<PAGE>
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
[X] Definitive Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
TELE-COMMUNICATIONS INTERNATIONAL, INC.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Limited
Partnership Interests
(2) Aggregate number of securities to which transaction applies: 111,035
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Pursuant to
Rule 0-11(c)(2), the transaction valuation is based upon the
Registrant's 9 percent interest in the $222,963,267 sales price that is
to be paid to the Cable TV Fund 12-BCD Venture in connection with the
transaction that is the subject of the proxy solicitation.
(4) Proposed maximum aggregate value of the transaction to the Registrant:
$20,066,694
(5) Total fee paid: $4,013
[_] 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:
Notes:
<PAGE>
TELE-COMMUNICATIONS INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 20, 1997
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"),
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, October 20,
1997 for the following purposes:
1. To elect three directors of the Company to hold office until the
annual meeting of stockholders to be held in the year 2000 and until their
successors are elected and qualified (the "Election of Directors
Proposal").
2. To transact such other business as may properly come before the Annual
Meeting.
Holders of record of shares 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 September 11, 1997, the
record date for the Annual Meeting, 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 three directors pursuant to the Election of Directors 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 September 30, 1997.
By Order of the Board of Directors,
[SIGNATURE OF STEPHEN M. BRETT APPEARS HERE]
Stephen M. Brett Secretary
Englewood, Colorado September 30, 1997
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY, WHETHER OR NOT YOU
INTEND TO BE PRESENT AT THE ANNUAL MEETING.
<PAGE>
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 are collectively referred to in this Proxy
Statement, from time to time, as the "International Common Stock." Also
included in this mailing is a copy of the Company's 1996 Annual Report to
Stockholders.
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, October 20, 1997,
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 annual meeting of
stockholders to be held in the year 2000 and until their successors are
elected and qualified (the "Election of Directors Proposal"); and (ii) 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 on or about September 30, 1997 to the Company's stockholders as of the
record date for the Annual Meeting.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
The Board of Directors has fixed the close of business on September 11, 1997
(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. 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) 103,597,805 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. Each director elected pursuant to 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 Annual Meeting, voting as a single class.
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
<PAGE>
11,700,000 outstanding shares of International Series B Common Stock. Such
stock ownership by TCI represents 85% of the shares of International Common
Stock and 92% 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 each of the three director nominees
named in the Election of Directors Proposal below, election of all three
nominees as directors is 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
as a director of each of the director nominees named in the Election of
Directors Proposal. So far as the Company's Board of Directors is aware, the
Election of Directors Proposal is the only matter 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 a
particular 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 July 31, 1997, 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 85% of the shares of International Common Stock, 83% of the
shares of International Series A Common Stock, and 92% of the combined voting
power of the shares of 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 the outstanding shares of either series of International Common
Stock.
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) Tele-Communications, Inc.
Series A TCI Group Common Stock ("Series A TCI Group Common Stock"), (ii)
Tele-Communications, Inc. Series B TCI Group Common Stock ("Series B TCI Group
Common Stock"), (iii) Tele-Communications, Inc. Series A Liberty
2
<PAGE>
Media Group Common Stock ("Series A Liberty Group Common Stock"), (iv) Tele-
Communications, Inc. Series B Liberty Media Group Common Stock ("Series B
Liberty Group Common Stock"), (v) Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock ("Class B Preferred Stock"), (vi)
Convertible Preferred Stock, Series C ("Series C Preferred Stock"), (vii)
Redeemable Convertible TCI Group Preferred Stock, Series G ("Series G
Preferred Stock"), and (viii) Redeemable Convertible Liberty Media Group
Preferred Stock, Series H ("Series H Preferred Stock"). The information in the
table and the footnotes is dated as of July 31, 1997, 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" set forth
below and by the directors and all executive officers of the Company as a
group. Effective January 14, 1997, TCI issued a stock dividend to holders of
Liberty Group Common Stock consisting of one share of Series A Liberty Group
Common Stock for every two shares of Series A Liberty Group Common Stock owned
and one share of Series A Liberty Group Common Stock for every two shares of
Series B Liberty Group Common Stock owned (the "Liberty Group Stock
Dividend"). The shares of Series A Liberty Group Common Stock referenced in
the following table and notes thereto have been adjusted to give effect to the
Liberty Group Stock Dividend. 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 with respect to the TCI securities indicated in the table is
computed with respect to a general election of directors of TCI 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, Class B Preferred
Stock, Series C Preferred Stock, Series G Preferred Stock and Series H
Preferred Stock, voting together as one class. Voting power with respect to
the International Common Stock is computed with respect to a general election
of directors of the Company, with the International Series A Common Stock and
the International Series B Common 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 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 Common
Stock 50,000(2) * *
Series A TCI Group Common Stock 2,162,287(3) *
Series B TCI Group Common Stock 63,268,784(4)(5)(6) 76.3%
Series A Liberty Group Common
Stock 1,504,749(3) * 37.0%
Series B Liberty Group Common
Stock 8,627,395(4)(5) 40.7%
Class B Preferred Stock 289,800(4) 17.9%
Fred A. Vierra International Series A Common
Stock 446,000(7) * *
Series A TCI Group Common Stock 583,138(8) *
Series A Liberty Group Common *
Stock 212,256(8) *
Class B Preferred Stock 200 *
Brendan R. Clouston Series A TCI Group Common Stock 1,988,222(9) *
Series B TCI Group Common Stock 230 * *
Series A Liberty Group Common
Stock 332,832(9) *
Series B Liberty Group Common
Stock 57 *
</TABLE>
3
<PAGE>
<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>
Paul A. Gould International Series A Common
Stock 95,000(2) * *
Series A TCI Group Common Stock 127,330(10) *
Series B TCI Group Common Stock 273,824 *
Series A Liberty Group Common
Stock 102,538(10) * *
Series B Liberty Group Common
Stock 39,081 *
Class B Preferred Stock 19,558 1.2%
Jerome H. Kern International Series A Common
Stock 50,000(2) * *
Series A TCI Group Common Stock 2,400,000(11) * *
Series A Liberty Group Common
Stock 868,750(11) *
Pierre Lescure International Series A Common
Stock 50,000(2) * *
Adam N. Singer International Series A Common
Stock 415,500(12) * *
Series A TCI Group Common Stock 149,746(13) * *
Series A Liberty Group Common
Stock 55,667(13) *
Miranda Curtis International Series A Common
Stock 210,500(14) * *
Series A TCI Group Common Stock 32,500(15) * *
Series A Liberty Group Common
Stock 12,187(15) *
Richard L. Rexroat, Jr. International Series A Common
Stock 50,100(16) * *
Series A TCI Group Common Stock 41,590(17) *
Series A Liberty Group Common
Stock 14,832(17) * *
Class B Preferred Stock 32 *
All directors and International Series A Common
Stock 1,518,700(18)(19) 1.5% *
executive officers Series A TCI Group Common Stock 8,265,322(20) 1.2%
as a group (14 persons) Series B TCI Group Common Stock 63,542,838(4)(5) 76.6% 37.5%
Series A Liberty Group Common 3,396,172(20) 1.5%
Stock 8,666,533(4)(5) 40.9%
Series B Liberty Group Common 309,590(4) 19.1%
Stock
Class B Preferred Stock
</TABLE>
- --------
* Less than one percent
(1) The figures for the percent of class and voting power calculations are
based on the following numbers of shares (in the case of all securities,
after elimination of any shares held in treasury or held by
subsidiaries), which were outstanding as of July 31, 1997: (i)
103,597,805 shares of International Series A Common Stock; (ii)
11,700,000 shares of International Series B Common Stock; (iii)
660,181,987 shares of Series A TCI Group Common Stock; (iv) 52,405,138
shares of Series B TCI Group Common Stock; (v) 223,083,080 shares of
Series A Liberty Group Common Stock; (vi) 21,175,465 shares of Series B
Liberty Group Common Stock; (vii) 1,620,026 shares of Class B Preferred
Stock; (viii) 70,575 shares of Series C Preferred Stock; (ix) 6,693,027
shares of Series G Preferred Stock; and (x) 6,693,127 shares of Series H
Preferred Stock.
(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 International Series A
Common Stock. Options to acquire 10,000 shares are currently exercisable.
See "CONCERNING MANAGEMENT--Executive Compensation--Compensation of
Directors" for additional information concerning this grant.
(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 375,000 shares of Series
4
<PAGE>
A Liberty Group Common Stock. Options to acquire 800,000 shares of Series
A TCI Group Common Stock and 300,000 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 375,000 shares of Series A Liberty Group Common Stock. Options
to acquire 200,000 shares of Series A TCI Group Common Stock and 75,000
shares of Series A Liberty Group Common Stock are currently exercisable.
(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 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 (the "1988
Agreement"), TCI's late Chairman of the Board, Mr. Bob Magness, 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. Dr. Malone agreed with TCI to waive
his rights under the 1988 Agreement with respect to a June 16, 1997
transaction whereby the Estate of Bob Magness swapped 30,545,864 shares
of Series B TCI Group Common Stock with TCI in exchange for an equal
number of shares of Series A TCI Group Common Stock (the "Estate Swap").
The Estate Swap was effected in connection with the sale by the Estate of
all of its shares of TCI Group Common Stock. In consideration of the
waiver by Dr. Malone, TCI granted Dr. Malone the right to acquire, at any
time and from time to time prior to June 30, 1999, up to 30,545,864
shares of Series B TCI Group Common Stock for either (or any combination
of): (i) shares of Series A TCI Group Common Stock on a one-for-one basis
or (ii) cash based on the closing sales price of the Series B TCI Group
Common Stock on The Nasdaq Stock Market for a specified period prior to
the acquisition of shares by Dr. Malone (the "TCI-Estates Agreement").
Consequently, the table includes 30,545,864 shares of Series B TCI Group
Common Stock that Dr. Malone has the right to acquire at any time prior
to June 30, 1999. Similarly, Dr. Malone has agreed to forgo exercising
his rights under the 1988 Agreement and a later agreement with Kearns
dated April 18, 1997 in connection with the recent merger of Kearns with
a wholly owned subsidiary of TCI in consideration of TCI's agreement (the
"TCI-KT Agreement") that he may acquire directly from TCI, at any time
and from time to time prior to July 30, 1998, up to 9,112,500 shares of
Series B TCI Group Common Stock and 2,278,125 shares of Series B Liberty
Group Common Stock in exchange for equal numbers of shares of Series A
TCI Group Common Stock and Series A Liberty Group Common Stock,
respectively. Pursuant to the TCI-KT Agreement, on July 24, 1997, Dr.
Malone acquired 7,296,324 shares of Series B TCI Group Common Stock and
2,278,125 shares of Series B Liberty Group Common Stock from TCI in
exchange for a like number of shares of Series A TCI Group Common Stock
and Series A Liberty Group Common Stock held by Dr. Malone.
(6) Includes 139,513 shares of Series B TCI Group Common Stock over which Dr.
Malone has the power to direct the voting. Dr. Malone also has a right of
first refusal with respect to any proposed transfer of such shares, which
may be exercised by Dr. Malone either by the payment of cash or, subject
to certain exceptions, through an exchange of shares of Series A TCI
Group Common Stock for such Series B TCI Group Common Stock. If not
exercised by Dr. Malone, the right of first refusal may be exercised by
TCI. Subsequent to July 31, 1997, Dr. Malone was given the right to
direct the voting of an additional 2,405,942 shares of Series B TCI Group
Common Stock. Such additional shares are not included in Dr. Malone's
beneficial ownership or voting power as of July 31, 1997.
(7) 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. Options to acquire 80,000 shares
are currently exercisable. Also assumes the vesting in full of 15,000
restricted shares of 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. See notes 4 and 9 to the table
in "CONCERNING MANAGEMENT--Executive Compensation--Summary Compensation
Table of International" for additional information.
5
<PAGE>
(8) 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 37,500 shares of
Series A Liberty Group Common Stock, of which options to acquire 80,000
and 30,000, 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 37,500 shares of Series A Liberty Group Common Stock, of which
options to acquire 75,000 and 28,125, 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 75,000 shares of Series A Liberty
Group Common Stock, of which options to acquire 80,000 and 30,000,
respectively, of such shares are currently exercisable. See note 5 to the
table in "CONCERNING MANAGEMENT--Executive Compensation--Summary
Compensation Table of International" for additional information.
(9) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 300,000 shares
of Series A TCI Group Common Stock and 112,500 shares of Series A Liberty
Group Common Stock. Options to acquire 200,000 shares of Series A TCI
Group Common Stock and 75,000 shares of Series A Liberty Group Common
Stock are currently exercisable. Additionally, assumes the exercise in
full of stock options granted in tandem with stock appreciation rights in
November of 1993 to acquire 375,000 shares of Series A TCI Group Common
Stock and 140,625 shares of Series A Liberty Group Common Stock. Options
to acquire 250,000 shares of Series A TCI Group Common Stock and 93,750
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 November of 1994 to acquire 200,000 shares
of Series A TCI Group Common Stock and 75,000 shares of Series A Liberty
Group Common Stock. Options to acquire 80,000 shares of Series A TCI
Group Common Stock and 30,000 shares of Series A Liberty Group Common
Stock are currently exercisable. Assumes the exercise in full of stock
options granted in tandem with stock appreciation rights in December of
1995 to purchase 1,000,000 shares of Series A TCI Group Common Stock.
Options to acquire 200,000 shares of Series A TCI Group Common Stock are
currently exercisable. Additionally, assumes the vesting in full of
100,000 restricted shares of Series A TCI Group Stock. None of the stock
is currently vested.
(10) Assumes the exercise in full of options granted in December of 1996,
pursuant to the TCI Director Stock Option Plan, to acquire 50,000 shares
of Series A TCI Group Common Stock and 18,750 shares of Series A Liberty
Group Common Stock. None of these options are exercisable until December
13, 1997.
(11) 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 and 562,500 shares of Series A Liberty Group Common
Stock. None of these options are exercisable until July 23, 1998. Also
includes 200,000 shares of restricted Series A TCI Group Common Stock.
Such shares vest as to 50% in July of 2001 and as to the remaining 50% in
July of 2002. 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 18,750 shares of Series A Liberty
Group Common Stock. Options to acquire 20,000 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
December of 1995 to acquire 500,000 shares of Series A TCI Group Common
Stock and 187,500 shares of Series A Liberty Group Common Stock. Options
to acquire 100,000 shares of Series A TCI Group Common Stock and 37,500
shares of Series A Liberty Group Common Stock are currently exercisable.
(12) 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. Options to acquire 80,000 of such
shares are currently exercisable. 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. See notes 4 and 9 to the table in
"CONCERNING MANAGEMENT--Executive Compensation--Summary Compensation
Table of International" for additional information.
6
<PAGE>
(13) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 20,000 shares of
Series A TCI Group Common Stock and 7,500 shares of Series A Liberty
Group Common Stock. Options to acquire 10,000 and 3,750, 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 25,000 shares of Series A TCI Group Common
Stock and 9,375 shares of Series A Liberty Group Common Stock. Options to
acquire 12,500 and 4,688, 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 37,500 shares of
Series A Liberty Group Common Stock, of which options to acquire 40,000
and 15,000, respectively, of such shares are currently exercisable. See
note 5 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 December of 1995 to acquire 200,000 shares
of International Series A Common Stock. Options to acquire 40,000 of such
shares are currently exercisable. 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. See notes 4 and 9 to the table in
"CONCERNING MANAGEMENT--Executive Compensation--Summary Compensation
Table of International" for additional information.
(15) 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 2,812 shares of Series A Liberty
Group Common Stock. Options to acquire 5,625 and 2,109, 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 9,375 shares of Series A Liberty Group Common Stock, of which
options to acquire 10,000 and 3,750, respectively, of such shares are
currently exercisable. See note 5 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 December of 1995 to acquire 50,000 shares of
International Series A Common Stock. Options to acquire 10,000 of such
shares are currently exercisable. See note 9 to the table in "CONCERNING
MANAGEMENT--Executive Compensation--Summary Compensation Table of
International" for additional information.
(17) 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 3,750 shares of Series A Liberty
Group Common Stock. Options to acquire 8,000 and 3,000, 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 10,000 shares of Series A TCI Group Common
Stock and 3,750 shares of Series A Liberty Group Common Stock. Options to
acquire 7,500 and 2,813, respectively, of such shares are currently
exercisable.
(18) Certain executive officers and directors (seven persons, including
Messrs. Vierra, Singer, and Rexroat and Ms. Curtis) hold options, which
were granted in tandem with stock appreciation rights in December of
1995, to acquire 1,200,000 shares of International Series A Common Stock.
Options to acquire 240,000 of such shares are currently exercisable.
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.
(19) 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. Options to acquire 40,000 of such shares are
currently exercisable. See "CONCERNING MANAGEMENT--Executive
Compensation--Compensation of Directors" for additional information
concerning these grants.
7
<PAGE>
(20) Certain executive officers and directors (six persons, including Messrs.
Malone, Vierra, Clouston, Singer and Rexroat) hold options, which were
granted in tandem with stock appreciation rights in November of 1992, to
acquire an aggregate of 1,530,000 shares of Series A TCI Group Common
Stock and 573,750 shares of Series A Liberty Group Common Stock. Options
to acquire 1,178,000 and 441,750 of such shares are currently
exercisable. Also, certain executive officers and directors (six persons,
including Messrs. Vierra, Clouston, Singer and Rexroat and Ms. Curtis)
hold options, which were granted in tandem with stock appreciation rights
in October of 1993, to acquire an aggregate of 617,500 shares of Series A
TCI Group Common Stock and 231,562 shares of Series A Liberty Group
Common Stock. Options to acquire 425,625 and 159,610 shares of such
shares are currently exercisable. Additionally, certain executive
officers and directors (seven persons including Messrs. Vierra, Clouston,
Singer, and Ms. Curtis) hold options, which were granted in tandem with
stock appreciation rights in November of 1994, to acquire 743,000 shares
of Series A TCI Group Common Stock and 278,625 shares of Series A Liberty
Group Common Stock. Options to acquire 297,200 and 111,450, respectively,
of such shares are currently exercisable. In addition, Mr. Kern holds
stock options, which were 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 18,750 shares of Series A Liberty Group Common
Stock. Options to acquire 20,000 and 7,500, respectively, of such shares
are currently exercisable. Certain executive officers and directors (four
persons, including Messrs. Malone, Clouston, and Kern) hold options,
which were granted in tandem with stock appreciation rights in December
of 1995, to acquire an aggregate of 2,800,000 shares of Series A TCI
Group Common Stock and 675,000 shares of Series A Liberty Group Common
Stock. Options to acquire 560,000 and 135,000, respectively, of such
shares are currently exercisable. Additionally, an executive officer and
Mr. Clouston hold in the aggregate 140,000 shares of restricted Series A
TCI Group Common Stock and an executive officer holds 15,000 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. In addition,
Mr. Gould holds stock options, which were granted in December of 1996
pursuant to the TCI Director Stock Option Plan to purchase 50,000 shares
of Series A TCI Group Common Stock and 18,750 shares of Series A Liberty
Group Common Stock. None of these options are exercisable until December
of 1997. In addition, Mr. Kern holds stock options, which were granted in
tandem with stock appreciation rights in July of 1997, to acquire
1,500,000 shares of Series A TCI Group Common Stock and 562,500 shares of
Series A Liberty Group Common Stock. None of these options are
exercisable until July 23, 1998. Also Mr. Kern was granted 200,000 shares
of restricted Series A TCI Group Common Stock. Such shares vest as to 50%
in July 2001 and as to the remaining 50% in July of 2002.
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. There can be no assurance,
however, of TCI's continued ownership of a significant majority of the
outstanding shares of the International Common Stock or as to the manner or
timing of any disposition of TCI's International Common Stock. 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.
8
<PAGE>
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 annual
meeting of stockholders to be held in the year 2000 and until his successor
shall have been duly elected and qualified, unless authority to vote is
withheld. The Company's Board of Directors has proposed Brendan R. Clouston,
Pierre Lescure and Fred A. Vierra as its three nominees for election at the
Annual Meeting 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. Messrs. Clouston, Lescure and Vierra are incumbent
directors. Mr. Clouston was appointed to the Board of Directors in April 1997.
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 eight members. For purposes of determining
their terms, directors are divided into three classes. The Class I directors,
whose current term expires at the 1999 annual meeting of stockholders, are
Messrs. Akiyama, Kern and Singer. The Class II director nominees, whose
current term expires at the Annual Meeting, are Messrs. Clouston, Lescure and
Vierra. The Class III directors, whose current term expires at the 1998 annual
meeting of stockholders, are Messrs. Gould and Malone. Each director elected
at an annual meeting of stockholders will serve for a term ending on the date
of the third annual meeting of stockholders after his election and until his
successor is elected and qualified or until his earlier death, resignation or
removal.
The following lists the three nominees for election as directors of the
Company and the five directors of the Company whose term of office will
continue after the Annual Meeting, as well as 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 July 31, 1997 is set forth in "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
NOMINEES FOR ELECTION AS DIRECTORS
BRENDAN R. CLOUSTON: Born April 28, 1953; Director of the Company since
April 1997. Mr. Clouston has served as a consultant to TCI since August 1997.
Mr. Clouston served as an Executive Vice President of TCI from January 1994 to
August 1997 and as Chief Financial Officer of TCI from March 1997 to April
1997. Mr. Clouston served as President and Chief Executive Officer of TCI
Communications, Inc., the predecessor company and now a subsidiary of TCI
("TCIC"), from October 1994 to March 1997 and as Executive Vice President and
Chief Operating Officer of TCIC from March 1992 to October 1994.
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 + S.A.
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 an Executive
Vice President of TCI since January 1994, and as an Executive Vice President
of TCIC from December 1991 to October 1994. Mr. Vierra is a Director of
Telewest Communications plc ("Telewest") and Flextech p.l.c. ("Flextech").
9
<PAGE>
DIRECTORS WHOSE TERMS EXPIRE 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 Ascent Entertainment Group, Choice Hotels
International, Inc. and United Video Satellite Group, Inc.
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
of TCI since January 1994, and as Chairman of the Board of TCI since November
1996. Dr. Malone served as President of TCI from January 1994 to March 1997,
as Chief Executive Officer of TCIC from March 1992 to October 1994 and as
President of TCIC from 1973 to October 1994. Dr. Malone is a Director of TCI,
TCIC, TCI Pacific Communications, Inc., TCI Satellite Entertainment, Inc., BET
Holdings, Inc., The At Home Corporation and The Bank of New York.
DIRECTORS WHOSE TERMS EXPIRE IN 1999
TOMIICHI AKIYAMA: Born December 17, 1929; Director of the Company since
August 1995. Mr. Akiyama has served as Senior Corporate Advisor of Sumitomo
Corporation ("Sumitomo"), a Japanese trading company, since February 1997,
served as Chairman of the Board of Sumitomo from June 1996 to February 1997
and served as President of Sumitomo from June 1990 to February 1997.
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. Mr. Kern is a Director of TCI.
ADAM N. SINGER: Born January 19, 1952; Director of the Company since May
1995. Mr. Singer has been Chairman of Flextech since May 1997. Mr. Singer was
President and Chief Operating Officer of the Company from October 1994 to May
1997. Previously, from June 1992 to October 1994, Mr. Singer was Vice
President-International of TCIC. Mr. Singer was President and Chief Executive
Officer of Flextech Television Limited ("FTV") (formerly United Artists
Entertainment (Programming) Limited), from September 1988 to June 1992. Mr.
Singer is a Director of Telewest and Flextech.
VOTE REQUIRED FOR APPROVAL
Each of the above-named director nominees will be elected if 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 together as a single
class. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF
THE ABOVE-NAMED NOMINEES AS A DIRECTOR FOR A THREE-YEAR TERM EXPIRING AT THE
YEAR 2000 ANNUAL MEETING OF STOCKHOLDERS AND UNTIL HIS SUCCESSOR SHALL HAVE
BEEN DULY ELECTED AND QUALIFIED.
10
<PAGE>
CONCERNING MANAGEMENT
EXECUTIVE OFFICERS
The following lists the executive officers of the Company (other than those
that are also directors and hence listed above), their birth dates, and a
description of their business experience and positions held within the Company
as of July 31, 1997. All officers are appointed for an indefinite term and
serve at the pleasure of the Board of Directors.
NAME POSITIONS
Miranda Curtis Executive Vice President of the Company since
Born November 26, 1955 September 1996. Senior Vice President of the Company
from May 1995 to August 1996. From October 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 FTV.
Wayne L. Gowen Senior Vice President of the Company since February
Born October 21, 1946 1996. Mr. 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 Senior Vice President of the Company since September
Born September 27, 1946 1996. Mr. Armstrong served as Vice President of
Cable Operations of the Company from May 1995 to
September 1996, 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
Born September 20, 1940 May 1995. Mr. 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.
Graham E. Hollis Executive Vice President of the Company since
Born January 9, 1952 September 1996 and Chief Financial Officer of the
Company since May 1995. Mr. Hollis served as Vice
President of the Company from May 1995 to August
1996. 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.
11
<PAGE>
NAME POSITIONS
Richard L. Rexroat, Jr. Vice President of Engineering of the Company since May
Born October 5, 1945 1995. From 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.
There are no family relations, of first cousin or closer, among the
Company's directors or executive officers, by blood, marriage or adoption.
During the past five years, neither the above executive officers nor any
director of the Company has had any involvement in such legal proceedings as
would be material to an evaluation of his or her 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 a review of the copies of such Section 16(a) forms filed on
Forms 3, 4 and 5, and any amendments thereto furnished to the Company with
respect to its most recent fiscal year, the Company believes that, during the
year ended December 31, 1996, its officers, directors and greater-than-ten-
percent beneficial owners complied on a timely basis with all Section 16(a)
filing requirements.
EXECUTIVE COMPENSATION
Summary Compensation Table of International. On December 4, 1996, the
Company distributed (the "SATCo Distribution") to the holders of shares of
Series A TCI Group Common Stock and Series B TCI Group Common Stock (the "TCI
Group Common Stock") all of the issued and outstanding common stock of TCI
Satellite Entertainment, Inc. ("Satellite"), a wholly owned subsidiary of TCI.
Certain directors, officers and employees of TCI and its subsidiaries have
been granted options to purchase shares of Series A TCI Group Common Stock
("TCI Options") and stock appreciation rights with respect to shares of Series
A TCI Group Common Stock ("TCI SARs"). The TCI Options and TCI SARs have been
granted pursuant to various stock plans of TCI (the "TCI Plans"). The TCI
Plans give the Board of Directors of TCI the authority to make equitable
adjustments to outstanding TCI Options and TCI SARs in the event of certain
transactions, including transactions such as the SATCo Distribution.
The Board of Directors of TCI determined that, immediately prior to the
SATCo Distribution, each TCI Option would be divided into the following two
separately exercisable options: (i) an option to purchase TCI Satellite
Entertainment, Inc. Series A Common Stock ("SATCo Option"), exercisable for
the number of shares of TCI Satellite Entertainment, Inc. Series A Common
Stock ("SATCo Series A Common Stock") that would have been issued in the SATCo
Distribution in respect of the shares of Series A TCI Group Common Stock
subject to the applicable TCI Option, if such TCI Option had been exercised in
full immediately prior to the record date of the SATCo Distribution, and
containing substantially equivalent terms as the existing TCI Option, and (ii)
an option to purchase Series A TCI Group Common Stock (a "Series A TCI Group
Option"), exercisable for the same number of shares of Series A TCI Group
Common Stock as the corresponding TCI Option had been exercisable for prior to
the SATCo Distribution. The aggregate exercise price of each TCI Option was
allocated between the SATCo Option and the Series A TCI Group Option into
which it was divided, and all other terms, including the date of grant, of the
SATCo Option and Series A TCI Group Option are in all material respects the
same as the terms of such TCI Option. Similar adjustments were made to the
outstanding TCI SARs, resulting in the holders thereof holding stock
appreciation rights ("SARs") with respect to Series A TCI Group Common Stock
and SATCo Series A Common Stock instead of TCI SARs, and to outstanding
restricted share awards, resulting in the holders thereof holding restricted
shares of SATCo Series A Common
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<PAGE>
Stock in addition to restricted shares of Series A TCI Group Common Stock. The
foregoing adjustments were made pursuant to the anti-dilution provisions of
the TCI Plans pursuant to which the respective TCI Options and TCI SARs had
been granted.
TCI and Satellite remain obligated for the delivery of any securities issued
upon exercise of SATCO Options, Series A TCI Group Options, and SARs granted
to their respective employees. Prior to the SATCo Distribution, TCI and
Satellite entered into an agreement to sell to each other from time to time at
the then current market price shares of Series A TCI Group Common Stock and
SATCo Series A Common Stock, respectively, as necessary to satisfy their
respective obligations under any agreements or plans.
TCI, in addition to the TCI Group Common Stock, has issued Series A Liberty
Group Common Stock and Series B Liberty Group Common Stock (and together with
the Series A Liberty Group Common Stock, the "Liberty Group Common Stock").
Prior to the SATCo Distribution, the financial results of Satellite were
attributed to the TCI Group Common Stock. Accordingly, the SATCo Distribution
was made to holders of TCI Group Common Stock and the holders of Liberty Group
Common Stock did not participate in the SATCo Distribution.
Effective January 14, 1997, TCI issued the Liberty Group Stock Dividend. As
a result of the Liberty Group Stock Dividend, the number of options granted to
purchase Series A Liberty Group Common Stock and the price to purchase such
shares have been adjusted.
The following table shows for the three years ended December 31, 1996, all
forms of compensation for the Chief Executive Officer and each of the four
most highly compensated executive officers of the Company, whose annual salary
and bonus exceeded $100,000 for the year ended December 31, 1996:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------- -----------------------
SECURITIES
OTHER RESTRICTED UNDERLYING ALL
ANNUAL STOCK OPTIONS/ OTHER
COMPENSATION AWARDS SARS COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) ($) (#) TION ($)(1)
- --------------------------- ---- ---------- --------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Fred A. Vierra.......... 1996 $650,000(2) $ -- $ 4,231(3) $ -- -- $15,000
(Chief Executive 1995 $650,000(2) $ -- $ 3,207(3) $380,625(4) 400,000(9) $15,000
Officer) 1994 $669,613(2) $ -- $ 1,024(3) $ -- 295,000(5) $15,000
Adam N. Singer,......... 1996 $400,000 $ -- $ 9,411(6) $ -- -- $14,006
(Formerly President and 1995 $350,000 $50,000 $11,355(3) $380,625(4) 400,000(9) $ 6,006
Chief Operating 1994 $314,187 $ -- $ -- $ -- 147,500(5) $15,000
Officer)
Miranda Curtis.......... 1996 $253,654(7) $25,488(7) $31,775(8) $ -- -- $ --
(Executive Vice 1995 $157,990(7) $35,548(7) $31,579(8) $253,750(4) 200,000(9) $ --
President) 1994 $153,930(7) $34,634(7) $44,917(8) $ -- 36,875(5) $ --
Richard L. Rexroat, 1996 $152,250 $ -- $ 3,551(3) $ -- -- $14,760
Jr..................... 1995 $145,000 $26,500 $ 2,998(3) $ -- 50,000(9) $13,260
(Vice President of 1994 $140,000 $11,465 $ -- $ -- -- $13,260
Engineering)
Wayne Gowen............. 1996 $181,731(10) $ -- $92,228(11) $ -- -- $ --
(Senior Vice President)
</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 1996, 1995 and 1994 are fully vested. 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
13
<PAGE>
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's contributions to
the TCI ESPP 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 of the plan. 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 the Company's directors. The Company is
allocated, and is required to reimburse TCI, for that portion of TCI's
compensation expense attributable to contributions made to the TCI ESPP
for the benefit of employees of the Company. See "Concerning Management--
Certain Relationships and Related Transactions--Services Agreement" below.
(2) Includes deferred compensation of $250,000. See, "Employment Contracts,
Termination of Employment and Change of Control Agreements" below.
(3) Primarily consists of amounts reimbursed by TCI for the payment of taxes.
The Company is allocated, and is required to reimburse, TCI for such
amounts. See "Concerning Management--Certain Relationships and Related
Transactions--Services Agreements" below.
(4) 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. The values set forth in the table
are calculated as of the December 13, 1995 grant date. Such restricted
shares 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 1996, based upon the closing sales price per share of the
International Series A Common Stock on the Nasdaq National Market on
December 31, 1996, of $198,750, $198,750 and $132,500, 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.
(5) 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, 1,196,625 shares of
Series A Liberty Group Common Stock, and 319,100 shares of SATCo Series A
Common Stock at adjusted purchase prices of $14.19, $14.67, and $23.06
per share, respectively. Messrs. Vierra and Singer 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, beginning on November 17, 1994 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: (i) shall terminate by reason of: (x) termination by TCI
without cause (y) termination by the grantee for good reason (as defined
in the agreement) or (z) disability, (ii) 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
14
<PAGE>
of specified events (other than the giving of notice and passage of time),
or (iii) 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 in such governing agreements), unless in the case of an
Approved Transaction, the Compensation Committee of TCI determines
otherwise as permitted by the plan.
(6) The 1996 amount includes $8,994 paid to Mr. Singer as a reimbursement of
the employer match that Mr. Singer would have received in his TCI ESPP
account if his pre-tax contributions to the TCI ESPP had not been
inadvertently terminated.
(7) Ms. Curtis' salary and bonus were paid in UK pounds sterling. The 1996,
1995 and 1994 amounts in the table represent the U.S. dollar equivalent
using the weighted average exchange rates in effect during the years
ended December 31, 1996, 1995 and 1994, respectively.
(8) All of the 1996 and 1995 amounts and $30,767 of the 1994 amount represent
the U.S. dollar equivalents, using the weighted average exchange rates in
effect during the years ended December 31, 1996, 1995, and 1994,
respectively, for the portions of the disturbance allowances and other
compensation that were paid to Ms. Curtis in UK pounds sterling.
(9) 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, stock appreciation rights, restricted shares,
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
stock appreciation right), or are forfeited prior to becoming vested will
return to the pool of such shares available for grant under the 1995
Plan. On December 13, 1995, pursuant to the 1995 Plan, certain executive
officers, directors and other key employees of International and TCI were
granted an aggregate of 1,302,000 options in tandem with stock
appreciation rights to acquire shares of International Series A Common
Stock at a purchase price of $16.00 per share. Additionally, one
executive officer and one employee of TCI were each granted an aggregate
of 50,000 options in tandem with stock appreciation rights to acquire
from TCI shares of International Series A Common Stock owned by it. Such
options and stock appreciation rights vest evenly over five years, with
such vesting period beginning August 4, 1995, and expire on August 4,
2005.
(10) Mr. Gowen commenced employment on February 19, 1996. Accordingly, the
1996 compensation information included in the table represents ten months
of employment.
(11) Amount is primarily comprised of a cost of living allowance with respect
to Mr. Gowen's term as an expatriate employee working in the Company's
London office during 1996.
Option and SAR Grants Table. During the year ended December 31, 1996, no
Awards under the 1995 Plan were granted to the named executive officers of the
Company. For a description of certain options granted to non-employee
directors of the Company, see "--Compensation of Directors" below.
15
<PAGE>
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value
Table. The following table provides certain information concerning the
exercise of stock options and stock appreciation rights during the year ended
December 31, 1996, by each of the executive officers of the Company named in
the compensation table above, and the 1996 year-end number and value of
unexercised options and stock appreciation rights on an aggregated basis:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT 12/31/96(#) AT 12/31/96($)
NAME AND SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
SERIES OF COMMON STOCK ON EXERCISE (#) VALUE REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---------------------- --------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C>
Fred A. Vierra
International Series A
Exercisable........... -- -- 80,000 $ --
Unexercisable......... -- -- 320,000 $ --
Series A TCI Group
Exercisable........... -- -- 235,000 $358,438
Unexercisable......... -- -- 165,000 $104,063
Series A Liberty Group
Exercisable........... -- -- 88,125 $589,301
Unexercisable......... -- -- 61,875 $329,749
SATCo Series A
Exercisable........... -- -- 23,500 $ --
Unexercisable......... -- -- 16,500 $ --
Adam N. Singer
International Series A
Exercisable........... -- -- 80,000 $ --
Unexercisable......... -- -- 320,000 $ --
Series A TCI Group
Exercisable........... 55,000 $508,750 62,500 $ 52,031
Unexercisable......... -- -- 82,500 $ 52,031
Series A Liberty Group
Exercisable........... 20,625 $170,157 23,438 $132,084
Unexercisable......... -- -- 30,937 $164,866
SATCo Series A
Exercisable........... -- -- 7,475 $ --
Unexercisable......... -- -- 7,025 $ --
Miranda Curtis
International Series A
Exercisable........... -- -- 40,000 $ --
Unexercisable......... -- -- 160,000 $ --
Series A TCI Group
Exercisable........... -- -- 15,625 $ 13,008
Unexercisable......... -- -- 16,875 $ 4,336
Series A Liberty Group
Exercisable........... -- -- 5,859 $ 33,018
Unexercisable......... -- -- 6,328 $ 30,134
SATCo Series A
Exercisable........... -- -- 1,563 $ --
Unexercisable......... -- -- 1,688 $ --
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS SARS
AT 12/31/96(#) AT 12/31/96($)
NAME AND SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
SERIES OF COMMON STOCK ON EXERCISE (#) VALUE REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---------------------- --------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C>
Richard L. Rexroat, Jr.
International Series A
Exercisable........... -- -- 10,000 $ --
Unexercisable......... -- -- 40,000 $ --
Series A TCI Group
Exercisable........... -- -- 15,500 $35,844
Unexercisable......... -- -- 4,500 $10,406
Series A Liberty Group
Exercisable........... -- -- 5,813 $45,814
Unexercisable......... -- -- 1,688 $13,301
SATCo Series A
Exercisable........... -- -- 1,550 $ --
Unexercisable......... -- -- 450 $ --
</TABLE>
- --------
(1) Based on the closing sales price per share of International Series A
Common Stock, Series A TCI Group Common Stock, Series A Liberty Group
Common Stock, and SATCo Series A Common Stock on the National Market tier
of The Nasdaq Stock Market on December 31, 1996.
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.
On April 11, 1996, the Company 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) pursuant to the
1996 Nonemployee Director Stock Option Plan (the "Director Plan"). 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), vest
and become exercisable over a five-year period, commencing on April 11, 1996,
and will expire on April 11, 2006. Mr. Akiyama waived his right to receive
such options.
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 stock
options for 50,000 shares under the Director Plan (subject to anti-dilution
adjustments) 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 under the Director Plan. 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 1996.
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.
17
<PAGE>
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 1996 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 or the termination of Mr. Vierra's full-time employment with
the Company, together with interest thereon at the rate of 8% per annum
compounded annually from the date of deferral to the payment date. In the
event of Mr. Vierra's death, all outstanding deferred amounts will be paid in
a lump sum to his beneficiaries.
While he is employed by 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 will 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 his 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 Chairman of the Board 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 have been at any time,
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
18
<PAGE>
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 prior to July 1995, 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 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." In January 1996,
the December 1995 salary levels were adjusted to provide for increases in
salaries consistent with comparable media companies.
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" for additional information
concerning these awards. The exercise price of
19
<PAGE>
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 Group
Common Stock. In addition, the Compensation Committee determined to grant to
certain of the Company's executives, including the Chief Executive Officer,
restricted stock in order to encourage executive stock ownership which the
Compensation Committee believes will more closely align the interests of such
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, commencing 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 similar media
companies.
The Compensation Committee did not grant any stock options or award any
restricted shares during 1996 as it viewed the current level of ownership of
such securities by the executive officers named in the foregoing compensation
table to be commensurate with the levels of ownership of similar securities by
executive officers at comparable media companies. The Compensation Committee
plans to reconsider in 1997 the level of stock option awards and restricted
share awards.
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 a result, many companies with executive pay levels exceeding the $1
million limit have revised or amended, or are considering revising or amending
their 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
20
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return 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 (assuming reinvestment of dividends). 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 date of the Company's
initial public offering). 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.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
TOTAL STOCKHOLDER RETURNS
-------------------------
(DIVIDENDS REINVESTED)
INDEXED RETURNS
BASE YEARS ENDING
PERIOD
COMPANY/INDEX 18 JUL 95 DEC 95 DEC 96
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
TELE-COMMUN INTL INC -SER A $ 100 $ 142.19 $ 82.81
NASDAQ TELECOMMUNICATIONS STOCK INDEX $ 100 $ 106.27 $ 108.65
NASDAQ COMPOSITE INDEX (U.S. & FOREIGN) $ 100 $ 104.92 $ 128.48
</TABLE>
BOARD MEETINGS
During 1996, there were two meetings of the full Board of Directors of the
Company. Except for Mr. Lescure, no director attended fewer than 75% of the
meetings of the Board of Directors or of any committee of which he was a
member during 1996.
21
<PAGE>
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.
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 1996.
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. The Compensation Committee of the Company held no meetings during 1996.
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 1996.
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 July 31, 1997, collectively represented approximately 92% 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.
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 TCI did not contribute 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. During 1996, Liberty contributed its interests
in foreign sports programming to a limited liability company owned in equal
parts by subsidiaries of the Company and Liberty, Liberty/TINTA LLC (the
"LLC"). The LLC then contributed such assets to a newly formed sports
programming venture with the News Corporation Limited ("News Corp"). See "--
Sports Programming Venture" below.
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
22
<PAGE>
foregoing does not apply to: (i) international programming services that were
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)
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) Programming
Opportunities in respect of foreign sports programming, which is expected to
be pursued by the LLC and made available to a joint venture in which the LLC
owns a 50% interest (see "--Sports Programming Venture" below), (iv) any
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) any 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, 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 other 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 above policy of TCI could be modified or rescinded by TCI in its sole
discretion, without approval of the Company, although TCI has informed the
Company it has no present intention to do so. TCI could also adopt additional
policies with respect to the Company depending upon future circumstances. TCI
has informed the Company that any determination it might make to modify or
rescind its policy with the Company, or to adopt additional policies affecting
the Company, would be made by its board of directors, which has a duty to act
with due care and in the best interests of all the stockholders of TCI.
TCI and the Company have entered into a number of inter-company agreements
more fully described below covering lending arrangements, indemnification, the
provision of services, tax sharing, 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 agreements and arrangements were established by TCI in
consultation with the Company, but were executed or implemented while the
Company was a wholly owned subsidiary and therefore 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 such
terms, 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.
Sports Programming Venture. Effective April 29, 1996, the Company and
Liberty through the LLC formed a joint venture with News Corp. (the "Sports
Venture") to operate currently existing sports services in Latin America and
Australia and a variety of new sports services throughout the world, excluding
the United States, Canada, and certain other defined geographic areas. Liberty
and the Company each own a 50% interest in the LLC. The LLC, in turn, owns a
50% interest in the Sports Venture, with News Corp. owning the other 50%
interest. As of June 30, 1997, the Company had contributed to the LLC $56
million and the Company's 35% equity interest in Torneos y Competencias S.A.,
an Argentinian sports programming production company ("Torneos"). In addition,
Liberty had contributed to the LLC all of Liberty's interests in Latin
American and Australian sports programming services and its rights under
various television sports programming agreements. The LLC contributed the non-
cash assets contributed to it by the Company and Liberty to the Sports
Venture. News Corp. contributed various international sports rights and
certain trademark rights in exchange for its 50% interest in the Sports
Venture.
The Company may make additional cash contributions totaling $22 million to
the LLC to fund the operations of the Sports Venture over the next three
years. As part of the formation of the Sports Venture, the
23
<PAGE>
LLC is entitled to receive from News Corp. 7.5% of the outstanding stock of
STAR Television Limited. Upon the delivery of such stock to the LLC, News Corp
is entitled to receive from the LLC up to $20 million and the assignment of
rights under various Asian sports programming agreements. STAR Television
Limited operates a satellite-delivered television platform in Asia.
The operating agreement of the Sports Venture includes, 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 operating agreement of the Sports Venture
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 international sports programming as to which the
Sports Venture holds United States or Canadian distribution rights.
Prior to November 1, 2000, News Corp. and the LLC cannot transfer their
interests in the Sports Venture other than to certain of their respective
affiliates. Thereafter, any proposed transfer to a non-affiliate will be
subject to a right of first refusal in favor of the non-transferring member.
Transfers to affiliates (as defined) 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 the fifth anniversary of the formation of the Sports
Venture, 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 LLC 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 LLC at a price equal to the
appraised fair market value of such interest. The agreement governing the
formation of the LLC includes 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 of
the members in the Sports Venture.
On April 19, 1996, the Company, Torneos and the stockholders of Torneos
entered into an agreement (the "International/Torneos Sports Agreement")
whereby the Company agreed to make minimum periodic payments from 1996 through
2004 aggregating $235.2 million to acquire certain rights and considerations,
including the exploitation rights to all sports rights owned by Torneos with
the exception of any rights which at that time had been contractually
committed to any third party. In particular, the Company acquired worldwide
distribution rights outside of Argentina for Clasico del Domingo and worldwide
distribution rights (excluding Buenos Aires) for Futbol de Primera and Torneos
de Verano (Summer Games). The rights and obligations under the
International/Torneos Sports Agreement were assumed by the Sports Venture.
Through June 30, 1997, payments made under the International/Torneos Sports
Agreement totaled $26.5 million.
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"). As of
September 10, 1997, TCI assigned all of its rights, interests and obligations
in and to the TCI Credit Facility to TCI Ventures Group, LLC. TCI Ventures
Group, LLC is wholly owned by TCI. At the time of such assignment, no
borrowings were outstanding under the TCI Credit Facility. In connection with
the assignment, the parties agreed to extend the maturity date of the TCI
Credit Facility to September 10, 2002, at which time all borrowings under the
TCI Credit Facility, together with all accrued interest thereon, will be
payable. Prior to such maturity date, borrowings repaid by the Company under
the TCI Credit Facility will be available for reborrowing, subject to certain
conditions to borrowing.
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Interest Rate and Payment. Effective from and after September 10, 1997,
borrowings under the TCI Credit Facility bear interest at the rate of 10% per
annum. Accrued interest on outstanding borrowings, which compound quarterly,
are due and payable on September 10, 2002, or upon the earlier repayment of
such borrowings under the TCI Credit Facility.
During the six months ended June 30, 1997 and the year ended December 31,
1996, the Company had no borrowings pursuant to the TCI Credit Facility.
Accordingly, the Company incurred no interest expense during the six months
ended June 30, 1997 and the year ended December 31, 1996, with respect 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 $375,000 and $750,000 during the six months ended June
30, 1997 and the year ended December 31, 1996, respectively.
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. 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 under the TCI Credit Facility 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 generally
for the election of directors, TCI Ventures Group, LLC 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 its 4 1/2% Convertible Subordinated Debentures due 2006 having an
aggregate principal amount of $345 million (the "Debentures"). Pending its use
by the Company, the net proceeds from the Debentures were 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. At June 30, 1997 and December
31, 1996, amounts outstanding under the promissory note aggregated $53.7
million and $176.5 million, respectively. During the six months ended June 30,
1997 and the year ended December 31, 1996, interest income related to the
promissory note aggregated $3.8 million and $14.0 million, respectively.
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 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
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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 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 the Company at any time on not less than 60 days' notice to TCI,
or by TCI at any time after July 18, 1998, on not less than four months'
notice to the Company.
The amounts charged to the Company by TCI pursuant to the Services Agreement
aggregated $872,000 and $2.9 million during the six months ended June 30, 1997
and the year ended December 31, 1996, respectively.
Tax Sharing Agreement. Federal income taxes and certain state and local
taxes are paid by TCI and the Company on a consolidated basis. Prior to
October 1, 1997, the Company is a party to a tax sharing agreement that
contains provisions regarding the allocation of certain TCI consolidated
income tax attributes and the settlement procedures with respect to the inter-
company allocation of current tax attributes. Effective October 1, 1997, such
agreement will be replaced by a new tax sharing agreement (the "New Tax
Sharing Agreement"),
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which will govern the allocation and sharing of income taxes by the TCI Group,
the Liberty Media Group and the TCI Ventures Group within TCI (each a
"Group"). The Company and its subsidiaries are a member of the TCI Ventures
Group for purposes of the New Tax Sharing Agreement. Amounts in the inter-
company tax account between TCI and the Company for the period from July 1,
1995 to September 10, 1997, will be required to be settled between the TCI
Ventures Group and the Company if and when the Company ceases to be a member
of TCI's consolidated group for federal income tax purposes.
Federal income taxes will be calculated, with certain adjustments, on a
separate return basis for each Group, applying provisions of the Code as if
each such Group filed a separate consolidated return for Federal income tax
purposes. Based upon these separate calculations, an allocation of tax
liabilities is made such that each Group will be required to make cash
payments to TCI based on its allocable share of TCI's consolidated Federal
income tax liabilities (on a regular tax or alternative minimum tax basis, as
applicable). Similarly, TCI would reimburse each Group for tax benefits (on a
regular tax or alternative minimum tax basis, as applicable) attributable to
such Group and actually used by TCI in reducing its consolidated Federal
income tax liability. Tax attributes, including but not limited to net
operating losses, foreign tax credits, investment tax credits, alternative
minimum tax net operating losses, deferred inter-company gains, and tax basis
in assets will be inventoried and tracked for ultimate credit to or charge
against each Group with certain limited exceptions. Similarly, in each taxable
period that TCI pays alternative minimum tax, the Federal income tax
liabilities and Federal income tax benefits of each Group, computed as if such
Group were subject to regular tax, would be inventoried and tracked for
payment to or payment by each Group (at the difference between the amount each
Group would have paid or received under the New Tax Sharing Agreement if TCI
had paid regular tax during such taxable period and the amount such Group paid
or received under the New Tax Sharing Agreement on an alternative minimum tax
basis for such taxable period) in years that TCI uses the alternative minimum
tax credit associated with such taxable period with certain limited
exceptions.
In addition, pursuant to the New Tax Sharing Agreement, state and local
income taxes are calculated on a separate return basis for each Group
(applying provisions of state and local tax law and related regulations as if
the Group were a separate unitary or combined group for tax purposes) and
TCI's combined or unitary tax liability is allocated among the Groups based
upon such separate calculation. TCI has retained the right to file all
returns, make all elections and control all audits and contests.
During the six months ended June 30, 1997 and the year ended December 31,
1996, inter-company income tax benefits aggregating $7.5 million and $10.2
million, respectively, were allocated to TCI by the Company. Pursuant to the
tax sharing agreement in effect until October 1, 1997, 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. On July 18, 1995, Dr. Malone purchased 450,000 shares of
International Series A Common Stock in the Company's initial public offering
at a per share price of $16. Effective April 1, 1996, TCI purchased all of
such shares from Dr. Malone at the then current market price of $21.75 per
share.
The Company's consolidated entities engaged in the multichannel 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
$2.9 million and $4.3 million during the six months ended June 30, 1997 and
the year ended December 31, 1996, respectively.
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Certain key employees of the Company hold stock options with tandem stock
appreciation rights with respect to certain common stock of TCI (the "TCI
Options and SARs"). Estimates of the compensation expense relating to the TCI
Options and SARs have been included in the financial statements of the
Company, but are subject to future adjustment based upon the market value of
the underlying TCI common stock, and ultimately on the final determination of
market value when the rights are exercised. The estimated compensation
adjustment with respect to the TCI Options and SARs resulted in increases
(decreases) to the Company's share of TCI's stock compensation liability of
$1.7 million and ($1.8 million) for the six months ended June 30, 1997 and the
year ended December 31, 1996, respectively. The Company's share of TCI's stock
compensation liability will be settled in cash only to the extent that TCI is
required to make cash payments to satisfy such liability.
During 1996, TCIC transferred, subject to regulatory approval, certain
distribution equipment to a subsidiary of the Company in exchange for a
promissory note in the principal amount of (Pounds)14,950,000 ($23.3 million
using the applicable exchange rate). Such note bears interest at 7% compounded
semi-annually. During the six months ended June 30, 1997 and the year ended
December 31, 1996, the U.S. dollar equivalent of interest expense incurred
with respect to such note was $789,000 and $658,000, respectively. The
distribution equipment was subsequently leased back to TCIC over a 5 year term
with semi-annual payments of (Pounds)998,000 ($1.7 million), plus expenses.
The Company can require TCIC to repurchase the equipment at the end of the
lease term at an amount equal to the greater of: (i) fair market value or (ii)
an amount that when combined with the rental payments received (excluding
executory costs) during the lease term, and discounted using an interest rate
of 7%, would not exceed 89% of the fair market value of the equipment at the
inception of the lease. During the six months ended June 30, 1997 and the year
ended December 31, 1996, the U.S. dollar equivalent of the lease revenue under
the above-described lease agreement aggregated $1.7 million and $1.4 million,
respectively.
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. Fees paid to Baker & Botts, L.L.P. by
TCI and consolidated subsidiaries (including the Company) were approximately
$11,000,000 for the 1996 fiscal year. Pierre Lescure, a director of the
Company, is Chief Executive Officer of Canal + S.A. On April 30, 1996, the
Company issued 473,373 shares of International Series A Common Stock to Canal
+ S.A. for an aggregate cash purchase price of $10,000,005.
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.
STOCKHOLDER PROPOSALS
Proposals by stockholders for which consideration is desired at the 1997
annual meeting of stockholders must be received by the Company by June 2,
1998, in order to be considered for inclusion in proxy materials for the 1998
annual meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, 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
September 30, 1997
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TELE-COMMUNICATIONS INTERNATIONAL, INC.
TERRACE TOWER II 5619 DTC PARKWAY ENGLEWOOD, COLORADO 80111 (303) 267-5500
September 30, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Tele-Communications International, Inc. (the "Company"), which will be held at
the Company's corporate offices, located at 5619 DTC Parkway, Englewood,
Colorado, on October 20, 1997, 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 annual
meeting of stockholders to be held in the year 2000 and until their successors
are elected and qualified, and (ii) such other business as may properly come
before the Annual Meeting. The Board of Directors recommends that the
stockholders vote in favor of the proposal 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,
[SIGNATURE OF DR. JOHN C. MALONE APPEARS HERE]
Dr. John C. Malone
Chairman of the Board
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
<S> <C> <C> <C>
1. Election of Three FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
Directors listed below. [X] for all nominees listed below. [X] [X]
</TABLE>
Nominees: Brenden R. Clouston, Pierre Lescure and Fred A. Vierra
(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.)
*Exceptions ____________________________________________________________________
2. In their discretion, the Proxies are authorized to vote upon any other
business as may properly come before the Annual Meeting.
CHANGE OF ADDRESS OR
COMMENTS MARK HERE [X]
Signature should agree with name
provided herein. 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: __________________________, 1997
_______________________________________
Stockholder's Signature
_______________________________________
Stockholder's Signature
Votes MUST be indicated
(x) in Black or Blue ink. [X]
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
================================================================================
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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 authorize 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 September 11, 1997, at
the Annual Meeting of International to be held on October 20, 1997 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 PROPOSAL 1.
(Continued, and to be signed and dated on reverse side.)
TELE-COMMUNICATIONS INTERNATIONAL, INC.
P.O. BOX 11045
NEW YORK, N.Y. 10203-0048
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