable until April of
1997. Such grants are subject to the approval by the stockholders of the
Director Plan Proposal. See "CONCERNING MANAGEMENT -- Executive
Compensation -- Compensation of Directors" and "THE DIRECTOR PLAN PROPOSAL"
for additional information concerning these grants.
(19) Certain executive officers and directors (five persons, including Messrs.
Malone, Vierra, Singer and Rexroat) hold options, which were granted in
tandem with stock appreciation rights in November of 1992, to acquire an
aggregate of 1,260,000 shares of Series A TCI Group Common Stock and
315,000 shares of Series A Liberty Group Common Stock. Options to acquire
756,000 and 189,000 of such shares are currently exercisable. Also, certain
executive officers and directors (six persons, including Messrs. Vierra,
Singer, Kern and Rexroat and Ms. Curtis) hold options, which were granted
in tandem with stock appreciation rights in October and November of 1993,
to acquire an aggregate of 1,767,500 shares of Series A TCI Group Common
Stock and 441,875 shares of Series A Liberty Group Common Stock. Options to
acquire 883,750 and 208,437 shares of such shares are currently
exercisable. Additionally, certain executive officers and directors (six
persons including Messrs. Vierra, Singer, and Hollis and Ms. Curtis) hold
options, which were granted in tandem with stock appreciation rights in
November of 1994, to acquire 543,000 shares of Series A TCI Group Common
Stock and 135,750 shares of Series A Liberty Group Common Stock. Options to
acquire 108,600 and 27,150, respectively, of such shares are currently
exercisable. In addition, Mr. Kern holds a stock option, which was granted
in November of 1994 pursuant to the TCI Director Stock Option Plan, to
purchase 50,000 shares of Series A TCI Group Common Stock and 12,500 shares
of Series A Liberty Group Common Stock. Options to acquire 10,000 and
2,500, respectively, of such shares are currently exercisable. Certain
executive officers and directors (three persons, including Messrs. Malone
and Kern) hold options, which were granted in tandem with stock
appreciation rights in December of 1995, to acquire an aggregate of
1,800,000 shares of Series A TCI Group Common Stock and 450,000 shares of
Series A Liberty Group Common Stock. Twenty percent of these options became
exercisable on August 4, 1996. The grant of certain of such options is
subject to the approval by stockholders of TCI of a new stock incentive
plan. Additionally, an officer holds 40,000 shares of restricted Series A
TCI Group Common Stock and 10,000 shares of restricted Series A Liberty
Group Common Stock. Such shares vest 50% in December of 1999 and the
remaining 50% in December of 2000.
7
<PAGE> 11
In addition, all of the directors and executive officers of the Company as
a group hold an aggregate of 17,700 Ordinary Shares of TeleWest plc, an
indirectly owned subsidiary of the Company ("TeleWest"), with Mr. Vierra holding
17,500 of such shares and Mr. Singer holding 200 of such shares.
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. Notwithstanding the foregoing,
TCI, the controlling stockholder of the Company, is not committed to maintain
its current ownership position in the Company. As a result, there can be no
assurance of TCI's continued ownership of International Common Stock or as to
the manner or timing of any disposition of TCI's International Common Stock, and
any substantial change in such ownership could result in a change in control of
the Company. See also, "CONCERNING MANAGEMENT -- Certain Relationships and
Related Transactions -- Relationship with TCI" for additional information.
ELECTION OF DIRECTORS PROPOSAL
GENERAL
The persons named in the accompanying proxy will vote for the election of
three directors, with the term of office of each to continue until the 1999
annual meeting of stockholders or until his successor shall have been duly
elected and qualified, unless authority to vote is withheld. Tomiichi Akiyama,
Jerome H. Kern and Adam N. Singer are the three nominees for election as
directors of the Company, and the Company is informed that these nominees are
willing to serve as directors. However, if any such nominee should decline or
should become unable to serve as a director for any reason, votes will be cast
for a substitute nominee, if any, designated by the Board of Directors, or, if
none is so designated prior to the election, votes will be cast according to the
judgment in such matters of the person or persons voting the proxy. Each of
Messrs. Akiyama, Kern and Singer is an incumbent director.
The Company's Restated Certificate of Incorporation provides for a
classified Board of Directors of not less than three members, with the exact
number of directors to be fixed by resolution of the Board. The Board of
Directors currently consists of seven members. For purposes of determining their
terms, directors are divided into three classes. The Class I directors, whose
term expires at the Annual Meeting, are Messrs. Akiyama, Kern and Singer. The
Class II directors, whose term expires at the 1997 annual stockholders meeting,
are Messrs. Pierre Lescure and Fred A. Vierra. The Class III directors, whose
term expires at the 1998 annual stockholders meeting, are Mr. Paul A. Gould and
Dr. John C. Malone. Each director elected at an annual stockholders meeting will
serve for a term ending on the date of the third annual stockholders meeting
after his election or until his earlier death, resignation or removal.
The following lists the three nominees for election as directors of the
Company and the four directors of the Company whose term of office will continue
after the Annual Meeting, including the birth date of each person, the positions
with the Company or principal occupations of each person, certain other
directorships held and the year each person became a director of the Company.
The number of shares of International Common Stock owned beneficially by each
such person as of April 30, 1996 is set forth in "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
NOMINEES FOR ELECTION AS DIRECTORS
TOMIICHI AKIYAMA: Born December 17, 1929; Director of the Company since
August 1995. Mr. Akiyama has served as President of Sumitomo Corporation, a
Japanese trading company, for more than the last five years.
JEROME H. KERN: Born June 1, 1937; Director of the Company since May 1995.
Mr. Kern has been special counsel from July 1996 to present and was a senior
partner from September 1992 to July 1996 with the law firm of Baker & Botts,
L.L.P. From January 1992 to September 1992, Mr. Kern was senior partner with
8
<PAGE> 12
the Law Offices of Jerome H. Kern, and from 1986 to 1991, Mr. Kern was a senior
partner with the law firm of Shea & Gould. Mr. Kern is a Director of TCI.
ADAM N. SINGER: Born January 19, 1952; President and Chief Operating
Officer of the Company since October 1994 and Director of the Company since May
1995. Previously, from June 1992 to October 1994, Mr. Singer was Vice
President-International of TCI Communications, Inc., the predecessor company to
TCI, and now a subsidiary of TCI ("TCIC"). Mr. Singer was President and Chief
Executive Officer of United Artists Entertainment (Programming) Limited, a
company which provides programming management services ("UAEP"), from September
1988 to June 1992. Mr. Singer is a Director of TeleWest and Flextech plc
("Flextech").
DIRECTORS WHOSE TERM EXPIRES IN 1997
PIERRE LESCURE: Born February 7, 1945; Director of the Company since July
1995. Mr. Lescure has served as Chief Executive Officer of Canal + S.A. and
Chairman and Chief Executive Officer of Le Studio Canal + since 1986. Canal +
S.A. is an European pay TV operator and Le Studio Canal + is a movie production
subsidiary of Canal +.
FRED A. VIERRA: Born November 9, 1931; Chief Executive Officer and Director
of the Company since October 1994 and Vice Chairman of the Board of the Company
since May 1995. From October 1994 to May 1995, Mr. Vierra served as Chairman of
the Board of the Company. Mr. Vierra has served as Executive Vice President of
TCI since January 1994 and as Executive Vice President of TCIC from December
1991 to October 1994. From May 1989 to December 1991, Mr. Vierra was President,
Chief Operating Officer and Director of United Artists Entertainment, Inc.
("United Artists"), which at the time was a majority owned subsidiary of TCIC.
Mr. Vierra is a Director of TeleWest, Flextech and Turner Broadcasting System,
Inc.
DIRECTORS WHOSE TERM EXPIRES IN 1998
PAUL A. GOULD: Born September 27, 1945; Director of the Company since July
1995. Mr. Gould has been a Managing Director and an Executive Vice President of
Allen & Company Incorporated, a securities firm, for more than the last five
years. He is also a Director of National Patent Development Corporation and
United Video Satellite Group Incorporated.
JOHN C. MALONE: Born March 7, 1941; Chairman of the Board and Director of
the Company since May 1995. Dr. Malone has served as Chief Executive Officer
since March 1992 and President since 1973 of TCI (and its predecessor company).
Dr. Malone is a Director of TCI, Turner Broadcasting System, Inc., BET Holdings,
Inc., Home Shopping Network, Inc. and The Bank of New York.
VOTE REQUIRED FOR APPROVAL
THE ELECTION OF DIRECTORS PROPOSAL MUST BE APPROVED BY A PLURALITY OF THE
VOTES OF THE SHARES OF THE INTERNATIONAL SERIES A COMMON STOCK AND THE
INTERNATIONAL SERIES B COMMON STOCK, REPRESENTED IN PERSON OR BY PROXY AND
ENTITLED TO VOTE AT THE ANNUAL MEETING, VOTING AS A SINGLE CLASS.
9
<PAGE> 13
CONCERNING MANAGEMENT
EXECUTIVE OFFICERS
The following lists the executive officers of the Company, other than the
directors listed above, their birth dates, and a description of their business
experience and positions held within the Company as of July 30, 1996. All
officers are appointed for an indefinite term, serving at the pleasure of the
Board of Directors.
<TABLE>
<CAPTION>
NAME POSITIONS
---- ---------
<S> <C>
Miranda Curtis Senior Vice President of the Company since May 1995. From October
Born November 26, 1955 1994 to May 1995, Ms. Curtis served as a Vice President of the
Company. From May 1992 to October 1994, Ms. Curtis was Director of
International Development in the international division of TCI
(and its predecessor company) and was principally responsible for
that division's activities in Asia and the United Kingdom. From
September 1989 through May 1992, Ms. Curtis served as Director of
Development and Marketing for a predecessor of TeleWest and then
as Business Development Manager of UAEP.
Wayne L. Gowen Senior Vice President of the Company since February 1996. Mr.
Born October 21, 1946 Gowen served as Managing Director of TeleCommunications of Comcast
Europe, a company which provided cable and telephony services,
from October 1993 to January 1996, and as Vice President of
Corporate Development of U S WEST, Inc., a regional Bell operating
company, from January 1992 through September 1993. From October
1989 to January 1992, Mr. Gowen served as Managing Director of U S
WEST Cable Communications in the United Kingdom.
Gregory B. Armstrong Vice President of Cable Operations of the Company since May 1995,
Born September 27, 1946 having previously been an employee of the Company since August
1994. In his current capacity, Mr. Armstrong is responsible for
oversight of the cable performance of the Company's cable
television subsidiaries and affiliates. Mr. Armstrong was
President of Cable Management Group, Inc., a company which
specialized in cable operations, from 1988 to 1994.
Stephen M. Brett Vice President and Secretary of the Company since May 1995. Mr.
Born September 20, 1940 Brett has served as Executive Vice President, General Counsel and
Secretary of TCI since January 1994 and as Senior Vice President
and General Counsel of TCIC since December 1991. From August 1988
through December 1991, Mr. Brett was Executive Vice
President-Legal and Secretary of United Artists and its
predecessor, United Artists Communications, Inc.
Graham E. Hollis Vice President and Chief Financial Officer of the Company since
Born January 9, 1952 May 1995. From July 1994 to May 1995, Mr. Hollis was the Director
of Finance of the Company. From January 1994 to July 1994, Mr.
Hollis was Vice President-Finance of DTC Management, LLC, a
subsidiary of The Peninsula and Oriental Steam Navigation Company,
an English company which provided diversified transportation,
leisure and shipping services. Prior to his position with DTC
Management LLC, Mr. Hollis served as the Director of Accounting
for TCD North, Inc., a real estate investment company.
Richard L. Rexroat, Jr. Vice President of Engineering of the Company since May 1995. From
Born October 5, 1945 February 1993 to May 1995, Mr. Rexroat served as Vice President of
TCI responsible for its technical cable operations. Prior to
February 1993, Mr. Rexroat served at different times as Director
of Engineering, Director of Fiber Optic Engineering and Operations
Engineer for TCIC.
</TABLE>
There are no family relations, of first cousin or closer, among the
Company's directors or executive officers, by blood, marriage or adoption.
10
<PAGE> 14
During the past five years, neither the above officers nor any director of
the Company has 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 (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company'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 stockholders are required by SEC regulation to furnish
the Company 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 the Company with respect to its most recent
fiscal year, the Company believes that, during the year ended December 31, 1995,
its officers, directors and greater-than-ten-percent beneficial owners complied
with all Section 16(a) filing requirements, except that a report covering Mr.
Brett's December 1995 grant of stock options in tandem with stock appreciation
rights was filed late.
EXECUTIVE COMPENSATION
Summary Compensation Table of International. On August 3, 1995, TCI amended
its Restated Certificate of Incorporation to, among other things, (i)
re-designate the TCI Class A Common Stock as "Tele-Communications, Inc. Series A
TCI Group Common Stock" (the "Series A TCI Group Common Stock") and the TCI
Class B Common Stock as "Tele-Communications, Inc. Series B TCI Group Common
Stock" (the "Series B TCI Group Common Stock" and together with the Series A TCI
Group Common Stock, the "TCI Group Common Stock") and (ii) authorize two
additional series of TCI common stock, designated as "Tele-Communications, Inc.
Series A Liberty Media Group Common Stock" (the "Series A Liberty Group Common
Stock") and "Tele-Communications, Inc. Series B Liberty Media Group Common
Stock" (the "Series B Liberty Group Common Stock" and together with the Series A
Liberty Group Common Stock, the "Liberty Group Common Stock"). Thereafter, TCI
distributed to the holders of TCI Group Common Stock one-fourth of a share of
the corresponding series of Liberty Group Common Stock in respect of each share
of TCI Group Common Stock held of record as of August 4, 1995, the record date
for such distribution (the "Distribution"). Certain of the stock options with
tandem stock appreciation rights relative to Series A TCI Group Common Stock and
Series A Liberty Group Common Stock indicated in the following tables were
granted prior to the foregoing redesignation and Distribution. Options to
purchase TCI Class A Common Stock outstanding at the time of the Distribution
were adjusted by issuing to the holders of such options separate options to
purchase that number of shares of Series A Liberty Group Common Stock which the
holder would have been entitled to receive had the holder exercised such option
to purchase TCI Class A Common Stock prior to the record date for the
Distribution and reallocating a portion of the aggregate exercise price of the
previously outstanding options to the newly issued options to purchase Series A
Liberty Group Common Stock.
11
<PAGE> 15
The following table shows for the years ended December 31, 1995 and 1994
all forms of compensation for the Chief Executive Officer and each of the four
most highly compensated executive officers of the Company, whose annual salary
and bonus exceeded $100,000 for the year ended December 31, 1995:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION --------------------------
--------------------------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING ALL OTHER
NAME AND ANNUAL STOCK OPTIONS/ COMPENSA-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) SARS(#) TION($)(1)
- ------------------------- ---- ---------- -------- --------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Fred A. Vierra
(Chief Executive Officer) 1995 $650,000(3) -- $ 3,207 $ 380,625(2) 400,000(7) $15,000
1994 $669,613(3) $ 1,024 250,000(4) $15,000
Adam N. Singer
(President and Chief 1995 $350,000 $50,000 $11,355 $ 380,625(2) 400,000(7) $ 6,006
Operating Officer) 1994 $314,187 -- -- -- 125,000(4) $15,000
Miranda Curtis
(Senior Vice President) 1995 $155,300(5) $34,943 (5) $31,041(6) $ 253,750(2) 200,000(7) --
1994 $156,650(5) $35,246 (5) $45,711(6) -- 31,250(4) --
Richard L. Rexroat, Jr.
(Vice President of 1995 $145,000 $26,500 $ 2,998 -- 50,000(7) $13,260
Engineering) 1994 $140,000 $11,465 -- -- -- $13,260
Graham E. Hollis
(Chief Financial Officer 1995 $124,231 $61,500 -- -- 50,000(7) $ 6,133
and Vice President of 1994 $ 53,077 -- -- -- 11,250(4) --
Finance)
</TABLE>
- ---------------
(1) All amounts shown in this column represent contributions to the TCI ESPP.
All named executive officers of the Company for whom contributions were made
in 1995 and 1994 are fully vested except for Mr. Hollis. Directors who are
not employees of TCI or the Company are ineligible to participate in the TCI
ESPP. The TCI ESPP, a defined contribution plan, enables participating
employees to acquire a proprietary interest in TCI and provides benefits
upon retirement. Under the terms of the TCI ESPP, employees are eligible for
participation after one year of service. The TCI 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 a matching 100% of the participants' contributions. The TCI 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 TCI ESPP, it may do so at any time. The TCI ESPP
provides for full immediate vesting of all participants' rights upon
termination. The Company's employees are eligible to participate in the TCI
ESPP for so long as TCI beneficially owns shares of the common stock of the
Company representing a majority in voting power of the outstanding shares of
capital stock of the Company entitled to vote generally in the election of
directors.
(2) On December 13, 1995, Messrs. Vierra and Singer and Ms. Curtis were granted
15,000, 15,000 and 10,000 restricted shares, respectively, of International
Series A Common Stock. Such restricted shares
12
<PAGE> 16
vest as to 50% of such shares on December 13, 1999 and as to the remaining
50% on December 13, 2000. Such restricted shares had a value at the end of
1995, based upon the closing sales price per share of the International
Series A Common Stock on the Nasdaq National Market on December 29, 1995,
of $341,250, $341,250 and $227,500, respectively. The Company has not paid
cash dividends on its International Series A Common Stock and does not
anticipate declaring and paying cash dividends on the International Series
A Common Stock at any time in the foreseeable future. See "-- Option and
SAR Grants Table" below.
(3) Includes deferred compensation of $250,000.
(4) On November 17, 1994, certain key employees of TCI were granted options in
tandem with stock appreciation rights to acquire an aggregate of 3,191,000
shares of Series A TCI Group Common Stock and 797,750 shares of Series A
Liberty Group Common Stock at adjusted purchase prices of $16.50 and $22.00
per share, respectively. Messrs. Vierra, Singer and Hollis and Ms. Curtis
(who were at the time officers or employees of TCI) received the awards
indicated in the table pursuant to such grants. Such options vest evenly
over five years, became exercisable beginning on November 17, 1995 and
expire on November 17, 2004. Notwithstanding the vesting schedule as set
forth in the applicable option agreement, the option shares and stock
appreciation rights shall become available for purchase if the grantee's
employment with TCI (a) shall terminate by reason of (i) termination by TCI
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 TCI 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 the grantee dies while employed by TCI. Further,
the option shares and stock appreciation rights will become available for
purchase in the event of an Approved Transaction, Board Change, or Control
Purchase (each as defined), unless in the case of an Approved Transaction,
the Compensation Committee of TCI determines otherwise as permitted by the
plan.
(5) Ms. Curtis' salary and bonus were paid by United Artists European Holdings,
Inc. ("UAEH") in UK pounds sterling. The 1995 and 1994 amounts in the table
represent the U.S. dollar equivalent using the exchange rates in effect on
December 29, 1995 and December 31, 1994, respectively. UAEH is an indirect
subsidiary of the Company.
(6) All of the 1995 amount and $31,311 of the 1994 amount represent the U.S.
dollar equivalents, using the exchange rates in effect on December 29, 1995
and December 31, 1994, respectively, for the portions of the disturbance
allowances and other compensation that were paid to Ms. Curtis in pounds
sterling.
(7) For additional information regarding this award, see "-- Option and SAR
Grants Table" below.
Option and SAR Grants Table. Subject to stockholder approval, the Board of
Directors of the Company adopted, on July 11, 1995, the Tele-Communications
International, Inc. 1995 Stock Incentive Plan (the "1995 Plan"). The 1995 Plan
provides for awards to be made in respect of a maximum of 3,000,000 shares of
International Series A Common Stock (subject to certain anti-dilution
adjustments). Awards may be made as grants of stock options ("Options"), stock
appreciation rights ("SARs"), restricted shares ("Restricted Shares"), stock
units ("Stock Units"), or any combination thereof (collectively, "Awards").
Shares of International Series A Common Stock that are subject to Awards that
expire, terminate or are annulled for any reason without having been exercised
(or deemed exercised, by virtue of the exercise of a related SAR), or are
forfeited prior to becoming vested will return to the pool of such shares
available for grant under the 1995 Plan.
13
<PAGE> 17
The following table discloses all individual grants of stock options and
SARs granted to each of the named executive officers of the Company during the
year ended December 31, 1995.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS MARKET
SARS GRANTED TO EXERCISE OR PRICE ON GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE GRANT DATE EXPIRATION PRESENT VALUE
NAME (1) 1995(1) ($/SH) ($/SH)(5) DATE (6)
- ---- --------- ------------ ----------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Fred A. Vierra............ 400,000 (2) $ 16.00 $ 25.375 August 4, 2005 $ 6,913,440
Adam M. Singer............ 400,000 (2) $ 16.00 $ 25.375 August 4, 2005 $ 6,913,440
Miranda Curtis............ 200,000 (3) $ 16.00 $ 25.375 August 4, 2005 $ 3,456,720
Richard L. Rexroat, JR. .. 50,000 (4) $ 16.00 $ 25.375 August 4, 2005 $ 864,180
Graham E. Hollis.......... 50,000 (4) $ 16.00 $ 25.375 August 4, 2005 $ 864,180
</TABLE>
- ---------------
(1) On December 13, 1995, pursuant to the 1995 Plan, certain executive officers,
directors and other key employees of the Company and TCI were granted
1,302,000 options in tandem with stock appreciation rights to acquire shares
of International Series A Common Stock at a purchase price of $16 per share.
Additionally, one executive officer of TCI was granted an aggregate of
50,000 options in tandem with stock appreciation rights to acquire from TCI
shares of International Series A Common Stock owned by it. Such options vest
evenly over five years with such vesting period beginning August 4, 1995,
first become exercisable beginning on August 4, 1996 and expire on August 4,
2005. The above-described grants are subject to stockholder approval
pursuant to the 1995 Stock Plan Proposal.
(2) Mr. Vierra's and Mr. Singer's grants of such options in tandem with stock
appreciation rights each represent 30.7% of the total options granted
pursuant to the 1995 Plan, and 29.6% of all options granted in 1995 to
purchase International Series A Common Stock (including the grant by TCI to
one of its officers of options in tandem with stock appreciation rights to
purchase shares of International Series A Common Stock owned by TCI).
(3) Ms. Curtis' grant of such options in tandem with stock appreciation rights
represents 15.4% of the total options granted pursuant to the 1995 Plan, and
14.8% of all options granted in 1995 to purchase International Series A
Common Stock (including the grant by TCI to one of its officers of options
in tandem with stock appreciation rights to purchase shares of International
Series A Common Stock owned by TCI).
(4) Mr. Rexroat's and Mr. Hollis' grants of such options in tandem with stock
appreciation rights each represent 3.8% of the total options granted
pursuant to the 1995 Plan, and 3.7% of all options granted in 1995 to
purchase International Series A Common Stock (including the grant by TCI to
one of its officers of options in tandem with stock appreciation rights to
purchase shares of International Series A Common Stock owned by TCI).
(5) Based on the closing sales price per share of International Series A Common
Stock on the Nasdaq National Market on December 13, 1995.
(6) 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 5.75% discount rate; (b) a volatility factor based upon the Company's
historical trading pattern; (c) the 10-year option term; and (d) the closing
price of International Series A Common Stock on January 15, 1996. The actual
value an executive may realize will depend on 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.
14
<PAGE> 18
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value
Table. The following table provides each exercise of stock options and SARs
during the year ended December 31, 1995 by each of the named executive officers
of the Company and the December 31, 1995 year-end number and 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 AT OPTIONS/SARS AT
DECEMBER 31, DECEMBER 31,
1995(#) 1995($)
NAME AND SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
SERIES OF COMMON STOCK ON EXERCISE(#) $ UNEXERCISABLE UNEXERCISABLE(1)
- ----------------------------------- --------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Fred A. Vierra
International Series A
Exercisable................... -- -- 0 $ 0
Unexercisable................. -- -- 400,000 $2,700,000
Series A TCI Group
Exercisable................... 9,714 $100,054 150,000 $ 946,250
Unexercisable................. -- -- 250,000 $1,203,750
Series A Liberty Group
Exercisable................... -- -- 37,500 $ 327,188
Unexercisable................. -- -- 62,500 $ 422,812
Adam N. Singer
International Series A
Exercisable................... -- -- 0 $ 0
Unexercisable................. -- -- 400,000 $2,700,000
Series A TCI Group
Exercisable................... -- -- 75,000 $ 473,125
Unexercisable................. -- -- 125,000 $ 601,875
Series A Liberty Group
Exercisable................... -- -- 18,750 $ 163,594
Unexercisable................. -- -- 31,250 $ 211,406
Miranda Curtis
International Series A
Exercisable................... -- -- 0 $ 0
Unexercisable................. -- -- 200,000 $1,305,000
Series A TCI Group
Exercisable................... -- -- 8,750 $ 44,531
Unexercisable................. -- -- 23,750 $ 95,156
Series A Liberty Group
Exercisable................... -- -- 2,187 $ 15,581
Unexercisable................. -- -- 5,938 $ 33,872
Richard L. Rexroat, Jr.
International Series A
Exercisable................... -- -- 0 $ 0
Unexercisable................. -- -- 50,000 $ 337,500
Series A TCI Group
Exercisable................... -- -- 11,000 $ 81,125
Unexercisable................. -- -- 9,000 $ 66,375
Series A Liberty Group
Exercisable................... -- -- 2,750 $ 27,844
Unexercisable................. -- -- 2,250 $ 22,781
</TABLE>
15
<PAGE> 19
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, DECEMBER 31,
1995(#) 1995($)
NAME AND SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
SERIES OF COMMON STOCK ON EXERCISE(#) $ UNEXERCISABLE UNEXERCISABLE(1)
- ---------------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Graham E. Hollis
International Series A
Exercisable................... -- -- 0 $ 0
Unexercisable................. -- -- 50,000 $337,500
Series A TCI Group Exercisable... -- -- 1,800 $ 6,075
Unexercisable................. -- -- 7,200 $ 24,300
Series A Liberty Group
Exercisable................... -- -- 450 $ 2,194
Unexercisable................. -- -- 1,800 $ 8,775
</TABLE>
- ---------------
(1) Based on the closing sales price per share of International Series A Common
Stock, Series A TCI Group Common Stock and Series A Liberty Group Common
Stock on the Nasdaq National Market on December 29, 1995.
Compensation of Directors. The standard arrangement by which the Company'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 the Company receives additional compensation of $30,000 per year. In
addition, if approved by the stockholders pursuant to the Director Plan
Proposal, the Director Plan and the grants to nonemployee directors described
below will become effective.
The Company has made grants of stock options for 50,000 shares of
International Series A Common Stock to each nonemployee director of the Company
(Messrs. Akiyama, Gould, Kern, Lescure and Malone). Such options have a purchase
price of $16 per share (which was the initial public offering price of
International Series A Common Stock on July 18, 1995) and vest and become
exercisable over a five-year period, commencing on April 11, 1996, and will
expire on April 11, 2006. 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 similar options upon such person becoming a director.
Additionally, each person who is an employee and director of the Company who
ceases to be an employee of the Company but remains a director of the Company
will be automatically granted similar options upon such event. However, the
exercise price of each such subsequently granted option will be equal to the
fair market value of the International Series A Common 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 International Series A Common Stock as reported
on the Nasdaq National Market on the date of the grant, with the price resulting
from such percentage rounded down to the nearest quarter dollar.
There are no other arrangements whereby any of the Company's directors
received compensation for services as a director during 1995 in addition to or
in lieu of that specified by the aforementioned standard arrangement.
Employment Contracts, Termination of Employment and Change of Control
Agreements. The Company and TCI have entered into an Amended and Restated
Employment Agreement with Mr. Vierra relating to Mr. Vierra's employment with
the Company 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 1995 was set at $650,000. 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 the Company, together with interest thereon at the
rate
16
<PAGE> 20
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 the Company 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 the
Company'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 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. Vierra. Upon his death during the employment term, the
Company 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, the Company 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 the
Company and for the longer of: (i) a period of two years following the effective
date of his termination of employment, or (ii) until December 31, 1998 (in the
event Mr. Vierra terminates his employment before the end of the term of his
employment in breach of the employment agreement or in the event Mr. Vierra is
terminated "for cause" (as defined in the employment agreement) by the Company),
Mr. Vierra will not be connected with any entity in any manner, as defined in
the agreement, which competes in a material respect with the business of the
Company or any of the Company'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 on 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 the
Company. TCI is a party to the employment agreement and agrees to provide to Mr.
Vierra certain benefits thereunder; however, any payment or expense incurred by
TCI under the employment agreement will be reimbursed to TCI by the Company
under the terms of the Services Agreement between TCI and the Company, dated as
of July 18, 1995. See "CONCERNING MANAGEMENT -- Certain Relationships and
Related Transactions."
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee of the Company's Board of Directors is responsible for
determining executive compensation policies and guidelines. Messrs. Gould, Kern
and Malone constitute the Compensation Committee. Dr. Malone is the Chairman of
the Board of the Company and the President and Chief Executive Officer of TCI.
He is not an officer of any of the Company's subsidiaries. Neither Mr. Gould nor
Mr. Kern are or were officers of the Company or any of its subsidiaries.
However, Mr. Kern is a director of TCI and special counsel with the law firm of
Baker & Botts, L.L.P., the principal outside counsel for the Company and TCI.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Neither the report of the Compensation Committee of the Board of Directors
(the "Compensation Committee") nor the stock performance graph that follows such
report shall be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Consistent with the compensation philosophy applicable when the Company was
a wholly owned subsidiary of TCI, and continuing that philosophy, the
Compensation Committee believes that a link should exist between executive
compensation and the return on investment provided to stockholders. The
Compensation Committee has developed and implemented a compensation policy which
seeks to attract and retain highly skilled and effective executives with the
business experience and acumen necessary to achievement of the long-term
business objectives of the Company and to align the financial interest of the
Company's senior
17
<PAGE> 21
executives with those of its stockholders. The Company attempts to realize these
goals by providing competitive compensation and linking a substantial portion of
compensation to the enhancement of stockholder value.
The Company's executive compensation is based principally on two
components -- salary and equity based incentives -- each of which is intended to
serve the Company's overall compensation philosophy. Generally, the Company does
not pay cash bonuses to its senior executives.
Base Salary. Base salary for executive officers is generally targeted at
the median for executives with comparable qualifications, experience and
responsibilities of other companies in the media industry. Executive salaries
are consistent with this philosophy. Base salary levels are also based on the
employee's relative level of seniority and responsibility.
During 1995, the Compensation Committee of TCI (the "TCI Compensation
Committee") undertook a review of the compensation paid to its key employees,
including present employees of the Company, and retained independent consultants
to advise it in connection with setting base salaries. The consultants provided
TCI, the TCI Compensation Committee and the Compensation Committee with surveys
of base salaries, bonuses and long-term incentive compensation packages of the
chief executive officers and certain other senior officers in the media
industry, including seven companies with international operations in the cable
television industry and approximately 80 companies in various other industries.
The TCI Compensation Committee then established salary levels for the executive
officers of the Company while the Company was still wholly owned by TCI.
In December 1995, the Compensation Committee established new salary levels
for 1996 for certain of its executive officers (other than the Chief Executive
Officer) at the median of the annual salaries and bonuses of officers in
comparable positions and in companies included in the survey. In connection with
the Compensation Committee's assessment of the appropriate base salary levels
for its executives, the Compensation Committee took into account the employment
agreement between its Chief Executive Officer, the Company and TCI with a stated
termination date of December 31, 1998, which agreement establishes a minimum
base salary and participation in certain incentive, retirement and insurance
plans or policies adopted for the benefit of the Company's or TCI's executive
officers or employees generally. Certain terms of the employment agreement of
the Chief Executive Officer are described under "CONCERNING MANAGEMENT --
Executive Compensation -- Employment Contracts, Termination of Employment and
Change of Control Agreements."
Equity-Based Incentives. The Compensation Committee has emphasized
equity-based incentives rather than salary and bonuses in determining the
appropriate mix of compensation in order to arrive at a competitive compensation
package for its executive officers. The Compensation Committee believes that
reliance upon such incentives is advantageous to the Company because they foster
a long-term commitment by the recipients to the Company and motivate the
recipients to seek to improve the long-term market performance of International
Series A Common Stock. During 1995, the Compensation Committee authorized the
grant of stock options in tandem with stock appreciation rights to the named
executive officers, including the Chief Executive Officer, and other key
employees. See "CONCERNING MANAGEMENT -- Executive Compensation -- Summary
Compensation Table of International" and CONCERNING MANAGEMENT -- Executive
Compensation -- Option and SAR Grants Table" for additional information
concerning these awards. The exercise price of such options was established at
the initial public offering price of the International Series A Common Stock.
Such options vest in equal amounts over five years and, except in certain
circumstances, executives must be employed by the Company at the time of vesting
in order to exercise the options. The aggregate number of shares of the
International Series A Common Stock covered by the options granted to the named
executives in 1995 represents approximately 1% of the total number of shares of
such series outstanding. These grants were made after a review of the exercise
prices, numbers and dates of awards of those options and tandem stock
appreciation rights already held by the Company's executives and other key
employees, which were all options to acquire Series A TCI Group Common Stock and
Series A Liberty Media Group Common Stock. In addition, the Compensation
Committee determined to grant to its executives, including the Chief Executive
Officer, restricted stock in order to encourage executive
18
<PAGE> 22
stock ownership which the Compensation Committee believes will more closely
align the interests of the executives with those of the Company's stockholders.
The terms and conditions of the restricted stock awards require, with certain
exceptions, that the recipient be employed by the Company at the time of vesting
in order to be entitled to retain the restricted stock, and provide for vesting
of 50% at the end of four years and 100% at the end of five years from August 4,
1995. See "CONCERNING MANAGEMENT -- Executive Compensation -- Summary
Compensation Table of International" for additional information concerning these
awards. With respect to the grant to Mr. Vierra of stock options in tandem with
stock appreciation rights to purchase 400,000 shares of International Series A
Common Stock and the grant to Mr. Vierra of 15,000 restricted shares of
International Series A Common Stock, the Compensation Committee believed that
such grants were required to maintain Mr. Vierra's compensation package at a
level competitive with that of chief executive officers at other similar media
companies.
Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code of 1986, as amended, and the U.S. Treasury Regulations relating to
the Code (collectively, the "Code") restrict publicly traded companies from
claiming or receiving a tax deduction on compensation paid to an executive
officer in excess of $1 million, unless such compensation is performance based.
As result, many companies with executive pay levels exceeding the $1 million
limit are considering revising or amending current compensation programs to
qualify the payments thereunder for deductibility. The 1995 Plan has been
established in a manner which permits the Compensation Committee to make certain
awards that are not subject to this limitation. In making awards under the 1995
Plan, the Compensation Committee will consider the implications of Section
162(m).
COMPENSATION COMMITTEE
Paul A. Gould
Jerome H. Kern
Dr. John C. Malone
19
<PAGE> 23
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
(assuming reinvestment of dividends) on the International Series A Common Stock
against the Nasdaq Composite Index (U.S. and Foreign) and a peer group of
companies based on the NASDAQ Telecommunications Stock Index. The graph assumes
that the value of the investment in International Series A Common Stock and each
index was $100 on July 18, 1995. The Company has not paid any cash dividends on
the International Series A Common Stock and does not expect to pay dividends for
the foreseeable future. The stockholder return performance graph below is not
necessarily indicative of future performance.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD TELE-COMMUNICATIONS NASDAQ TELECOMMUNICATIONS NASDAQ COMPOSITE INDEX
(FISCAL YEAR COVERED) INTERNATIONAL, INC. STOCK INDEX* (U.S. AND FOREIGN)*
- --------------------- ------------------- ------------------------- ----------------------
<S> <S> <S> <S>
7/18/95 100.00 100.00 100.00
12/29/95 142.19 106.27 104.92
</TABLE>
* All Nasdaq total return to stockholder figures are calculated on a monthly
basis and quotations are as of July 18, 1995.
BOARD MEETINGS
From July 18, 1995 (the date of the Company's initial public offering) to
December 31, 1995, there was one meeting of the full Board of Directors of the
Company. The meeting was attended by all directors except Mr. Kern. All other
Board action during such period was taken by unanimous written consent of the
members of the Board. Except for Mr. Kern, no director attended fewer than 75%
of the meetings of the Board of Directors or of any committee of which he is a
member during the aforementioned period in 1995.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has an Audit Committee, a Compensation
Committee and an Executive Committee. There is no standing nomination committee
of the Company's Board of Directors.
20
<PAGE> 24
The members of the Audit Committee are Messrs. Gould and Lescure. The
duties of the Audit Committee are to review and monitor the Company's financial
reports and accounting practices to ascertain that they are within acceptable
limits of sound practice, to receive and review audit reports submitted by the
Company's independent auditors and by its internal auditing staff and to make
such recommendations to the Board as may seem appropriate to the Audit Committee
to assure that the interests of the Company are adequately protected and to
review all related party transactions and potential conflict-of-interest
situations. The Audit Committee of the Company held no meetings during 1995.
The members of the Compensation Committee are Messrs. Gould, Kern and
Malone. The functions of the Compensation Committee are to review and make
recommendations to the Board of Directors concerning the compensation of the
executive officers of the Company, to consider and make recommendations to the
Board of Directors concerning existing and proposed employment agreements
between the Company and its executive officers and to administer the 1995 Plan,
if approved by stockholders. The Compensation Committee of the Company held one
meeting during 1995.
The members of the Executive Committee are Messrs. Gould, Malone and
Vierra. The Executive Committee exercises all of the powers and authority of the
Board of Directors between meetings of the entire Board, other than such powers
and authority as the Delaware General Corporation Law specifically prohibits an
executive committee from performing. The Executive Committee took all action by
unanimous written consent and therefore held no meetings during 1995.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationship with TCI. TCI owns 86,250,000 shares of International Series A
Common Stock and 11,700,000 shares of International Series B Common Stock which,
at April 30, 1995, collectively represented approximately 91% of the total
voting power of the outstanding shares of International Common Stock.
Consequently, TCI has significant influence over the policies and affairs of the
Company and is in a position to determine the outcome of corporate actions
requiring stockholder approval, including the election of directors, the
adoption of amendments to the Company's charter and the approval of mergers and
sales of the Company's assets.
There can be no assurance as to TCI's continued ownership interest in the
Company or as to the manner or timing of any disposition of International Common
Stock by TCI. Any disposition of International Common Stock by TCI that results
in it owning less than a majority in voting power of the International Common
Stock may have significant adverse consequences for the Company, including the
possible termination of TCI's lending commitment to the Company under the TCI
Credit Facility. See "-- TCI Credit Facility" below.
TCI formed the Company during the fourth quarter of 1994 and the first
quarter of 1995 through the contribution to the Company of substantially all of
TCI's international cable television and telephony assets and certain of TCI's
international programming assets. The international programming assets that were
not contributed to the Company remained in two of TCI's other subsidiaries,
Liberty Media Corporation ("Liberty") and TCIC. The international programming
assets that remained with Liberty are those that were either (i) devoted to
foreign sports programming or (ii) owned directly or indirectly (in whole or in
part) by U.S.-based programming companies in which Liberty has an interest.
Liberty's foreign sports programming is operated through Liberty Sports,
Inc. (100% interest), Affiliated Regional Communications Ltd. (65% interest) and
LMC International, Inc. (100% interest), and includes services such as Prime
Deportiva, Premier Sports Network, Premier All Star Sports and Prime Sports.
Liberty also distributes certain of its domestic sports programming to markets
outside of the United States, primarily as "backdrop" services. In addition to
its foreign sports programming, Liberty has significant interests in domestic
regional sports channels and networks. Liberty Sports Inc., which produces Prime
Deportiva, is principally engaged in the production and distribution of domestic
regional sports programming. Liberty initially retained the international sports
assets of TCI due to Liberty's experience in sports programming. On October 30,
1995, each of the Company and Liberty agreed to contribute their respective
interests in foreign
21
<PAGE> 25
sports programming to a newly-formed partnership with The News Corporation
Limited to conduct a sports programming business on a world-wide basis. See
"-- Sports Programming Venture" below.
U.S.-based programming companies in which Liberty has an ownership
interest, and which operate or have interests in foreign programming services,
are Discovery Communications, Inc. (49% interest) (The Discovery Channel Europe,
Discovery Asia, Discovery Latin America and TLC Europe), International Family
Entertainment, Inc. (20% non-voting interest) (The Family Channel and Cable
Health Club), Turner Broadcasting System, Inc. (23% interest) (CNN
International, TNT Latin America, Cartoon Network Latin America, TNT & Cartoon
Network Europe and TNT & Cartoon Network Asia), QVC, Inc. (42.6% interest)
(QVC-The Shopping Channel (UK) and CVC Telemercado Alameda (Mexico)), Video
Jukebox Network, Inc. (5.5% interest) (Video Jukebox International Limited
(UK)), and DMX, Inc. (14% interest) (music distribution in Canada, Israel and
parts of Europe). The U.S.-based programming companies identified above are
engaged primarily in the production and development of programming for the U.S.
market. Because Liberty does not have a direct interest in the foreign
programming services operated by those companies, they were not transferred to
the Company.
TCI owns an indirect 50% interest of Lenfest Communications, Inc. ("Lenfest
Communications"), which is principally engaged in the operation of cable
television systems in the United States. A wholly-owned subsidiary of Lenfest
Communications holds a 32.7% interest in Australis Media Limited (an entity
which has issued certain convertible debentures and ordinary shares to the
Company) and another subsidiary of Lenfest Communications holds, as of June 30,
1996, a 19.5% interest in Videopole S.A. (a company in which the Company has a
9.5% indirect ownership interest). As TCIC does not have a direct interest in
Australis or Videopole, Lenfest Communications' interest in those companies were
not transferred to the Company.
TCI has advised the Company that TCI presently intends (i) to make
available to the Company any opportunity to acquire, develop, own and/or manage
cable and/or telephony operations outside the United States that is presented to
TCI or any of its controlled affiliates and (ii) except as provided below, to
make available to the Company any opportunity to acquire, develop, manage and/or
operate programming services outside of the United States (a "Programming
Opportunity") that is presented to TCI or any of its controlled affiliates. The
foregoing does not apply to (i) international programming services owned or
managed, directly or indirectly (in whole or in part), by TCI or any of its
controlled affiliates other than the Company as of July 12, 1995, (ii)
international programming opportunities under development by TCI or any of its
controlled affiliates other than the Company that were the subject of a signed
letter of intent or other agreement in principle as of July 12, 1995, (iii) a
Programming Opportunity in respect of foreign sports programming, which is
expected to be pursued by a partnership owned equally by the Company and Liberty
and made available to a joint venture in which the Company and Liberty will own
an equal interest (see "-- Sports Programming Venture" below), (iv) a
Programming Opportunity presented to a public company that is a controlled
affiliate of either TCI or any of TCI's controlled affiliates (other than the
Company), (v) a Programming Opportunity presented to, or cable television or
cable telephony services provided by, any company or other entity in which TCI
or any of its controlled affiliates has an interest but which is not itself a
controlled affiliate of either TCI or any of TCI's controlled affiliates
(included in this category would be, among others, Discovery Communications,
Inc., International Family Entertainment, Inc., Turner Broadcasting System, Inc.
and QVC, Inc.) and (vi) the distribution outside the United States of a
programming service initially distributed within the United States and owned
and/or managed by TCI or any of its controlled affiliates (other than the
Company). If the Company determines not to pursue a Programming Opportunity,
subsidiaries or controlled affiliates of TCI other than the Company may pursue
such Programming Opportunity or the Company and another subsidiary of TCI (or
any of its other controlled affiliates) may pursue such opportunity jointly.
Neither TCI nor any of its controlled affiliates will be obligated to make
available to the Company any Programming Opportunity to the extent TCI or such
controlled affiliate is legally (for example, by a fiduciary duty owed to
others) or contractually prohibited from doing so. The foregoing arrangement
concerning Programming Opportunities will, in any event, be terminable at such
time as TCI ceases to beneficially own at least a majority in voting power of
the outstanding International Common Stock of the Company.
TCI and the Company have entered into a number of inter-company agreements
more fully described below covering matters such as lending arrangements,
indemnification, the provision of services, tax sharing,
22
<PAGE> 26
the use of the Tele-Communications name and registration rights. TCI also
provides certain administrative, financial, legal, treasury, accounting, tax and
other services to the Company and makes available certain of its employee
benefit plans to the Company's employees. The terms of these arrangements were
established by TCI in consultation with the Company, but were executed while the
Company was a wholly owned subsidiary and were not the result of arm's-length
negotiations. Accordingly, although the Company believes that the terms of these
arrangements are reasonable, there is no assurance that the terms and conditions
of these agreements, or the terms of any future arrangements between TCI and the
Company, are or will be as favorable to the Company as could be obtained from
unaffiliated third parties.
If TCI were to seek to re-acquire the shares of the Company held by the
public, it would likely have the power to do so over the objection of other
stockholders, subject to any applicable provisions of Delaware law requiring
such a transaction to be "fair" to minority stockholders.
Conflicts of interest between the Company and TCI could arise with respect
to business dealings between them, including potential acquisitions of
businesses or properties, the issuance of additional securities, the election of
new or additional directors, and the payment of dividends by the Company. A
conflict of interest could also arise from TCI's position as the sole and
exclusive agent for the Company in any and all matters relating to the Company's
federal income tax liability, which includes the sole and exclusive
responsibility for the preparation and filing of consolidated federal and
consolidated or combined state income tax returns (or amended returns), to
contest or compromise any asserted tax adjustment or deficiency and to file,
litigate or compromise any claim for refund on behalf of the Company. The
Company has not instituted any formal plan or arrangement to address potential
conflicts of interest that may arise between the Company and TCI. However, the
directors of the Company intend to exercise reasonable judgment and take such
steps as they deem necessary under all of the circumstances in resolving any
specific conflict of interest that may occur and will determine what, if any,
specific measures, such as retention of an independent advisor or independent
counsel or appointment of a special committee, may be necessary or appropriate.
There can be no assurance that any conflicts will be resolved in favor of the
Company.
Sports Programming Venture. Effective April 29, 1996, the Company formed a
joint venture with Liberty and The News Corporation Limited ("News Corp.") (the
"Sports Venture") to conduct a sports programming business on a multinational
basis, excluding the United States (other than Puerto Rico), Canada, portions of
Asia, the United Kingdom and New Zealand. In connection with the formation of
the Sports Venture, Liberty and the Company, formed a limited liability company
(the "International/Liberty Venture") in which each owns a 50% interest. The
International/Liberty Venture, in turn, owns a 50% interest in the Sports
Venture, with News Corp. (through one or more wholly owned subsidiaries) owning
the other 50% interest. The Company's initial contribution to the
International/Liberty Venture consisted of $49 million and the Company's 35%
equity interest in Torneos y Competencia S.A. ("Torneos"). The Company acquired
its 35% interest in Torneos on July 28, 1995 in exchange for $10 million in
cash, 687,500 shares of International Series A Common Stock, and certain
programming rights. Additionally, the Sports Venture assumed the potential
obligation of the Company to pay additional amounts (not to exceed $30 million)
on July 31, 2001 based on the achievement by Torneos of certain earnings goals.
Liberty's initial contribution to the International/Liberty Venture
consisted of all of Liberty's international sports programming assets, including
its interests in Spanish-language sports programming services and television
rights to a variety of international sports events. To maintain its 50% interest
in the International/Liberty Venture, the Company will be required to make
future cash contributions to the International Liberty/Venture, totaling $29
million. The parties negotiated and established the amounts of the initial
contributions based on their valuation of the assets being contributed to the
International/Liberty Venture and the Sports Venture. It is anticipated that the
Company will be required to make additional significant cash payments in
connection with the operation of the International/Liberty Venture and the
Sports Venture.
The International/Liberty Venture will purchase from News Corp. 7.5% of the
outstanding stock of Star Television Limited in consideration of the payment of
$20 million and the assignment of rights under various Asian sports programming
agreements. Star Television Limited operates a satellite-delivered television
platform in Asia.
23
<PAGE> 27
The final agreements with News Corp. providing for the formation of the
Sports Venture are expected to include, among other things, provisions generally
prohibiting any of the parties from engaging in any business that is within the
scope of the business to be conducted by the Sports Venture (other than through
the Sports Venture), that being the operation of programming services featuring
predominantly sports and sports-related programming, data or content for
distribution by any means and in any form anywhere in the world, except in the
excluded areas noted above. Those restrictions will be binding on TCI until such
time as neither the Company nor Liberty is controlled by TCI. The agreement with
News Corp. also includes provisions granting to a separate joint venture to be
formed by Liberty and Fox Inc. (a wholly owned subsidiary of News Corp.) rights
of first refusal with respect to English language sports programming as to which
the Sports Venture holds United States or Canadian distribution rights.
The members of the Sports Venture generally will be prohibited from
transferring all or any part of their interests therein during the period from
formation to October 30, 2000. Thereafter, any proposed transfer will be subject
to a right of first refusal in favor of the other member. Transfers to
affiliates will not be subject to those transfer restrictions or rights of first
refusal. In certain events, either member of the Sports Venture will have the
right to trigger a procedure under which the other member will be required
either to purchase the triggering member's interest or to sell its interest to
the triggering member, in either case at the price stated by the triggering
member. Those buy/sell rights will arise if, at any time after October 30, 2000,
the members cannot agree for two consecutive years on the approval of an annual
budget or the appointment of a chief executive officer for the Sports Venture.
If control of the International/Liberty Venture is acquired by any one of
certain named media industry participants, then News Corp. will have an option
to purchase the interest in the Sports Venture held by the International/Liberty
Venture at a price equal to the fair market value of such interest. The
agreement governing the formation of the International/Liberty Venture will
include restrictions on transfers of interests and buy/sell rights applicable to
the interests of the Company and Liberty in that entity that are substantially
the same as those applicable to the interests in the Sports Venture.
On May 9, 1996, the International/Liberty Venture invested $29 million of
the funds that it received in connection with its initial capitalization by
lending the funds to TCI pursuant to an unsecured promissory note. The
promissory note accrues interest at the TCIC 30-day borrowing rate as determined
by the TCIC treasury department at the end of each month. The promissory note
matures on December 31, 1997 unless a prior demand for payment has been made by
the International/Liberty Venture.
TCI Credit Facility. The Company and TCI have entered into a subordinated
revolving credit facility (the "TCI Credit Facility"), effective April 25, 1995,
which provides for loans from TCI to International in an aggregate outstanding
principal amount of up to $200 million (the "Commitment"). Borrowings under the
TCI Credit Facility, together with all accrued interest thereon, will be payable
in full on April 25, 2000. At June 30, 1996, no borrowings were outstanding
under the TCI Credit Facility.
Prior to April 25, 2000, borrowings repaid by the Company under the TCI
Credit Facility will be available for re-borrowing, subject to certain
conditions to borrowing.
Interest Rate and Payment. Borrowings under the TCI Credit Facility bear
interest at the rate of 13% per annum. Accrued interest on outstanding
borrowings, which compound quarterly, are due and payable on April 25, 2000, or
upon the earlier repayment of such borrowings under the TCI Credit Facility.
During the year ended December 31, 1995, the Company incurred aggregate
interest expense of $3.9 million on borrowings pursuant to the TCI Credit
Facility.
Fees. The Company paid to TCI a $2 million origination fee and is
required to pay an annual credit facility fee in an amount equal to .375% of the
unused borrowing availability under the TCI Credit Facility. Such credit
facility fee aggregated $279,000 during the year ended December 31, 1995.
Subordination; No Collateral. The payment of the principal of and
interest on all borrowings under the TCI Credit Facility are subordinated in
right of payment to the prior payment in full of all "Senior Indebtedness."
Senior Indebtedness is defined, generally, as all indebtedness of the Company
for money borrowed, obligations of the Company in respect of letters of credit
or bankers acceptances and indebtedness issued as part of the deferred purchase
price of property or services, except any such indebtedness that by the terms of
the instrument creating or representing such indebtedness is expressly made
equal in right of payment with, or subordinate and subject in right of payment
to, borrowings outstanding under the TCI Credit Facility.
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<PAGE> 28
If the Company incurs Senior Debt (defined generally as indebtedness for money
borrowed from institutional lenders) in a principal amount in excess of $200
million (such excess, the "Senior Excess Amount"), the Commitment will be
immediately reduced by the amount of such Senior Excess Amount. In such event,
outstanding loans from TCI in a principal amount necessary to cause such
outstanding loans to not exceed the amount of the Commitment, as so adjusted,
together with accrued interest, will immediately become due and payable. The
Commitment may be readjusted upward (but not above $200 million) to the extent
that such Senior Excess Amount is subsequently repaid by the Company. Borrowings
under the TCI Credit Facility are unsecured. The Debentures (as defined below)
constitute "Senior Indebtedness" (but not "Senior Debt") under the terms of the
TCI Credit Facility.
Early Termination. If at any time TCI shall beneficially own capital
stock of the Company representing less than a majority in voting power of the
outstanding shares of International capital stock entitled to vote for the
election of directors, TCI may terminate its obligation to make further loans
under the TCI Credit Facility upon two business days prior notice to the
Company. The principal of and interest on all outstanding loans shall become due
and payable on the first anniversary of the receipt by the Company of such
notice.
Loans to TCI Pursuant to Unsecured Promissory Note. On February 8, 1996,
the Company received net cash proceeds of approximately $336 million from the
issuance of 4 1/2% Convertible Subordinated Debentures due 2006 having an
aggregate principal amount of $345.0 million (the "Debentures"). Pending its use
by the Company, the net proceeds from the Debentures have been loaned to TCI
pursuant to an unsecured promissory note with an aggregate borrowing limit of
$400 million. Amounts outstanding under the promissory note bear interest at
variable rates based on TCI's weighted average cost of bank borrowings of
similar maturities, and principal and interest is due and payable as mutually
agreed from time to time by TCI and the Company.
Registration Rights Agreement. As of July 18, 1995, the Company and TCI
entered into a Registration Rights Agreement (the "Registration Rights
Agreement") which, among other things, provides that upon the request of TCI,
the Company will register under the Securities Act of 1933 any of the shares of
International Series A Common Stock or International Series B Common Stock (and
any other shares of capital stock of International issued in respect of such
shares) held by TCI for sale in accordance with TCI's intended method of
disposition thereof. TCI has the right to request three such registrations. The
Company has agreed to pay all registration expenses (other than underwriting
discounts and commissions) in connection with such registrations. The
Registration Rights Agreement will terminate if TCI ceases to own for five
consecutive years shares of International Common Stock representing at least 30%
in voting power of the outstanding shares of capital stock of the Company
entitled to vote generally in the election of directors.
Indemnification Agreement. TCI or certain of its subsidiaries (other than
the Company) continues to be an obligor under, or a guarantor of the payment or
performance of, certain contractual obligations, including financial and debt
obligations, which are for the benefit of the Company. The Company has entered
into an Indemnification Agreement with TCI, dated as of July 12, 1995, pursuant
to which the Company has agreed to indemnify TCI (or any of TCI's officers,
directors, employees, and agents) for any payment made by TCI, or any claim,
loss or liability that TCI may otherwise incur, by reason of such obligations.
The Company has not made any payments to TCI pursuant to the Indemnification
Agreement.
Services Agreement. TCI has agreed, at the request of the Company, to
provide certain facilities, services and personnel to the Company. The scope of
the facilities, personnel and services to be provided by TCI to the Company and
the respective charges payable in respect thereof are set forth in a services
agreement between TCI and the Company, dated as of July 18, 1995 (the "Services
Agreement"). Pursuant to the Services Agreement, TCI has agreed to provide to
the Company administrative and operational services necessary for the conduct of
its business, including, but not limited to, such services as are generally
performed by TCI's accounting, finance, corporate, legal and tax departments. In
addition, TCI has agreed to make available to the Company such general overall
management services and strategic planning services as TCI and the Company shall
agree and shall provide the Company with such access to and assistance from
TCI's cable
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<PAGE> 29
engineering and construction groups and TCI's domestic cable television and
programming and technology/venture personnel as the Company may from time to
time request.
The Services Agreement also provides that, for so long as TCI continues to
beneficially own shares of International Common Stock representing at least a
majority in voting power of the outstanding shares of capital stock of the
Company entitled to vote generally in the election of directors, TCI will
continue to permit the Company's employees to participate in TCI's employee
benefit plans. In this regard, the Company will be allocated that portion of
TCI's compensation expense attributable to benefits extended to employees of the
Company.
Pursuant to the Services Agreement, the Company will reimburse TCI for all
direct expenses incurred by TCI in providing such services and a pro rata share
of all indirect expenses incurred by TCI in connection with the rendering of
such services, including a pro rata share of the salary and other compensation
of TCI employees performing services for the Company, general overhead expenses
and rental expenses for any physical facilities of TCI utilized by the Company.
In this regard, it is anticipated that the Company will, for the foreseeable
future, share office space with, or sublease office space from, TCI. The
obligations of TCI to provide services under the Services Agreement (other than
TCI's obligation to allow the Company's employees to participate in TCI's
employee benefit plans) will continue in effect until terminated by either the
Company at any time on not less than 60 days' notice to TCI, or by TCI at any
time after three years on not less than four months' notice to the Company.
From the effective date of the Services Agreement through December 31,
1995, the amounts charged to the Company by TCI pursuant to the Services
Agreement aggregated $1.9 million.
Tax Sharing Agreement. Federal income taxes and certain state and local
taxes are paid by TCI and the Company on a consolidated basis. However, pursuant
to a tax sharing agreement, dated as of July 1, 1995 (the "Tax Sharing
Agreement"), Federal income taxes are calculated, with certain adjustments, on a
separate return basis for each corporation included in TCI's consolidated tax
group (including the Company's subsidiary corporations that are included in such
group (the "International Consolidated Subsidiaries"), applying provisions of
the Code as if each such corporation filed a separate return for Federal income
tax purposes. Based upon these separate calculations, an allocation of tax
liabilities is made such that the Company and each of the International
Consolidated Subsidiaries is responsible to TCI for its gross share of TCI's
consolidated Federal income tax liabilities, such gross share being determined
without regard to (i) tax benefits that are attributable to TCI and its other
consolidated corporations or (ii) certain tax benefits that are attributable to
the Company and the International Consolidated Subsidiaries but that are taken
into account in determining TCI's consolidated Federal income tax benefit
carryovers. Similarly, TCI would reimburse the Company and the International
Consolidated Subsidiaries for tax benefits attributable to the Company and the
International Consolidated Subsidiaries and actually used by TCI in determining
its consolidated Federal income tax liability. Tax attributes, including but not
limited to net operating losses, foreign tax credits, alternative minimum tax
net operating losses, alternative minimum tax credits, deferred inter-company
gains and tax basis in assets will be inventoried and tracked for the
consolidated entities comprising each of the Company and TCI and its other
consolidated subsidiaries. In addition, pursuant to the Tax Sharing Agreement,
state and local income taxes are calculated on a separate return basis for TCI
and the Company (applying provisions of state and local tax law and related
regulations as if the Company and the International Consolidated Subsidiaries
were a separate unitary or combined group for tax purposes) and TCI's combined
or unitary tax liability is allocated between TCI and the Company based upon
such separate calculation. TCI has retained the right to file all returns, make
all elections and control all audits and contests. The Tax Sharing Agreement
(except as to the provisions relating to audits, refunds and actions that may
affect prior year returns) will terminate as to the Company at such time as the
Company is no longer permitted to file a consolidated Federal income tax return
for Federal income tax purposes with TCI. Under current Internal Revenue Service
regulations, the Company and TCI must file a consolidated return until such time
as TCI owns less than 80% of the total voting power of the capital stock of the
Company or owns stock representing less than 80% in value of the total value of
the capital stock of the Company.
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<PAGE> 30
From the effective date of the Tax Sharing Agreement through December 31,
1995, inter-company income tax benefits aggregating $4.9 million were allocated
to TCI by the Company. Pursuant to the Tax Sharing Agreement, the resulting
receivable will only be settled in cash upon the deconsolidation of the Company
for purposes of TCI's Federal income tax returns.
Trade Name and Service Mark License Agreement. The Company and TCI have
entered into a Trade Name and Service Mark License Agreement, dated as of July
18, 1995 (the "License Agreement"), pursuant to which TCI has granted to the
Company a non-exclusive non-assignable license to use certain trade names and
service marks specifically identified in the License Agreement. The Company has
agreed that all advertising, promotion and use of certain of TCI's trade names
and service marks by the Company shall be consistent with TCI guidelines and
standards, as well as subject to TCI's control in certain circumstances. The
term of the License Agreement terminates one year after TCI ceases to
beneficially own a majority (by voting power) of the outstanding shares of
voting capital stock of the Company. The term may be extended for one year upon
the consent of both parties.
Other Transactions. The Company's consolidated entities engaged in the
multi-channel video distribution business in Puerto Rico (the "Consolidated
Puerto Rico Entities") purchase programming services from a subsidiary of TCI.
The charges, which approximate such TCI subsidiary's cost and are based on the
aggregate number of subscribers served by the Consolidated Puerto Rico Entities,
aggregated $3.4 million during the year ended December 31, 1995. The
Consolidated Puerto Rico Entities also have management agreements with certain
subsidiaries of TCI whereby such subsidiaries' management provides
administrative services and has assumed managerial responsibility for cable
television system operations and construction. As compensation for these
services, the Consolidated Puerto Rico Entities pay a monthly fee calculated on
a per-subscriber basis. Charges for such services were $680,000 during the year
ended December 31, 1995.
Certain Business Relationships. Jerome H. Kern, a director of the Company,
is special counsel with the law firm of Baker & Botts, L.L.P., principal outside
counsel for the Company and TCI. Pierre Lescure, a director of the Company, is
Chief Executive Officer of Canal +. On April 30, 1996, the Company issued
473,373 shares of International Series A Common Stock to Canal + for an
aggregate cash purchase price of $10,000,005.
1995 STOCK PLAN PROPOSAL
INTRODUCTION
The Board of Directors adopted the Tele-Communications International, Inc.
1995 Stock Incentive Plan (the "1995 Plan") to provide a means whereby (i)
employees of the Company and its subsidiaries and (ii) independent contractors
providing services to the Company or its subsidiaries ("Eligible Participants"
or individually, an "Eligible Participant") can be awarded additional
remuneration for services rendered and encouraged to invest in capital stock of
the Company, thereby increasing such Eligible Participants' proprietary interest
in the Company's businesses, encouraging such Eligible Participants to remain in
the employ of the Company or its subsidiaries, and increasing such Eligible
Participants' personal interest in the continued success and progress of the
Company and its subsidiaries. Accordingly, on July 11, 1995, the Board of
Directors of the Company adopted the 1995 Plan and directed that the 1995 Stock
Plan Proposal be submitted to a vote of the stockholders of the Company at the
Annual Meeting.
Only the Eligible Participants may receive awards under the 1995 Plan.
There are approximately 26 employees of the Company and approximately 1,600
employees of the Company's consolidated subsidiaries eligible to receive awards
under the 1995 Plan. The number of independent contractors eligible to receive
awards under the 1995 Plan is not determinable. The Compensation Committee of
the Board is invested with broad authority to select Eligible Participants to
receive awards under the 1995 Plan. The Compensation Committee may take into
account the nature of the services rendered by the Eligible Participant, the
present and past contributions of the Eligible Participant and such other
factors as the Compensation Committee deems relevant.
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<PAGE> 31
NEW PLAN BENEFITS
The following table sets forth information with respect to all of the
awards of stock options granted in tandem with stock appreciation rights made to
date under the 1995 Plan. All of such awards were made on December 13, 1995.
NEW PLAN BENEFITS
TELE-COMMUNICATIONS INTERNATIONAL, INC.
1995 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
INTERNATIONAL SERIES A
NAME AND POSITION DOLLAR VALUE($)(1) COMMON STOCK
----------------- ------------------ ----------------------
<S> <C> <C>
Fred A. Vierra........................................... $ 6,913,440 400,000(2)
(Chief Executive Officer)
Adam N. Singer........................................... $ 6,913,440 400,000(2)
(President and Chief Operating Officer)
Miranda Curtis........................................... $ 3,456,720 200,000(2)
(Senior Vice President)
Richard L. Rexroat, Jr................................... $ 864,180 50,000(2)
(Vice President of Engineering)
Graham E. Hollis......................................... $ 864,180 50,000(2)
(Chief Financial Officer and Vice President of Finance)
Executive Officers as a Group............................ $ 20,740,320 1,200,000(2)(3)
Non-Executive Directors as a Group....................... -- --
Non-Executive Officers and Employees as a Group.......... $ 1,590,091 52,000(3)
</TABLE>
- ---------------
(1) The present dollar value of the stock options in tandem with stock
appreciation rights presented in the table is based on the Black-Scholes
Model and on the assumptions described in note 6 of the table in "CONCERNING
MANAGEMENT -- Executive Compensation -- Option and SAR Grants Table."
(2) See "CONCERNING MANAGEMENT -- Executive Compensation -- Option and SAR
Grants Table" for additional information on these grants.
(3) Grants of stock options in tandem with stock appreciation rights were made
to a total of 10 employees and officers of the Company. The total number of
shares of the International Series A Common Stock underlying such grants is
1,252,000. See note 17 in "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT -- Security Ownership of Management" and CONCERNING
MANAGEMENT -- Executive Compensation -- Option and SAR Grants Table" for
additional information on certain of these grants.
Additionally, on December 13, 1995, pursuant to the 1995 Plan, Messrs.
Vierra and Singer and Ms. Curtis were granted 15,000, 15,000 and 10,000
restricted shares, respectively, of International Series A Common Stock. Such
restricted shares had a value on the date of grant, based upon the closing sales
price per share of the International Series A Common Stock on the Nasdaq
National Market on December 13, 1995, of $380,625, $380,625 and $253,750,
respectively. See "CONCERNING MANAGEMENT -- Executive Compensation -- Summary
Compensation Table of International" for additional information on these grants.
The 1995 Plan and the aforementioned grants made thereunder are subject to,
and will become effective upon approval of, the 1995 Stock Plan Proposal by the
requisite vote of the stockholders at the Annual Meeting. Other than the amount
of underlying shares, each grant of stock options in tandem with stock
appreciation rights described above in the "New Plan Benefits Table" has
identical terms.
Except for the above-mentioned grants made under the 1995 Plan, the
benefits or the amounts that would have been granted in 1995 or which will be
granted in the future under the 1995 Plan to eligible participants is not
determinable. The amounts and benefits are not determinable because the
Compensation Committee of
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<PAGE> 32
the Company has complete discretion over the making of any awards under the 1995
Plan and, as a result, may choose to make awards or may choose to decline to
make awards in accordance with the Compensation Committee's then existing
policies and in accordance with the terms of the 1995 Plan.
The market value of the International Series A Common Stock subject to
award under the 1995 Plan (including the shares attributable to the grants
described above) is $49,687,500. Such market value is based on the maximum
number of shares of International Series A Common Stock eligible to be awarded
under the 1995 Plan multiplied by $16.5625, the last reported sales price of
International Series A Common Stock on the Nasdaq National Market on August 5,
1996.
DESCRIPTION OF THE 1995 PLAN
A copy of the 1995 Plan is attached hereto as Appendix I. The discussion of
the 1995 Plan set forth below is subject to, and qualified in its entirety by
reference to, the 1995 Plan.
General. The 1995 Plan provides for awards to be made in respect of a
maximum of 3,000,000 shares of International Series A Common Stock (subject to
certain adjustments described below).
Awards may be made as grants of stock options ("Options"), stock
appreciation rights ("SARs"), restricted shares ("Restricted Shares"), stock
units ("Stock Units"), or any combination thereof (collectively, "Awards").
Shares in respect of which Awards are made may be either authorized but unissued
shares of International Series A Common Stock or issued shares reacquired by the
Company, including shares purchased in the open market. Shares of International
Series A Common Stock that are subject to Awards that expire, terminate or are
annulled for any reason without having been exercised (or, with respect to
Tandem SARs deemed exercised, by virtue of the exercise of a related Option), or
are Restricted Shares or Stock Units that are forfeited prior to becoming
vested, or are subject to Awards of SARs that are exercised for cash, will
return to the pool of such shares available for grant under the 1995 Plan.
The 1995 Plan will be administered by the Compensation Committee of the
Company's Board of Directors, or such other committee as the Board may in the
future appoint, which shall be comprised of at least two persons (the
"Compensation Committee"). Each member of the Compensation Committee shall be a
member of the Board who during the one-year period prior to service on the
Compensation Committee was not, and during such service is not, granted or
awarded equity securities pursuant to the 1995 Plan or any other plan of the
Company or any of its affiliates, if such grant or award or participation in
such plan would prevent such member from being a "disinterested person" with
respect to the 1995 Plan for purposes of Rule 16b-3 of the Exchange Act. The
members of the Compensation Committee of the Company are Mr. Kern, Mr. Gould and
Dr. Malone. See "CONCERNING MANAGEMENT -- Committees of the Board of Directors"
above.
The Compensation Committee will have broad discretion in administering the
1995 Plan, and is authorized, subject only to the express provisions of the 1995
Plan, to determine the persons to whom Awards may be made, to determine the
terms and conditions (which need not be identical) of each Award (including the
timing of the grant, the type of Award granted, the pricing and the amount of
the Award and terms related to vesting, exercisability, forfeiture and
termination), and to interpret the provisions of the 1995 Plan and each
agreement relating to Awards granted under the 1995 Plan. The determinations of
the Compensation Committee are final and binding upon all participants.
Stock Options. Options granted pursuant to the 1995 Plan may be either
incentive stock options ("Incentive Option(s)") within the meaning of Section
422 of the Code or non-qualified stock options ("Non-qualified Option") which do
not qualify under Code Section 422. The Compensation Committee is authorized to
designate an Option as an Incentive Option or a Non-qualified Option.
The exercise price of all Options granted under the 1995 Plan will be fixed
by the Compensation Committee, and may be more than, less than or equal to the
fair market value of the International Series A Common Stock subject to the
Option as of the date the Option is granted. Except as otherwise provided in the
1995 Plan regarding acceleration of Awards, no participant may be granted in any
calendar year Options covering more than 1,000,000 shares of International
Series A Common Stock (as adjusted for stock splits, etc.).
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<PAGE> 33
Subject to the provisions of the 1995 Plan with respect to death,
retirement and termination of employment, the term of each Option shall be for
such period as the Compensation Committee shall determine as set forth in the
applicable agreement relating to the Award. An Option granted under the 1995
Plan shall become (and remain) exercisable during the term of the Option to the
extent provided in the applicable agreement relating to the Award and the 1995
Plan and, unless the applicable agreement relating to the Award otherwise
provides, may be exercised to the extent exercisable, in whole or in part, at
any time and from time to time during such term; provided, however, that
subsequent to the grant of an Option, the Compensation Committee, at any time
before complete termination of such Option, may accelerate the time or times at
which such Option may be exercised in whole or in part (without reducing the
term of such Option).
An Option may be exercised by written notice to the Company in accordance
with the terms of each agreement relating to the Award and in accordance with
the procedures established by the Compensation Committee. The method of payment
of the exercise price of an Option, and of the amount required to satisfy
applicable Federal, state and local withholding tax requirements, will be
determined by the Compensation Committee and may consist of cash, a check, a
promissory note, the surrender of already owned shares of International Common
Stock, the withholding of shares of International Series A Common Stock issuable
upon exercise of such Option, the delivery of a properly executed exercise
notice and irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds required to pay the purchase price,
any combination of the foregoing methods of payment or such other consideration
and method of payment as may be permitted for the issuance of shares under the
Delaware General Corporation Law. The permitted method or methods of payment of
the Option exercise price and applicable withholding taxes, if other than cash,
shall be set forth in the agreement relating to the Award and may be subject to
such conditions as the Compensation Committee deems appropriate.
Shares of International Common Stock surrendered in payment in whole or in
part of the Option exercise price and applicable withholding taxes, and shares
of International Series A Common Stock issuable upon exercise of an Option that
are withheld for such purposes, will be valued at their fair market value on the
date of exercise. In general, fair market value is determined by reference to
the last sale price for shares of the International Common Stock as reported on
the Nasdaq National Market on the relevant date. If such International Common
Stock is not listed on the Nasdaq National Market, or on any other exchange, the
1995 Plan provides that the Compensation Committee shall determine the fair
market value of such International Common Stock based on such considerations as
it deems appropriate. If an Option holder elects to have shares withheld in
payment of all or part of the amounts payable upon exercise of an Option and, in
order to comply with the requirements of Rule 16b-3, such election is made
during a 10-day "window period" following the release of quarterly or annual
statements of the Company's sales and earnings, then for purposes of valuing the
shares withheld, the Option (other than an Incentive Option) will be deemed to
have been exercised on the date during such window period on which the highest
last sale price of a share of the International Series A Common Stock is
reported on the Nasdaq National Market, and the fair market value of such shares
shall be deemed to be such highest last reported sale price. The Compensation
Committee will have the right in its sole discretion to approve or disapprove
any election by the holder to have shares withheld to pay the Option exercise
price or withholding taxes.
Unless otherwise determined by the Compensation Committee and provided in
the agreement relating to the Award, Options shall not be transferable other
than by will or the laws of descent and distribution or pursuant to a domestic
relations order and, except as otherwise required pursuant to a domestic
relations order, Options may be exercised during the lifetime of the holder
thereof only by such holder (or his or her court appointed legal
representative).
Stock Appreciation Rights. An SAR may be granted under the 1995 Plan to the
holder of an Option (a "Related Option") with respect to all or a portion of the
shares of International Series A Common Stock subject to the Related Option (a
"Tandem SAR") or may be granted separately to an eligible employee (a "Free
Standing SAR"). A Tandem SAR may be granted either concurrently with the grant
of the Related Option or (if the Related Option is a Non-qualified Option) at
any time thereafter and prior to the complete exercise, termination, expiration
or cancellation of the Related Option. A Tandem SAR will be exercisable
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<PAGE> 34
only at the time and to the extent that the Related Option is exercisable and
may be subject to such additional limitations on exercisability as the related
agreement may provide. A Tandem SAR cannot be exercised after the complete
termination or full exercise of the Related Option. Conversely, upon the
exercise or termination of the Related Option, the Tandem SAR will be canceled
automatically to the extent of the number of shares of International Series A
Common Stock with respect to which the Related Option was so exercised or
terminated. Free Standing SARs will be exercisable at the time, to the extent
and upon the terms set forth in the agreement relating to the Award. No
participant may be granted in any calendar year SARs covering more than
1,000,000 shares of International Series A Common Stock (as adjusted for stock
splits, etc.).
The base price of a Tandem SAR will be the same as the exercise price of
the Related Option unless the Compensation Committee provides for a higher base
price. The base price of a Free Standing SAR will not be less than the fair
market value of the applicable International Series A Common Stock on the date
of grant of the Free Standing SAR. Upon exercise of an SAR, the holder will be
entitled to receive from the Company, for each share of applicable International
Series A Common Stock with respect to which the SAR is exercised, an amount
equal to the excess of the fair market value of a share of such International
Series A Common Stock on the date of exercise over the base price per share of
such SAR. Such amount shall be paid in cash, shares of International Series A
Common Stock (valued at their fair market value on the date of exercise of the
SAR) or a combination thereof as specified in the agreement relating to the
Award or, if so provided in the agreement, either as determined by the
Compensation Committee in its sole discretion or as elected by the holder. The
Compensation Committee will have the right in its sole discretion to approve or
disapprove any election by the holder to receive cash in full or partial
settlement of an SAR. As described above with respect to Options granted under
the 1995 Plan, if in order to meet the requirement of Rule 16b-3, a holder
exercises an SAR (other than one granted in tandem with an Incentive Option) in
whole or in part for cash during a 10-day window period prescribed by such Rule,
then such SAR will be deemed to have been exercised on the day during such
window period on which the highest last sale price of a share of International
Series A Common Stock is reported on the Nasdaq National Market, and the fair
market value of such shares shall be deemed to be such highest reported last
sale price. Unless the Compensation Committee shall otherwise determine, to the
extent a Free Standing SAR is exercisable, it will be exercised automatically
for cash on its expiration date.
The agreement relating to an Award of SARs may provide for a limit on the
amount payable to a holder upon exercise of SARs at any time or in the
aggregate, for a limit on the number of SARs that may be exercised by the holder
in whole or in part for cash during any specified period, for a limit on the
time periods during which a holder may exercise SARs and for such other limits
on the rights of the holder and other terms and conditions as the Compensation
Committee may determine.
Unless otherwise determined by the Compensation Committee and provided in
the applicable agreement, SARs shall not be transferable other than by will or
the laws of descent and distribution or pursuant to a domestic relations order
and, except as otherwise required pursuant to a domestic relations order, SARs
may be exercised during the lifetime of the holder thereof only by such holder
(or his or her court appointed legal representative).
Restricted Shares. At the time of any Award of Restricted Shares, the
Compensation Committee will designate a period of time which must elapse (the
"Restriction Period") and may impose such other restrictions, terms and
conditions that must be fulfilled, before the Restricted Shares will become
vested. The Compensation Committee may determine that (i) Restricted Shares will
be issued at the beginning of the Restriction Period; in which case, such shares
will constitute issued and outstanding shares of International Series A Common
Stock for all corporate purposes, or (ii) Restricted Shares will not be issued
until the end of the Restriction Period; in which case, the holder will have
none of the rights of a stockholder with respect to the shares of International
Series A Common Stock covered by such Award until such shares shall have been
issued to such holder at the end of the Restriction Period. The holder will have
the right to vote Restricted Shares issued at the beginning of the Restriction
Period and to receive such dividends and other distributions as the Compensation
Committee may, in its sole discretion, designate which are paid or distributed
on such Restricted Shares, and generally to exercise all other rights as a
holder of International Series A Common Stock, except that, until the end of the
Restriction Period: (i) such holder will not be entitled to take
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possession of the stock certificates representing the Restricted Shares, (ii)
such holder may not sell, transfer or otherwise dispose of the Restricted
Shares, and (iii) other than such dividends and other distributions as the
Compensation Committee may designate, the Company will retain custody of all
dividends and distributions made or declared with respect to the Restricted
Shares ("Retained Distributions") and such Retained Distributions shall not bear
interest or be segregated in a separate account. In the case of Restricted
Shares issued at the end of the Restriction Period, the holder will be entitled
to receive, to the extent specified by the Compensation Committee only, an
amount equal to all dividends and other distributions (or the economic
equivalent thereof) that would have been paid, made or declared on such
Restricted Shares had such shares been issued at the beginning of the
Restriction Period (collectively, "Dividend Equivalents"), and such Dividend
Equivalents will be paid as specified by the Compensation Committee in the
applicable Award agreement. A breach of any restrictions, terms or conditions
established by the Compensation Committee with respect to any award of
Restricted Shares will cause a forfeiture of such Restricted Shares and any
Retained Distributions (including any unpaid Dividend Equivalents) with respect
thereto. The 1995 Plan also provides that the Compensation Committee may
authorize awards of cash to a holder of Restricted Shares, payable at any time
after the Restricted Shares become vested.
Upon expiration of the applicable Restriction Period and the satisfaction
of any other applicable conditions, all or part of the Restricted Shares and any
Retained Distributions thereon (including any unpaid Dividend Equivalents) will
become vested and all or part of any cash amount awarded will become payable.
Any Restricted Shares and Retained Distributions thereon (including any unpaid
Dividend Equivalents) which do not vest will be forfeited.
Stock Units. The 1995 Plan also authorizes the Compensation Committee to
grant to eligible persons, either alone or in addition to Options, SARs and
Restricted Shares, awards of International Series A Common Stock and other
awards that are valued in whole or in part by reference to, or are otherwise
based on, the fair market value of the International Series A Common Stock
("Stock Units"). The Compensation Committee will determine all terms and
conditions of such Awards, including any restrictions (including restrictions on
transfer), deferral periods, or performance requirements. The provisions of any
Award of Stock Units need not be the same with respect to each recipient and are
subject to such rules as the Compensation Committee may establish at the time of
grant.
Effect of Termination of Employment. Under the terms of the 1995 Plan, if
the employment of the holder of an Award terminates by reason of death or total
disability, then, unless the agreement relating to such Award provides
otherwise, (i) all outstanding Options and SARs granted in such Award will
become immediately exercisable in full in respect of the aggregate number of
shares covered thereby, (ii) the Restriction Period for all Restricted Shares
granted in such Award will be deemed to have expired and all such Restricted
Shares, any related Retained Distributions and any unpaid Dividend Equivalents
will become vested and any cash amounts payable pursuant to the related
agreement will be adjusted in such manner as may be provided in such agreement,
and (iii) all Stock Units will become vested in full.
Under the terms of the 1995 Plan, if the employment of the holder of an
Award is terminated during the Restriction Period with respect to any Restricted
Shares, or prior to the complete exercise (or deemed exercise thereof) of any
Option or SAR or the vesting or complete exercise of any Stock Units, then such
Options, SARs and Stock Units will thereafter be exercisable, and the holder's
rights to any such unvested Restricted Shares, Retained Distributions, unpaid
Dividend Equivalents and cash amounts and any such unvested Stock Units will
thereafter vest, only to the extent provided by the Compensation Committee in
the agreement relating to such Award, except that (i) if the holder's employment
terminates by reason of death or total disability then any Option or SAR will
remain exercisable for a period of at least one year after such termination, and
(ii) if the holder's employment is terminated for cause (as defined in the
applicable agreement or the 1995 Plan), then (a) such employee's rights to all
Restricted Shares, Retained Distributions, unpaid Dividend Equivalents and any
cash amounts covered by such Award will be forfeited immediately and (b) all
Options and SARs and all unvested or unexercised Stock Units will immediately
terminate.
Additional Provisions. Unless otherwise provided by the Compensation
Committee in the agreement relating to an Award, each Award will vest and become
exercisable in full in the event of any of the following
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transactions which are approved by the Company's Board (or stockholders, if
Board approval is not required by law) (each an "Approved Transaction"): (i) any
consolidation or merger of the Company, or binding share exchange, pursuant to
which shares of International Series A Common Stock would be changed or
converted into or exchanged for cash, securities or other property, other than
any such transaction in which the common stockholders of the Company immediately
prior to such transaction have the same proportionate ownership of the common
stock of, and voting power with respect to, the surviving corporation
immediately after such transaction, (ii) any merger, consolidation or binding
share exchange, to which the Company is a party as a result of which the persons
who are common stockholders of the Company immediately prior thereto would have
less than a majority of the combined voting power of the outstanding capital
stock of the Company ordinarily (and apart from the rights accruing under
special circumstances) having the right to vote in the election of directors
immediately following such merger, consolidation or binding share exchange,
(iii) the adoption of any plan or proposal for the liquidation or dissolution of
the Company, or (iv) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company. Options, SARs or, if applicable, Stock Units not
theretofore exercised will terminate upon consummation of an Approved
Transaction. The Compensation Committee will have the discretion, unless
otherwise provided in the agreement relating to a particular Award, to determine
that any or all outstanding Awards of any or all types granted pursuant to the
1995 Plan will not vest or become exercisable on an accelerated basis in
connection with an Approved Transaction and/or will not terminate if not
exercised prior to consummation of the Approved Transaction, if action that, in
the opinion of the Compensation Committee, is equitable and appropriate is taken
by the Company's Board or by the surviving or acquiring corporation, as the case
may be, to assume such Award or substitute a new Award therefor and in order to
make such assumed or new Award, as nearly as may be practicable, equivalent to
the old Award, taking into account the kind and amount of securities, cash or
other assets into or for which the International Series A Common Stock may be
changed, converted or exchanged in connection with the Approved Transaction.
In the event of a stock split, stock dividend, reclassification,
recapitalization or other corporate event that affects the International Series
A Common Stock (including mergers or consolidations other than those which
constitute Approved Transactions), the 1995 Plan provides for the Compensation
Committee to make such adjustments as it deems equitable and appropriate to any
or all of (i) the number and kind of shares subject to outstanding Awards, (ii)
the purchase or exercise price and the relevant base price of outstanding Awards
and (iii) the number and kind of shares for which Awards may thereafter be
granted under the 1995 Plan.
The Compensation Committee may require in the agreement relating to an
Award that if the holder acquires any shares of International Series A Common
Stock through the exercise of Options or SARs or through the vesting of
Restricted Shares or Stock Units granted in the Award, then prior to selling any
such shares, such holder must offer to sell such shares to the Company, at their
fair market value, pursuant to a right of first refusal.
The obligations of the Company with respect to Awards granted under the
1995 Plan are subject to all applicable laws.
No awards may be granted under the 1995 Plan on or after the ten-year
anniversary of its effective date. The Board or the Compensation Committee may
at any time prior to the tenth anniversary of the effective date terminate the
1995 Plan, and may, from time to time, suspend or discontinue the 1995 Plan or
modify or amend the 1995 Plan in such respects as it shall deem advisable;
except that no such modification or amendment shall be effective prior to
approval by the Company's stockholders to the extent such approval is then
required pursuant to Rule 16b-3 of the Exchange Act in order to preserve the
applicability of any exemption provided by such rule to any Award then
outstanding (unless the holder of such Award consents) or to the extent
stockholder approval is otherwise required by applicable legal requirements.
Termination or amendment of the 1995 Plan may not adversely affect the rights of
any holder of an Award without his or her consent. With the consent of the
holder and subject to the specific terms of the 1995 Plan, the Compensation
Committee may accelerate any Award or waive any conditions or restrictions
pertaining to such Award at any time.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary generally describes the principal Federal (but not
state and local) income tax consequences of Awards made pursuant to the 1995
Plan. It is general in nature and is not intended to cover all tax consequences
that may apply to a particular employee or to the corporation or other entity
employing the recipient of an award (the "Employer Entity"). In particular, this
summary is qualified in its entirety by the discussion of Section 162(m) of the
Code, discussed below under "-- Limitation on Deductions". The provisions of the
Code relating to these matters are complicated and their impact in any one case
may depend upon the particular circumstances.
Options. In general, for Federal income tax purposes, neither the grant nor
the exercise of an Incentive Option will result in taxable income to the
Optionholder or a deduction for the Company. However, an Optionholder may be
subject to the alternative minimum tax in the year that an Incentive Option is
exercised. The excess of the fair market value of the International Series A
Common Stock (determined at the date of exercise) acquired through the exercise
of an Incentive Option over the exercise price is in addition to income in
determining alternative minimum taxable income and such additional amount may be
sufficient in amount to subject the Optionholder to the alternative minimum tax.
If the Option holder holds International Series A Common Stock acquired
through the exercise of Incentive Options for the full holding period (two years
after the Option is granted and one year after it is exercised), he will
recognize a capital gain or loss at the time of the sale of the stock based on
the difference between the Option exercise price and the sale price. Currently,
long-term capital gains are taxed to an individual at a maximum rate of 28% as
opposed to a maximum rate of 39.6% for ordinary income. There is no tax effect
on the Employer Entity from the sale of such stock.
If International Series A Common Stock acquired through the exercise of an
Incentive Option is disposed of before the end of the holding period described
in the preceding paragraph (a "disqualifying disposition"), the Optionholder
will recognize ordinary income equal to the lesser of (i) the difference between
the fair market value of the shares on the date the Option was exercised and the
Option exercise price or (ii) the difference between the amount received on the
sale of the International Series A Common Stock and the Option exercise price.
In the event of a disqualifying disposition, the Employer Entity will be
entitled to a deduction in a corresponding amount to the extent that the amount
is reasonable compensation and is an ordinary and necessary business expense. If
the amount received by the Optionholder on the disqualifying disposition exceeds
the fair market value of the shares on the date of exercise of the Incentive
Option, such excess will ordinarily constitute capital gain.
Although the Compensation Committee has the discretion under the 1995 Plan
to provide for a period of time after the termination of an Optionholder's
employment in which his or her Options may continue to be exercised, under
current law an option must generally be exercised within three months after
termination of employment (one year in the case of termination because of death
or disability) in order to qualify as an Incentive Option.
In general, the grant of a Non-qualified Option will not result in taxable
income to the Optionholder or a deduction to the Employer Entity for Federal
income tax purposes. Upon exercise of a Non-qualified Option, the Employer
Entity will be entitled, for Federal income tax purposes, to a tax deduction and
the Optionholder will recognize ordinary income. The amount of such deduction
and income generally will equal the amount by which the fair market value of the
shares acquired on the date the Non-qualified Option is exercised exceeds the
Option exercise price of the shares if the International Series A Common Stock
is transferable and not subject to a substantial risk of forfeiture at such
time. In general, the International Series A Common Stock received on exercise
of a Non-qualified Option will be transferable and will not be subject to a
substantial risk of forfeiture. However, if the sale of the International Series
A Common Stock acquired upon exercise of a Non-qualified Option would subject
the Optionholder to liability under Section 16(b) of the Exchange Act, which
requires certain "insiders" to pay to the Company any profits received upon
certain sales of International Series A Common Stock, the Optionholder will
recognize ordinary income (and the Employer Entity will be entitled to a
corresponding tax deduction) equal to the amount by which the fair market value
of the shares acquired exceeds the Option exercise price for the shares on the
earlier of (i) the date that the
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Optionholder is no longer subject to liability under Section 16(b) of the
Exchange Act or (ii) six months after the date the Non-qualified Option is
exercised. An Optionholder subject to liability under Section 16(b) of the
Exchange Act may, however, recognize ordinary income (and the Employer Entity
will be entitled to a corresponding tax deduction) at the time the Option is
exercised if the Optionholder makes an election under Section 83(b) of the Code.
If an Option is exercised through the use of International Common Stock
previously owned by the holder, such exercise generally will not be considered a
taxable disposition of the previously owned shares and thus no gain or loss will
be recognized with respect to such shares upon such exercise. However, if the
previously owned shares were acquired by the exercise of an Incentive Option and
the holding period requirement for those shares is not satisfied at the time
they are used to exercise an Incentive Option, such use would constitute a
disqualifying disposition of such previously owned shares resulting in the
recognition of ordinary income in the amount described above. If shares issuable
upon exercise of an Incentive Option are withheld to pay amounts payable in
connection with the exercise of such Option, such shares would be deemed to have
been disposed of in a disqualifying disposition, also resulting in the
recognition of ordinary income with respect to the shares withheld as described
above.
Any difference between the basis of the International Series A Common Stock
acquired through the exercise of a Non-qualified Option (the Option exercise
price plus the ordinary income recognized) and the amount realized upon a
subsequent sale of such shares will be treated as a short-term or long-term
capital gain or loss, depending on the length of the period such shares are held
prior to sale. Currently, long-term capital gains are taxed to an individual at
a maximum rate of 28% as opposed to a maximum rate of 39.6% for ordinary income.
Stock Appreciation Rights. For Federal income tax purposes, the grant of an
SAR will not result in taxable income to the holder or a tax deduction to the
Employer Entity. At the time of exercise of an SAR, the holder will forfeit the
right to benefit from any future appreciation of the stock subject to the SAR.
Accordingly, taxable income to the holder is deferred until the SAR is
exercised. Upon exercise, the amount of cash and fair market value of shares
received by the holder, less cash or other consideration paid (if any), is taxed
to the holder as ordinary income and the Employer Entity will receive a
corresponding income tax deduction to the extent the amount represents
reasonable compensation and an ordinary and necessary business expense, subject
to any required income tax withholding. However, if the holder receives
International Series A Common Stock upon the exercise of an SAR and is then
subject to the restrictions under Section 16(b) of the Exchange Act discussed
above, unless the holder elects otherwise, the amount of ordinary income and
deduction will generally be measured at the time such restrictions lapse.
Restricted Shares. The award of Restricted Shares will not result in
taxable income to the employee or a tax deduction to the Employer Entity for
Federal income tax purposes. Upon expiration of the Restriction Period
applicable to the Restricted Shares awarded, or, if applicable, at such later
date as the restrictions under Section 16(b) of the Exchange Act described above
expire, the fair market value of such shares at such expiration date, plus the
amount of any Retained Distributions and unpaid Dividend Equivalents on such
shares and any cash amount awarded, less cash or other consideration paid (if
any), will be included in the holder's ordinary income as compensation, except
that, in the case of Restricted Shares issued at the beginning of the
Restriction Period, the holder may elect to include in his ordinary income as
compensation at the time the Restricted Shares are awarded, the fair market
value of such shares at such time, less any amount paid therefor. Absent the
making of the election referred to in the preceding sentence, any cash dividends
or other distributions paid with respect to Restricted Shares prior to
expiration of the applicable Restriction Period will be included in the
employee's ordinary income as compensation at the time of receipt. In each case,
the Employer Entity will be entitled to a corresponding income tax deduction to
the extent that the amount represents reasonable compensation and an ordinary
and necessary business expense, subject to any required income tax withholding.
Stock Units. The Federal income tax consequences of the award of Stock
Units will depend on the conditions of the Award. Generally, the transfer of
cash or property will result in ordinary income to the recipient and a tax
deduction to the Employer Entity. If there is a substantial risk that the
property transferred
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will be forfeited (for example, because receipt of the property is conditioned
upon the performance of substantial future services), the taxable event is
deferred until the risk of forfeiture lapses. However, the recipient may
generally elect to accelerate the taxable event to the date of transfer, even if
the property is subject to a substantial risk of forfeiture. If this election is
made, subsequent appreciation is not taxed until the property is sold or
exchanged (and the lapse of the forfeiture restriction does not create a taxable
event). Generally, any deduction for the Employer Entity occurs only when
ordinary income in respect of an Award is recognized by the employee (and then
the deduction is subject to reasonable compensation and withholding
requirements). Because Stock Unit Awards will be subject to whatever conditions
may be determined by the Compensation Committee, the Federal income tax
consequences to the recipient and to the Employer Entity will depend on the
specific conditions and terms of the Award.
Limitation on Deductions. Section 162(m) to the Code restricts the
deduction of compensation by a publicly held corporation which, according to
regulations, includes compensation paid by any members of its affiliated group
of corporations. Specifically, Section 162(m) prohibits the deduction of
compensation to "covered employees" to the extent that "remuneration" to any
such covered employee exceeds $1,000,000 in any taxable year. Covered employees
are defined as any individual who on the last day of the taxable year is the
chief executive officer or among the four most highly compensated officers
(other than the chief executive officer). For the purpose of determining whether
the $1,000,000 limitation is applicable the following items do not count as
remuneration: (i) compensation paid on a commission basis, (ii) non-taxable
fringe benefits, (iii) payments to or from a tax-qualified pension plan, (iv)
"performance-based compensation" (as defined in Section 162(m)(4)(C) of the
Code) and (v) payments made pursuant to a binding written contract in effect on
February 17, 1993 and not modified in any material respect after such date prior
to the grant of compensation. In general, in order to qualify as
"performance-based compensation" the compensation must be payable solely on
account of performance goals which are disclosed to and approved by
stockholders, and the compensation must be established and administered by a
compensation committee which consists solely of two or more outside directors as
defined in the Treasury regulations. Because stockholders will not be approving
any performance goal formulas in connection with the vote on the 1995 Plan at
the Annual Meeting, compensation paid under the 1995 Plan will not generally
qualify as performance-based compensation, except that compensation which is
based solely on an increase in value of the employee's stock after the date of
grant (such as an Option or SAR granted with an exercise price or base price at
least equal to the fair market value on the date of grant) is deemed to be paid
on account of performance goals. However, compensation which is based solely on
an increase in value of the employee's stock will not qualify as
performance-based compensation unless the requirement that such compensation is
granted by a compensation committee consisting of two or more outside directors
is met. The 1995 Plan itself only requires that the Compensation Committee
members be "disinterested" directors. Accordingly, no grants (including grants
of Options and SARs) will qualify under the performance based compensation
exception unless all the members of the Compensation Committee qualify as
"outside" directors. The definition of outside directors is considerably more
restrictive than that of "disinterested" directors.
If compensation granted by the Compensation Committee does not fall within
any of the exceptions to the definition of remuneration, then the Employer
Entities which are members of the Company's affiliated group of corporations may
lose part of the deductions they would otherwise be entitled to take with
respect to covered employees.
INTEREST OF CERTAIN PERSONS IN THE 1995 STOCK PLAN PROPOSAL
On December 13, 1995, the Compensation Committee of the Board granted,
pursuant to the 1995 Plan, options in tandem with stock appreciation rights for
the following amounts of underlying shares of International Series A Common
Stock: Fred A. Vierra: 400,000 shares; Adam M. Singer: 400,000 shares; Miranda
Curtis: 200,000 shares; Richard L. Rexroat, Jr.: 50,000 shares; Graham E.
Hollis: 50,000 shares; Gregory B. Armstrong: 50,000 shares and Stephen M. Brett:
50,000 shares. In addition, on the same date, Messrs. Vierra and Singer and Ms.
Curtis were granted restricted stock awards of 15,000 shares, 15,000 shares and
10,000 shares, respectively. See "CONCERNING MANAGEMENT -- Executive
Compensation -- Option and SAR Grants Table" and "1995 STOCK PLAN
PROPOSAL -- New Plan Benefits" for a
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discussion of the terms of these grants. The effectiveness of these grants is
conditioned upon the stockholders approving the 1995 Stock Plan Proposal at the
Annual Meeting.
VOTES REQUIRED FOR APPROVAL
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE COMBINED VOTING POWER AND A
MAJORITY OF THE COMBINED NUMBER OF THE SHARES OF INTERNATIONAL SERIES A COMMON
STOCK AND INTERNATIONAL SERIES B COMMON STOCK REPRESENTED IN PERSON OR BY PROXY
AND ENTITLED TO VOTE AT THE ANNUAL MEETING, VOTING AS A SINGLE CLASS, IS
REQUIRED TO APPROVE THE 1995 STOCK PLAN PROPOSAL.
THE DIRECTOR PLAN PROPOSAL
INTRODUCTION
The Board of Directors believes that the Company's ability to attract and
retain capable persons as independent directors will be enhanced if it can
provide its nonemployee directors with stock options and that the Company will
benefit from encouraging a sense of proprietorship of such persons and
stimulating the active interest of such persons in the development and financial
success of the Company. Accordingly, on April 11, 1996, the Board of Directors
of the Company adopted the Director Plan and directed that the Director Plan
Proposal be submitted to a vote of the stockholders of the Company at the Annual
Meeting. The Director Plan and existing automatic grants thereunder are subject
to, and will become effective upon approval of, the Director Plan Proposal by
the requisite vote of the stockholders at the Annual Meeting. A copy of the
Director Plan is attached hereto as Appendix II. The following description of
the Director Plan is subject to, and qualified in its entirety by reference to,
the Director Plan.
NEW PLAN BENEFITS
On April 11, 1996, each of Messrs. Akiyama, Gould, Kern, Lescure and Malone
were granted, pursuant to the Director Plan, an option to purchase 50,000 shares
of International Series A Common Stock. The options vest evenly over a five year
period with twenty percent of such options becoming exercisable on April 11,
1997. The exercise price of these grants was set at $16 per share, which was the
per share initial public offering price of the International Series A Common
Stock. The present dollar value (using the Black-Scholes model) of such grants
to Messrs. Akiyama, Gould, Kern, Lescure and Malone was $700,430 per person as
of the date of grant.
The market value of the International Series A Common Stock subject to
award under the Director Plan (including the shares attributable to the grants
described above) is $16,562,500. Such market value is based on the maximum
number of shares of International Series A Common Stock eligible to be awarded
under the Director Plan multiplied by $16.5625, the last reported sales price of
International Series A Common Stock on the Nasdaq National Market on August 5,
1996.
DESCRIPTION OF THE DIRECTOR PLAN
The Director Plan provides for grants to be made of options ("Director
Options") to purchase a maximum of 1,000,000 shares of International Series A
Common Stock. Shares that are subject to Director Options that expire or
terminate for any reason without having been exercised will return to the pool
of such shares underlying Director Options available for grant under the
Director Plan.
Under the Director Plan, each of the Company's five directors who were not
employees of the Company or any subsidiary of the Company (any such director, a
"Nonemployee Director") as of April 11, 1996 (the "Effective Date") has been
granted, subject to stockholder approval of the Director Plan Proposal, a
Director Option to purchase 50,000 shares of International Series A Common Stock
at an exercise price of $16 per share. The term "subsidiary of the Company"
means any corporation of which the Company directly or indirectly owns shares
representing more than 50% of the voting power of all classes or series of
capital stock of
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such corporation which have the right to vote generally on matters submitted to
a vote of the stockholders of such corporation.
The Director Plan provides that each individual who becomes a Nonemployee
Director after the Effective Date will automatically be granted a Director
Option to purchase 50,000 shares of International Series A Common Stock (subject
to adjustment as described below) on the date such person first becomes a
Nonemployee Director, if the number of shares subject to future grant under the
Director Plan is sufficient to make all automatic grants required to be made
pursuant to the Director Plan on such date of grant. The number of such future
Nonemployee Directors is not determinable.
The Director Plan provides that the per share exercise price of any
Director Option granted subsequent to April 11, 1996 will be equal to 95% of the
fair market value of the International Series A Common Stock on the date the
Director Option is granted, with the price resulting from such percentage
rounded down to the nearest quarter dollar. In general, fair market value is
determined by reference to the last sale price for shares of the International
Series A Common Stock as reported on the Nasdaq National Market on the date of
the grant. Director Options granted pursuant to the Director Plan will be
non-qualified stock options which do not qualify under Section 422 of the Code.
Director Options granted under the Director Plan will vest and become
exercisable in equal annual installments over a five-year period commencing on
the first anniversary of the date of the grant. The method of payment of the
exercise price of a Director Option, and of the amount required to satisfy
applicable Federal, state and local withholding tax requirements as determined
by the Company, may consist of cash, the surrender of shares of International
Series A Common Stock that have been held by the optionee for more than six
months or any combination thereof, at the election of the optionee. Shares so
surrendered in payment in whole or in part of the Director Option exercise price
and applicable withholding taxes will be valued at their fair market value on
the date of exercise.
Each Director Option granted pursuant to the Director Plan will terminate
upon the earliest to occur of the following: (i) the expiration of 10 years
following the date upon which the Director Option is granted; (ii) the
expiration of one year following the date upon which the optionee ceases to be a
director of the Company for any reason other than voluntary termination of
director status; or (iii) the expiration of three months following the date on
which the optionee voluntarily ceases his status as a director.
In the event that an optionee ceases to serve as a director of the Company
for any reason other than voluntary termination of director status, each
unmatured outstanding Director Option held by such optionee shall be
accelerated. Upon the occurrence of a Change in Control, all unmatured
outstanding Director Options will be accelerated effective as of such Change in
Control. A "Change of Control" will be deemed to have occurred if any of the
following events shall have occurred: (i) an event required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any
similar item on any similar schedule or form) promulgated under the Exchange
Act, whether or not the Company is then subject to such reporting requirement;
(ii) after the Effective Date any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than a person who was a director of
the Company on the Effective Date or any person controlled by such a director,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding
International Common Stock; (iii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter; or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute at least a
majority of the Board of Directors.
In the event of any subdivision or consolidation of outstanding shares of
International Series A Common Stock or declaration of a dividend payable in
shares of International Series A Common Stock or other reorganization,
reclassification or stock split affecting the outstanding shares, then (i) the
number of shares of
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International Series A Common Stock reserved under the Director Options, and
(ii) the per share exercise price of the Director Options shall each be
proportionately adjusted to reflect such transaction. In the event of any
consolidation or merger of the Company with another corporation or entity, the
adoption by the Company of a plan of exchange affecting the International Series
A Common Stock or any distribution to holders of International Series A Common
Stock of securities or property (other than normal cash dividends or dividends
payable in International Series A Common Stock), the Board of Directors shall
make such adjustments or other provisions as it may deem equitable to give
proper effect to the transaction. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation, the Board of Directors shall be authorized to issue or assume stock
options by means of substitution of new options for previously issued options or
an assumption of previously issued options as a part of such adjustment.
The obligations of the Company with respect to Director Options granted
under the Director Plan are subject to all applicable laws.
All grants of Director Options under the Director Plan will be automatic
and will not be subject to the discretion of any person. The Director Plan will
be administered by the Company's Board of Directors, who will receive no
additional compensation for such service. Members of the Board of Directors who
are eligible for Director Options may vote on matters affecting administration
of the Director Plan.
The Board of Directors may amend, alter or discontinue the Director Plan,
except that (i) no amendment or alteration that would impair the rights of any
optionee under any Director Option that he has been granted shall be made
without his consent, (ii) no amendment or alteration shall be effective prior to
approval by the Company's stockholders to the extent such approval is then
required pursuant to Rule 16b-3 (or any successor provision) under the Exchange
Act in order to preserve the applicability of any exemption provided by such
rule to any Director Option then outstanding (unless the holder of such Director
Option consents) or to the extent stockholder approval is otherwise required by
applicable legal requirements, and (iii) the Director Plan shall not be amended
more than once every six months to the extent such limitation is required by
Rule 16b-3(c)(2)(ii) (or any successor provision) under the Exchange Act as then
in effect.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary generally describes the principal Federal (but not
state and local) income tax consequences of the Director Plan. It is general in
nature and is not intended to cover all tax consequences that may apply to a
particular optionee or the Company. The provisions of the Code relating to these
matters are complex and their impact in any case may depend upon the particular
circumstances.
In general, the grant of a Director Option will not result in taxable
income to the optionee or a deduction to the Company for Federal income tax
purposes. Upon exercise of a Director Option, the Company will be entitled, for
Federal income tax purposes, to a tax deduction and the optionee will recognize
ordinary income. The amount of such deduction and income generally will equal
the amount by which the fair market value of the shares acquired on the date the
Director Option is exercised exceeds the Director Option exercise price of the
shares if the shares received on exercise are transferable and not subject to a
substantial risk of forfeiture at such time. In general, the shares received on
exercise of a Director Option will be transferable and will not be subject to a
substantial risk of forfeiture. However, if the sale of shares acquired upon
exercise of a Director Option would subject the optionee to liability under
Section 16(b) of the Exchange Act, which requires certain "insiders" to pay to
the Company any profits received from certain purchases and sales of equity
securities of the Company, the optionee will recognize ordinary income (and the
Company will be entitled to a corresponding tax deduction) equal to the amount
by which the fair market value of the shares acquired exceeds the Director
Option exercise price for the shares on the earlier of (i) the date that the
optionee is no longer subject to liability under Section 16(b) of the Exchange
Act or (ii) six months after the date the Director Option is exercised. An
optionee subject to liability under Section 16(b) of the Exchange Act may,
however, recognize ordinary income (and the Company will be entitled to a
corresponding tax deduction) at the time the Director Option is exercised if the
optionee makes an election under Section 83(b) of the Code.
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If a Director Option is exercised through the delivery of shares previously
owned by the optionee, such exercise generally will not be considered a taxable
disposition of the previously owned shares and thus no gain or loss will be
recognized with respect to such shares upon such exercise.
Any difference between the basis of the shares acquired through the
exercise of a Director Option (the Director Option exercise price plus the
ordinary income recognized) and the amount realized upon a subsequent sale of
such shares will be treated as a short-term or long-term capital gain or loss,
depending on the length of the period such shares are held prior to sale.
Currently, long-term capital gains are taxed to an individual at a maximum rate
of 28% as opposed to a maximum rate of 39.6% for ordinary income.
INTEREST OF CERTAIN PERSONS IN THE DIRECTOR PLAN PROPOSAL
On April 11, 1996, the Compensation Committee of the Board granted,
pursuant to the Director Plan, stock options to acquire 50,000 shares of
International Series A Common Stock to all nonemployee directors of the Company
(Messrs. Akiyama, Gould, Kern, Lescure and Malone). See "DIRECTOR PLAN
PROPOSAL -- New Plan Benefits" for a discussion of the terms of these grants.
The effectiveness of these grants is conditioned upon the stockholders approving
the Director Plan Proposal at the Annual Meeting.
VOTES REQUIRED FOR APPROVAL
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE COMBINED VOTING POWER AND A
MAJORITY OF THE COMBINED NUMBER OF SHARES OF INTERNATIONAL SERIES A COMMON STOCK
AND INTERNATIONAL SERIES B COMMON STOCK REPRESENTED IN PERSON OR BY PROXY AND
ENTITLED TO VOTE AT THE ANNUAL MEETING, VOTING AS A SINGLE CLASS, IS REQUIRED
FOR APPROVAL OF THE DIRECTOR PLAN PROPOSAL.
INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick LLP serves as the Company's independent
certified public accountants. A partner of KPMG Peat Marwick LLP will be present
at the Annual Meeting with the opportunity to make a statement if KPMG Peat
Marwick LLP so desires and will be available to respond to appropriate
questions.
STOCKHOLDERS' PROPOSALS
Proposals by stockholders for which consideration is desired at the 1997
annual meeting of stockholders must be received by the Company by April 17, 1997
in order to be considered for inclusion in proxy materials for the 1997 annual
meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1995 AS FILED WITH THE SEC, EXCLUDING EXHIBITS, MAY BE OBTAINED BY
STOCKHOLDERS WITHOUT CHARGE BY WRITTEN REQUEST ADDRESSED TO THE INVESTOR
RELATIONS DEPARTMENT, TELE-COMMUNICATIONS INTERNATIONAL, INC., POST OFFICE BOX
5630, DENVER, COLORADO 80217-5630.
Englewood, Colorado
August 15, 1996
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APPENDIX I
TELE-COMMUNICATIONS INTERNATIONAL, INC.
1995 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE AND EFFECTIVENESS
1.1 Purpose. The purpose of the Tele-Communications International, Inc.
1995 Stock Incentive Plan (the "Plan") is to promote the success of
Tele-Communications International, Inc. (the "Company") by providing a method
whereby (i) eligible employees of the Company and its Subsidiaries and (ii)
independent contractors providing services to the Company or its Subsidiaries
may be awarded additional remuneration for services rendered and encouraged to
invest in capital stock of the Company, thereby increasing their proprietary
interest in the Company's businesses, encouraging them to remain in the employ
of the Company or its Subsidiaries, and increasing their personal interest in
the continued success and progress of the Company or its Subsidiaries. The Plan
is also intended to aid (i) in attracting persons of exceptional ability to
become officers and employees of the Company and its Subsidiaries and (ii)
inducing independent contractors to agree to provide services to the Company.
1.2 Effective Date. The Plan shall be subject to, and become effective
upon, the approval by the affirmative vote of the holders of at least a majority
of the outstanding shares of capital stock of the Company.
ARTICLE II
DEFINITIONS
2.1 Certain Defined Terms. Capitalized terms not defined elsewhere in the
Plan shall have the following meanings (whether used in the singular or plural):
"Affiliate" of the Company means any corporation, partnership, or
other business association that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with the Company.
"Agreement" means a stock option agreement, stock appreciation rights
agreement, restricted shares agreement or stock units agreement, or an
agreement evidencing more than one type of Award, specified in Section
10.5, as any such Agreement may be supplemented or amended from time to
time.
"Approved Transaction" means any transaction in which the Board (or,
if approval of the Board is not required as a matter of law, the
stockholders of the Company) shall approve (i) any consolidation or merger
of the Company, or binding share exchange, pursuant to which shares of
Series A Stock would be changed or converted into or exchanged for cash,
securities or other property, other than any such transaction in which the
common stockholders of the Company immediately prior to such transaction
have the same proportionate ownership of the common stock of, and voting
power with respect to, the surviving corporation immediately after such
transaction, (ii) any merger, consolidation or binding share exchange to
which the Company is a party as a result of which the persons who are
common stockholders of the Company immediately prior thereto have less than
a majority of the combined voting power of the outstanding capital stock of
the Company ordinarily (and apart from the rights accruing under special
circumstances) having the right to vote in the election of directors
immediately following such merger, consolidation or binding share exchange,
(iii) the adoption of any plan or proposal for the liquidation or
dissolution of the Company, or (iv) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company.
"Award" means a grant of Options, SARs, Restricted Shares and/or Stock
Units under this Plan.
"Board" means the Board of Directors of the Company.
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"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute or statutes thereto. Reference to any
specific Code section shall include any successor section.
"Committee" means the committee of the Board appointed pursuant to
Section 3.1 to administer the Plan.
"Company" means Tele-Communications International, Inc., a Delaware
corporation.
"Disability" means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than 12 months.
"Dividend Equivalents" means, with respect to Restricted Shares to be
issued at the end of the Restriction Period, to the extent specified by the
Committee only, an amount equal to all dividends and other distributions
(or the economic equivalent thereof) which are payable to stockholders of
record during the Restriction Period on a like number of shares of Series A
Stock.
"Domestic relations order" means a domestic relations order as defined
by the Code or Title I of the Employee Retirement Income Security Act, or
the rules thereunder.
"Effective Date" means the date on which the Plan becomes effective
pursuant to Section 1.2.
"Equity security" shall have the meaning ascribed to such term in
Section 3(a)(11) of the Exchange Act, and an equity security of an issuer
shall have the meaning ascribed thereto in Rule 16a-1 promulgated under the
Exchange Act, or any successor Rule.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute or statutes thereto. Reference
to any specific Exchange Act section shall include any successor section.
"Fair Market Value" of a share of Series A Stock or Series B Stock on
any day means the last sale price (or, if no last sale price is reported,
the average of the high bid and low asked prices) for a share of Series A
Stock or Series B Stock, as applicable, on such day (or, if such day is not
a trading day, on the next preceding trading day) as reported on NASDAQ or,
if not reported on NASDAQ, as quoted by the National Quotation Bureau
Incorporated, or if the Series A Stock or Series B Stock is listed on an
exchange, on the principal exchange on which the Series A Stock or Series B
Stock, as applicable, is listed. If for any day the Fair Market Value of a
share of Series A Stock or Series B Stock, as applicable, is not
determinable by any of the foregoing means, then the Fair Market Value for
such day shall be determined in good faith by the Committee on the basis of
such quotations and other considerations as the Committee deems
appropriate.
"Free Standing SAR" has the meaning ascribed thereto in Section 7.1.
"Holder" means an employee of the Company or a Subsidiary or an
independent contractor who has received an Award under this Plan.
"Incentive Stock Option" means a stock option granted under Article VI
which is intended to be an incentive stock option within the meaning of
Section 422 of the Code.
"NASDAQ" means the Nasdaq Stock Market.
"Nonqualified Stock Option" means a stock option granted under Article
VI that is designated a nonqualified stock option.
"Option" means any Incentive Stock Option or Nonqualified Stock
Option.
"Plan" has the meaning ascribed thereto in Section 1.1.
"Restricted Shares" means shares of Series A Stock or the right to
receive shares of Series A Stock, as the case may be, awarded pursuant to
Article VIII.
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"Restriction Period" means a period of time beginning on the date of
each award of Restricted Shares and ending on the Vesting Date with respect
to such award.
"Retained Distribution" has the meaning ascribed thereto in Section
8.3.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or
any successor Rule. References to paragraphs of Rule 16b-3 shall include
the comparable provisions of any successor Rule.
"SARs" means stock appreciation rights, awarded pursuant to Article
VII, with respect to shares of Series A Stock.
"Series A Stock" means the Series A Common Stock, $1.00 par value per
share, of the Company.
"Series B Stock" means the Series B Common Stock, $1.00 par value per
share, of the Company.
"Stock Unit Award" has the meaning ascribed thereto in Section 9.1.
"Subsidiary" of the Company means any present or future subsidiary (as
defined in Section 424(f) of the Code) of the Company or any business
entity in which the Company owns directly or indirectly, 50% or more of the
voting, capital or profits interests. An entity shall be deemed a
subsidiary of the Company for purposes of this definition only for such
periods as the requisite ownership or control relationship is maintained.
"Tandem SARs" has the meaning ascribed thereto in Section 7.1.
"Vesting Date" with respect to any Restricted Shares awarded hereunder
means the date on which such Restricted Shares cease to be subject to a
risk of forfeiture, as designated in or determined in accordance with the
Agreement with respect to such award of Restricted Shares pursuant to
Article VIII. If more than one Vesting Date is designated for an award of
Restricted Shares, reference in the Plan to a Vesting Date in respect of
such Award shall be deemed to refer to each part of such Award and the
Vesting Date for such part.
ARTICLE III
ADMINISTRATION
3.1 Committee. The Plan shall be administered by the Compensation
Committee of the Board unless a different committee is appointed by the Board.
The Committee shall be comprised of not less than two persons. Each member of
the Committee shall be a member of the Board who during the one year period
prior to service on the Committee was not, and during such service is not,
granted or awarded equity securities pursuant to the Plan or any other plan of
the Company or any of its Affiliates if such grant or award or participation in
such plan would prevent such member from being a "disinterested person" with
respect to the Plan for purposes of Rule 16b-3. Subject to the foregoing, the
Board may from time to time appoint members of the Committee in substitution for
or in addition to members previously appointed, may fill vacancies in the
Committee and may remove members of the Committee. The Committee shall select
one of its members as its chairman and shall hold its meetings at such times and
places as it shall deem advisable. A majority of its members shall constitute a
quorum and all determinations shall be made by a majority of such quorum. Any
determination reduced to writing and signed by all of the members shall be fully
as effective as if it had been made by a majority vote at a meeting duly called
and held.
3.2 Powers. The Committee shall have full power and authority to grant to
eligible persons Options under Article VI of the Plan, SARs under Article VII of
the Plan, Restricted Shares under Article VIII of the Plan and/or Stock Units
under Article IX of the Plan, to determine the terms and conditions (which need
not be identical) of all Awards so granted, to interpret the provisions of the
Plan and any Agreements relating to Awards granted under the Plan, and to
supervise the administration of the Plan. The Committee in making an Award may
provide for the granting or issuance of additional, replacement or alternative
Awards upon the occurrence of specified events, including the exercise of the
original Award. The Committee shall have sole authority in the selection of
persons to whom Awards may be granted under the Plan and in the determination
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of the timing, pricing and amount of any such Award, subject only to the express
provisions of the Plan. In making determinations hereunder, the Committee may
take into account the nature of the services rendered by the respective
employees and independent contractors, their present and potential contributions
to the success of the Company and its Subsidiaries and such other factors as the
Committee in its discretion deems relevant.
3.3 Interpretation. The Committee is authorized, subject to the provisions
of the Plan, to establish, amend and rescind such rules and regulations as it
deems necessary or advisable for the proper administration of the Plan and to
take such other action in connection with or in relation to the Plan as it deems
necessary or advisable. Each action and determination made or taken pursuant to
the Plan by the Committee, including any interpretation or construction of the
Plan, shall be final and conclusive for all purposes and upon all persons. No
member of the Committee shall be liable for any action or determination made or
taken by him or the Committee in good faith with respect to the Plan.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to the provisions of this Article IV, the
maximum number of shares of Series A Stock with respect to which Awards may be
granted during the term of the Plan shall be 3,000,000 shares. Shares of Series
A Stock will be made available from the authorized but unissued shares of the
Company or from shares reacquired by the Company, including shares purchased in
the open market. The shares of Series A Stock subject to (i) any Award granted
under the Plan that shall expire, terminate or be annulled for any reason
without having been exercised (or considered to have been exercised as provided
in Section 7.2), (ii) any Award of any SARs granted under the Plan that shall be
exercised for cash and (iii) any Award of Restricted Shares or Stock Units that
shall be forfeited prior to becoming vested (provided that the Holder received
no benefits of ownership of such Restricted Shares or Stock Units other than
voting rights and the accumulation of Retained Distributions and unpaid Dividend
Equivalents that are likewise forfeited), shall again be available for purposes
of the Plan.
4.2 Adjustments. If the Company subdivides its outstanding shares of
Series A Stock into a greater number of shares of Series A Stock (by stock
dividend, stock split, reclassification or otherwise) or combines its
outstanding shares of Series A Stock into a smaller number of shares of Series A
Stock (by reverse stock split, reclassification or otherwise), or if the
Committee determines that any stock dividend, extraordinary cash dividend,
reclassification, recapitalization, reorganization, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Series
A Stock, or other similar corporate event (including mergers or consolidations
other than those which constitute Approved Transactions) affects the Series A
Stock such that an adjustment is required in order to preserve the benefits or
potential benefits intended to be made available under this Plan, then the
Committee shall, in its sole discretion and in such manner as the Committee may
deem equitable and appropriate, make such adjustments to any or all of (i) the
number and kind of shares which thereafter may be awarded, optioned, or
otherwise made subject to the benefits contemplated by the Plan, (ii) the number
and kind of shares subject to outstanding Awards, and (iii) the purchase or
exercise price and the relevant appreciation base with respect to any of the
foregoing, provided, however, that the number of shares subject to any Award
shall always be a whole number. The Committee may, if deemed appropriate,
provide for a cash payment to any Holder of an Award in connection with any
adjustment made pursuant to this Section 4.2.
ARTICLE V
ELIGIBILITY
5.1 General. The persons who shall be eligible to participate in the Plan
and to receive Awards under the Plan shall be such employees (including officers
and, subject to Section 5.2, directors) of the Company and its Subsidiaries or
independent contractors as the Committee shall select. Awards may be made to
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employees or independent contractors who hold or have held Awards under this
Plan or any similar or other awards under any other plan of the Company or any
of its Affiliates.
5.2 Ineligibility. No member of the Committee, while serving as such,
shall be eligible to receive an Award.
ARTICLE VI
STOCK OPTIONS
6.1 Grant of Options. Subject to the limitations of the Plan, the
Committee shall designate from time to time those eligible persons to be granted
Options, the time when each Option shall be granted to such eligible persons,
the number of shares subject to such Option, whether such Option is an Incentive
Stock Option or a Nonqualified Stock Option and, subject to Section 6.2, the
purchase price of the shares of Series A Stock subject to such Option. Subject
to the other provisions of the Plan, the same person may receive Incentive Stock
Options and Nonqualified Stock Options at the same time and pursuant to the same
Agreement, provided that Incentive Stock Options and Nonqualified Stock Options
are clearly designated as such. Except for Awards described in Section 11.1, no
person may be granted in any calendar year Options covering more than 1,000,000
shares of Series A Common Stock (adjusted as provided in Section 4.2).
6.2 Option Price. The price at which shares may be purchased upon exercise
of an Option shall be fixed by the Committee and may be more than, less than or
equal to the Fair Market Value of the Series A Stock as of the date the Option
is granted.
6.3 Term of Options. Subject to the provisions of the Plan with respect to
death, retirement and termination of employment, the term of each Option shall
be for such period as the Committee shall determine as set forth in the
applicable Agreement.
6.4 Exercise of Options. An Option granted under the Plan shall become
(and remain) exercisable during the term of the Option to the extent provided in
the applicable Agreement and this Plan and, unless the Agreement otherwise
provides, may be exercised to the extent exercisable, in whole or in part, at
any time and from time to time during such term; provided, however, that
subsequent to the grant of an Option, the Committee, at any time before complete
termination of such Option, may accelerate the time or times at which such
Option may be exercised in whole or in part (without reducing the term of such
Option).
6.5 Manner of Exercise.
(a) Form of Payment. An Option shall be exercised by written notice
to the Company upon such terms and conditions as the Agreement may provide
and in accordance with such other procedures for the exercise of Options as
the Committee may establish from time to time. The method or methods of
payment of the purchase price for the shares to be purchased upon exercise
of an Option and of any amounts required by Section 10.10 shall be
determined by the Committee and may consist of (i) cash, (ii) check, (iii)
promissory note, (iv) whole shares of Series A Stock or of Series B Stock
already owned by the Holder, (v) the withholding of shares of Series A
Stock issuable upon such exercise of the Option, (vi) the delivery,
together with a properly executed exercise notice, of irrevocable
instructions to a broker to deliver promptly to the Company the amount of
sale or loan proceeds required to pay the purchase price, (vii) any
combination of the foregoing methods of payment, or such other
consideration and method of payment as may be permitted for the issuance of
shares under the Delaware General Corporation Law. The permitted method or
methods of payment of the amounts payable upon exercise of an Option, if
other than in cash, shall be set forth in the applicable Agreement and may
be subject to such conditions as the Committee deems appropriate. Without
limiting the generality of the foregoing, if a Holder is permitted to elect
to have shares of Series A Stock issuable upon exercise of an Option
withheld to pay all or any part of the amounts payable in connection with
such exercise, then the Committee shall have the sole discretion to approve
or disapprove such election, which approval or disapproval shall be given
after such election is made.
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(b) Value of Shares. Shares of Series A Stock or Series B Stock
delivered in payment of all or any part of the amounts payable in
connection with the exercise of an Option, and shares of Series A Stock
withheld for such payment, shall be valued for such purpose at their Fair
Market Value as of the exercise date. Notwithstanding the foregoing, if a
Holder who is permitted to do so pursuant to the applicable Agreement
elects to have shares of Series A Stock issuable upon exercise of an Option
withheld in payment of all or any part of the amounts payable in connection
with the exercise of such Option and if, in order to meet the exemptive
requirements of Rule 16b-3, such election is made during a window period
determined in accordance with paragraph (e)(3) of such Rule (or is made
prior thereto to become effective during such window period), then for
purposes of determining the Fair Market Value of the shares of Series A
Stock withheld, such Option (other than an Incentive Stock Option) shall be
deemed to have been exercised on the day during such window period on which
the highest reported last sale price of a share of Series A Stock as
reported on NASDAQ occurred and the Fair Market Value of such shares shall
be deemed to be such highest reported last sale price.
(c) Issuance of Shares. The Company shall effect the transfer of the
shares of Series A Stock purchased under the Option as soon as practicable
after the exercise thereof and payment in full of the purchase price
therefor and of any amounts required by Section 10.10, and within a
reasonable time thereafter such transfer shall be evidenced on the books of
the Company. No Holder or other person exercising an Option shall have any
of the rights of a stockholder of the Company with respect to shares of
Series A Stock subject to an Option granted under the Plan until due
exercise and full payment has been made. No adjustment shall be made for
cash dividends or other rights for which the record date is prior to the
date of such due exercise and full payment.
6.6 Nontransferability. Unless otherwise determined by the Committee and
provided in the applicable Agreement, Options shall not be transferable other
than by will or the laws of descent and distribution or pursuant to a domestic
relations order and, except as otherwise required pursuant to a domestic
relations order, Options may be exercised during the lifetime of the Holder
thereof only by such Holder (or his or her court appointed legal
representative).
ARTICLE VII
SARS
7.1 Grant of SARs. Subject to the limitations of the Plan, SARs may be
granted by the Committee to such eligible persons in such numbers and at such
times during the term of the Plan as the Committee shall determine. An SAR may
be granted to a Holder of an Option (hereinafter called a "related Option") with
respect to all or a portion of the shares of Series A Stock subject to the
related Option (a "Tandem SAR") or may be granted separately to an eligible
employee (a "Free Standing SAR"). Subject to the limitations of the Plan, SARs
shall be exercisable in whole or in part upon notice to the Company upon such
terms and conditions as are provided in the Agreement. Except for Awards
described in Section 10.1, no person may be granted in any calendar year SARs
covering more than 1,000,000 shares of Series A Stock (adjusted as provided in
Section 4.2).
7.2 Tandem SARs. A Tandem SAR may be granted either concurrently with the
grant of the related Option or (if the related Option is a Nonqualified Option)
at any time thereafter prior to the complete exercise, termination, expiration
or cancellation of such related Option. Tandem SARs shall be exercisable only at
the time and to the extent that the related Option is exercisable (and may be
subject to such additional limitations on exercisability as the Agreement may
provide), and in no event after the complete termination or full exercise of the
related Option. Upon the exercise or termination of the related Option, the
Tandem SARs with respect thereto shall be cancelled automatically to the extent
of the number of shares of Series A Stock with respect to which the related
Option was so exercised or terminated. Subject to the limitations of the Plan,
upon the exercise of a Tandem SAR, the Holder thereof shall be entitled to
receive from the Company, for each share of Series A Stock with respect to which
the Tandem SAR is being exercised, consideration (in the form determined as
provided in Section 7.4) equal in value to the excess of the Fair Market Value
of a share
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of Series A Stock on the date of exercise over the related Option purchase price
per share; provided, however, that the Committee may, in any Agreement granting
Tandem SARs, provide that the appreciation realizable upon exercise thereof
shall be measured from a base higher than the related Option purchase price.
7.3 Free Standing SARs. Free Standing SARs shall be exercisable at the
time, to the extent and upon the terms and conditions set forth in the
applicable Agreement. The base price of a Free Standing SAR shall be not less
than 100% of the Fair Market Value of the Series A Stock on the date of grant of
the Free Standing SAR. Subject to the limitations of the Plan, upon the exercise
of a Free Standing SAR, the Holder thereof shall be entitled to receive from the
Company, for each share of Series A Stock with respect to which the Free
Standing SAR is being exercised, consideration (in the form determined as
provided in Section 7.4) equal in value to the excess of the Fair Market Value
of a share of Series A Stock on the date of exercise over the base price per
share of such Free Standing SAR.
7.4 Consideration. The consideration to be received upon the exercise of
an SAR by the Holder shall be paid in cash, shares of Series A Stock (valued at
Fair Market Value on the date of exercise of such SAR) or a combination of cash
and shares of Series A Stock as specified in the Agreement, or, if so provided
in the Agreement, either as determined by the Committee in its sole discretion
or as elected by the Holder, provided that the Committee shall have the sole
discretion to approve or disapprove the election by a Holder to receive cash in
full or partial settlement of an SAR, which approval or disapproval shall be
given after such election is made. The Company's obligation arising upon the
exercise of an SAR may be paid currently or on a deferred basis with such
interest or earnings equivalent as the Committee may determine. No fractional
shares of Series A Stock shall be issuable upon exercise of an SAR and, unless
otherwise provided in the applicable Agreement, the Holder will receive cash in
lieu of fractional shares. Unless the Committee shall otherwise determine, to
the extent a Free Standing SAR is exercisable, it will be exercised
automatically for cash on its expiration date.
7.5 Limitations. The applicable Agreement may provide for a limit on the
amount payable to a Holder upon exercise of SARs at any time or in the
aggregate, for a limit on the number of SARs that may be exercised by the Holder
in whole or in part for cash during any specified period, for a limit on the
time periods during which a Holder may exercise SARs and for such other limits
on the rights of the Holder and such other terms and conditions of the SAR as
the Committee may determine, including, without limitation, a condition that the
SAR may be exercised only in accordance with rules and regulations adopted by
the Committee from time to time. Unless otherwise so provided in the applicable
Agreement, any such limit relating to a Tandem SAR shall not restrict the
exercisability of the related Option. Such rules and regulations may govern the
right to exercise SARs granted prior to the adoption or amendment of such rules
and regulations as well as SARs granted thereafter.
7.6 Exercise. For purposes of this Article VII, the date of exercise of an
SAR shall mean the date on which the Company shall have received notice from the
Holder of the SAR of the exercise of such SAR, except that, if in order to meet
the exemptive requirements of Rule 16b-3 a Holder exercises any SAR (other than
one granted in tandem with an Incentive Stock Option) in whole or in part for
cash during a window period determined in accordance with paragraph (e)(3) of
such Rule, then such SAR shall be deemed to have been exercised on the day
during such window period on which the highest reported last sale price of a
share of Series A Stock as reported on NASDAQ occurred and the Fair Market Value
of such shares shall be deemed to be such highest reported last sale price.
7.7 Nontransferability. Unless otherwise determined by the Committee and
provided in the applicable Agreement, SARs shall not be transferable other than
by will or the laws of descent and distribution or pursuant to a domestic
relations order and, except as otherwise required pursuant to a domestic
relations order, SARs may be exercised during the lifetime of the Holder thereof
only by such Holder (or his or her court appointed legal representative).
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ARTICLE VIII
RESTRICTED SHARES
8.1 Grant. Subject to the limitations of the Plan, the Committee shall
designate those eligible persons to be granted awards of Restricted Shares,
shall determine the time when each such Award shall be granted, whether shares
of Series A Stock covered by awards of Restricted Shares will be issued at the
beginning or the end of the Restriction Period and whether Dividend Equivalents
will be paid during the Restriction Period in the event shares of the Series A
Stock are to be issued at the end of the Restriction Period, and shall designate
(or set forth the basis for determining) the Vesting Date or Vesting Dates for
each award of Restricted Shares and may prescribe other restrictions, terms and
conditions applicable to the vesting of such Restricted Shares in addition to
those provided in the Plan. The Committee shall determine the price, if any, to
be paid by the Holder for the Restricted Shares; provided, however, that the
issuance of Restricted Shares shall be made for at least the minimum
consideration necessary to permit such Restricted Shares to be deemed fully paid
and nonassessable. All determinations made by the Committee pursuant to this
Section 8.1 shall be specified in the Agreement.
8.2 Issuance of Restricted Shares at Beginning of the Restriction
Period. If shares of Series A Stock are issued at the beginning of the
Restriction Period, the stock certificate or certificates representing such
Restricted Shares shall be registered in the name of the Holder to whom such
Restricted Shares shall have been awarded. During the Restriction Period,
certificates representing the Restricted Shares and any securities constituting
Retained Distributions shall bear a restrictive legend to the effect that
ownership of the Restricted Shares (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the restrictions,
terms and conditions provided in the Plan and the applicable Agreement. Such
certificates shall remain in the custody of the Company and the Holder shall
deposit with the Company stock powers or other instruments of assignment, each
endorsed in blank, so as to permit retransfer to the Company of all or any
portion of the Restricted Shares and any securities constituting Retained
Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and the applicable Agreement.
8.3 Restrictions. Restricted Shares issued at the beginning of the
Restriction Period shall constitute issued and outstanding shares of Series A
Stock for all corporate purposes. The Holder will have the right to vote such
Restricted Shares, to receive and retain such dividends and distributions, as
the Committee may in its sole discretion designate, paid or distributed on such
Restricted Shares and to exercise all other rights, powers and privileges of a
Holder of Series A Stock with respect to such Restricted Shares; except, that
(a) the Holder will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Shares until the Restriction Period
shall have expired and unless all other vesting requirements with respect
thereto shall have been fulfilled or waived; (b) the Company will retain custody
of the stock certificate or certificates representing the Restricted Shares
during the Restriction Period as provided in Section 8.2; (c) other than such
dividends and distributions as the Committee may in its sole discretion
designate, the Company will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the Restricted Shares (and such
Retained Distributions will be subject to the same restrictions, terms and
vesting and other conditions as are applicable to the Restricted Shares) until
such time, if ever, as the Restricted Shares with respect to which such Retained
Distributions shall have been made, paid or declared shall have become vested,
and such Retained Distributions shall not bear interest or be segregated in a
separate account; (d) the Holder may not sell, assign, transfer, pledge,
exchange, encumber or dispose of the Restricted Shares or any Retained
Distributions or his interest in any of them during the Restriction Period; and
(e) a breach of any restrictions, terms or conditions provided in the Plan or
established by the Committee with respect to any Restricted Shares or Retained
Distributions will cause a forfeiture of such Restricted Shares and any Retained
Distributions with respect thereto.
8.4 Issuance of Stock at End of the Restriction Period. Restricted Shares
issued at the end of the Restriction Period shall not constitute issued and
outstanding shares of Series A Stock and the Holder shall not have any of the
rights of a stockholder with respect to the shares of Series A Stock covered by
such an award of Restricted Shares, in each case until such shares shall have
been transferred to the Holder at the end of the Restriction Period. If and to
the extent that shares of Series A Stock are to be issued at the end of the
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Restriction Period, the Holder shall be entitled to receive Dividend Equivalents
with respect to the shares of Series A Stock covered thereby either (i) during
the Restriction Period or (ii) in accordance with the rules applicable to
Retained Distributions, as the Committee may specify in the Agreement.
8.5 Cash Awards. In connection with any award of Restricted Shares, an
Agreement may provide for the payment of a cash amount to the Holder of such
Restricted Shares at any time after such Restricted Shares shall have become
vested. Such cash awards shall be payable in accordance with such additional
restrictions, terms and conditions as shall be prescribed by the Committee in
the Agreement and shall be in addition to any other salary, incentive, bonus or
other compensation payments which such Holder shall be otherwise entitled or
eligible to receive from the Company.
8.6 Completion of Restriction Period. On the Vesting Date with respect to
each award of Restricted Shares, and the satisfaction of any other applicable
restrictions, terms and conditions (a) all or the applicable portion of such
Restricted Shares shall become vested, (b) any Retained Distributions and any
unpaid Dividend Equivalents with respect to such Restricted Shares shall become
vested to the extent that the Restricted Shares related thereto shall have
become vested and (c) any cash award to be received by the Holder with respect
to such Restricted Shares shall become payable, all in accordance with the terms
of the applicable Agreement. Any such Restricted Shares, Retained Distributions
and any unpaid Dividend Equivalents that shall not become vested shall be
forfeited to the Company and the Holder shall not thereafter have any rights
(including dividend and voting rights) with respect to such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall have been
so forfeited. The Committee may, in its discretion, provide that the delivery of
any Restricted Shares, Retained Distributions and unpaid Dividend Equivalents
that shall have become vested, and payment of any cash awards that shall have
become payable, shall be deferred until such date or dates as the recipient may
elect. Any election of a recipient pursuant to the preceding sentence shall be
filed in writing with the Committee in accordance with such rules and
regulations, including any deadline for the making of such an election, as the
Committee may provide.
ARTICLE IX
STOCK UNITS
9.1 Grant. In addition to granting awards of Options, SARs and Restricted
Shares, the Committee shall have authority to grant to eligible persons awards
of Stock Units which may be in the form of Series A Stock or units, the value of
which is based, in whole or in part, on the Fair Market Value of the Series A
Stock. Subject to the provisions of the Plan, including any rules established
pursuant to Section 9.2, awards of Stock Units shall be subject to such terms,
restrictions, conditions, vesting requirements and payment rules as the
Committee may determine in its sole discretion, which need not be identical for
each Award. The determinations made by the Committee pursuant to this Section
9.1 shall be specified in the applicable Agreement.
9.2 Rules. The Committee may, in its sole discretion, establish any or all
of the following rules for application to an award of Stock Units:
(a) Any shares of Series A Stock which are part of an award of Stock
Units may not be assigned, sold, transferred, pledged or otherwise
encumbered prior to the date on which the shares are issued, or if later,
the date provided by the Committee at the time of the Award.
(b) Such Awards may provide for the payment of cash consideration by
the person to whom such Award is granted or provide that the Award, and
Series A Stock to be issued in connection therewith, if applicable, shall
be delivered without the payment of cash consideration; provided, however,
that the issuance of any shares of Series A Stock in connection with an
award of Stock Units shall be for at least the minimum consideration
necessary to permit such shares to be deemed fully paid and nonassessable.
(c) Awards of Stock Units may relate in whole or in part to
performance or other criteria established by the Committee at the time of
grant.
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(d) Awards of Stock Units may provide for deferred payment schedules,
vesting over a specified period of employment, the payment (on a current or
deferred basis) of dividend equivalent amounts with respect to the number
of shares of Series A Stock covered by the Award, and elections by the
employee to defer payment of the Award or the lifting of restrictions on
the Award, if any.
(e) In such circumstances as the Committee may deem advisable, the
Committee may waive or otherwise remove, in whole or in part, any
restrictions or limitations to which a Stock Unit Award was made subject at
the time of grant.
ARTICLE X
GENERAL PROVISIONS
10.1 Acceleration of Options, SARs, Restricted Shares and Stock Units.
(a) Death or Disability. If a Holder's employment shall terminate by
reason of death or Disability, notwithstanding any contrary waiting period,
installment period, vesting schedule or Restriction Period in any Agreement
or in the Plan, unless the applicable Agreement provides otherwise: (i) in
the case of an Option or SAR, each outstanding Option or SAR granted under
the Plan shall immediately become exercisable in full in respect of the
aggregate number of shares covered thereby; (ii) in the case of Restricted
Shares, the Restriction Period applicable to each such award of Restricted
Shares shall be deemed to have expired and all such Restricted Shares, any
related Retained Distributions and any unpaid Dividend Equivalents shall
become vested and any cash amounts payable pursuant to the applicable
Agreement shall be adjusted in such manner as may be provided in the
Agreement, and (iii) in the case of Stock Units, each such award of Stock
Units shall become vested in full.
(b) Approved Transactions. In the event of any Approved Transaction,
notwithstanding any contrary waiting period, installment period, vesting
schedule or Restriction Period in any Agreement or in the Plan, unless the
applicable Agreement provides otherwise: (i) in the case of an Option or
SAR, each such outstanding Option or SAR granted under the Plan shall
become exercisable in full in respect of the aggregate number of shares
covered thereby; (ii) in the case of Restricted Shares, the Restriction
Period applicable to each such award of Restricted Shares shall be deemed
to have expired and all such Restricted Shares, any related Retained
Distributions and any unpaid Dividend Equivalents shall become vested and
any cash amounts payable pursuant to the applicable Agreement shall be
adjusted in such manner as may be provided in the Agreement, and (iii) in
the case of Stock Units, each such award of Stock Units shall become vested
in full, in each case effective immediately prior to consummation of the
Approved Transaction; provided, however, that any Options, SARs or, if
applicable, Stock Units not theretofore exercised shall terminate upon
consummation of the Approved Transaction. Notwithstanding the foregoing,
unless otherwise provided in the applicable Agreement, the Committee may,
in its discretion, determine that any or all outstanding Awards of any or
all types granted pursuant to the Plan will not vest or become exercisable
on an accelerated basis in connection with an Approved Transaction and/or
will not terminate if not exercised prior to consummation of the Approved
Transaction, if the Board or the surviving or acquiring corporation, as the
case may be, shall have taken, or made effective provision for the taking
of, such action as in the opinion of the Committee is equitable and
appropriate to substitute a new Award for such Award or to assume such
Award and in order to make such new or assumed Award, as nearly as may be
practicable, equivalent to the old Award (before giving effect to any
acceleration of the vesting or exercisability thereof), taking into
account, to the extent applicable, the kind and amount of securities, cash
or other assets into or for which the Series A Stock may be changed,
converted or exchanged in connection with the Approved Transaction.
10.2 Termination of Employment.
(a) General. If a Holder's employment shall terminate prior to the
complete exercise of an Option or SAR (or deemed exercise thereof, as
provided in Section 7.2) or during the Restriction Period with respect to
any Restricted Shares or prior to the vesting or complete exercise of any
Stock Units, then such Option, SAR or Stock Unit shall thereafter be
exercisable, and the Holder's rights to any unvested
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Restricted Shares, Retained Distributions, unpaid Dividend Equivalents and
cash amounts and any such unvested Stock Units shall thereafter vest solely
to the extent provided in the applicable Agreement; provided, however, that
(i) no Option or SAR may be exercised after the scheduled expiration date
thereof; (ii) if the Holder's employment terminates by reason of death or
Disability, the Option or SAR shall remain exercisable for a period of at
least one year following such termination (but not later than the scheduled
expiration of such Option or SAR); and (iii) any termination by the Company
for cause will be treated in accordance with the provisions of Section
10.2.
(b) Termination by Company for Cause. If a Holder's employment with
the Company or a Subsidiary shall be terminated by the Company or such
Subsidiary during the Restriction Period with respect to any Restricted
Shares, or prior to the exercise of any Option or SAR, or prior to the
vesting or exercise of any Stock Unit, for cause (for these purposes, cause
shall have the meaning ascribed thereto in any employment agreement to
which such Holder is a party or, in the absence thereof, shall include but
not be limited to, insubordination, dishonesty, incompetence, moral
turpitude, other misconduct of any kind and the refusal to perform his
duties and responsibilities for any reason other than illness or
incapacity; provided, however, that if such termination occurs within 12
months after an Approved Transaction, termination for cause shall mean only
a felony conviction for fraud, misappropriation or embezzlement), then (i)
all Options and SARs and all unvested or unexercised Stock Units held by
such Holder shall immediately terminate and (ii) such Holder's rights to
all Restricted Shares, Retained Distributions, any unpaid Dividend
Equivalents and any cash awards shall be forfeited immediately.
(c) Miscellaneous. The Committee may determine whether any given leave
of absence constitutes a termination of employment; provided, however, that
for purposes of the Plan (i) a leave of absence, duly authorized in writing
by the Company for military service or sickness, or for any other purpose
approved by the Company if the period of such leave does not exceed 90
days, and (ii) a leave of absence in excess of 90 days, duly authorized in
writing by the Company, provided the employee's right to reemployment is
guaranteed either by statute or contract, shall not be deemed a termination
of employment. Awards made under the Plan shall not be affected by any
change of employment so long as the Holder continues to be an employee of
the Company or any Subsidiary.
10.3 Right of Company to Terminate Employment. Nothing contained in the
Plan or in any Award, and no action of the Company or the Committee with respect
thereto, shall confer or be construed to confer on any Holder any right to
continue in the employ of the Company or any of its Subsidiaries or interfere in
any way with the right of the Company or a Subsidiary to terminate the
employment of the Holder at any time, with or without cause; subject, however,
to the provisions of any employment agreement between the Holder and the Company
or any Subsidiary.
10.4 Nonalienation of Benefits. No right or benefit under the Plan shall
be subject to anticipation, alienation, sale, assignment, hypothecation, pledge,
exchange, transfer, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or
charge the same shall be void. No right or benefit hereunder shall in any manner
be liable for or subject to the debts, contracts, liabilities or torts of the
person entitled to such benefits.
10.5 Written Agreement. Each grant of an Option under the Plan shall be
evidenced by a stock option agreement which shall designate the Options granted
thereunder as Incentive Stock Options or Nonqualified Stock Options; each SAR
shall be evidenced by a stock appreciation rights agreement; each award of
Restricted Shares shall be evidenced by a restricted shares agreement and each
award of Stock Units shall be evidenced by a stock units agreement, each in such
form and containing such terms and provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve;
provided, however, that if more than one type of Award is made to the same
Holder, such Awards may be evidenced by a single agreement with such Holder.
Each grantee of an Option, SAR, Restricted Shares or Stock Units shall be
notified promptly of such grant and a written agreement shall be promptly
executed and delivered by the Company and the grantee, provided that, in the
discretion of the Committee, such grant of Options, SARs, Restricted Shares or
Stock Units shall terminate if such written agreement is not signed by such
grantee (or his attorney) and delivered to the Company within 60 days after the
date the Committee approved such grant.
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Any such written agreement may contain (but shall not be required to contain)
such provisions as the Committee deems appropriate (i) to insure that the
penalty provisions of Section 4999 of the Code will not apply to any stock or
cash received by the Holder from the Company or (ii) to provide cash payments to
the Holder to mitigate the impact of such penalty provisions upon the Holder.
Any such agreement may be supplemented or amended from time to time as approved
by the Committee as contemplated by Section 10.8(b).
10.6 Designation of Beneficiaries. Each person who shall be granted an
Award under the Plan may designate a beneficiary or beneficiaries and may change
such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Committee on a form to be prescribed by
it, provided that no such designation shall be effective unless so filed prior
to the death of such person.
10.7 Right of First Refusal. The Agreements may contain such provisions as
the Committee shall determine to the effect that if a Holder elects to sell all
or any shares of Series A Stock that such Holder acquired upon the exercise of
an Option or SAR or upon the vesting of Restricted Shares or Stock Units awarded
under the Plan, then such Holder shall not sell such shares unless such Holder
shall have first offered in writing to sell such shares to the Company at Fair
Market Value on a date specified in such offer (which date shall be at least
three business days and not more than ten business days following the date of
such offer). In any such event, certificates representing shares issued upon
exercise of Options or SARs and the vesting of Restricted Shares or Stock Units
shall bear a restrictive legend to the effect that transferability of such
shares are subject to the restrictions contained in the Plan and the applicable
Agreement and the Company may cause the transfer agent for the Series A Stock to
place a stop transfer order with respect to such shares.
10.8 Termination and Amendment.
(a) General. Unless the Plan shall theretofore have been terminated as
hereinafter provided, no Awards may be made under the Plan on or after the
tenth anniversary of the Effective Date. The Board or the Committee may at
any time prior to the tenth anniversary of the Effective Date terminate the
Plan, and may, from time to time, suspend or discontinue the Plan or modify
or amend the Plan in such respects as it shall deem advisable; except that
no such modification or amendment shall be effective prior to approval by
the Company's stockholders to the extent such approval is then required
pursuant to Rule 16b-3 in order to preserve the applicability of any
exemption provided by such rule to any Award then outstanding (unless the
holder of such Award consents) or to the extent stockholder approval is
otherwise required by applicable legal requirements.
(b) Modification. No termination, modification or amendment of the
Plan may, without the consent of the person to whom any Award shall
theretofore have been granted, adversely affect the rights of such person
with respect to such Award. No modification, extension, renewal or other
change in any Award granted under the Plan shall be made after the grant of
such Award, unless the same is consistent with the provisions of the Plan.
With the consent of the Holder and subject to the terms and conditions of
the Plan (including Section 10.8(a)), the Committee may amend outstanding
Agreements with any Holder, including, without limitation, any amendment
which would (i) accelerate the time or times at which the Award may be
exercised and/or (ii) extend the scheduled expiration date of the Award.
Without limiting the generality of the foregoing, the Committee may, but
solely with the Holder's consent unless otherwise provided in the
Agreement, agree to cancel any Award under the Plan and issue a new Award
in substitution therefor, provided that the Award so substituted shall
satisfy all of the requirements of the Plan as of the date such new Award
is made. Nothing contained in the foregoing provisions of this Section
10.08(b) shall be construed to prevent the Committee from providing in any
Agreement that the rights of the Holder with respect to the Award evidenced
thereby shall be subject to such rules and regulations as the Committee
may, subject to the express provisions of the Plan, adopt from time to
time, or impair the enforceability of any such provision.
10.9 Government and Other Regulations. The obligation of the Company with
respect to Awards shall be subject to all applicable laws, rules and regulations
and such approvals by any governmental agencies as may be required, including,
without limitation, the effectiveness of any registration statement required
under the Securities Act of 1933, and the rules and regulations of any
securities exchange or association on which the
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Series A Stock may be listed or quoted. For so long as the Series A Stock is
registered under the Exchange Act, the Company shall use its reasonable efforts
to comply with any legal requirements (i) to maintain a registration statement
in effect under the Securities Act of 1933 with respect to all shares of Series
A Stock that may be issued to Holders under the Plan, and (ii) to file in a
timely manner all reports required to be filed by it under the Exchange Act.
10.10 Withholding. The Company's obligation to deliver shares of Series A
Stock or pay cash in respect of any Award under the Plan shall be subject to
applicable federal, state and local tax withholding requirements. Federal, state
and local withholding tax due at the time of an Award, upon the exercise of any
Option or SAR or upon the vesting of, or expiration of restrictions with respect
to, Restricted Shares or Stock Units, as appropriate, may, in the discretion of
the Committee, be paid in shares of Series A Stock already owned by the Holder
or through the withholding of shares otherwise issuable to such Holder, upon
such terms and conditions (including, without limitation, the conditions
referenced in Section 6.5) as the Committee shall determine. If the Holder shall
fail to pay, or make arrangements satisfactory to the Committee for the payment,
to the Company of all such federal, state and local taxes required to be
withheld by the Company, then the Company shall, to the extent permitted by law,
have the right to deduct from any payment of any kind otherwise due to such
Holder an amount equal to any federal, state or local taxes of any kind required
to be withheld by the Company with respect to such Award.
10.11 Separability. It is the intent of the Company that this Plan comply
with Rule 16b-3 with respect to persons subject to Section 16 of the Exchange
Act unless otherwise provided herein or in an Award Agreement, that any
ambiguities or inconsistencies in the construction of this Plan be interpreted
to give effect to such intention, and that if any provision of this Plan is
found not to be in compliance with Rule 16b-3, such provision shall be null and
void to the extent required to permit this Plan to comply with Rule 16b-3.
10.12 Non-Exclusivity of the Plan. Neither the adoption of the Plan by the
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options and the awarding of
stock and cash otherwise then under the Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
10.13 Exclusion from Pension and Profit-Sharing Computation. By acceptance
of an Award, unless otherwise provided in the applicable Agreement, each Holder
shall be deemed to have agreed that such Award is special incentive compensation
that will not be taken into account, in any manner, as salary, compensation or
bonus in determining the amount of any payment under any pension, retirement or
other employee benefit plan, program or policy of the Company or any Subsidiary.
In addition, each beneficiary of a deceased Holder shall be deemed to have
agreed that such Award will not affect the amount of any life insurance
coverage, if any, provided by the Company on the life of the Holder which is
payable to such beneficiary under any life insurance plan covering employees of
the Company or any Subsidiary.
10.14 Unfunded Plan. Neither the Company nor any Subsidiary shall be
required to segregate any cash or any shares of Series A Stock which may at any
time be represented by Awards and the Plan shall constitute an "unfunded" plan
of the Company. Except as provided in Article VII with respect to awards of
Restricted Shares and except as expressly set forth in writing, no employee
shall have voting or other rights with respect to shares of Series A Stock prior
to the delivery of such shares. Neither the Company nor any Subsidiary shall, by
any provisions of the Plan, be deemed to be a trustee of any Series A Stock or
any other property, and the liabilities of the Company and any Subsidiary to any
employee pursuant to the Plan shall be those of a debtor pursuant to such
contract obligations as are created by or pursuant to the Plan, and the rights
of any employee, former employee or beneficiary under the Plan shall be limited
to those of a general creditor of the Company or the applicable Subsidiary, as
the case may be. In its sole discretion, the Board may authorize the creation of
trusts or other arrangements to meet the obligations of the Company under the
Plan, provided, however, that the existence of such trusts or other arrangements
is consistent with the unfunded status of the Plan.
10.15 Governing Law. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
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10.16 Accounts. The delivery of any shares of Series A Stock and the
payment of any amount in respect of an Award shall be for the account of the
Company or the applicable Subsidiary, as the case may be, and any such delivery
or payment shall not be made until the recipient shall have paid or made
satisfactory arrangements for the payment of any applicable withholding taxes as
provided in Section 10.10.
10.17 Legends. In addition to any legend contemplated by Section 10.7,
each certificate evidencing Series A Stock subject to an Award shall bear such
legends as the Committee deems necessary or appropriate to reflect or refer to
any terms, conditions or restrictions of the Award applicable to such shares,
including, without limitation, any to the effect that the shares represented
thereby may not be disposed of unless the Company has received an opinion of
counsel, acceptable to the Company, that such disposition will not violate any
federal or state securities laws.
10.18 Company's Rights. The grant of Awards pursuant to the Plan shall not
affect in any way the right or power of the Company to make reclassifications,
reorganizations or other changes of or to its capital or business structure or
to merge, consolidate, liquidate, sell or otherwise dispose of all or any part
of its business or assets.
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APPENDIX II
TELE-COMMUNICATIONS INTERNATIONAL, INC.
1996 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose of the Plan. This Nonemployee Director Stock Option Plan (the
"Plan") is intended as an incentive to retain and attract persons of training,
experience and ability to serve as independent directors on the Board of
Directors of Tele-Communications International, Inc., a Delaware corporation
(the "Company"), to encourage the sense of proprietorship of such persons and to
stimulate the active interest of such persons in the development and financial
success of the Company. It is further intended that the options granted pursuant
to this Plan (the "Options") will be nonqualified options within the meaning of
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Stockholder Approval. This Plan shall be effective as of the date (the
"Effective Date") it was approved by the Board of Directors of the Company,
April 11, 1996. All Options granted pursuant to this Plan are subject to, and
may not be exercised before, the approval of this Plan by the affirmative vote
of the holders of a majority in voting power of the shares of capital stock of
the Company that are present, or represented, and entitled to vote thereon at a
meeting of the Company's stockholders. If the stockholders of the Company should
fail so to approve this Plan on or prior to such date, this Plan shall terminate
and cease to be of any further force or effect and all grants of options
hereunder shall be null and void.
3. Designation of Participants; Automatic Grant of Options. Each director
of the Company who is not an employee of the Company or any Subsidiary (as
hereinafter defined) of the Company (any such director being hereinafter
referred to as a "Nonemployee Director") shall be granted Options as described
hereunder. Each Nonemployee Director who is a director as of the Effective Date
(as hereinafter defined) shall automatically be granted Options to purchase
50,000 shares of Series A Common Stock, $1.00 par value per share of the Company
(the "Common Stock") at the Effective Date. Thereafter, each individual who
becomes a Nonemployee Director shall automatically be granted Options to
purchase 50,000 shares of Common Stock (subject to adjustment as provided in
Paragraph 10) on the date such person first becomes a Nonemployee Director.
Notwithstanding the foregoing, in the case of any grant of Options made on a
date subsequent to the Effective Date, such grant shall only be made if the
number of shares subject to future grant under this Plan is sufficient to make
all automatic grants required to be made pursuant to this Plan on such date of
grant. As used herein, the term "Subsidiary" of the Company shall mean any
corporation of which the Company directly or indirectly owns shares representing
more than 50% of the voting power of all classes or series of capital stock of
such corporation which have the right to vote generally on matters submitted to
a vote of the stockholders of such corporation.
4. Option Agreement. Each Option granted hereunder shall be embodied in a
written option agreement ("Option Agreement"), which shall be subject to the
terms and conditions set forth above and shall be signed by the Optionee and by
the Chief Executive Officer, the Chief Operating Officer, or any Vice President
of the Company for and on behalf of the Company.
5. Common Stock Reserved for the Plan. Subject to adjustment as provided in
Paragraph 10 hereof, a total of 1,000,000 shares of Common Stock shall be
reserved for issuance upon the exercise of Options granted pursuant to this
Plan. The Board of Directors and the appropriate officers of the Company shall
from time to time take whatever actions are necessary to execute, acknowledge,
file and deliver any documents required to be filed with or delivered to any
governmental authority or any stock exchange or transaction reporting system on
which shares of Common Stock are listed or quoted in order to make shares of
Common Stock available for issuance to an Optionee (as hereinafter defined)
pursuant to this Plan. Common Stock subject to Options that are forfeited or
terminated or expire unexercised in such a manner that all or some of the shares
subject thereto are not issued to an Optionee shall immediately become available
for the granting of Options. As used herein, the term "Optionee" shall mean any
Nonemployee Director to whom on April 11, 1996, $16.00 per share Options are
granted hereunder.
II-1
<PAGE> 59
6. Option Price.
(a) The purchase price of each share of Common Stock that is subject to an
Option granted on April 11, 1996, shall be $16.00. Thereafter, the purchase
price of each share of Common Stock that is subject to an Option granted
pursuant to this Plan shall be 95% of the Fair Market Value of such share of
Common Stock on the date the Option is granted, such percentage rounded down to
the nearest quarter dollar.
(b) The Fair Market Value of a share of Common Stock on a particular date
means the last sale price (or, if no last sale price is reported, the average of
the high bid and low asked prices) for a share of Common Stock, as applicable,
on such day (or, if such day is not a trading day, on the next preceding trading
day) as reported on the Nasdaq Stock Market or, if not reported on the Nasdaq
Stock Market, as quoted by the National Quotation Bureau Incorporated, or if the
Common Stock is listed on an exchange, on the principal exchange on which the
Common Stock, as applicable, is listed.
7. Option Period. Each Option granted pursuant to this Plan shall terminate
and be of no force and effect with respect to any shares of Common Stock not
purchased by the Optionee upon the earliest to occur of the following: (a) the
expiration of ten years following the date upon which the Option is granted; (b)
the expiration of one year following the date upon which the Optionee ceases to
be a Director for any reason other than voluntary termination of Director
status; or (c) the expiration of three months following the date on which the
Optionee voluntarily ceases his status as a Director.
8. Exercise of Options.
(a) Options granted pursuant to this Plan shall be exercisable, on a
cumulative basis, as follows: (i) with respect to 20% of the total number of
shares of Common Stock initially subject to any Option, such Option shall be
exercisable on the first anniversary of the date of grant; and (ii) with respect
to the remaining shares of Common Stock subject to any Option, such Option shall
be exercisable with respect to an additional 20% of the total number of shares
initially subject thereto as of the second, third, fourth and fifth
anniversaries of the date of the grant.
(b) An Option may be exercised solely by the Optionee during his lifetime
or after his death by the person or persons entitled thereto under his will or
the laws of descent and distribution.
(c) In the event that an Optionee voluntarily ceases his status as a
Director, an Option granted to such Optionee may be exercised only to the extent
such Option was exercisable at the time he ceased to serve in such capacity.
(d) In the event that an Optionee ceases to serve as a Director for any
reason other than voluntary termination of Director status, at a time when an
Option granted hereunder is still in force and unexpired under the terms of
Paragraph 7 hereof, each such unmatured Option shall be accelerated. Such
acceleration shall be effective as of the date of termination of Director status
and each Option so accelerated shall be exercisable in full for so long as it is
still in force and unexpired under the terms of Paragraph 7 hereof.
(e) Upon the occurrence of a Change in Control, as defined in Paragraph
10(c), all Options previously granted and still in force and unexpired under the
terms of Paragraph 7 hereof shall be accelerated effective as of such Change in
Control.
(f) The purchase price of the shares as to which an Option is exercised
shall be paid in full at the time of the exercise. Such purchase price shall be
payable in cash or by means of tendering theretofore owned Common Stock which
has been held by the Optionee for more than six months, valued at Fair Market
Value on the date of exercise, or any combination thereof. No holder of an
Option shall be, or have any of the rights or privileges of, a stockholder of
the Company in respect of any shares subject to any Option unless and until
certificates evidencing such shares shall have been issued by the Company to
such holder.
9. Assignability. No Option shall be assignable or otherwise transferable
except by will or the laws of descent and distribution or pursuant to a domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder. Any attempted assignment of an
Option in violation of this Paragraph 9 shall be null and void.
II-2
<PAGE> 60
10. Adjustments.
(a) The existence of outstanding Options shall not affect in any manner the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to the
Common Stock) or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding shares
of Common Stock or declaration of a dividend payable in shares of Common Stock
or capital reorganization or reclassification or other transaction involving an
increase or reduction in the number of outstanding shares of Common Stock, the
Board of Directors may adjust proportionally (i) the number of shares of Common
Stock reserved under these Options; and (ii) the exercise price of such Options.
In the event of any consolidation or merger of the Company with another
corporation or entity or the adoption by the Company of a plan of exchange
affecting the Common Stock or any distribution to holders of Common Stock of
securities or property (other than normal cash dividends or dividends payable in
Common Stock), the Board of Directors shall make such adjustments or other
provisions as it may deem equitable, including adjustments to avoid fractional
shares, to give proper effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation, the Board of Directors shall be authorized to issue or assume stock
options by means of substitution of new options for previously issued options or
an assumption of previously issued options, or to make provision for the
acceleration of the exercisability of, or lapse of restrictions with respect to,
the termination of unexercised options in connection with such transaction.
(c) An Option shall become fully exercisable upon a Change in Control (as
hereinafter defined) of the Company. For purposes of this Plan, a "Change of
Control" shall be conclusively deemed to have occurred if (and only if) any of
the following events shall have occurred: (a) there shall have occurred an event
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A (or in response to any similar item on any similar schedule or form)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether or not the Company is then subject to such reporting requirement;
(b) after the Effective Date any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than a person that is a director of
the Company on the Effective Date or any person controlled by such a director,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding voting
securities; (c) the Company is a party to a merger, consolidation, sale of
assets or other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of Directors
thereafter; or (d) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors (including
for this purpose any new director whose election or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board of
Directors.
11. Purchase for Investment. Unless the Options and shares of Common Stock
covered by this Plan have been registered under the Securities Act of 1933, as
amended, each person exercising an Option under this Plan may be required by the
Company to give a representation in writing in form and substance satisfactory
to the Company to the effect that he is acquiring such shares for his own
account for investment and not with a view to, or for sale in connection with,
the distribution of such shares or any part thereof.
12. Taxes. The Company may make such provisions as it may deem appropriate
for the withholding of any taxes that it determines is required in connection
with any Options granted to any Optionee hereunder.
13. Amendments or Termination. The Board of Directors of the Company may
amend, alter or discontinue this Plan, except that (a) no amendment or
alteration that would impair the rights of any Optionee under any Option that he
has been granted shall be made without his consent, (b) no amendment or
II-3
<PAGE> 61
alteration shall be effective prior to approval by the Company's stockholders to
the extent such approval is then required pursuant to Rule 16b-3 (or any
successor provision) under the Exchange Act in order to preserve the
applicability of any exemption provided by such rule to any Option then
outstanding (unless the holder of such Option consents) or to the extent
stockholder approval is otherwise required by applicable legal requirements, and
(c) the Plan shall not be amended more than once every six months to the extent
such limitation is required by Rule 16b-3(c)(2)(ii) (or any successor provision)
under the Exchange Act as then in effect.
14. Government Regulations. This Plan, and the granting and exercise of
Options hereunder, and the obligation of the Company to sell and deliver shares
of Common Stock under such Options, shall be subject to all applicable laws,
rules and regulations, and to such approvals on the part of any governmental
agencies or national securities exchanges or transaction reporting systems as
may be required.
15. Governing Law. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions of
the Code or the securities laws of the United States, shall be governed by and
construed in accordance with the laws of the State of Delaware.
16. Miscellaneous. The granting of any Option shall not impose upon the
Company, the Board of Directors of the Company or any other directors of the
Company any obligation to nominate any Optionee for election as a director and
the right of the stockholders of the Company to remove any person as a director
of the Company shall not be diminished or affected by reason of the fact that an
Option has been granted to such person.
II-4
<PAGE> 62
TELE-COMMUNICATIONS INTERNATIONAL, INC.
POST OFFICE BOX 5630
DENVER, CO 80217
TELE-COMMUNICATIONS INTERNATIONAL, INC.
SERIES A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen M. Brett, John C. Malone and
Fred A. Vierra, as Proxies, with full power to act without the other and each
with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse side hereof, all the shares
of the above-referenced common stock of Tele-Communications International, Inc.
("International") held of record by the undersigned on July 30, 1996, at the
Annual Meeting of International to be held on September 9, 1996 or any
adjournment thereof.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, AND 3
(Continued, and to be signed and dated on reverse side.)
<PAGE> 63
1. Election of Three Directors (Nominees: Tomiichi Akiyama, Jerome H. Kern
and Adam N. Singer).
FOR all nominees listed above:
----
WITHHOLD AUTHORITY to vote for all nominees listed above:
----
*EXCEPTIONS:
----
Instructions: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominee's name in the space
provided below:
- --------------------------------------------------------------------------------
2. To consider and vote upon a proposal to approve the Tele-Communications
International, Inc. 1995 Stock Incentive Plan.
FOR AGAINST ABSTAIN
---- ---- ----
3. To consider and vote upon a proposal to approve the Tele-Communications
International, Inc. 1996 Nonemployee Director Stock Option Plan.
FOR AGAINST ABSTAIN
---- ---- ----
4. In their discretion, the Proxies are authorized to vote upon any other
business as may properly come before the Annual Meeting.
Signature should agree with name
printed hereon. If stock is
held in the name of more than
one person, each joint owner
should sign. Executors,
administrators, trustees,
guardians, and attorneys
should indicate the capacity
in which they sign.
DATED: , 1996
--------------------
--------------------------------
Stockholder's Signature
--------------------------------
Stockholder's Signature
Please Sign, Date and Return the Proxy Card Votes MUST be Indicated
Promptly Using the Enclosed Envelope in Black or Blue Ink (X)
<PAGE> 64
TELE-COMMUNICATIONS INTERNATIONAL, INC.
POST OFFICE BOX 5630
DENVER, CO 80217
TELE-COMMUNICATIONS INTERNATIONAL, INC.
SERIES B COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen M. Brett, John C. Malone and
Fred A. Vierra, as Proxies, with full power to act without the other and each
with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse side hereof, all the shares
of the above-referenced common stock of Tele-Communications International, Inc.
("International") held of record by the undersigned on July 30, 1996, at the
Annual Meeting of International to be held on September 9, 1996 or any
adjournment thereof.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, AND 3
(Continued, and to be signed and dated on reverse side.)
<PAGE> 65
1. Election of Three Directors (Nominees: Tomiichi Akiyama, Jerome H. Kern
and Adam N. Singer).
FOR all nominees listed above:
----
WITHHOLD AUTHORITY to vote for all nominees listed above:
----
*EXCEPTIONS:
----
Instructions: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominee's name in the space
provided below:
- --------------------------------------------------------------------------------
2. To consider and vote upon a proposal to approve the Tele-Communications
International, Inc. 1995 Stock Incentive Plan.
FOR AGAINST ABSTAIN
---- ---- ----
3. To consider and vote upon a proposal to approve the Tele-Communications
International, Inc. 1996 Nonemployee Director Stock Option Plan.
FOR AGAINST ABSTAIN
---- ---- ----
4. In their discretion, the Proxies are authorized to vote upon any other
business as may properly come before the Annual Meeting.
Signature should agree with name
printed hereon. If stock is
held in the name of more than
one person, each joint owner
should sign. Executors,
administrators, trustees,
guardians, and attorneys
should indicate the capacity
in which they sign.
DATED: , 1996
--------------------
--------------------------------
Stockholder's Signature
--------------------------------
Stockholder's Signature
Please Sign, Date and Return the Proxy Card Votes MUST be Indicated
Promptly Using the Enclosed Envelope in Black or Blue Ink (X)
