<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____ to _____
Commission File Number 0-26264
TELE-COMMUNICATIONS INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of Delaware 84-1289408
--------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
5619 DTC Parkway
Englewood, Colorado 80111
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Series A Common Stock, par value $1.00 per share
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Tele-Communications International, Inc.'s knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendments to this Form 10-K. [ ]
Indicate by check mark whether Tele-Communications International, Inc.
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months; and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No
The aggregate market value of the voting stock held by nonaffiliates of
Tele-Communications International, Inc., computed by reference to the last sales
price of such stock, as of the close of trading on January 31, 1998, was
$341,040,895.
The number of shares outstanding of Tele-Communications International
Inc.'s common stock (net of shares held in treasury) as of January 31, 1998, was
Series A Common Stock 103,627,880 shares; and
Series B Common Stock - 11,700,000 shares
<PAGE> 2
PART III.
Tele-Communications International, Inc. ("TINTA") is a majority-owned
subsidiary of TCI Ventures Group, LLC ("TVG LLC"), which is a limited liability
company wholly owned by Tele-Communications, Inc. ("TCI"). During the fourth
quarter of 1994 and the first quarter of 1995, TCI contributed its indirect
ownership interests in substantially all of its international cable and
telephony assets and certain of its international programming assets to TINTA
(the "Contributions"). For purposes of the following discussion, except to the
extent the context otherwise requires, the term the "Company" refers to (i) such
contributed ownership interests before the date of the Contributions and (ii)
TINTA and its direct and indirect subsidiaries and affiliates on and after the
date TCI completed the Contributions.
Item 10. Directors and Executive Officers of the Registrant
The following lists the directors and executive officers of TINTA, their
birth dates, a description of their business experience and the positions held
with TINTA as of April 21, 1998.
Name Position
- ---- --------
David J. Evans Has served as the President of TINTA
Born June 1, 1940 since September 1997, a Director of TINTA
since November 1997, and as the Chief
Executive Officer since January 1998.
From September 1997 to January 1998, Mr.
Evans served as Chief Operating Officer
of TINTA. Previously, from July 1996 to
August 1997, Mr. Evans was an Executive
Vice President of News Corporation, a
multi-media company, and the President
and Chief Executive Officer of Sky
Entertainment Services Latin America,
Inc., a subsidiary of News Corporation.
In such positions, Mr. Evans had
oversight responsibility for Latin
American operations. Mr. Evans served
also as the President and Chief Operating
Officer of Fox Television, a subsidiary
of News Corporation, from August 1994 to
July 1997, where he oversaw all
international programming and the
creation of new channels. Prior to his
position with Fox Television, Mr. Evans
served as the President of the
international division of British Sky
Broadcasting. Mr. Evans is a director of
Flextech plc ("Flextech").
Paul A. Gould Has served as a director of TINTA since
Born September 27, 1945 July 1995. Mr. Gould has been a Managing
Director and an Executive Vice President
of Allen & Company Incorporated, an
investment banking services company, for
more than the last five years. Mr. Gould
has served as a director of TCI since
December 1996. He is also a director of
Ascent Entertainment Group, Inc. and
Sunburst Hospitality Corporation.
III-1
<PAGE> 3
Name Position
- ---- --------
Leo J. Hindery, Jr. Has served as a director of TINTA since
Born October 31, 1947 April 1998. Mr. Hindery has served as the
President and Chief Operating Officer of
TCI since March 1997 and as a director of
TCI since May 1997. Mr. Hindery has
served as the President and Chief
Executive Officer of TCI Communications,
Inc., a subsidiary of TCI ("TCIC"), since
March 1997, and has served as President
and Chief Executive Officer of TCI
Pacific Communications, Inc., a
majority-owned subsidiary of TCI ("TCI
Pacific"), since September 1997. Mr.
Hindery is also the President, the Chief
Executive Officer and/or a director of
many of TCI's subsidiaries. Mr. Hindery
was previously founder, Managing General
Partner and Chief Executive Officer of
InterMedia Partners, a cable TV operator,
and its affiliated entities from 1988 to
March 1997. Mr. Hindery is a director of
TCIC, TCI Pacific, TCI Music, Inc.,
United Video Satellite Group, Inc.
("UVSG") and At Home Corporation ("At
Home"), all of which entities are
subsidiaries of TCI. Mr. Hindery is also
a director of Cablevision Systems
Corporation ("CSC") and TCI Satellite
Entertainment, Inc. ("Satellite").
Gary S. Howard Has served as a director of TINTA since
Born February 22, 1951 April 1998. Mr. Howard has served as an
Executive Vice President of TCI and also
as President and Chief Executive Officer
of TVG LLC since December 1997. Mr.
Howard has served as Chief Executive
Officer of Satellite, a distributor of
satellite-based television services,
since December 1996, and as President of
Satellite from February 1995 to August
1997. Since June 1997, Mr. Howard has
also served as Chief Executive Officer of
UVSG and is a director of UVSG. Mr.
Howard served as President of UVSG from
June 1997 to September 1997, a Senior
Vice President of TCIC from October 1994
to December 1996, and as a Vice President
of TCIC from December 1991 to October
1994.
Jerome H. Kern Has served as a director of TINTA since
Born June 1, 1937 May 1995. Mr. Kern is a consultant and
has been Special Counsel with the law
firm Baker & Botts, L.L.P. since July
1996, and was a senior partner with Baker
& Botts, L.L.P. from September 1992 to
July 1996. Mr. Kern has served as a
director of TCI since June 1994. Mr. Kern
is a director of TCI Pacific.
Pierre Lescure Has served as a director of TINTA since
Born February 7, 1945 July 1995. Mr. Lescure has served as the
Chairman and Chief Executive Officer of
Canal + S.A. and the Chairman of Le
Studio Canal + since 1986. Canal + S.A.
is a European pay television operator and
Le Studio Canal + is a movie production
subsidiary of Canal + S.A.
III-2
<PAGE> 4
Name Position
- ---- --------
John C. Malone Has served as the Chairman of the Board
Born March 7, 1941 and as a director of TINTA since May
1995. Dr. Malone has served as the Chief
Executive Officer of TCI since January
1994, and as the Chairman of the Board of
TCI since November 1996. Dr. Malone
served as the President of TCI from
January 1994 to March 1997, as the Chief
Executive Officer of TCIC from March 1992
to October 1994, and as the President of
TCIC from 1973 to October 1994. Dr.
Malone is a director of TCI, TCIC, TCI
Pacific, and At Home, all of which
entities are subsidiaries of TCI. Dr.
Malone is also a director of BET
Holdings, Inc., Lenfest Communications,
Inc., The Bank of New York, CSC, and
Satellite.
Fred A. Vierra Has served as a director of TINTA since
Born November 9, 1931 October 1994, and as the Vice Chairman
of the Board of TINTA since May 1995.
From October 1994 to January 1998, Mr.
Vierra served as the Chief Executive
Officer of TINTA and from October 1994 to
May 1995, Mr. Vierra served as the
Chairman of the Board of TINTA. Mr.
Vierra has served as an Executive Vice
President of TCIC from December 1991 to
October 1994, and as an Executive Vice
President of TCI from January 1994 to
January 1998. Since January 1998, Mr.
Vierra has served as a consultant to TCI.
Mr. Vierra is a director of Flextech.
Gregory B. Armstrong Has served as a Senior Vice President
Born September 27, 1946 of TINTA since September 1996, and the
Managing Director for Latin American
operations since January 1998. Mr.
Armstrong served as a Vice President of
TINTA from May 1995 to September 1996,
having previously been an employee of the
Company since August 1994. Mr. Armstrong
is also an officer of several of TINTA's
subsidiaries. Mr. Armstrong served as the
President of Cable Management Group,
Inc., a company which specializes in
cable operations, from 1988 to 1994,
where he had oversight responsibility for
all company operations, including
investor and banking relations and new
business development.
Stephen M. Brett Has served as a Vice President and the
Born September 20, 1940 Secretary of TINTA since May 1995. Mr.
Brett is also an officer of several of
TINTA's subsidiaries. Mr. Brett has
served as an Executive Vice President,
the General Counsel and the Secretary of
TCI since January 1994, as an Executive
Vice President of TCIC since October
1997, and as the General Counsel and
Secretary of TCIC since December 1991.
From December 1991 to October 1997, Mr.
Brett served as a Senior Vice President
of TCIC.
III-3
<PAGE> 5
Name Position
- ---- --------
Miranda Curtis Has served as an Executive Vice President
Born November 26, 1955 of TINTA since September 1996. Ms. Curtis
is also an officer of several of TINTA's
subsidiaries. Ms. Curtis served as a
Senior Vice President of TINTA from May
1995 to August 1996. From October 1994 to
May 1995, Ms. Curtis served as a Vice
President of TINTA. From May 1992 to
October 1994, Ms. Curtis was the Director
of International Development in the
international division of TCI and was
principally responsible for that
division's activities in Asia and the
United Kingdom.
Graham E. Hollis Has served as an Executive Vice President
Born January 9, 1952 of TINTA since September 1996, and as the
Chief Financial Officer of TINTA since
May 1995. Mr. Hollis is also an officer
of several of TINTA's subsidiaries. Mr.
Hollis served as a Vice President of
TINTA 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
the Vice President-Finance of DTC
Management, LLC, a subsidiary of The
Peninsula and Oriental Steam Navigation
Company, an English company, which
provides diversified transportation,
leisure and shipping services, where he
had oversight responsibility for finance
and accounting matters. 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.
Brendan Clouston, a director of TINTA since April 25, 1997, resigned from
such position in February 1998. Wayne Gowen served as a Senior Vice President of
TINTA since February 1996. Mr. Gowen resigned from his position with TINTA in
February 1998. Effective April 21, 1998, Tomiichi Akiyama and Adam Singer
resigned as directors of TINTA. Mr. Akiyama had been a director since August
1995, and Mr. Singer had been a director since May 1995. Following such
resignations, the remaining members of the Board of Directors of TINTA appointed
Leo J. Hindery, Jr. and Gary S. Howard to the Board of Directors.
TINTA's Restated Certificate of Incorporation provides for a 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 nine members with one vacancy. For purposes of determining their terms,
directors are divided into three classes. The Class I directors, whose terms
expire at the 2000 annual stockholders' meeting, include Messrs. Hindery,
Lescure and Vierra. The Class II directors, whose terms expire at the 1998
annual stockholders' meeting, include Messrs. Evans and Gould and Dr. Malone.
The Class III directors, whose terms expire at the 1999 annual stockholders'
meeting, include Messrs. Howard and Kern. Each director elected at an annual
stockholders meeting will serve for a term ending on the date of the third
annual stockholders' meeting after his election or until his earlier death,
resignation or removal. Officers are appointed for an indefinite time, serving
at the pleasure of the Board of Directors.
Other
There are no family relations, of first cousin or closer, among TINTA's
directors or executive officers, by blood, marriage or adoption.
III-4
<PAGE> 6
During the past five years, neither the above executive officers nor any
director of TINTA 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) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires TINTA's officers and directors, and persons who own more than 10% of a
registered class of TINTA'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 beneficial owners are required
by SEC regulation to furnish TINTA with copies of all Section 16(a) forms they
file.
Based solely on TINTA's review of the copies of such Section 16(a) forms
and amendments thereto received, or written representations that no reporting
was required, TINTA believes that, during the year ended December 31, 1997, its
officers, directors and greater-than-ten-percent beneficial owners complied with
all Section 16(a) filing requirements, except for the following: (i) TCI failed
to file on a timely basis a Form 4 reporting the acquisition of 450,000 shares
of Tele-Communications International, Inc. Series A Common Stock, par value
$1.00 per share (the "Series A Common Stock"); and (ii) Mr. Clouston, a former
director of TINTA, failed to file on a timely basis his Form 3 reporting his
appointment as a director of TINTA.
Item 11. Executive Compensation
Background of Stock Adjustments. TCI has issued Tele-Communications, Inc.
Series A TCI Group Common Stock, par value $1.00 per share (the "Series A TCI
Group Common Stock"), Tele-Communications, Inc. Series B TCI Group Common Stock,
par value $1.00 per share (the "Series B TCI Group Common Stock" and together
with the Series A TCI Group Common Stock, the "TCI Group Common Stock"),
Tele-Communications, Inc. Series A Liberty Media Group Common Stock, par value
$1.00 per share (the "Series A Liberty Group Common Stock"),
Tele-Communications, Inc. Series B Liberty Media Group Common Stock, par value
$1.00 per share (the "Series B Liberty Group Common Stock" and together with the
Series A Liberty Group Common Stock, the "Liberty Media Group Common Stock"),
and in September 1997, TCI issued Tele-Communications, Inc. Series A TCI
Ventures Group Common Stock, par value $1.00 per share (the "Series A Ventures
Group Common Stock"), and Tele-Communications, Inc. Series B TCI Ventures Group
Common Stock, par value $1.00 per share (the "Series B Ventures Group Common
Stock" and together with the Series A Ventures Group Common Stock, the "Ventures
Group Common Stock").
On August 3, 1995, TCI amended it Restated Certificate of Incorporation
to, among other things, (i) redesignate its then outstanding TCI Class A Common
Stock as the Series A TCI Group Common Stock and redesignate its then
outstanding TCI Class B Common Stock as the Series B TCI Group Common Stock and
(ii) authorize the Series A Liberty Group Common Stock and the Series B Liberty
Group Common Stock as two additional series of TCI common stock. Thereafter, TCI
distributed to the holders of TCI common stock one-fourth of a share of the
corresponding series of Liberty Media Group Common Stock in respect of each
share of TCI Group Common Stock held of record as of August 4, 1995, the record
date for such distribution (the "Liberty Stock Distribution"). Certain of the
stock options with tandem stock appreciation rights relative to Series A TCI
Group Common Stock and Series A Liberty Group Common Stock indicated in the
following table were granted prior to the foregoing redesignation and Liberty
Stock Distribution. Options to purchase TCI Class A Common Stock outstanding at
the time of the Liberty Stock Distribution were adjusted by issuing to the
holders of such options separate options to purchase that number of shares of
Series A Liberty Group Common Stock, which the holder would have been entitled
to receive had the holder exercised such option to purchase TCI Class A Common
Stock prior to the record date for the Liberty Stock Distribution and
reallocating a portion of the aggregate exercise price of the previously
outstanding options to the newly issued options to purchase Series A Liberty
Group Common Stock.
III-5
<PAGE> 7
On December 4, 1996, TCI distributed (the "Distribution") to the holders
of shares of Series A TCI Group Common Stock and Series B TCI Group Common Stock
all of the issued and outstanding common stock of Satellite, a wholly-owned
subsidiary of TCI. Prior to the Distribution, certain directors, officers and
employees of TCI and its subsidiaries had 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 had been granted pursuant to various stock plans of
TCI (the "TCI Plans"). The TCI Plans give the Board of Directors of TCI (the
"TCI Board") the authority to make equitable adjustments to outstanding TCI
Options and TCI SARs in the event of certain transactions, including
transactions such as the Distribution.
The TCI Board determined that, immediately prior to the Distribution,
each TCI Option would be divided into two separately exercisable options: (i) an
option to purchase TCI Satellite Entertainment, Inc. Series A Common Stock (a
"SATCo Option"), exercisable for the number of shares of TCI Satellite
Entertainment, Inc. Series A Common Stock, par value $1.00 per share (the "SATCo
Series A Common Stock"), that would have been issued in the Distribution with
respect to 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 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 prior to the 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 date of grant, of the SATCo Option and the Series A TCI
Group Option are in all material respects the same as the terms of such TCI
Option. The TCI Board made similar adjustments 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 stock awards, resulting in
the holders thereof holding restricted shares of SATCo Series A Common Stock in
addition to restricted shares of Series A TCI Group Common Stock. The TCI Board
made the foregoing adjustments pursuant to the anti-dilution provisions of the
TCI Plans, pursuant to which the respective TCI Options and TCI SARs had been
granted.
Prior to the Distribution, TCI and Satellite entered into an agreement to
sell to each other from time to time at the then current market price shares of
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.
Effective January 14, 1997, TCI issued a stock dividend to holders of
Liberty Media 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
held and one share of Series A Liberty Group Common Stock for every two shares
of Series B Liberty Group Common Stock held. As a result of such stock dividend,
the number of shares underlying options granted in tandem with SARs to purchase
Series A Liberty Group Common Stock and the exercise prices of such options in
tandem with SARs have been adjusted.
On September 10, 1997, TCI concluded an exchange offer with its
stockholders (the "Exchange Offer") whereby TCI created two new series of
tracking stocks, the Series A Ventures Group Common Stock and the Series B
Ventures Group Common Stock. Upon consummation of the Exchange Offer, TCI
exchanged (i) shares of Series A Ventures Group Common Stock for shares of
Series A TCI Group Common Stock; and (ii) shares of Series B Ventures Group
Common Stock for shares of Series B TCI Group Common Stock. In addition, in
accordance with the TCI Plans, the TCI Board authorized an equitable adjustment
to the Series A TCI Group Options and the SARs with respect to Series A TCI
Group Common Stock outstanding immediately prior to the consummation of the
Exchange Offer to reflect the expected shift of attributed
III-6
<PAGE> 8
value from the TCI Group Common Stock to the Ventures Group Common Stock. As a
result, the Series A TCI Group Options outstanding immediately prior to the
Exchange Offer have been canceled and reissued as two separately exercisable
options: (i) with 70% of the shares of Series A TCI Group Common Stock
underlying the Series A TCI Group Options allocated to an option to purchase
Series A TCI Group Common Stock; and (ii) with 30% of the shares of Series A TCI
Group Common Stock underlying the Series A TCI Group Options allocated to an
option to purchase Series A Ventures Group Common Stock. The terms of these
adjusted options, including the exercise price and the date of grant, are in all
material respects the same as the terms of the Series A TCI Group Options. The
TCI Board made corresponding adjustments to outstanding SARs with respect to
Series A TCI Group Common Stock.
Effective February 6, 1998, TCI issued a stock dividend to holders of
Liberty Media 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
held and one share of Series B Liberty Group Common Stock for every two shares
of Series B Liberty Group Common Stock held (the "Liberty Stock Dividend"). In
addition, TCI issued a stock dividend to holders of Ventures Group Common Stock
consisting of one share of Series A Ventures Group Common Stock for each share
of Series A Ventures Group Common Stock held and one share of Series B Ventures
Group Common Stock for each share of Series B Ventures Group Common Stock held
(the "Ventures Stock Dividend" and together with the Liberty Stock Dividend, the
"1998 Stock Dividends"). References to share amounts and per share exercise and
other prices have been adjusted retroactively to give effect to the 1998 Stock
Dividends. As a result, the number of shares underlying the options granted in
tandem with SARs to purchase Series A Liberty Group Common Stock, Series A
Ventures Group Common Stock, and Series B Ventures Group Common Stock,
respectively, and the respective exercise prices of such options in tandem with
SARs have been adjusted.
(a) Summary Compensation Table. The following table shows for the years
ended December 31, 1997, 1996 and 1995, all forms of compensation for the Chief
Executive Officer and each of the four most highly compensated executive
officers of TINTA, whose annual salary and bonus exceeded $100,000 for the year
ended December 31, 1997. Unless otherwise noted, all share and per share amounts
reflected in the table and the related footnotes have been restated to reflect
the above-described transactions under "-Background of Stock Adjustments". In
addition, the information in this section reflects compensation received by the
named executive officers for all services performed for TINTA, TCI and their
respective subsidiaries.
III-7
<PAGE> 9
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------------------- -------------------------
Securities
Other Restricted Underlying All
Annual Stock Options/ Other
Name and Compensation Awards SARs Compensation
Principal Position Year Salary ($) Bonus ($) ($) ($) (#) ($)(1)
- ------------------ ---- ---------- --------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fred A. Vierra
(Chief Executive
Officer until 1-1-98) 1997 $ 666,346(2) $ -- $ 2,812(3) $2,193,750(4) -- $ 15,000
1996 $ 650,000(2) $ -- $ 4,231(3) $ -- -- $ 15,000
1995 $ 650,000(2) $ -- $ 3,207(3) $ 380,625(5) 400,000(6) $ 15,000
David J. Evans
(President and
Chief Operating
Officer) 1997 $ 696,154(7) $ -- $ -- $ -- 450,000(8) $ --
Stephen M. Brett
(Vice President
and Secretary) 1997 $ 482,250 $ -- $ 2,796(3) $ -- 648,500(8) $ 15,000
1996 $ 450,000 $ -- $ 4,239(3) $ -- -- $ 15,000
1995 $ 364,000 $ -- $ 3,362(3) $1,087,500(9) 638,750(6)(10) $ 15,000
Miranda Curtis
(Executive Vice
President) 1997 $ 266,807(11) $ -- $ 33,564(12) $ -- 100,000(8) $ --
1996 $ 262,587(11) $ 25,488(11) $ 31,775(12) $ -- -- $ --
1995 $ 157,990(11) $ 35,548(11) $ 31,579(12) $ 253,750(5) 200,000(6) $ --
Graham E. Hollis
(Executive Vice
President and
Chief Financial
Officer) 1997 $ 200,000 $ 34,000 $ 3,089(3) $ -- 100,000(8) $ 9,500
1996 $ 135,000 $ -- $ -- $ -- -- $ 9,500
1995 $ 124,231 $ 61,500 $ -- $ -- 50,000(6) $ 6,133
</TABLE>
- --------------
III-8
<PAGE> 10
(1) Amounts represent contributions to the TCI Employee Stock Purchase Plan,
which TCI amended as of January 1, 1998, and in connection with such
amendment changed the name of the plan to the "TCI 401(k) Stock Plan"
(the "Stock Plan"). The Stock Plan provides benefits upon an employee's
retirement, which is normally when the employee reaches 65 years of age.
Stock Plan 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. Participant
contributions to the Stock Plan are fully vested upon contribution.
Generally, participants acquire a vested right in TCI contributions as
follows:
<TABLE>
<CAPTION>
Years of Vesting
Service Percentage
-------- ----------
<S> <C>
Less than 1 0%
1-2 33%
2-3 66%
3 or more 100%
</TABLE>
With respect to contributions made in 1997, 1996 and 1995, Messrs. Vierra
and Brett are fully vested and, as of January 1, 1998, Mr. Hollis is also
fully vested. The Stock Plan includes a salary deferral feature with
respect to employee contributions. Forfeitures (due to participants'
withdrawal prior to full vesting) are used to reduce TCI's otherwise
determined contributions.
Directors, who are not employees of TCI or TINTA, are ineligible to
participate in the Stock Plan. The Stock Plan provides benefits upon
retirement. Under the terms of the Stock Plan, employees are eligible for
participation after three months of service. Although TCI has not
expressed a present intent to terminate the Stock Plan, it may do so at
any time. The Stock Plan provides for full immediate vesting of all
participants' rights upon termination of the Stock Plan. TINTA's
employees are eligible to participate in the Stock Plan for so long as
TCI beneficially owns shares of the common stock of TINTA representing at
least 80% of the voting power of the outstanding shares of capital stock
of TINTA entitled to vote generally in the election of directors.
(2) Includes deferred compensation of $250,000 in each of the years
indicated.
(3) Consists of amounts reimbursed during the year indicated for the payment
of taxes.
(4) Grants of stock options, stock appreciation rights, restricted shares,
stock units, or any combination thereof may be made by the Board of
Directors of TINTA under the Tele-Communications International, Inc. 1995
Stock Incentive Plan (the "1995 Plan"). Pursuant to the 1995 Plan, on
July 23, 1997, TINTA granted Mr. Vierra 150,000 restricted shares of
Series A Common Stock, which vest as to 50% of such shares in July 2001
and as to the remaining 50% in July 2002. At the end of 1997, these
restricted shares had a value of $2,700,000, based upon the closing
market price per share of the Series A Common Stock on the National
Market tier of The Nasdaq Stock Market ("Nasdaq") on December 31, 1997.
TINTA has not paid cash dividends on its Series A Common Stock and does
not anticipate declaring and paying cash dividends on the Series A Common
Stock at any time in the foreseeable future. For additional information
concerning the 1995 Plan, see "-Option and SAR Grants in Last Fiscal
Year" below.
III-9
<PAGE> 11
(5) On December 13, 1995, pursuant to the 1995 Plan, TINTA granted Mr. Vierra
and Ms. Curtis 15,000 and 10,000 restricted shares, respectively, of
Series A Common Stock, which vest as to 50% of such shares on December
13, 1999, and as to the remaining 50% on December 13, 2000. At the end of
1997, these restricted shares had a value of $270,000 and $180,000,
respectively, based upon the closing market price per share of the Series
A Common Stock on Nasdaq on December 31, 1997. TINTA has not paid cash
dividends on its Series A Common Stock and does not anticipate declaring
and paying cash dividends on the Series A Common Stock at any time in the
foreseeable future.
(6) On December 13, 1995, pursuant to the 1995 Plan, TINTA granted certain
executive officers, directors and other key employees of TINTA and TCI
options in tandem with SARs to acquire an aggregate of 1,302,000 shares
of Series A Common Stock at a purchase price of $16.00 per share.
Additionally, TCI granted to one of its executive officers options in
tandem with SARs to acquire 50,000 shares of Series A Common Stock owned
by TCI. Such options vest evenly over five years with such vesting period
beginning August 4, 1995, first becoming exercisable on August 4, 1996,
and expiring on August 4, 2005. As a result of such grants, Messrs.
Vierra, Brett and Hollis and Ms. Curtis received options in tandem with
SARs to acquire 400,000, 50,000, 50,000 and 200,000 shares, respectively,
of Series A Common Stock. For additional information concerning the 1995
Plan, see note 5 to the Optional SAR Grants in Last Fiscal Year table
below.
(7) Mr. Evans commenced employment with TINTA on September 1, 1997, as
President and Chief Operating Officer. Accordingly, the 1997 compensation
information included in the table represents only four months of
employment during 1997. In addition, such compensation includes $500,000,
which is the value of 30,075 shares of Series A Common Stock granted Mr.
Evans by TINTA on September 1, 1997, pursuant to his employment agreement
with TINTA. Such value is based on a per share price of $16.63, which is
the average of the closing prices of the Series A Common Stock on Nasdaq
for the 10 trading days preceding the date of grant. For additional
information relating to this grant, see "-Employment Contracts,
Termination of Employment and Change of Control Agreements" below. As of
January 1, 1998, Mr. Evans became the Chief Executive Officer of TINTA.
(8) For information concerning this award, see "-Option and SAR Grants in
Last Fiscal Year" below.
(9) On December 13, 1995, pursuant to the TCI 1994 Stock Incentive Plan (the
"TCI 1994 Plan"), TCI granted Mr. Brett 35,634 restricted shares of
Series A TCI Group Common Stock, 22,500 shares of Series A Liberty Group
Common Stock, 8,732 shares of Series A Ventures Group Common Stock, and
4,000 shares of SATCo Series A Common Stock. Such restricted shares vest
as to 50% of such shares in December 1999 and as to the remaining 50% of
such shares in December 2000. At the end of 1997, these restricted shares
had an aggregate value of $1,690,387 based upon the respective closing
prices per share of such securities on Nasdaq on December 31, 1997. TCI
has not paid cash dividends on any such securities and does not
anticipate declaring and paying cash dividends on such securities at any
time in the foreseeable future.
III-10
<PAGE> 12
(10) Pursuant to the TCI 1994 Plan, on December 13, 1995, TCI granted Mr.
Brett options in tandem with SARs to acquire 210,000 shares of Series A
TCI Group Common Stock, 168,750 shares of Series A Liberty Group Common
Stock, 180,000 shares of Series A Ventures Group Common Stock and 30,000
shares of SATCo Series A Common Stock at adjusted exercise prices of
$14.62, $10.66, $7.31 and $23.76, respectively, per share. Such options
vest evenly over five years with such vesting period beginning August 4,
1995, first becoming exercisable on August 4, 1996, and expiring on
August 4, 2005.
Notwithstanding the vesting schedule as set forth in the option
agreement, the options and SARs shall immediately vest and become
exercisable if grantee's employment with TCI: (a) shall terminate by
reason of: (i) termination by TCI without cause, (ii) termination by the
grantee for good reason (as defined in the agreement), or (iii)
disability; (b) shall terminate pursuant to provisions of a written
employment agreement, if any, between the grantee and TCI which expressly
permits the grantee to terminate such employment upon occurrence of
certain specified events; or (c) shall terminate if grantee dies while
employed by TCI. Further, the options and SARs will immediately vest and
become exercisable in the event of an Approved Transaction, Board Change,
or Control Purchase (each as defined in the TCI 1994 Plan), unless, in
the case of an Approved Transaction, the Compensation Committee of the
TCI Board, under the circumstances specified in the TCI 1994 Plan,
determines otherwise.
(11) TINTA paid Ms. Curtis' salary and bonus in United Kingdom pounds
sterling. The 1997, 1996 and 1995 amounts in the table represent the U.S.
dollar equivalent using the average exchange rate in effect during the
years ended December 31, 1997, 1996 and 1995, respectively.
(12) All of the 1997, 1996 and 1995 amounts represent the U.S. dollar
equivalents, using the average exchange rate in effect during the years
ended December 31, 1997, 1996 and 1995, respectively, for the disturbance
allowances and other compensation paid to Ms. Curtis in pounds sterling.
III-11
<PAGE> 13
(b) Option and SAR Grants in Last Fiscal Year. The following table shows
all grants of stock options and SARs to each of the named executive officers of
TINTA during the year ended December 31, 1997. All share and per share amounts
reflected in the table and the related footnotes have been restated to reflect
the transactions described under "-Background of Stock Adjustments" above.
Option/SAR Grants in Last Fiscal Year
-------------------------------------
<TABLE>
<CAPTION>
Number of % of
Securities Total
Under- Options/
lying SARs
Options/ Granted to Exercise
SARs Employees or Base Market Price Grant Date
Granted in Fiscal Price on Grant Expiration Present Value
Name (#) Year ($/Sh) Date ($/Sh) Date ($)
- -------------------------- ---------- ---------- -------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
David Evans
Series A Common Stock 450,000(1) 39.8%(2) $ 14.63 $ 15.94(3) 9/01/07 $ 4,608,000(4)
Stephen Brett
Series A Common Stock 50,000(5) 4.4%(2) $ 14.63 $ 14.63(6) 7/23/07 $ 449,500(4)
Series A TCI Group 241,500(7) 3.3%(8) $ 15.68 $ 15.81(9) 7/23/07 $ 2,357,040(4)
Series A Liberty Group 150,000(7) 6.2%(10) $ 16.75 $ 17.25(11) 7/23/07 $ 1,612,000(4)
Series A Ventures Group 207,000(7) 3.1%(12) $ 7.84 $ --(13) 7/23/07 $ --(13)
Miranda Curtis
Series A Common Stock 100,000(5) 8.8%(2) $ 14.63 $ 14.63(6) 7/23/07 $ 899,000(4)
Graham Hollis
Series A Common Stock 100,000(5) 8.8%(2) $ 14.63 $ 14.63(6) 7/23/07 $ 899,000(4)
</TABLE>
- ----------------
(1) On September 1, 1997, pursuant to the 1995 Plan, TINTA granted Mr. Evans
options in tandem with SARs to acquire 450,000 shares of Series A Common
Stock. Such options in tandem with SARs vest evenly over five years with
such vesting period beginning September 1, 1997, first becoming
exercisable September 1, 1998, and expiring on September 1, 2007.
Notwithstanding the vesting schedule as set forth in the option
agreement, the options and SARs shall immediately vest and become
exercisable if grantee's employment with TINTA: (a) shall terminate by
reason of: (i) termination by TINTA without cause, (ii) termination by
grantee for good reason (as defined in the agreement), or (iii)
disability; (b) shall terminate pursuant to provisions of a written
employment agreement, if any, between the grantee and TINTA which
expressly permits the grantee to terminate such employment upon
occurrence of certain specified events; or (c) shall terminate if grantee
dies while employed by TINTA. Further, the options and SARs will
immediately vest and become exercisable in the event of an Approved
Transaction, Board Change, or Control Purchase (each as defined in the
1995 Plan), unless, in the case of an Approved Transaction, the
Compensation Committee of TINTA's Board of Directors, under the
circumstances specified in the 1995 Plan, determines otherwise.
(2) Based on all options to purchase Series A Common Stock granted to TINTA
and TCI employees during the year ended December 31, 1997.
(3) Represents the closing market price per share of the Series A Common
Stock on Nasdaq on September 2, 1997, the first trading day following the
date of grant.
III-12
<PAGE> 14
(4) The values shown are based on the Black-Scholes model and are stated in
current annualized dollars on a present value basis. The key assumptions
used in the model for purposes of this calculation include the following:
(a) a 6.15% discount rate on the date of grant; (b) a 35% volatility
factor; (c) the 10-year option term; (d) the closing market price of the
respective securities on the date of grant; and (e) an expected dividend
rate of zero. The actual value an executive may realize will depend upon
the extent to which the stock price exceeds the exercise price on the
date the option or SAR is exercised. Accordingly, the value if any,
realized by an executive will not necessarily be the value determined by
the model.
(5) On July 23, 1997, pursuant to the 1995 Plan, TINTA granted certain
executive officers, directors and other key employees of TINTA and TCI
options in tandem with SARs to acquire an aggregate of 630,000 shares of
Series A Common Stock. Such options in tandem with SARs vest evenly over
five years with such vesting period beginning July 23, 1997, first
becoming exercisable on July 23, 1998, and expiring on July 23, 2007.
Messrs. Brett and Hollis and Ms. Curtis received options in tandem with
SARs to acquire 50,000, 100,000 and 100,000 shares, respectively, of
Series A Common Stock.
Notwithstanding the vesting schedule as set forth in the option
agreement, the options and SARs shall immediately vest and become
exercisable if grantee's employment with TINTA: (a) shall terminate by
reason of: (i) termination by TINTA without cause, (ii) termination by
grantee for good reason (as defined in the agreement), or (iii)
disability; (b) shall terminate pursuant to provisions of a written
employment agreement, if any, between the grantee and TINTA which
expressly permits the grantee to terminate such employment upon
occurrence of certain specified events; or (c) shall terminate if grantee
dies while employed by TINTA. Further, the options and SARs will
immediately vest and become exercisable in the event of an Approved
Transaction, Board Change, or Control Purchase (each as defined in the
1995 Plan), unless, in the case of an Approved Transaction, the
Compensation Committee of TINTA's Board of Directors, under the
circumstances specified in the 1995 Plan, determines otherwise.
(6) Represents the closing market price per share of the Series A Common
Stock on Nasdaq on July 23, 1997.
(7) On July 23, 1997, pursuant to the TCI 1996 Incentive Plan, TCI granted to
Mr. Brett options in tandem with SARs to acquire 241,500 shares of Series
A TCI Group Common Stock, 150,000 shares of Series A Liberty Group Common
Stock and 207,000 shares of Series A Ventures Group Common Stock. Such
options in tandem with SARs vest evenly over five years with such vesting
period beginning July 23, 1997, first becoming exercisable on July 23,
1998, and expiring on July 23, 2007.
Notwithstanding the vesting schedule as set forth in the option
agreement, the options and SARs shall immediately vest and become
exercisable if grantee's employment with TCI: (a) shall terminate by
reason of: (i) termination by TCI without cause, (ii) termination by
grantee for good reason (as defined in the agreement), or (iii)
disability; (b) shall terminate pursuant to provisions of a written
employment agreement, if any, between the grantee and TCI which expressly
permits the grantee to terminate such employment upon occurrence of
certain specified events; or (c) shall terminate if grantee dies while
employed by TCI. Further, the options and SARs will immediately vest and
become exercisable in the event of an Approved Transaction, Board Change,
or Control Purchase (each as defined in the 1996 Plan), unless, in the
case of an Approved Transaction, the Compensation Committee of the TCI
Board, under the circumstances specified in the TCI 1996 Incentive Plan,
determines otherwise.
(8) Based on all options to purchase Series A TCI Group Common Stock granted
to TCI employees during the year ended December 31, 1997.
III-13
<PAGE> 15
(9) Represents the closing market price per share of the Series A TCI Group
Common Stock on Nasdaq on July 23, 1997.
(10) Based on all options to purchase Series A Liberty Group Common Stock
granted to TCI employees during the year ended December 31 1997.
(11) Represents the closing market price per share of the Series A Liberty
Group Common Stock on Nasdaq on July 23, 1997.
(12) Based on all options to purchase Series A Ventures Group Common Stock
granted to TCI employees during the year ended December 31, 1997.
(13) Mr. Brett received his options in tandem with SARs to purchase Series A
Ventures Group Common Stock as a result of the Exchange Offer. For
additional information concerning the adjustments made by the TCI Board
to outstanding options and SARs see "-Background to Stock Adjustments"
above. Because the Series A Ventures Group Common Stock did not begin
regular way trading on Nasdaq until September 17, 1997, no market price
per share on grant date or grant date present value information is
available. Assuming, however, the closing market price of Series A
Ventures Group Common Stock on the relevant date would have been the same
as the closing market price of Series A TCI Group Common Stock on the
date of grant and then adjusting such closing market price for the
Ventures Stock Dividend, Mr. Brett's grant of options in tandem with SARs
to acquire 207,000 shares of Series A Ventures Group Common Stock would
have had a market price per share of $7.91 and a grant date present value
of $1,010,160. (See note 4 above for information about the assumptions
used in Black-Scholes model to determine the grant date present value.)
III-14
<PAGE> 16
(c) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value
Table. The following table provides each exercise of stock options and SARs
during the year ended December 31, 1997, by each of the named executive officers
of TINTA and the December 31, 1997 year-end number and value of unexercised
options and SARs on an aggregated basis. The number of securities underlying the
options have been adjusted to reflect the 1998 Stock Dividends.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
at 12/31/97(#) at 12/31/97($)
Name and Shares Acquired Exercisable/ Exercisable/
Series of Common Stock on Exercise (#)(1) Value Realized($) Unexercisable Unexercisable
- -------------------------- ------------------ ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Fred A. Vierra
Series A
Exercisable -- -- 160,000 $ 320,000
Unexercisable -- -- 240,000 $ 480,000
Series A TCI Group
Exercisable 70,000 $ 1,242,500 154,000 $ 2,357,915
Unexercisable -- -- 56,000 $ 769,860
Series A Liberty Group
Exercisable -- -- 180,000 $ 2,852,850
Unexercisable -- -- 45,000 $ 647,400
Series A Ventures Group
Exercisable -- -- 192,000 $ 1,562,160
Unexercisable -- -- 48,000 $ 338,940
SATCo Series A
Exercisable -- -- 32,000 $ --
Unexercisable -- -- 8,000 $ --
David J. Evans
Series A
Exercisable -- -- -- $ --
Unexercisable -- -- 450,000 $ 1,518,750
Stephen M. Brett
Series A
Exercisable -- -- 20,000 $ 40,000
Unexercisable -- -- 80,000 $ 228,500
Series A TCI Group
Exercisable 140,000 $ 1,779,750 168,000 $ 2,273,460
Unexercisable -- -- 423,500 $ 5,048,051
Series A Liberty Group
Exercisable -- -- 247,500 $ 3,764,100
Unexercisable -- -- 296,250 $ 3,126,275
Series A Ventures Group
Exercisable 120,000 $ 756,450 144,000 $ 1,001,340
Unexercisable -- -- 363,000 $ 2,385,799
SATCo Series A
Exercisable -- -- 44,000 $ --
Unexercisable -- -- 26,000 $ --
</TABLE>
III-15
<PAGE> 17
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
at 12/31/97(#) at 12/31/97($)
Name and Shares Acquired Exercisable/ Exercisable/
Series of Common Stock on Exercise (#)(1) Value Realized($) Unexercisable Unexercisable
- -------------------------- ------------------ ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Fred A. Vierra
Series A
Exercisable -- -- 160,000 $ 320,000
Unexercisable -- -- 240,000 $ 480,000
Series A TCI Group
Exercisable 70,000 $ 1,242,500 154,000 $ 2,357,915
Unexercisable -- -- 56,000 $ 769,860
Series A Liberty Group
Exercisable -- -- 180,000 $ 2,852,850
Unexercisable -- -- 45,000 $ 647,400
Series A Ventures Group
Exercisable -- -- 192,000 $ 1,562,160
Unexercisable -- -- 48,000 $ 338,940
SATCo Series A
Exercisable -- -- 32,000 $ --
Unexercisable -- -- 8,000 $ --
David J. Evans
Series A
Exercisable -- -- -- $ --
Unexercisable -- -- 450,000 $ 1,518,750
Stephen M. Brett
Series A
Exercisable -- -- 20,000 $ 40,000
Unexercisable -- -- 80,000 $ 228,500
Series A TCI Group
Exercisable 140,000 $ 1,779,750 168,000 $ 2,273,460
Unexercisable -- -- 423,500 $ 5,048,051
Series A Liberty Group
Exercisable -- -- 247,500 $ 3,764,100
Unexercisable -- -- 296,250 $ 3,126,275
Series A Ventures Group
Exercisable 120,000 $ 756,450 144,000 $ 1,001,340
Unexercisable -- -- 363,000 $ 2,385,799
SATCo Series A
Exercisable -- -- 44,000 $ --
Unexercisable -- -- 26,000 $ --
</TABLE>
III-15
<PAGE> 18
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
at 12/31/97(#) at 12/31/97($)
Name and Shares Acquired Exercisable/ Exercisable/
Series of Common Stock on Exercise (#)(1) Value Realized($) Unexercisable Unexercisable
- -------------------------- ------------------ ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Miranda Curtis
Series A
Exercisable -- -- 80,000 $ 160,000
Unexercisable -- -- 220,000 $ 577,000
Series A TCI Group
Exercisable -- -- 15,750 $ 234,583
Unexercisable -- -- 7,000 $ 96,233
Series A Liberty Group
Exercisable -- -- 12,655 $ 191,941
Unexercisable -- -- 5,625 $ 80,925
Series A Ventures Group
Exercisable -- -- 13,500 $ 103,067
Unexercisable -- -- 6,000 $ 42,368
SATCo Series A
Exercisable -- -- 2,250 $ --
Unexercisable -- -- 1,000 $ --
Graham E. Hollis
Series A
Exercisable -- -- 20,000 $ 40,000
Unexercisable -- -- 130,000 $ 397,000
Series A TCI Group
Exercisable 3,780 $ 33,302 -- $ --
Unexercisable -- -- 2,520 $ 34,644
Series A Liberty Group
Exercisable 3,037 $ 36,349 -- $ --
Unexercisable -- -- 2,025 $ 29,133
Series A Ventures Group
Exercisable 3,240 $ 14,969 -- $ --
Unexercisable -- -- 2,160 $ 15,252
SATCo Series A
Exercisable -- -- 540 $ --
Unexercisable -- -- 360 $ --
</TABLE>
- ------------------
(1) In all cases, represents the number of shares underlying the SARs, which
were exercised in 1997.
III-16
<PAGE> 19
(d) Compensation of Directors. The standard arrangement by which TINTA'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 TINTA receives additional compensation of $30,000 per year. During
1997, such additional compensation was waived by the non-employee directors who
were employees of TCI.
On April 11, 1996, TINTA made grants of stock options for 50,000 shares
of Series A Common Stock to each of the then nonemployee directors of TINTA
(Messrs. Akiyama, Gould, Kern, Lescure and Malone) under the 1996 Nonemployee
Director Stock Option Plan. Such options have an exercise price of $16.00 per
share (which was the initial public offering price of the Series A Common Stock
on July 18, 1995) and vest and become exercisable over a five-year period,
commencing on April 11, 1996, and will expire on April 11, 2006. Mr. Akiyama, a
former director of TINTA, waived his right to receive such options, which were
then canceled.
Each person who becomes a director of TINTA and is not an employee of
TINTA or any of its subsidiaries will be automatically granted similar options
upon such person becoming a director pursuant to the terms of TINTA's 1996
Nonemployee Stock Option Plan. Additionally, each person who is an employee and
director of TINTA who ceases to be an employee of TINTA but remains a director
of TINTA will be automatically granted similar options upon such event. The
exercise price of each such subsequently granted option will be equal, however,
to the fair market value of the 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 Series A Common Stock as reported on Nasdaq on the date of
grant, with the price resulting from such percentage rounded down to the nearest
quarter dollar.
There are no other arrangements whereby any of TINTA's directors received
compensation for services as a director during 1997 in addition to or in lieu of
that specified by the aforementioned standard arrangement.
(e) Employment Contracts, Termination of Employment and Change of Control
Agreements. Except as described below, TINTA has no employment contracts,
termination of employment agreements or change of control agreements with any
of the named executive officers of TINTA. The vesting of certain equity-based
incentive awards granted by TINTA to executive officers of TINTA may, under
certain circumstances, be accelerated in the event of a change in control of
TINTA or upon termination of an executive officer's employment with TINTA.
Employment Agreement with Mr. Vierra
Until December 31, 1997, TINTA, TCI and Mr. Vierra were parties to an
Amended and Restated Employment Agreement relating to Mr. Vierra's employment
with TINTA as Vice Chairman and Chief Executive Officer. Effective January 1,
1998, however, the parties terminated Mr. Vierra's employment agreement and
replaced it with a consulting agreement. In connection with Mr. Vierra becoming
a consultant, Mr. Vierra resigned as an officer of TINTA but remains a director
and the Vice Chairman of the TINTA Board of Directors. For more information on
Mr. Vierra's consulting agreement, see "Certain Relationships and Related
Transactions - Transactions with Management and Others - Consulting Agreement
with Mr. Vierra" below.
Under the terms of the employment agreement, Mr. Vierra received a base
salary of $650,000 per year. Mr. Vierra's salary was subject to annual review by
the TINTA Board of Directors, which could in its sole discretion increase his
salary. In October 1997, the TINTA Board of Directors increased Mr. Vierra's
salary from $650,000 per annum to $700,000 per annum. Mr. Vierra's employment
agreement provided 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
III-17
<PAGE> 20
would have been paid in monthly installments over a 240-month period commencing
on the later of December 31, 1998, and the termination of Mr. Vierra's full-time
employment with TINTA, 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 would have been
paid in a lump sum to his beneficiaries. Such deferred amounts will now be paid
in accordance with the terms of the consulting agreement referenced above.
While employed by TINTA pursuant to his employment agreement, Mr. Vierra
could 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 TINTA's executive officers or
employees generally. Additionally, Mr. Vierra's employment agreement provided
for personal use of TCI's aircraft and flight crew, limited to an aggregate
value of $35,000 per year.
Under the employment agreement, substantially all of Mr. Vierra's
business time, attention and efforts was devoted to the affairs of TINTA. Mr.
Vierra's agreement further provided that during his employment with TINTA 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 terminated his employment before the end of the term of his employment in
breach of the employment agreement or in the event Mr. Vierra was terminated
"for cause" (as defined in the employment agreement) by TINTA), Mr. Vierra would
not be connected with any entity in any manner, as defined in the agreement,
which competes in a material respect with the business of TINTA or any of
TINTA's or TCI's majority owned subsidiaries. The agreement provided, however,
that Mr. Vierra could own securities of any corporation listed on a national
securities exchange or quoted on Nasdaq to the extent of an aggregate of 5% of
the amount of such securities outstanding. As a party to the employment
agreement, TCI agreed to provide to Mr. Vierra certain benefits thereunder;
however, any payment or expense incurred by TCI under the employment agreement
was to be reimbursed to TCI by TINTA under the terms of the Services Agreement
between TCI and TINTA. See "Certain Relationships and Related Transactions -
Transactions with Management and Others" below.
Employment Agreement with Mr. Evans
Mr. Evans commenced employment as TINTA's President and Chief Operating
Officer effective September 1, 1997, and as TINTA's Chief Executive Officer in
January 1998, pursuant to the terms of an employment agreement with TINTA. The
employment agreement provides for a base salary of $600,000 per annum. Such
salary is subject to annual review by TINTA's Board of Directors, which may, in
its sole discretion, increase Mr. Evans salary. In addition, Mr. Evans will
receive an annual bonus of $200,000 payable in two equal installments on
February 1 and September 1 of each year, commencing February 1, 1998. The
employment agreement allows for discretionary bonuses as well.
Pursuant to the terms of the employment agreement, TINTA issued to Mr.
Evans on September 1, 1997, $500,000 of its Series A Common Stock (30,075
shares) and will issue to Mr. Evans on each of the next four successive
anniversaries of such issuance an additional $500,000 of its Series A Common
Stock. On September 1, 1997, TINTA also granted Mr. Evans options to purchase
450,000 shares of its Series A Common Stock with an exercise price of $14.625
per share. Such options have been granted pursuant to the terms of the 1995 Plan
and vest evenly over the next five years. At such time as Mr. Evans relocates to
Denver, Colorado, TINTA will reimburse Mr. Evans for his reasonable relocation
expenses. The agreement allows Mr. Evans to be based in Los Angeles, California
until August 31, 1999, at which time he will be based at TINTA's principal
offices. While he is employed by TINTA pursuant to his employment agreement, Mr.
Evans 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 TINTA's or TCI's
executive officers or employees generally.
III-18
<PAGE> 21
Mr. Evans employment agreement terminates on August 31, 2002. The
employment agreement provides that upon an earlier termination of Mr. Evans
employment by TINTA without cause, all remaining compensation due under such
agreement for the balance of the employment term would become immediately due
and payable to Mr. Evans. Upon his death during the employment term, TINTA would
pay to Mr. Evans beneficiaries all compensation accrued to the date of death. In
the event of his disability, TINTA would continue to pay Mr. Evans 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. Evans employment agreement provides further that during the term of
his employment with TINTA, Mr. Evans will not be connected with any entity in
any manner, which directly competes in a material respect with the business of
TINTA or any of its majority-owned subsidiaries. Mr. Evans may, however, own
securities of any corporation listed on a national securities exchange or quoted
on Nasdaq to the extent of an aggregate of 5% of the amount of such securities
outstanding.
(f) Compensation Committee Interlocks and Insider Participation. The
Compensation Committee of TINTA's Board of Directors is responsible for
determining executive compensation policies and guidelines. Messrs. Malone,
Gould and Kern constitute the Compensation Committee. Dr. Malone is the Chairman
of the Board of TINTA and the Chairman of the Board and Chief Executive Officer
of TCI. He is not an officer of any of TINTA's subsidiaries. Neither Mr. Gould
nor Mr. Kern are, or have been at any time, officers of TINTA or any of its
subsidiaries. Mr. Gould and Mr. Kern, however, are directors of TCI and Mr.
Gould is a member of the TCI Board Compensation Committee. In addition, Mr. Kern
is Special Counsel with the law firm of Baker & Botts, L.L.P., the principal
outside counsel for TINTA and TCI.
Item 12. Security Ownership or Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners. On December 31,
1997, TCI indirectly owned, through its wholly-owned subsidiary TVG LLC,
86,250,000 shares of Series A Common Stock and all of the 11,700,000 outstanding
shares of Tele-Communications International, Inc. Series B Common Stock, par
value $1.00 per share (the "Series B Common Stock," and together with the Series
A Common Stock, the "Common Stock"), which represented 85% of the outstanding
shares of the Common Stock, 83% of the outstanding shares of the Series A Common
Stock, and 92% of the combined voting power of the 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 TINTA that beneficially owns 5%
or more of either series of Common Stock.
(b) Security Ownership of Management. The following table sets forth
information with respect to the beneficial ownership of shares of the Series A
Common Stock. In addition, the table sets forth information with respect to the
beneficial ownership of shares of the following securities of TCI: (i) Series A
TCI Group Common Stock; (ii) Series B TCI Group Common Stock; (iii) Series A
Liberty Group Common Stock; (iv) Series B Liberty Group Common Stock; (v) Series
A Ventures Group Common Stock; (vi) Series B Ventures Group Common Stock; (vii)
Tele-Communications, Inc. Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock (the "TCI Class B Preferred Stock"); (viii) Convertible
Preferred Stock, Series C-TCI Group (the "TCOMA Series C Preferred Stock"); (ix)
Convertible Preferred Stock, Series C-Liberty Media Group (the "LBTYA Series C
Preferred Stock"); (x) Redeemable Convertible TCI Group Preferred Stock, Series
G (the "TCI Series G Preferred Stock"); and (xi) Redeemable Convertible Liberty
Media Group Preferred Stock, Series H (the "TCI Series H Preferred Stock"). The
information in the table and the footnotes is as of December 31, 1997, but has
been restated to reflect the 1998 Stock Dividends described under "Executive
Compensation - Background of Stock Adjustments" above. The table indicates
securities beneficially owned by each director of TINTA, by each executive
officer named in the "Summary Compensation Table" set forth above, and by the
directors and all executive officers of TINTA as a group. Shares issuable upon
exercise of options or conversion of convertible securities and upon vesting of
restricted stock awards are deemed to be outstanding
III-19
<PAGE> 22
for the purpose of computing the percentage ownership and overall voting power
of persons beneficially owning such securities, but have not been deemed to be
outstanding for the purpose of computing the percentage ownership or overall
voting power of any other person. Voting power in the table is computed with
respect to a general election of directors of TCI with the Series A TCI Group
Common Stock, Series A Liberty Group Common Stock, Series A Ventures Group
Common Stock, Series B TCI Group Common Stock, Series B Liberty Group Common
Stock, Series B Ventures Group Common Stock, TCI Class B Preferred Stock, TCOMA
Series C Preferred Stock, LBTYA Series C Preferred Stock, TCI Series G Preferred
Stock, and TCI Series H Preferred Stock voting together as one class. The number
of shares of Series A TCI Group Common Stock, Series A Liberty Group Common
Stock, and Series A Ventures Group Common Stock in the table includes interests
of the directors and named executive officers and of members of the group of
directors and executive officers in shares held for their respective accounts by
the trustee of the Stock Plan. So far as is known to TINTA, 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 for the benefit of such persons by the trustee of
the Stock Plan, which shares are voted at the discretion of the trustee.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Title of Beneficial of Voting
Beneficial Owner Class or Series Ownership Class(1) Power(1)
- ---------------- --------------- ---------- -------- --------
<S> <C> <C> <C> <C>
David J. Evans Series A 480,075 (2) * *
Paul A. Gould Series A 95,000 (3) * *
Series A TCI Group 99,197 (4) * *
Series B TCI Group 244,842 *
Series A Liberty Group 153,807 (4) *
Series B Liberty Group 58,621 *
Series A Ventures Group 56,266 *
Series B Ventures Group 57,964 *
TCI Class B Preferred Stock 12,248 *
Leo J. Hindery, Jr. Series A 50,000 (5) * *
Series A TCI Group 1,924,534 (6) * 1.60%
Series B TCI Group 1,684,775 (7) 3.49%
Series A Liberty Group 1,125,000 (6) *
Series A Ventures Group 1,550,932 (6) *
Series B Ventures Group 1,721,360 (7) 3.89%
Gary S. Howard Series A -- -- --
Series A TCI Group 242,767 (8) * *
Series A Liberty Group 104,624 (8) *
Series A Ventures Group 219,318 (8) *
Jerome H. Kern Series A 50,000 (3) * *
Series A TCI Group 2,086,335 (9) * *
Series A Liberty Group 1,546,292 (9) *
Series A Ventures Group 1,624,876 (9) *
Pierre Lescure Series A 50,000 (3) * *
</TABLE>
III-20
<PAGE> 23
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Title of Beneficial of Voting
Beneficial Owner Class or Series Ownership Class(1) Power(1)
- ---------------- --------------- --------- -------- --------
<S> <C> <C> <C> <C>
David J. Evans Series A 480,075 (2) * *
Paul A. Gould Series A 95,000 (3) * *
Series A TCI Group 99,197 (4) * *
Series B TCI Group 244,842 *
Series A Liberty Group 153,807 (4) *
Series B Liberty Group 58,621 *
Series A Ventures Group 56,266 *
Series B Ventures Group 57,964 *
TCI Class B Preferred Stock 12,248 *
Leo J. Hindery, Jr. Series A 50,000 (5) * *
Series A TCI Group 1,924,534 (6) * 1.60%
Series B TCI Group 1,684,775 (7) 3.49%
Series A Liberty Group 1,125,000 (6) *
Series A Ventures Group 1,550,932 (6) *
Series B Ventures Group 1,721,360 (7) 3.89%
Gary S. Howard Series A -- -- --
Series A TCI Group 242,767 (8) * *
Series A Liberty Group 104,624 (8) *
Series A Ventures Group 219,318 (8) *
Jerome H. Kern Series A 50,000 (3) * *
Series A TCI Group 2,086,335 (9) * *
Series A Liberty Group 1,546,292 (9) *
Series A Ventures Group 1,624,876 (9) *
Pierre Lescure Series A 50,000 (3) * *
</TABLE>
III-20
<PAGE> 24
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Title of Beneficial of Voting
Beneficial Owner Class or Series Ownership Class(1) Power(1)
- ---------------- --------------- ---------- -------- --------
<S> <C> <C> <C> <C>
John C. Malone Series A 50,000 (3) * *
Series A TCI Group 1,512,864 (10) * 48.68%
Series B TCI Group 54,128,186 (7)(11)(12)(13) 84.47%
Series A Liberty Group 1,229,469 (10)(11) *
Series B Liberty Group 27,233,811 (11)(12)(13) 85.96%
Series A Ventures Group 1,299,932 (10) *
Series B Ventures Group 45,239,888 (7)(10)(11)(12)(13) 93.16%
TCI Class B Preferred Stock 273,600 (11) 17.62%
Fred A. Vierra Series A 596,000 (14) * *
Series A TCI Group 242,528 (15) * *
Series A Liberty Group 318,382 (15) *
Series A Ventures Group 369,858 (15) *
TCI Class B Preferred Stock 200 *
Stephen M. Brett Series A 100,000 (16) * *
Series A TCI Group 636,424 (17) * *
Series A Liberty Group 572,232 (17) *
Series A Ventures Group 519,986 (17) *
Miranda Curtis Series A 310,500 (18) * *
Series A TCI Group 22,750 (19) * *
Series A Liberty Group 18,280 (19) *
Series A Ventures Group 19,500 (19) *
Graham E. Hollis Series A 150,600 (20) * *
Series A TCI Group 4,196 (21) * *
Series A Liberty Group 2,871 (21) *
Series A Ventures Group 3,524 (21) *
All directors and Series A 2,057,175 (2)(5)(22)(23) 1.95% *
executive officers
as a group Series A TCI Group 6,784,022 (24) 1.46% 49.11%
(14 persons) Series B TCI Group 54,373,028 (7)(11)(12)(13) 84.85%
Series A Liberty Group 5,081,472 (11)(24) 1.60%
Series B Liberty Group 27,292,432 (11)(12)(13) 86.15%
Series A Ventures Group 5,675,482 (24) 1.54%
Series B Ventures Group 45,297,852 (7)(11)(12)(13)(25) 93.28%
TCI Class B Preferred Stock 286,048 (11) 18.43%
</TABLE>
- ----------
* Less than one percent
III-21
<PAGE> 25
(1) The figures for the percent of class and voting power calculations for
TINTA are based on 103,627,880 shares of Series A Common Stock (after
elimination of shares held by TINTA or its subsidiaries) and 11,700,000
shares of Series B Common Stock outstanding on December 31, 1997. In
addition, the figures for the percent of class and voting power
calculations for TCI are based on 458,473,123 shares of Series A TCI
Group Common Stock, 48,230,923 shares of Series B TCI Group Common Stock,
313,225,982 shares of Series A Liberty Group Common Stock, 31,681,124
shares of Series B Liberty Group Common Stock, 365,719,524 shares of
Series A Ventures Group Common Stock, 44,228,902 shares of Series B
Ventures Group Common Stock, 1,552,490 shares of TCI Class B Preferred
Stock, 70,575 shares of TCOMA Series C Preferred Stock, 70,575 shares of
LBTYA Series C Preferred Stock, 6,567,344 shares of TCI Series G
Preferred Stock, and 6,567,894 shares of TCI Series H Preferred Stock
outstanding on December 31, 1997 (in each case after elimination of
shares of TCI held in treasury and by subsidiaries of TCI). The
aforementioned share numbers for the TCI stock have been adjusted for the
1998 Stock Dividends. Further, in connection with the settlement of
certain litigation brought against TCI and others, portions of certain
transactions entered into by TCI in June 1997 have been unwound such that
10,201,040 shares of Series A TCI Group Common Stock and 11,666,508
shares of Series A Ventures Group Common Stock have been returned to TCI
as authorized but unissued shares, and TCI issued 10,017,145 shares of
Series B TCI Group Common Stock and 12,034,298 shares of Series B
Ventures Group Common Stock. The December 31, 1997 outstanding shares
numbers have been adjusted accordingly to reflect the effect of such
settlement.
(2) Assumes the exercise in full of options granted in tandem with SARs in
September 1997, pursuant to the 1995 Plan, to acquire 450,000 shares of
Series A Common Stock. None of these options are exercisable until
September 1, 1998. See "Executive Compensation - Option and SAR Grants in
Last Fiscal Year" above for additional information concerning this grant.
(3) Assumes the exercise in full of options granted in April 1996, pursuant
to the 1996 Nonemployee Director Stock Option Plan, to acquire 50,000
shares of Series A Common Stock. Options to acquire 10,000 shares are
currently exercisable. See "Executive Compensation - Compensation of
Directors" above for additional information concerning this grant.
(4) Assumes the exercise in full of options granted in December 1996,
pursuant to TCI's 1994 Nonemployee Director Stock Option Plan (the "TCI
Director Stock Option Plan"), to acquire 50,000 shares of Series A TCI
Group Common Stock and 28,125 shares of Series A Liberty Group Common
Stock. Options to acquire 10,000 and 5,625, respectively, of such shares
are currently exercisable.
(5) Assumes the exercise in full of options granted in tandem with SARs in
February 1997, by TCI, to acquire 50,000 shares of Series A Common Stock
owned by TCI. None of such options were exercisable at December 31, 1997.
III-22
<PAGE> 26
(6) Assumes the exercise in full of the following: (a) stock options granted
in tandem with SARs in February 1997 to acquire 700,000 shares of Series
A TCI Group Common Stock, 375,000 shares of Series A Liberty Group Common
Stock, and 600,000 shares of Series A Ventures Group Common Stock, none
of which options were exercisable at December 31, 1997; and (b) stock
options granted in tandem with SARs in July 1997 to acquire 1,050,000
shares of Series A TCI Group Common Stock, 750,000 shares of Series A
Liberty Group Common Stock, and 900,000 shares of Series A Ventures Group
Common Stock, none of which options are exercisable until July 1998. Also
includes 174,534 restricted shares of Series A TCI Group Common Stock and
50,932 restricted shares of Series A Ventures Group Common Stock. Such
shares vest as to 50% in July 2001 and as to the remaining 50% in July
2002.
(7) Includes 1,684,775 shares of Series B TCI Group Common Stock and
1,721,360 shares of Series B Ventures Group Common Stock held by trusts
to which Mr. Hindery is the trustee and over which Dr. Malone has the
power to vote such shares. Dr. Malone also has a right of first refusal
with respect to any proposed transfer of such shares. Such right of first
refusal may be exercised by Dr. Malone either by the payment of cash or,
subject to certain exceptions, by the exchanging of shares of Series A
TCI Group Common Stock for such Series B TCI Group Common Stock or Series
A Ventures Group Common Stock for such Series B Ventures Group Common
Stock. If not exercised by Dr. Malone, the right of first refusal may be
exercised by TCI.
(8) Assumes the exercise in full of the following: (a) stock options granted
in tandem with SARs in November 1992 to acquire 35,000 shares of Series A
TCI Group Common Stock, 28,125 shares of Series A Liberty Group Common
Stock and 30,000 shares of Series A Ventures Group Common Stock, all of
which options are currently exercisable; (b) stock options granted in
tandem with SARs in October 1993 to acquire 35,000 shares of Series A TCI
Group Common Stock, 28,125 shares of Series A Liberty Group Common Stock
and 30,000 shares of Series A Ventures Group Common Stock, all of which
options are currently exercisable; (c) stock options granted in tandem
with SARs in November 1994 to acquire 35,000 shares of Series A TCI Group
Common Stock, 28,125 shares of Series A Liberty Group Common Stock and
30,000 shares of Series A Ventures Group Common Stock, of which options
to acquire 21,000, 16,875 and 18,000, respectively, of such shares are
currently exercisable; and (d) stock options granted in tandem with SARs
in December 1995 to acquire 105,000 shares of Series A TCI Group Common
Stock and 90,000 shares of Series A Ventures Group Common Stock, of which
options to acquire 42,000 and 36,000, respectively, of such shares are
currently exercisable. Also includes 9,543 restricted shares of Series A
TCI Group Common Stock and 10,914 restricted shares of Series A Ventures
Group Common Stock. Such shares vest as to 50% in December 1999 and as to
the remaining 50% in December 2000.
III-23
<PAGE> 27
(9) Assumes the exercise in full of the following: (a) stock options granted
in November 1994, pursuant to the TCI Director Stock Option Plan, to
acquire 50,000 shares of Series A TCI Group Common Stock and 28,125
shares of Series A Liberty Group Common Stock, of which options to
acquire 30,000 and 16,875, respectively, of such shares are currently
exercisable; (b) stock options granted in tandem with SARs in December
1995 to acquire 350,000 shares of Series A TCI Group Common Stock,
281,250 shares of Series A Liberty Group Common Stock and 300,000 shares
of Series A Ventures Group Common Stock, of which options to acquire
140,000, 112,500 and 120,000, respectively, of such shares are currently
exercisable; (c) stock options granted in tandem with SARs in July 1997
to acquire 1,050,000 shares of Series A TCI Group Common Stock, 843,750
shares of Series A Liberty Group Common Stock and 900,000 shares of
Series A Ventures Group Common Stock, none of which options are
exercisable until July 23, 1998; and (d) stock options granted in tandem
with SARs in December 1997 to acquire 350,000 shares of Series A TCI
Group Common Stock, 250,000 shares of Series A Liberty Group Common Stock
and 300,000 shares of Series A Ventures Group Common Stock, none of which
options are exercisable until December 29, 1998. Also includes 163,620
restricted shares of Series A TCI Group Common Stock and 72,760
restricted shares of Series A Ventures Group Common Stock. Such shares
vest as to 50% in July 2001 and as to the remaining 50% in July 2002.
(10) Assumes the exercise in full of the following: (a) stock options granted
in tandem with SARs in November 1992 to acquire 700,000 shares of Series
A TCI Group Common Stock, 562,500 shares of Series A Liberty Group Common
Stock, and 600,000 shares of Series A Ventures Group Common Stock, all of
which options are currently exercisable; (b) stock options granted in
tandem with SARs in December 1995 to acquire 700,000 shares of Series A
TCI Group Common Stock, 562,500 shares of Series A Liberty Group Common
Stock, and 600,000 shares of Series A Ventures Group Common Stock, of
which options to acquire 280,000, 225,000, and 240,000, respectively, of
such shares are currently exercisable; and (c) stock options granted in
tandem with SARs in December 1997 to acquire 2,800,000 shares of Series B
Ventures Group Common Stock, none of which options are exercisable until
December 16, 1998 and which grant is subject to TCI stockholder approval.
(11) Includes 776,380 shares of Series B TCI Group Common Stock, 12,726 shares
of Series A Liberty Group Common Stock, 439,875 shares of Series B
Liberty Group Common Stock, 793,240 shares of Series B Ventures Group
Common Stock and 6,900 shares of TCI Class B Preferred Stock held by Dr.
Malone's wife, Mrs. Leslie Malone, as to which Dr. Malone has disclaimed
beneficial ownership.
III-24
<PAGE> 28
(12) Pursuant to a letter agreement dated June 17, 1988, the late Mr. Bob
Magness (the founder and former Chairman of TCI) and Kearns-Tribune
Corporation each granted Dr. Malone certain rights with respect to the
then Class B Common Stock of TCI owned by them. Dr. Malone agreed with
TCI to forego the exercise of such rights in connection with a June 16,
1997 transaction whereby the Estate of Bob Magness sold 30,545,864 shares
of Series B TCI Group Common Stock to TCI in exchange for an equal number
of shares of Series A TCI Group Common Stock. In consideration thereof,
TCI granted Dr. Malone the right (the "Malone 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 market price of the Series B TCI Group
Common Stock on Nasdaq for a specified period prior to the acquisition of
such shares by Dr. Malone (the "TCI-Estates Agreement"). Effective
February 9, 1998, however, the number of shares of Series B TCI Group
Common Stock subject to the Malone Right was reduced from 30,545,864 to
14,511,570 shares. Dr. Malone and certain members of the Magness family,
individually, and in certain cases, on behalf of the Estate of Betsy
Magness and the Estate of Bob Magness (collectively, the "Magness Group")
have the right to participate with Dr. Malone in any acquisition of up to
12,406,238 of the 14,511,570 shares of Series B TCI Group Common Stock
subject to the Malone Right on a basis proportionate to the relative
ownership by the Magness Group and Dr. Malone and his spouse of capital
stock of TCI having more than one vote per share in the elections of
directors. At this time, Dr. Malone's proportionate share of such
12,406,238 shares is 6,809,537. The remaining 2,105,332 shares continue
to be subject to the Malone Right, free of any right of the Magness Group
to participate in such shares. The Malone Right may be exercised at any
time prior to June 30, 1999. If the Magness Group or any member thereof
declines to participate in the Malone Right, Dr. Malone may acquire all
such shares.
In connection with the foregoing changes to the TCI-Estates Agreement, on
February 9, 1998, Dr. Malone and his spouse (the "Malone Group") and the
Magness Group entered into a Stockholders' Agreement pursuant to which
the parties agreed to consult with each other on any matter coming to a
vote of TCI stockholders; provided, however, that in the event of a
disagreement, the shares of Series B TCI Group, Series B Liberty Group
and Series B Ventures Group Common Stock held by the Malone Group and the
Magness Group will be voted in the manner directed by Dr. Malone pursuant
to an irrevocable proxy given by the Magness Group.
As a result of the February 1998 transactions, Dr. Malone's beneficial
ownership of TCI common stock includes the following shares held by the
Magness Group: 16,365,681 shares of Series B TCI Group Common Stock,
14,292,719 shares of Series B Liberty Group Common Stock, and 18,684,034
shares of Series B Ventures Group Common Stock. In addition, all of the
shares subject to the Malone Right have been included in Dr. Malone's
beneficial stock ownership information.
(13) Dr. and Mrs. Malone's shares of Series B TCI Group Common Stock, Series B
Liberty Group Common Stock and Series B Ventures Group Common Stock
(collectively, the "Series B Stock") are subject to the terms of a Call
Agreement dated as of February 9, 1998, among Dr. and Mrs. Malone and
TCI. Such Call Agreement provides TCI the right to acquire all of the
shares of Series B Stock owned by Dr. and Mrs. Malone upon Dr. Malone's
death or a contemplated sale of such Series B Stock to third parties at
prices determined in accordance with the Call Agreement. Such Call
Agreement also prohibits Dr. and Mrs. Malone from disposing of their
Series B Stock, except for certain exempt transfers (such as transfers to
related parties or the Magness Group or public sales of up to an
aggregate of 5% of their Series B Stock).
III-25
<PAGE> 29
(14) Assumes the exercise in full of stock options granted in tandem with SARs
in December 1995 to acquire 400,000 shares of Series A Common Stock.
Options to acquire 160,000 of such shares of Series A Common Stock are
currently exercisable. Also assumes the vesting in full of 15,000
restricted shares of Series A Common Stock granted in December 1995. Such
shares vest as to 50% in December 1999 and as to the remaining 50% in
December 2000. In addition, assumes the vesting in full of 150,000
restricted shares of Series A Common Stock granted in July 1997. Such
shares vest as to 50% in July 2001 and as to the remaining 50% in July
2002. See notes 4 and 5 to the table in "Executive Compensation - Summary
Compensation Table" above for additional information.
(15) Assumes the exercise in full of the following: (a) stock options granted
in tandem with SARs in November 1992 to acquire 56,250 shares of Series A
Liberty Group Common Stock and 60,000 shares of Series A Ventures Group
Common Stock, all of which options are currently exercisable; (b) stock
options granted in tandem with SARs in October 1993 to acquire 70,000
shares of Series A TCI Group Common Stock, 56,250 shares of Series A
Liberty Group Common Stock and 60,000 shares of Series A Ventures Group
Common Stock, all of which options are currently exercisable; and (c)
stock options granted in tandem with SARs in November 1994 to acquire
140,000 shares of Series A TCI Group Common Stock, 112,500 shares of
Series A Liberty Group Common Stock and 120,000 shares of Series A
Ventures Group Common Stock, of which options to acquire 84,000, 67,500
and 72,000, respectively, of such shares are currently exercisable.
(16) Assumes the exercise in full of the following: (a) stock options granted
in tandem with SARs in December 1995 to acquire 50,000 shares of Series A
Common Stock, of which options to acquire 20,000 of such shares are
currently exercisable; and (b) stock options granted in tandem with SARs
in July 1997 to acquire 50,000 shares of Series A Common Stock, none of
which options are exercisable until July 23, 1998. See "Executive
Compensation - Option and SAR Grants in Last Fiscal Year" above for
additional information concerning the latter grant.
(17) Assumes the exercise in full of the following: (a) stock options granted
in tandem with SARs in November 1992 to acquire 56,250 shares of Series A
Liberty Group Common Stock, all of which options are currently
exercisable; (b) stock options granted in tandem with SARs in October
1993 to acquire 56,250 shares of Series A Liberty Group Common Stock, all
of which options are currently exercisable; (c) stock options granted in
tandem with SARs in November 1994 to acquire 140,000 shares of Series A
TCI Group Common Stock, 112,500 shares of Series A Liberty Group Common
Stock and 120,000 shares of Series A Ventures Group Common Stock; of
which options to acquire 84,000, 67,500 and 72,000, respectively, of such
shares are currently exercisable; (d) stock options granted in tandem
with SARs in December 1995 to acquire 210,000 shares of Series A TCI
Group Common Stock, 168,750 shares of Series A Liberty Group Common Stock
and 180,000 shares of Series A Ventures Group Common Stock, of which
options to acquire 84,000, 67,500 and 72,000, respectively, of such
shares are currently exercisable; and (e) stock options granted in tandem
with SARs in July 1997 to acquire 241,500 shares of Series A TCI Group
Common Stock, 150,000 shares of Series A Liberty Group Common Stock and
207,000 shares of Series A Ventures Group Common Stock, none of which
options are exercisable until July 23, 1998. In addition, assumes the
vesting in full of 35,634 restricted shares of Series A TCI Group Common
Stock, 22,500 restricted shares of Series A Liberty Group Common Stock
and 8,732 restricted shares of Series A Ventures Group Common Stock
granted in December 1995. Such shares vest as to 50% in December 1999 and
as to the remaining 50% in December 2000.
III-26
<PAGE> 30
(18) Assumes the exercise in full of the following: (a) stock options granted
in tandem with SARs in December 1995 to acquire 200,000 shares of Series
A Common Stock, of which options to acquire 80,000 of such shares are
currently exercisable; and (b) stock options granted in tandem with SARs
in July 1997 to acquire 100,000 shares of Series A Common Stock, none of
which options are exercisable until July 23, 1998. Also includes 10,000
restricted shares of Series A Common Stock granted in December 1995. Such
shares vest as to 50% in December 1999 and as to the remaining 50% in
December 2000. See notes 5, 6 and 8 to the table in "Executive
Compensation - Summary Compensation Table" above for additional
information.
(19) Assumes the exercise in full of the following: (a) stock options granted
in tandem with SARs in October 1993 to acquire 5,250 shares of Series A
TCI Group Common Stock, 4,218 shares of Series A Liberty Group Common
Stock and 4,500 shares of Series A Ventures Group Common Stock, all of
which options are currently exercisable; and (b) stock options granted in
tandem with SARs in November 1994 to acquire 17,500 shares of Series A
TCI Group Common Stock, 14,062 shares of Series A Liberty Group Common
Stock and 15,000 shares of Series A Ventures Group Common Stock, of which
options to acquire 10,500, 8,437 and 9,000, respectively, of such shares
are currently exercisable. See notes 5 and 6 to the table in "Executive
Compensation - Summary Compensation Table" above for additional
information.
(20) Assumes the exercise in full of the following: (a) stock options granted
in tandem with SARs in December 1995 to acquire 50,000 shares of Series A
Common Stock, of which options to acquire 20,000 of such shares are
currently exercisable; and (b) stock options granted in tandem with SARs
in July 1997 to acquire 100,000 shares of Series A Common Stock, none of
which options are exercisable until July 23, 1998. See notes 6 and 8 to
the table in "Executive Compensation - Summary Compensation Table" above
for additional information.
(21) Assumes the exercise in full of stock options granted in tandem with SARs
in November 1994 to acquire 2,520 shares of Series A TCI Group Common
Stock, 2,025 shares of Series A Liberty Group Common Stock and 2,160
shares of Series A Ventures Group Common Stock. None of such options are
currently exercisable until November 17, 1998.
(22) Certain executive officers and directors hold options, which were granted
in tandem with SARs in December 1995, to acquire 750,000 shares of Series
A Common Stock. Options to acquire 300,000 of such shares are currently
exercisable. Certain executive officers and directors hold options, which
were granted in tandem with SARs in July 1997, to acquire 325,000 shares
of Series A Common Stock. None of these options are exercisable until
July 23, 1998. Additionally, Mr. Vierra and Ms. Curtis hold in the
aggregate 175,000 restricted shares of Series A Common Stock. Of such
shares 25,000 vest as to 50% in December 1999 and as to the remaining 50%
in December of 2000 and the other 150,000 vest as to 50% in July 2001 and
as to the remaining 50% in July 2002.
(23) Assumes the exercise in full of stock options granted in April 1996
pursuant to the 1996 Nonemployee Director Stock Option Plan to acquire
200,000 shares of Series A Common Stock. Options to acquire 40,000 of
such shares are currently exercisable. See "Executive Compensation -
Compensation of Directors" above for additional information concerning
these grants.
III-27
<PAGE> 31
(24) Certain executive officers and directors hold options, which were granted
in tandem with SARs in November 1992, to acquire 735,000 shares of Series
A TCI Group Common Stock, 703,125 shares of Series A Liberty Group Common
Stock and 690,000 shares of Series A Ventures Group Common Stock. All
such options are currently exercisable.
Also, certain executive officers and directors hold options, which were
granted in tandem with SARs in October 1993, to acquire an aggregate of
110,250 shares of Series A TCI Group Common Stock, 144,843 shares of
Series A Liberty Group Common Stock and 94,500 shares of Series A
Ventures Group Common Stock. All such options are currently exercisable.
Additionally, certain executive officers and directors hold options,
which were granted in tandem with SARs in November 1994, to acquire
341,320 shares of Series A TCI Group Common Stock, 274,274 shares of
Series A Liberty Group Common Stock and 292,560 shares of Series A
Ventures Group Common Stock. Options to acquire 203,280, 163,349 and
174,240, respectively, of such shares are currently exercisable.
In addition, Mr. Kern holds a stock option, which was granted in November
1994, pursuant to the TCI Director Stock Option Plan, to purchase 50,000
shares of Series A TCI Group Common Stock and 28,125 shares of Series A
Liberty Group Common Stock. Options to acquire 30,000 and 16,875,
respectively, of such shares are currently exercisable.
Certain executive officers and directors hold options, which were granted
in tandem with SARs in December 1995, to acquire 1,365,000 shares of
Series A TCI Group Common Stock, 1,012,500 shares of Series A Liberty
Group Common Stock and 1,170,000 shares of Series A Ventures Group Common
Stock. Options to acquire 546,000, 405,000 and 468,000, respectively, of
such shares are currently exercisable.
Additionally, certain executive officers and directors hold 45,177
restricted shares of Series A TCI Group Common Stock, 22,500 restricted
shares of Series A Liberty Group Common Stock and 19,646 restricted
shares of Series A Ventures Group Common Stock. Such shares vest 50% in
December 1999 and the remaining 50% in December 2000.
Mr. Hindery holds stock options granted in tandem with SARs in February
1997 to acquire 700,000 shares of Series A TCI Group Common Stock,
375,000 shares of Series A Liberty Group Common Stock and 600,000 shares
of Series A Ventures Group Common Stock. None of these options in tandem
with SARs were exercisable at December 31, 1997.
In addition, Mr. Gould holds a stock option, which was granted in
December 1996, pursuant to the TCI Director Stock Option Plan, to
purchase 50,000 shares of Series A TCI Group Common Stock and 28,125
shares of Series A Liberty Group Common Stock. Options to acquire 10,000
and 5,625, respectively, are exercisable.
In addition, certain executive officers and directors hold stock options,
which were granted in tandem with SARs in July 1997, to acquire 2,341,500
shares of Series A TCI Group Common Stock, 1,743,750 shares of Series A
Liberty Group Common Stock and 2,007,000 shares of Series A Ventures
Group Common Stock. None of these options are exercisable until July 23,
1998.
III-28
<PAGE> 32
Also, Messrs. Hindery and Kern were granted 338,154 restricted shares of
Series A TCI Group Common Stock and 123,692 shares of Series A Ventures
Group Common Stock. Such shares vest as to 50% in July 2001 and as to the
remaining 50% in July 2002. Additionally, Mr. Kern holds a stock option,
which was granted in tandem with SARs in December 1997, to acquire
350,000 shares of Series A TCI Group Common Stock, 250,000 shares of
Series A Liberty Group Common Stock and 300,000 shares of Series A
Ventures Group Common Stock. None of these options are exercisable until
December 29, 1998.
All of the aforementioned options with tandem SARs, options and
restricted stock are reflected in this table assuming the exercise or
vesting in full of such securities as to each individual.
(25) Dr. Malone holds a stock option, which was granted in tandem with SARs in
December 1997, to acquire 2,800,000 shares of Series B Ventures Group
Common Stock. Such grant is subject to TCI stockholder approval. None of
these options are exercisable until December 16, 1998. Such options are
reflected in this table assuming the exercise or vesting in full of such
securities.
No equity securities in any subsidiary of TINTA, other than directors'
qualifying shares, are owned by any of TINTA's executive officers or directors.
(c) Change of Control. TINTA knows of no arrangements, including any
pledge by any person of securities of TINTA, the operation of which may at a
subsequent date result in a change in control of TINTA.
III-29
<PAGE> 33
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others.
Relationship with TCI
TCI beneficially owns 86,250,000 shares of Series A Common Stock and
11,700,000 shares of Series B Common Stock which, at December 31, 1997,
collectively represented approximately 92% of the total voting power of the
outstanding shares of Common Stock. Consequently, TCI has significant influence
over the policies and affairs of TINTA 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 TINTA's Charter and the
approval of mergers and the sale of all or substantially all of TINTA's assets.
TCI formed TINTA during the fourth quarter of 1994 and the first quarter
of 1995 through the contribution to TINTA 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 TINTA remained in two of TCI's other subsidiaries, Liberty
Media Corporation ("Liberty") and TCIC. The international programming assets
that currently remain with Liberty are those that are 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 TINTA and
Liberty, Liberty/TINTA LLC ("Liberty/TINTA"). Liberty/TINTA then contributed
such assets to a newly formed sports programming venture with the News
Corporation Limited ("News Corp."). See "Sports Programming Venture" below.
In September 1997, TCI issued the Ventures Group Common Stock in the
Exchange Offer with the intent that such stock would reflect the separate
performance of the Ventures Group of TCI. The TCI Ventures Group includes TCI's
principal international assets, including TCI's equity interest in TINTA, and
substantially all of TCI's non-cable and non-programming domestic assets. With
the formation of the TCI Ventures Group, TCI assigned to TVG LLC various
agreements, rights and obligations related to TCI's assets attributed to the TCI
Ventures Group. Such assignments included transferring all of TCI's equity
interests in TINTA to TVG LLC and financial obligations with TINTA to TVG LLC.
See "-Credit Facility" and "-Loans Pursuant to Unsecured Promissory Notes"
below.
TCI has advised TINTA that TCI presently intends (i) to make available to
TINTA any opportunity to acquire, develop, own and/or manage cable and/or
telephony operations outside the United States presented to TCI or any of its
controlled affiliates, and (ii) except as provided below, to make available to
TINTA any opportunity to acquire, develop, manage and/or operate programming
services outside of the United States (a "Programming Opportunity") presented to
TCI or any of its controlled affiliates. The foregoing does not apply to: (i)
international programming services owned or managed, directly or indirectly (in
whole or in part), by TCI or any of its controlled affiliates other than TINTA
as of July 12, 1995 (the date of TINTA's initial public offering); (ii)
international programming opportunities under development by TCI or any of its
controlled affiliates other than TINTA, which were the subject of a signed
letter of intent or other agreement in principle as of July 12, 1995; (iii)
Programming Opportunities with respect to foreign sports programming, which is
expected to be pursued by Liberty/TINTA and made available to a joint venture in
which Liberty/TINTA owns a 50% interest (see "Sports Programming Venture"
below); (iv) any Programming Opportunity presented to a public company, which is
a controlled affiliate of either TCI or any of TCI's controlled affiliates
(other than TINTA); (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
III-30
<PAGE> 34
and/or managed by TCI or any of its controlled affiliates (other than TINTA). If
TINTA determines not to pursue a Programming Opportunity, subsidiaries or
controlled affiliates of TCI other than TINTA may pursue such Programming
Opportunity or TINTA and another subsidiary of TCI (or any of its other
controlled affiliates) may pursue such opportunity jointly. Neither TCI nor any
of its controlled affiliates will make available to TINTA any Programming
Opportunity if TCI or such controlled affiliate is legally (for example, by a
fiduciary duty owed to others) or contractually prohibited from taking such
action. The foregoing policy concerning Programming Opportunities will, in any
event, be terminable at such time as TCI ceases to beneficially own at least a
majority in voting power of the outstanding Common Stock of TINTA.
The above policy of TCI can be modified or rescinded by TCI in its sole
discretion, without approval of TINTA, although TCI has informed TINTA it has no
present intention to do so. TCI can also adopt additional policies with respect
to TINTA depending upon future circumstances. TCI has informed TINTA that any
determination it might make to modify or rescind its policy with respect to
TINTA, or to adopt additional policies affecting TINTA, would be made by the TCI
Board, which has a duty to act with due care and in the best interests of all
the stockholders of TCI.
TCI and TINTA have entered into a number of intercompany agreements more
fully described below, covering matters such as 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 TINTA and makes available certain of its employee benefit plans to TINTA's
employees. TCI established the terms of these arrangements in consultation with
TINTA, but TCI and TINTA executed the arrangements while TINTA was a wholly
owned subsidiary. As a result, such arrangements are not the result of
arm's-length negotiations. Accordingly, although TINTA believes the terms of
these arrangements are reasonable, no assurance can be given that the terms and
conditions of these agreements, or the terms of any future arrangements between
TCI and TINTA, are or will be as favorable to TINTA as could be obtained from
unaffiliated third parties.
Sports Programming Venture
In April 1996, Liberty/TINTA formed a joint venture with News Corp. ("Fox
Sports International") to operate 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 geographical areas. TINTA
and Liberty each owns a 50% interest in Liberty/TINTA. Liberty/TINTA, in turn
owns a 50% interest in Fox Sports International, with News Corp. owning the
other 50% interest. Liberty/TINTA contributed to Fox Sports International the
non-cash assets contributed to it by TINTA and Liberty. News Corp. contributed
various international sports rights and certain trademark rights in exchange for
its 50% interest in Fox Sports International.
As part of the formation of Fox Sports International, Liberty/TINTA is
entitled to receive from News Corp. 7.5% of the outstanding stock of STAR
Television Limited. Upon the delivery of such stock to Liberty/TINTA, News Corp.
is entitled to receive from Liberty/TINTA up to $20 million and rights under
various Asian sports programming agreements. STAR Television Limited operates a
satellite-delivered television platform in Asia.
The agreement with News Corp. 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 Fox Sports International
(other than through Fox Sports International), 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 referred to above. Those
restrictions will be binding on TCI until such time as neither TINTA nor Liberty
is controlled by TCI. The agreement with News Corp. also includes provisions
granting to a separate joint venture to be formed by
III-31
<PAGE> 35
Liberty and Fox Inc. (a wholly-owned subsidiary of News Corp.) rights of first
refusal with respect to international sports programming as to which Fox Sports
International holds United States or Canadian distribution rights.
Prior to November 1, 2000, News Corp. and Liberty/TINTA cannot transfer
their interests in Fox Sports International 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 will not be subject to those transfer restrictions or
rights of first refusal. In certain events, either member of Fox Sports
International 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 Fox Sports International,
the members cannot agree for two consecutive years on the approval of an annual
budget or the appointment of a chief executive officer for Fox Sports
International. If control of Liberty/TINTA is acquired by any one of certain
named media industry participants, then News Corp. will have an option to
purchase the interest in Fox Sports International held by Liberty/TINTA at a
price equal to the fair market value of such interest. The agreement governing
the formation of Liberty/TINTA includes restrictions on transfers of interests
and buy/sell rights applicable to Liberty/TINTA interests of TINTA and Liberty,
which are substantially the same as those applicable to the interests in Fox
Sports International.
During third quarter 1997, Fox Sports International distributed its 35%
equity interest in Torneos y Competencias S.A. ("Torneos") to Liberty/TINTA and
certain Australian sports rights to News Corp. On October 2, 1997, TINTA
purchased an additional 5% interest in Torneos from an unaffiliated party for
$12 million. In addition, as of December 31, 1997, TINTA had made cash
contributions to Torneos on behalf of Liberty/TINTA in the aggregate amount of
$48 million. It is anticipated that Liberty's portion of such capital calls will
be repaid to TINTA either in cash or other economic consideration to be
determined at a future date.
Credit Facility
TINTA and TCI entered into a subordinated revolving credit facility (the
"Credit Facility"), effective April 25, 1995, which provides for loans from TCI
to TINTA in an aggregate principal amount at any time outstanding 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 Credit Facility to TVG LLC. At
the time of such assignment, no borrowings were outstanding under the Credit
Facility. In connection with the assignment, the parties agreed to extend the
maturity date of the Credit Facility to September 10, 2002, at which time all
borrowings under the Credit Facility, together with all accrued interest
thereon, will be payable. In addition, the parties reduced the interest rate on
the Credit Facility from 13% to 10% per annum. Prior to such maturity date,
borrowings repaid by TINTA under the Credit Facility will be available for
re-borrowing, subject to certain conditions to borrowing.
During 1997, no borrowings were outstanding under the Credit Facility.
Accordingly, TINTA incurred no interest expense during the year ended December
31, 1997, with respect to the Credit Facility.
TINTA is required to pay an annual facility fee in an amount equal to
.375% of the unused borrowing availability under the Credit Facility. Such
credit facility fee aggregated $750,000 during the year ended December 31, 1997.
The payment of the principal of and interest on all borrowings under the
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 TINTA for money borrowed, obligations of TINTA in respect of
letters of credit or bankers' acceptances and indebtedness issued as part of the
deferred purchase price of property, except any such indebtedness that by the
terms of the instrument creating or representing such indebtedness is expressly
made equal in right of
III-32
<PAGE> 36
payment with, or subordinate and subject in right of payment to, borrowings
outstanding under the Credit Facility. If TINTA 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 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 TINTA. Borrowings under the Credit Facility are
unsecured.
If, at any time, TCI shall beneficially own capital stock of TINTA
representing less than a majority in voting power of the outstanding shares of
TINTA capital stock entitled to vote for the election of directors, TVG LLC may
terminate its obligation to make further loans under the Credit Facility upon
two business days prior notice to TINTA. The principal of and interest on all
outstanding loans shall become due and payable on the first anniversary of the
receipt by TINTA of such notice.
Loans Pursuant to Unsecured Promissory Notes
At December 31, 1997, amounts loaned by TINTA to TVG LLC pursuant to an
unsecured promissory note aggregated $89 million. Under the terms of such note,
TVG LLC can borrow in an aggregate amount of up to $200 million. Amounts
outstanding under this promissory note bear interest at variable rates (6.7% at
December 31, 1997) 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 TVG LLC and TINTA. During the year ended December
31, 1997, interest income related to the promissory note aggregated $5.8
million.
Intercompany Accounts
TINTA maintains cash and non-cash intercompany accounts with TVG LLC. At
December 31, 1997, the non-cash intercompany account with TVG LLC was comprised
of $12.6 million due to TVG LLC with respect to TINTA's share of TCI's
compensation liability arising from certain SARs and stock options and
$7.7 million due from TVG LLC with respect to the allocation of current
intercompany income tax benefit pursuant to the Old and New Tax Sharing
Agreements (as described below). The compensation liability, which represents
TINTA's share of TCI's stock compensation expense for periods subsequent to July
18, 1995, will be settled in cash only to the extent that TCI is required to
make cash payments to satisfy such liability. Amounts included in the non-cash
intercompany account are non-interest bearing.
Amounts included in the cash intercompany account with TVG LLC are
required to be settled within 30 days following notification. Any payable
amounts that remain outstanding after such 30-day period generally are treated
as adjustments of the outstanding borrowings pursuant to the Credit Facility.
Amounts included in such cash intercompany account are non-interest bearing. At
December 31, 1997, the amount owed by TINTA to TVG LLC, pursuant to the cash
intercompany account, was $5.8 million.
III-33
<PAGE> 37
Registration Rights Agreement
As of July 18, 1995, TINTA and TCI entered into a Registration Rights
Agreement (the "Registration Rights Agreement") which, among other things,
provides that upon the request of TCI, TINTA will register under the Securities
Act of 1933, as amended, any of the shares of Series A Common Stock or Series B
Common Stock (and any other shares of capital stock of TINTA issued in respect
of such shares) held by TCI for sale in accordance with TCI's intended method of
disposition thereof. TCI has the right to request three such registrations.
TINTA 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 Common Stock representing at least 30% in voting
power of the outstanding shares of capital stock of TINTA entitled to vote
generally in the election of directors.
Indemnification Agreement
TCI or certain of its subsidiaries (other than TINTA) 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 TINTA. TINTA has entered into an Indemnification Agreement with
TCI, dated as of July 12, 1995, pursuant to which TINTA 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. TINTA has not been required to make any payments to
TCI pursuant to the Indemnification Agreement.
Services Agreement
Certain facilities, personnel and services are provided to TINTA by TCI
or its subsidiaries pursuant to the terms of a services agreement between TCI
and TINTA, dated as of July 18, 1995 (the "Services Agreement"). Pursuant to the
Services Agreement, TCI provides TINTA 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, TINTA has available to it such general
overall management services and strategic planning services as TCI and TINTA
shall agree and TCI provides TINTA 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 TINTA may from time to time
request.
The Services Agreement also provides that, for so long as TCI continues
to beneficially own shares of Common Stock representing at least a majority in
voting power of the outstanding shares of capital stock of TINTA entitled to
vote generally in the election of directors, TCI will continue to permit TINTA's
employees to participate in TCI's employee benefit plans. In this regard, TINTA
is allocated that portion of TCI's compensation expense attributable to benefits
extended to employees of TINTA.
Pursuant to the Services Agreement, TINTA reimburses TCI for all direct
expenses incurred by TCI in providing services thereunder 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 TINTA, general overhead expenses and
rental expenses for any physical facilities of TCI used by TINTA. In this
regard, TINTA subleases office space from, TCI. The obligations of TCI to
provide services under the Services Agreement (other than TCI's obligation to
allow TINTA's employees to participate in TCI's employee benefit plans) will
continue in effect until terminated by either TINTA 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 TINTA.
The amounts charged to TINTA pursuant to the Services Agreement
aggregated $1.8 million during the year ended December 31, 1997.
III-34
<PAGE> 38
Tax Sharing Agreement
TINTA and its 80%-or-more-owned domestic subsidiaries (the "TINTA Tax
Group") are included in the consolidated federal and state income tax returns of
TCI. TINTA's income taxes include those items in the consolidated calculation
applicable to the TINTA Tax Group ("intercompany tax allocation") and any income
taxes of TINTA's consolidated foreign or domestic subsidiaries that are excluded
from the consolidated federal and state income tax returns of TCI. Intercompany
tax allocation represents an apportionment of tax expense or benefit (other than
deferred taxes) among subsidiaries of TCI in relation to their respective
amounts of taxable earnings or losses.
Effective July 1, 1995, TCI, TINTA and certain other subsidiaries of TCI
implemented a tax sharing agreement (the "Old Tax Sharing Agreement"). The Old
Tax Sharing Agreement formalized certain of the elements of a pre-existing tax
sharing arrangement and contains additional provisions regarding the allocation
of certain consolidated income tax attributes and the settlement procedures with
respect to the intercompany allocation of current tax attributes. Under the Old
Tax Sharing Agreement, TINTA was responsible to TCI for its share of
consolidated income tax liabilities (computed as if TCI were not liable for the
alternative minimum tax) determined in accordance with the Old Tax Sharing
Agreement, and TCI was responsible to TINTA to the extent that the income tax
attributes generated by the TINTA Tax Group were utilized by TCI to reduce its
consolidated income tax liabilities (computed as if TCI were not liable for the
alternative minimum tax). The tax liabilities and benefits of such entities so
determined are charged or credited to an intercompany account between TCI and
TINTA. Such intercompany account is required to be settled only upon the date
that an entity ceases to be a member of TCI's consolidated group for federal
income tax purposes. Under the Old Tax Sharing Agreement, TCI retains the burden
of any alternative minimum tax and has the right to receive the tax benefits
from an alternative minimum tax credit attributable to any tax period beginning
on or after July 1, 1995, and ending on or before October 1, 1997.
Effective October 1, 1997 (the "Effective Date"), TCI replaced the Old
Tax Sharing Agreement with a new tax sharing agreement, as so amended (the "New
Tax Sharing Agreement"), which governs 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"). TINTA and its subsidiaries are members of the TCI
Ventures Group for purposes of the New Tax Sharing Agreement. Effective for
periods on and after the Effective Date, federal income taxes will be computed
based upon the type of tax paid by TCI (on a regular tax or alternative minimum
tax basis) on a separate basis for each Group. Based upon these separate
calculations, an allocation of tax liabilities and benefits will be 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) attributable to
such Group and actually utilized by TCI in reducing its consolidated federal
income tax liability. Tax attributes and tax basis in assets would be
inventoried and tracked for ultimate credit to or charge against each Group.
Similarly, in each taxable period that TCI pays alternative minimum tax, the
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 in years that TCI uses the alternative minimum tax credit
associated with such taxable period. The Group generating the tax benefits
utilized would receive a cash payment only if, and when, the unused taxable
losses of one or more of the other Groups are actually utilized. If losses
expire without ever being utilized, the Group generating the utilized tax
benefits will never receive payment for such benefits. 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.
III-35
<PAGE> 39
Notwithstanding the foregoing, items of income, gain, loss, deduction or
credit resulting from certain specified transactions that are consummated after
the Effective Date pursuant to a letter of intent or agreement that was entered
into prior to the Effective Date will be shared and allocated pursuant to the
terms of the Old Tax Sharing Agreement, as amended. The intercompany tax account
existing between TCI and TINTA for the period beginning July 1, 1995, and ending
September 30, 1997, will be required to be settled between TVG LLC and TINTA if
and when TINTA ceases to be a member of TCI's consolidated group for federal
income tax purposes. A tax sharing arrangement between TVG LLC and TINTA
covering periods subsequent to September 30, 1997, is currently being
negotiated. It is expected, that the terms of such arrangement will be
substantially similar to the terms contained in the New Tax Sharing Agreement.
During the year ended December 31, 1997, TCI allocated to TINTA an
intercompany tax expense aggregating $7.5 million.
Trade Name and Service Mark License Agreement
TINTA 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 TINTA a non-exclusive non-assignable license to use
certain trade names and service marks specifically identified in the License
Agreement. TINTA has agreed that all advertising, promotion and use of certain
of TCI's trade names and service marks by TINTA 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 TINTA. The term may be extended for one year
upon the consent of both parties. No fees are paid by TINTA for use of this
non-exclusive non-assignable license.
Consulting Agreement with Mr. Vierra
Effective January 1, 1998, TCI entered into a five year consulting
agreement with Mr. Vierra for Mr. Vierra to provide consulting services to TCI
on the allocation of TCI's resources and other matters generally and with
respect to the international operations of TCI in particular. Mr. Vierra will
not be required to provide more than 700 hours per year in such consulting
services. For such consulting services, the consulting agreement provides for a
fee of $700,000 per annum. Pursuant to the agreement, a portion of such
consulting fee will be deferred at an annual rate of approximately $250,000 per
annum. The deferred amounts will be paid in monthly installments over a
240-month period commencing on the later of the first business day of the first
full calendar month following December 31, 2002, and the termination of Mr.
Vierra's position as a consultant to TCI, 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 Mr. Vierra is a consultant to TCI pursuant to the agreement, he is
entitled to participate in all insurance plans or policies adopted for the
benefit of TCI's employees. The consulting agreement provides that all options
for TCI common stock and TINTA Common Stock held by Mr. Vierra are now vested in
full. In addition, restricted stock awards for TINTA Common Stock shall vest
upon the expiration of the terms provided by the agreements evidencing their
respective grants.
Upon termination of the consulting agreement by TCI, TCI will pay all
remaining compensation due under the agreement for the balance of the term of
the agreement. Upon Mr. Vierra's death during the term of the consulting
agreement, TCI will pay to Mr. Vierra's beneficiaries a lump sum in an amount
equal to one year's compensation amount. The consulting agreement provides
further that, during the term of the agreement, Mr. Vierra will not be connected
in any manner with any entity which directly competes in a material respect with
the business of TCI or any of its
III-36
<PAGE> 40
majority-owned subsidiaries, which includes TINTA. Mr. Vierra may, however, own
securities of any corporation listed on a national securities exchange or quoted
on Nasdaq to the extent of an aggregate of 5% of the amount of such securities
outstanding. In addition, Mr. Vierra may provide consulting services to others
if approved by TCI's chief executive officer.
Employment Agreement with Mr. Evans
As of August 1, 1997, TINTA entered into a five year employment agreement
with Mr. Evans, which commenced September 1, 1997. The terms of this employment
agreement are described under "Executive Compensation - Employment Contracts,
Termination of Employment and Change of Control Agreements" above.
Other Transactions
TCI Cablevision of Puerto Rico, Inc., a wholly-owned subsidiary of TINTA
(the "Puerto Rico Subsidiary"), is engaged in the multi-channel video
distribution business in Puerto Rico and purchases 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 Puerto Rico
Subsidiary, aggregated $6 million during the year ended December 31, 1997.
Certain key employees of TINTA hold stock options with tandem SARs with
respect to certain common stock of TCI as well as restricted shares of common
stock of TCI. Estimates of the compensation expense relating to the options and
SARs as well as restricted stock awards have been included in the financial
statements of TINTA, 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 or the restricted
shares are vested. The estimated compensation adjustment with respect to the
options and SARs as well as restricted stock awards resulted in an increase to
TINTA's share of TCI's stock compensation liability of $12.4 million for the
year ended December 31, 1997. TINTA's share of TCI's stock compensation
liability will be settled in cash only to the extent cash payments are required
to satisfy such liability.
During 1996, TCIC transferred, subject to regulatory approval, certain
distribution equipment to a subsidiary of TINTA in exchange for a promissory
note in the principal amount of L.14,950,000 ($23.3 million using the
applicable exchange rate), bearing interest at 7% compounded semi-annually. The
distribution equipment was subsequently leased back to TCIC over a five year
term with semi-annual payments of L.998,000 ($1.6 million), plus expenses.
Effective October 1, 1997, the parties transferred such distribution equipment
back to TCIC and canceled the note and the lease. Until such transfer and
cancellation, during the year ended December 31, 1997: (i) the U.S. dollar
equivalent of interest expense incurred with respect to the note aggregated $1.2
million; (ii) the U.S. dollar equivalent of the lease revenue aggregated $3.3
million; and (iii) TINTA experienced unrealized foreign currency transaction
gains of $1.2 million with respect to the note.
On September 1, 1997, TINTA issued 30,075 shares of Series A Common Stock
(valued at $500,000 based upon a price per share of $16.63) to David Evans. For
more information on this issuance see "Executive Compensation - Employment
Contracts, Termination of Employment and Change of Control Agreements" above. On
January 15, 1998, Mr. Evans sold 12,200 of such shares to TINTA for $201,300
($16.50 per share). The closing market price of the Series A Common Stock on
Nasdaq on such date was $17.68 per share.
(b) Certain Business Relationships. Jerome H. Kern, a director of TINTA,
is Special Counsel with the law firm of Baker & Botts, L.L.P., the principal
outside counsel for TINTA and TCI. Fees paid to Baker & Botts, L.L.P. by TCI and
consolidated subsidiaries (including TINTA) did not exceed 5% of such firm's
gross revenues for the 1997 fiscal year.
(c) Indebtedness of Management. None.
III-37
<PAGE> 41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELE-COMMUNICATIONS INTERNATIONAL, INC.
Date: April 28, 1998 By: /s/ Graham Hollis
-------------------------------------
Graham Hollis
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
III-38
