<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
(Amendment No. 1)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December
31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from
____ to ____
Commission File Number 0-5550
TCI COMMUNICATIONS, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of Delaware 84-0588868
- ----------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5619 DTC Parkway
Englewood, Colorado 80111
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
Securities registered pursuant to Section 12(b) of the Act:
8.72% Trust Originated Preferred Securities
10% Trust Preferred Securities
9.65% Capital Securities
9.72% Trust Preferred Securities
Securities registered pursuant to Section 12(g) of the Act:
Cumulative Exchangeable Preferred Stock, Series A
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) have been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
------
The aggregate market value of the Cumulative Exchangeable Preferred
Stock, Series A held by nonaffiliates of TCI Communications, Inc., computed by
reference to the last sales price of such stock, as of the close of trading on
January 31, 1997, was $188,025,000.
All of the Registrant's common stock is owned by Tele-Communications,
Inc. The number of shares outstanding of the Registrant's common stock, as of
January 31, 1997, was:
Class A common stock - 811,655 shares; and
Class B common stock - 94,447 shares.
<PAGE> 2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: April 30, 1997 TCI COMMUNICATIONS, INC.
(Registrant)
By /s/ Stephen M. Brett
----------------------------------------
Stephen M. Brett
Senior Vice President and
General Counsel
<PAGE> 3
PART III.
Item 10. Directors and Executive Officers of the Registrant.
The following lists the directors and executive officers of TCI
Communications, Inc. ("TCIC" or the "Company"), their birth dates, a
description of their business experience and positions held with the Company as
of April 15, 1997. All officers are appointed for an indefinite term, serving
at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
Name Positions
- ---------------------------- ------------------------------------------------------------------
<S> <C>
John C. Malone Director of TCIC since 1973; Chief Executive Officer of TCIC from March
Born March 7, 1941 of 1992 to October of 1994 and President of TCIC from 1973 to October
of 1994; Tele-Communications, Inc. ("TCI") director since June of 1994;
Chairman of the Board of TCI from November 1996; Chief Executive
Officer of TCI since January of 1994; President of TCI from January
1994 through March 1997; is President and a director of many of TCI's
subsidiaries; also a director of BET Holdings, Inc., The Bank of New
York and TCI Satellite Entertainment, Inc. ("Satellite"). Chairman of
the Board and a director of Tele-Communications International, Inc.
("Inter-national") since May 1995 and director of TCI Pacific
Communications, Inc. since July 1996.
Kim Magness TCIC director from 1985 to August of 1994 and since January of 1996; TCI
Born May 17, 1952 director since June of 1994; manages numerous personal and business
investments, and is Chairman and President of a company developing
liners for irrigation canals.
John W. Gallivan Chairman of the Board of Kearns-Tribune Corporation ("Kearns"), a
Born June 28, 1915 newspaper publishing concern; also a director of Silver King Mining
Company; TCI director since June of 1994; TCIC director from 1980 to
August of 1994 and since January of 1996.
Donne F. Fisher Director of TCIC since 1980 and of TCI since June of 1994. Executive
Born May 24, 1938 Vice President of TCIC from December of 1991 to October of 1994; was
previously Senior Vice President of TCIC since 1982 and Treasurer since
1970; Executive Vice President of TCI from January of 1994 through
January 1, 1996. On January 1, 1996, Mr. Fisher resigned his position
of Executive Vice President of TCI; Mr. Fisher has provided consulting
services to TCI since January of 1996; also a director of General
Communication, Inc., DMX Inc. and United Video Satellite Group, Inc.
Leo J. Hindery, Jr. In March of 1997, Mr. Hindery joined TCI as its President and Chief
Born October 31, 1947 Operating Officer. Mr. Hindery was previously founder, Managing
General Partner and Chief Executive Officer of InterMedia Partners and
its affiliated entities since 1988. Mr. Hindery was also named
President and a director of TCIC in March of 1997.
</TABLE>
(continued)
III-1
<PAGE> 4
<TABLE>
<CAPTION>
Name Positions
- ---------------------------- ------------------------------------------------------------------
<S> <C>
Brendan R. Clouston Senior Vice President and Chief Financial Officer of TCIC from March of
Born April 28, 1953 1997 to April of 1997; President and Chief Executive Officer of TCIC
from October of 1994 to March of 1997; Executive Vice President and
Chief Operating Officer of TCIC from March of 1992 to October of 1994;
previously Senior Vice President of TCIC since December of 1991;
Executive Vice President of TCI since January of 1994; named Chief
Financial Officer of TCI in March 1997.
Marvin Jones Appointed TCIC Executive Vice President and Chief Operating Officer in
Born September 11, 1937 March 1997. Named TCIC director in 1997. President of one of TCIC's
three cable units since November 1, 1996. Consultant since December
1991 in the cable television industry.
Stephen M. Brett Appointed Senior Vice President and General Counsel of TCIC as of
Born September 20, 1940 December of 1991. Executive Vice President, General Counsel and
Secretary of TCI since January of 1994. Vice President and Secretary
and a director of most of TCI's subsidiaries.
Gary K. Bracken Controller of TCIC since 1969. Appointed Senior Vice President of TCIC
Born July 29, 1939 in December of 1991. Was named Vice President and Principal Accounting
Officer of TCIC in 1982.
Bernard W. Schotters Appointed Senior Vice President-Finance and Treasurer of TCIC in
Born November 25, 1944 December of 1991. Was appointed Vice President-Finance of TCIC in
1984. Vice President and Treasurer of most of TCI's subsidiaries.
Robert N. Thomson Appointed Senior Vice President of TCIC in February of 1995. Senior
Born December 19, 1943 Vice President of Communications and Policy Planning for TCIC from 1991
to October of 1994. Previously, Vice President of Government Affairs
for TCIC from January of 1987 to 1991.
Sadie N. Decker TCIC Senior Vice President from October, 1994; was Vice President from
Born October 8, 1939 April, 1993 through October, 1994; Executive Director with Martin
Marietta Astronautics (the predecessor company to Lockheed-Martin
Astronautics) from 1985 through April, 1993.
Gerald W. Gaines Appointed TCIC Senior Vice President of Telephony Services in October
Born May 29, 1956 1994; President and Chief Executive Officer of TCI Telephony Services,
Inc. since April, 1995; was President and founder of GCG, Inc. (a
management services firm serving the telecommunications industry) from
1991 to 1994.
</TABLE>
(continued)
III-2
<PAGE> 5
<TABLE>
<CAPTION>
Name Positions
- ---------------------------- ------------------------------------------------------------------
<S> <C>
Bruce W. Ravenel Senior Vice President of TCIC; President and Chief Executive Officer of
Born January 25, 1950 TCI.NET, Inc., a business unit of TCI, since January, 1996. Was Senior
Vice President and Chief Operating Officer of TCI Technology Ventures,
Inc., a subsidiary of TCI, since March, 1994. Was Vice President of
TCI Technology, Inc., another subsidiary of TCI, from 1992 through
March, 1994.
Jedd S. Palmer TCIC Senior Vice President-Programming from August, 1994; was Vice
Born July 28, 1954 President-Programming from 1992 through August, 1994 and Director of
Programming from January, 1991 through early 1992.
Camille K. Jayne TCIC Senior Vice President since January, 1996; was Vice
Born June 15, 1952 President/Senior Consultant with Ryan Partnership from 1994 through
January, 1996; prior to that was Senior Director/Co-Chairman New
Ventures of Ameritech Regional Bell Operating Company from 1992 through
1994; was First Vice President of Comerica Bank from 1987 through 1992.
</TABLE>
Mr. Bob Magness, founder and Chairman of the Board of TCI, died in
November of 1996. Mr. Magness had been Chairman of the Board and director of
TCI since June of 1994 and of TCIC (predecessor company to TCI) since 1973. He
had been a TCIC director since 1968.
Mr. Barry P. Marshall was Executive Vice President and Chief Operating
Officer of TCIC from October of 1994 through March of 1997. In March of 1997,
Mr. Marshall resigned his position as Executive Vice President and Chief
Operating Officer of TCIC. Mr. Marshall was Executive Vice President and Chief
Operating Officer of TCI Cable Management Corporation, TCIC's primary operating
subsidiary, from March of 1992 through January 1, 1994, where he directly
oversaw all of TCIC's regional operating divisions. From 1986 to March of
1992, Mr. Marshall was Vice President and Chief Operating Officer of TCIC's
largest regional operating division.
Mr. Gary S. Howard was President of Satellite from February 1995 and a
director of Satellite from November of 1996. Additionally, Mr. Howard was
Senior Vice President of TCIC from October 1994 to December of 1996. Mr.
Howard served as Vice President of TCIC from December 1991 through October
1994. Upon consummation of the Distribution, Mr. Howard's employment with the
Company terminated.
Ms. Barbara J. Mowry was President of one of TCIC's three cable
operating units since November of 1996 and was Senior Vice President-Customer
Satisfaction since June of 1995. Ms. Mowry resigned her positions with the
Company in April of 1997.
There are no family relations, of first cousin or closer, among the
above named individuals, by blood, marriage or adoption, except that Bob
Magness and Kim Magness were father and son.
During the past five years, none of the above persons have had any
involvement in such legal proceedings as would be material to an evaluation of
his ability or integrity.
III-3
<PAGE> 6
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires TCIC's executive officers and directors, and persons who own more than
ten percent of a registered class of TCIC's equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish TCIC with copies of all
Section 16(a) forms they file.
Based solely on review of the copies of such Forms 3, 4 and 5 and
amendments thereto furnished to TCIC with respect to its most recent fiscal
year, or written representations that no Forms 5 were required, TCIC believes
that, during the year ended December 31, 1996, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with.
Based solely on review of the copies of such Forms 3, 4 and 5 and
amendments thereto furnished to TCIC with respect to its most recent fiscal
year, or written representations that no Forms 5 were required, TCIC believes
that, during the year ended December 31, 1996, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with except that one report each, covering the
initial reporting of shareholdings, was filed late by Messrs. Gary Bracken,
Stephen Brett, Brendan Clouston, Donne Fisher, John Gallivan, Leo Hindery, Bob
Magness, Kim Magness, John Malone, Bernard Schotters and Robert Thomson.
Item 11. Executive Compensation.
(a) Summary Compensation Table of TCI Communications, Inc.
The following table shows, for the three years ended December 31,
1996, all forms of compensation for the Chief Executive Officer and each of the
five most highly compensated executive officers of TCIC, whose total annual
salary and bonus exceeded $100,000 for the year ended December 31, 1996.
Additionally, the following table includes disclosure of all forms of
compensation paid by the Company to Mr. Gary S. Howard during the year ended
December 31, 1996.
On December 4, 1996, TCI distributed (the "Distribution") to the
holders of shares of TCI Group common stock all of the issued and outstanding
common stock of Satellite. Certain directors, officers and employees of TCI
and its subsidiaries have been granted options to purchase shares of Series A
TCI Group common stock ("TCI Options") and stock appreciation rights with
respect to shares of Series A TCI Group common stock ("TCI SARs"). The TCI
Options and TCI SARs have been granted pursuant to various stock plans of TCI
(the "TCI Plans"). The TCI Plans give the Board of Directors of TCI (the "TCI
Board") the authority to make equitable adjustments to outstanding TCI Options
and TCI SARs in the event of certain transactions, of which the Distribution of
Satellite was one.
(continued)
III-4
<PAGE> 7
The TCI Board determined that, immediately prior to the Distribution,
each TCI Option would be divided into two separately exercisable options: (i)
an option to purchase TCI Satellite Entertainment, Inc. Series A common stock
("SATCo Option"), exercisable for the number of shares of TCI Satellite
Entertainment, Inc. Series A common stock ("SATCo Series A Stock") that would
have been issued in the Distribution in respect of the shares of Series A TCI
Group common stock ("TCI Group Series A Stock") subject to the applicable TCI
Option, if such TCI Option had been exercised in full immediately prior to the
record date of the Distribution, and containing substantially equivalent terms
as the existing TCI Option, and (ii) an option to purchase TCI Group Series A
Stock (a "TCI Group Series A Option"), exercisable for the same number of
shares of TCI Group Series A Stock as the corresponding TCI Option had been.
The aggregate exercise price of each TCI Option was allocated between the SATCo
Option and the TCI Group Series A Option into which it was divided, and all
other terms, including date of grant, of the SATCo Option and TCI Group Series
A Option are in all material respects the same as the terms of such TCI Option.
Similar adjustments were made to the outstanding TCI SARs, resulting in the
holders thereof holding TCI Group Series A SARs and SATCo SARs instead of TCI
SARs, and to outstanding restricted stock awards, resulting in the holders
thereof holding restricted shares of SATCo Series A Stock in addition to
restricted stock of TCI Group Series A Stock, effective immediately prior to
the Distribution. The foregoing adjustments were made pursuant to the
anti-dilution provisions of the TCI Plans pursuant to which the respective TCI
Group Series A Options and TCI Group Series A SARs were granted.
Prior to the Distribution, TCI and Satellite entered into an agreement
to sell to each other from time to time at the then current market price shares
of TCI Group Series A Stock and SATCo Series A Stock, respectively, as
necessary to satisfy their respective obligations under such securities.
TCI, in addition to the TCI Group Series A Stock, has shares of the
Tele-Communications, Inc. Series B TCI Group common stock ("TCI Group Series B
Stock") the Tele-Communications, Inc. Series A Liberty Media Group common stock
("Liberty Group Series A Stock"), and the Tele-Communications, Inc. Series B
Liberty Media Group common stock ("Liberty Group Series B Stock") outstanding.
Prior to the Distribution, Satellite was a member of the TCI Group and all of
the assets and businesses transferred to Satellite were included in the TCI
Group. Accordingly, the Distribution was made to the TCI Group Stockholders
and the holders of Liberty Media Group Common Stock did not participate in the
Distribution.
Effective January 14, 1997, TCI issued a stock dividend to holders of
Liberty Media Group common stock consisting of one share of Liberty Group
Series A Stock for every two shares of Liberty Group Series A Stock owned and
one share of Liberty Group Series A Stock for every two shares of Liberty Group
Series B Stock owned (the "Liberty Group Stock Dividend"). As a result of the
Liberty Group Stock Dividend, the number of options granted to purchase Liberty
Series A Stock and the price to purchase such options have been adjusted.
(continued)
III-5
<PAGE> 8
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------
Annual Compensation Awards
---------------------------------- -------------------------------------
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options/ Compen-
sation Award(s) SARs sation
Position Year Salary ($) Bonus($) ($) ($) (#) ($)
- -------- ---- ----------- -------- ----------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Brendan R. Clouston 1996 $ 650,000 -- $244,147(1)(3) 1,999,500(4) 664,106(6)(7)(8) $ 15,000
Formerly President 1995 $ 550,000 -- $ 3,181(1) 2,062,500(5) 1,100,000(9) $ 15,000
and Chief 1994 $ 525,000 -- $ 1,000(1) -- 295,000(10) $ 15,000
Executive Officer
Barry P. Marshall 1996 $ 385,875 -- $ 3,437(1) -- -- $ 14,076
Formerly Executive 1995 $ 367,500 -- $ 2,934(1) $309,375(5) 82,500(9) $ 13,816
Vice President and 1994 $ 349,947 -- $ 538(1) -- 147,500(10) $ 13,811
Chief Operating
Officer
Gary S. Howard 1996 $ 253,846 $ 23,210(2) $ 4,230(1) -- 664,076(6) $ 15,000
Formerly Senior Vice 1995 $ 262,500 $ 23,210(2) $ 3,415(1) $309,375(5) 165,000(9) $ 15,000
President 1994 $ 226,462 $ 23,210(2) $ 1,052(1) -- 73,750(10) $ 15,000
Barbara J. Mowry 1996 $ 265,000 $106,000 -- -- -- $ 9,500
Senior Vice President 1995 $ 154,116 $ 80,000 -- $206,250(5) 275,000(9) --
1994 -- -- -- -- -- --
Bernard S. Schotters 1996 $ 299,970 -- $ 4,530(1) -- -- $ 15,000
Senior Vice 1995 $ 248,063 -- $ 3,662(1) $515,625(5) 325,000(9) $ 15,000
President and 1994 $ 236,250 -- $ 2,775(1) -- 73,750(10) $ 15,000
Treasurer
Gerald W. Gaines 1996 $ 275,000 -- -- -- 20(7) $ 9,500
Senior Vice 1995 $ 200,000 -- -- $309,375(5) 247,500(9) --
President 1994 $ 38,462 -- -- -- 73,750(10) --
Bruce W. Ravenel 1996 $ 275,000 -- $ 6,484(1) -- 10.8 $ 15,000
Senior Vice 1995 $ 225,000 $ 71,000 $ 5,831(1) $309,375(5) 275,000(9) $ 15,000
President 1994 $ 151,690 $ 11,342 -- -- 73,750(10) $ 15,000
</TABLE>
____________________
(1) Consists of amounts reimbursed during the year for the payment of
taxes. During 1996, a total of $4,207 was paid to Mr. Clouston.
(2) This amount reflects the amortization of obligations under an
employment contract between Mr. Howard and a prior employer, which
obligations were assumed by TCI in connection with the acquisition of
such prior employer. The obligations were assumed by Satellite in
connection with the Distribution.
(3) Includes $239,940 in 1996 of dividend income received on WestMarc
Communications, Inc. ("WestMarc") preferred stock which is subject to
forfeiture (see note 4 below).
(4) On July 1, 1996, pursuant to a Restricted Stock Award Agreement, Mr.
Clouston was transferred all of the Company's right title and interest
in and to 62 shares of the 12% Series C Cumulative Compounding
Preferred Stock of WestMarc owned by the Company. Such preferred
stock is subject to forfeiture in the event of certain circumstances
from the date of grant through December 13, 2005.
(continued)
III-6
<PAGE> 9
(5) TCI has a stock incentive plan, the Tele-Communications, Inc. 1994
Stock Incentive Plan (the "1994 Plan"). On December 13, 1995,
pursuant to the 1994 Plan, Mr. Clouston was granted 100,000 restricted
shares of TCI Group Series A Stock, Mr. Marshall, Mr. Howard, Mr.
Gaines and Mr. Ravenel were each granted 15,000 restricted shares of
TCI Group Series A Stock, Ms. Mowry was granted 10,000 restricted
shares of TCI Group Series A Stock and Mr. Schotters was granted
25,000 restricted shares of TCI Group Series A Stock. Such restricted
shares vest as to 50% of such shares on December 13, 1999 and as to
the remaining 50% of such shares on December 13, 2000. The value of
such restricted shares at the end of 1996 was $1,306,250 for Mr.
Clouston, $195,938 each for Messrs. Marshall, Howard, Gaines and
Ravenel, $130,625 for Ms. Mowry and $326,563 for Mr. Schotters based
upon the closing price of TCI Group Series A Stock on December 31,
1996. TCI has not paid cash dividends on the TCI Group Series A Stock
and does not anticipate declaring and paying cash dividends on the TCI
Group Series A Stock at any time in the foreseeable future.
(6) On December 4, 1996, Mr. Clouston and Mr. Howard were each granted
options to acquire 664,076 shares of SATCo Series A Stock. For
additional information relating to these grants, see notes to the
table provided pursuant to Item 11(b).
(7) On December 1, 1996, Mr. Clouston and Mr. Gaines were each granted
options to acquire 10 shares of TCI Telephony Services, Inc. common
stock (the "Telephony Options") and 10 shares of TCI Wireline, Inc.
common stock (the "Wireline Options"). For additional information
with respect to these grants, see notes to the table provided pursuant
to Item 11(b).
(8) On December 1, 1996, Mr. Clouston and Mr. Ravenel were each granted
options to acquire 10 shares of TCI.NET, Inc. common stock (the
"Internet Options"). For additional information with respect to these
grants, see notes to the table provided pursuant to Item 11(b).
(9) On December 13, 1995, pursuant to an incentive plan (the "1996 Plan"),
certain executive officers of TCI were granted an aggregate of
2,000,000 Options in tandem with stock appreciation rights to acquire
shares of TCI Group Series A Stock, 1,650,000 Liberty Group Series A
Options in tandem with stock appreciation rights to acquire shares of
Liberty Group Series A Stock and 200,000 SATCo Series A Options in
tandem with stock appreciation rights to acquire shares of SATCo
Series A Stock at adjusted purchase prices of $14.62, $16.00 and
$23.76 per share, respectively. Each such grant of options with
tandem stock appreciation rights vests evenly over five years with
such vesting period beginning August 4, 1995, first becomes
exercisable beginning on August 4, 1996 and expires on August 4, 2005.
(continued)
III-7
<PAGE> 10
On December 13, 1995, pursuant to the 1994 Plan, certain executive
officers were granted an aggregate of 2,650,000 TCI Group Series A
Options in tandem with stock appreciation rights to acquire shares of
TCI Group Series A Stock, an aggregate of 1,012,500 Liberty Group
Series A Options in tandem with stock appreciation rights to acquire
shares of Liberty Series A Stock and 265,000 SATCo Series A Options in
tandem with stock appreciation rights to acquire shares of SATCo
Series A Stock at adjusted purchase prices of $14.62, $16.00 and
$23.76 per share, respectively. Additionally, the Company has a stock
incentive plan, the Tele-Communications, Inc. 1995 Stock Incentive
Plan (the "1995 Plan"). On December 13, 1995, pursuant to the 1995
Plan, certain key employees were granted an aggregate of 2,757,500 TCI
Group Series A Options in tandem with stock appreciation rights to
acquire shares of TCI Group Series A Stock, an aggregate of 654,000
Liberty Group Series A Options in tandem with stock appreciation
rights to acquire shares of Liberty Group Series A Stock and 275,750
SATCo Series A Options in tandem with stock appreciation rights to
acquire shares of SATCo Series A Stock at adjusted purchase prices of
$14.62, $16.00 and $23.76 per share, respectively. Each such grant of
options with tandem stock appreciation rights vests evenly over five
years with such vesting period beginning August 4, 1995, first becomes
exercisable beginning on August 4, 1996 and expires on August 4, 2005.
Notwithstanding the vesting schedule as set forth in the option
agreement, the option shares shall become available for purchase if
grantee's employment with the Company (a) shall terminate by reason of
(i) termination by the Company without cause (ii) termination by the
grantee for good reason (as defined in the agreement) or (iii)
disability, (b) shall terminate pursuant to provisions of a written
employment agreement, if any, between the grantee and the Company
which expressly permits the grantee to terminate such employment upon
occurrence of specified events (other than the giving of notice and
passage of time), or (c) if grantee dies while employed by the
Company. Further, the option shares will become available for
purchase in the event of an Approved Transaction, Board Change, or
Control Purchase (each as defined in the applicable Plan), unless in
the case of an Approved Transaction, the Compensation Committee under
the circumstances specified in the Plan determines otherwise.
Mr. Schotters was granted 50,000 options in tandem with stock
appreciation rights to acquire from TCI shares of Series A
Tele-Communications International, Inc. common stock ("TINTA Series A
Stock") owned by it. Additionally, Tele-Communications International,
Inc. ("International"), a majority owned subsidiary of TCI, has a
stock incentive plan (the "International Plan"). On December 13,
1995, pursuant to the International Plan, certain executive officers
and other key employees of TCI were granted an aggregate of 1,302,000
options in tandem with stock appreciation rights to acquire shares of
TINTA Series A Stock. Each such grant of options vests evenly over 5
years, becomes exercisable beginning August 4, 1996 and expires on
August 4, 2005.
(10) On November 17, 1994, pursuant to the 1994 Plan, certain executive
officers and other key employees were granted an aggregate of
3,220,000 TCI Group Series A Options in tandem with stock appreciation
rights to acquire shares of TCI Group Series A Stock at an adjusted
purchase price of $14.19 per share, an aggregate of 1,196,625 Liberty
Group Series A Options in tandem with stock appreciation rights to
acquire shares of Liberty Group Series A Stock at a purchase price of
$14.67 per share and 322,000 SATCo Series A Options in tandem with
stock appreciation rights at an adjusted purchase price of $23.06 per
share. Such options vest evenly over five years, became exercisable
beginning on November 17, 1995 and expire on November 17, 2004.
(continued)
III-8
<PAGE> 11
(11) Includes dollar value of annual TCI contributions to the TCI Employee
Stock Purchase Plan ("ESPP") in which all named executive officers are
fully vested. Directors who are not employees of the Company are
ineligible to participate in the ESPP. The ESPP, a defined
contribution plan, enables participating employees to acquire a
proprietary interest in TCI and benefits upon retirement. Under the
terms of the ESPP, employees are eligible for participation after one
year of service. The ESPP's normal retirement age is 65 years.
Participants may contribute up to 10% of their compensation and TCI
(by annual resolution of the TCI Board of Directors) may contribute up
to 100% of the participants' contributions. The ESPP includes a
salary deferral feature in respect of employee contributions.
Forfeitures (due to participants' withdrawal prior to full vesting)
are used to reduce TCI's otherwise determined contributions.
Generally, participants acquire a vested right in TCI contributions as
follows:
<TABLE>
<CAPTION>
Years of service Vesting Percentage
------------------ ----------------
<S> <C>
Less than 1 0
1-2 20
2-3 30
3-4 45
4-5 60
5-6 80
6 or more 100
</TABLE>
Participant contributions are fully vested. Although TCI has not
expressed an intent to terminate the ESPP, it may do so at any time.
The ESPP provides for full and immediate vesting of all participants'
rights upon termination.
(b) Option/SAR Grants Table of TCI Communications, Inc. The
following table shows all individual grants of stock options and stock
appreciation rights ("SARs") granted to each of the named executive officers of
TCIC during the year ended December 31, 1996:
<TABLE>
<CAPTION>
Number of
Securities
Underlying % of Total
Options/ Options/SARs Market
SARs Granted Exercise or Price on Grant Date
Granted to Employees Base Price Grant Date Expiration Present Value
Name (#) in Fiscal Year ($/Sh) ($/Sh) Date ($)
- ---- ----------- -------------- ----------- ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Brendan R. Clouston 664,076(1) 28.6% $ 8.86 $ 12.625(5) February 1, 2006 $ 5,806,083(7)
10(2) 50% $ 855,631(2) $ 2,100,000(6) February 1, 2006 $13,477,000
10(3) 50% $ 12,537(3) $ 12,537(6) February 1, 2006 $ 44,000(9)
10(4) 33 1/3% $ 55,246(4) $ 400,000(6) February 1, 2006 $ 3,468,000(10)
Gary S. Howard 664,076(1) 28.6% $ 8.86 $ 12.625(5) February 1, 2006 $ 5,806,083(7)
Gerald W. Gaines 10(2) 50% $ 855,631(2) $ 2,100,000(6) February 1, 2006 $13,477,000(8)
10(3) 50% $ 12,537(3) $ 12,537(6) February 1, 2006 $ 44,000(9)
Bruce W. Ravenel 10(4) 33 1/3% $ 55,246(4) $ 400,000(6) February 1, 2006 $ 3,468,000(10)
</TABLE>
(continued)
III-9
<PAGE> 12
(1) On December 4, 1996, Mr. Clouston and Mr. Romrell were each was
granted an option to purchase 664,076 shares of SATCo Series A Stock
representing 1.0% of the number of shares of Satellite common stock
issued and outstanding on the date of the Distribution, determined
immediately after giving effect to the Distribution, but before giving
effect to the exercise of such option or the other options to be
evidenced by a stock option agreement. The aggregate exercise price
for such option is equal to 1.0% of TCI's net investment as of the
date of the Distribution, but excluding any portion of TCI's net
investment that as of such date is represented by a promissory note or
other evidence of indebtedness from Satellite to TCI. All of such
options will vest and become exercisable in five equal annual
installments, with the first annual installment vesting on February 1,
1997, and will expire on February 1, 2006.
(2) Effective December 1, 1996, Mr. Clouston and Mr. Gaines were each
granted Telephony Options representing 1.0% of the Company's common
equity in TCI Telephony Services, Inc. ("TCI Telephony"). The
aggregate exercise price for each such option, which is payable to TCI
Telephony, is equal to 1.0% of (i) the Company's cumulative investment
in TCI Telephony as of December 1, 1996, adjusted for a 6% per annum
interest factor from the date each such investment was made to the
date of such exercise, less (ii) the sum of (x) $500 million
(representing the aggregate initial liquidation price of a TCI
Telephony preferred stock) and (y) the amount of the tax benefits
generated by the TCI Telephony (up to $500 million) as and when used
by TCI. The per share exercise price on the date of grant was
$850,029. Any exercise by one of such executive officers of all or
part of such options would need to be accompanied by the exercise by
such executive officer of a pro rata portion of the option described
in note 3 below. All of such options will vest and become exercisable
in five equal annual installments, with the first annual installment
vesting on February 1, 1997, and will expire on February 1, 2006.
(3) Effective December 1, 1996, Mr. Clouston and Mr. Gaines were each
granted Wireline Options representing 1.0% of the Company's common
equity in TCI Wireline, Inc. ("TCI Wireline"). The aggregate exercise
price for each such option, which is payable to TCI Wireline, is equal
to 1.0% of the Company's cumulative investment in TCI Wireline as of
December 1, 1996, adjusted for a 6% per annum interest factor from the
date each such investment was made to the date of such exercise. The
per share exercise price on the date of grant was $12,502. All of
such options will vest and become exercisable in five equal annual
installments, with the first annual installment vesting on February 1,
1997, and will expire on February 1, 2006. Such options must be
exercised on a pro rata basis with the Telephony Options as discussed
in note 2 above.
(continued)
III-10
<PAGE> 13
(4) Effective December 1, 1996, Mr. Clouston and Mr. Ravenel were each
granted Internet Options representing 1.0% of the Company's common
equity in TCI.NET, Inc. ("TCI.NET"). The aggregate exercise price for
each such option, which is payable to TCI.NET, is equal to 1.0% of the
Company's cumulative investment in TCI.NET as of December 1, 1996,
adjusted for a 6% per annum interest factor from the date each such
investment was made to the date of such exercise. The per share
exercise price on the date of grant was $55,070. All of such options
will vest and become exercisable in five equal annual installments,
with the first annual installment vesting on February 1, 1997, and
will expire on February 1, 2006.
(5) Represents the closing market price per share of SATCo Series A Stock
on December 5, 1996, the first date of trading following the date of
grant.
(6) Represents the market value on December 1, 1996 as determined by the
Board of Directors of TCI.
(7) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 6.22% discount rate; (b) a 35% volatility factor;
(c) the 10-year option term; (d) the closing price of SATCo Series A
Stock on December 5, 1996; and (e) a per share exercise price of
$8.86. The actual value an executive may realize will depend upon the
extent to which the stock price exceeds the exercise price on the date
the option is exercised. Accordingly, the value, if any, realized by
an executive will not necessarily be the value determined by the
model.
(8) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 6.87% discount rate; (b) a 50% volatility factor;
(c) the 10-year option term; (d) the market value of the Telephony
Option on December 1, 1996 as determined by the Board of Directors of
TCI: (e) a per share exercise price of $850,029 on December 1, 1996;
and (f) a 6% per annum interest adjustment to the exercise price.
The actual value an executive may realize will depend upon the extent
to which the stock price exceeds the exercise price on the date the
option is exercised. Accordingly, the value, if any, realized by an
executive will not necessarily be the value determined by the model.
(9) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 6.87% discount rate; (b) a 55% volatility factor;
(c) the 10-year option term; (d) the market value of the Wireline
Option on December 1, 1996 as determined by the Board of Directors of
TCI; (e) a per share exercise price of $12,502 on December 1, 1996;
and (f) a 6% per annum interest adjustment to the exercise price. The
actual value an executive may realize will depend upon the extent to
which the stock price exceeds the exercise price on the date the
option is exercised. Accordingly, the value, if any, realized by an
executive will not necessarily be the value determined by the model.
(continued)
III-11
<PAGE> 14
(10) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 6.87% discount rate; (b) a 60% volatility factor;
(c) the 10-year option term; (d) the market value of the Internet
Option on December 1, 1996 as determined by the Board of Directors of
TCI; (e) a per share exercise price of $55,070 on December 1, 1996;
and (f) a 6% per annum interest adjustment to the exercise price. The
actual value an executive may realize will depend upon the extent to
which the stock price exceeds the exercise price on the date the
option is exercised. Accordingly, the value, if any, realized by an
executive will not necessarily be the value determined by the model.
(c) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR
Value Table of TCI Communications, Inc. The following table shows each
exercise of stock options and SARs during the year ended December 31, 1996 by
each of the named executive officers of TCIC and the December 31, 1996 number
and year-end value of unexercised options and SARs on an aggregated basis:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at at
December 31, December 31,
1996 (#) 1996 ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- ----- ------------------ ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Brendan Clouston
Exercisable
Series A -- -- 730,000 $ 1,040,625
Liberty Series A -- -- 198,750 $ 1,461,428
SATCo Series A -- -- 80,125 --
Telephony -- -- -- --
Wireline -- -- -- --
Internet -- -- -- --
Unexercisable
Series A -- -- 1,145,000 $ 520,313
Liberty Series A -- -- 129,375 $ 861,784
SATCo Series A -- -- 771,451 $ 674,037
Telephony -- -- 10 $12,443,692
Wireline -- -- 10 --
Internet -- -- 10 $ 3,447,538
Barry Marshall
Exercisable
Series A -- -- 365,000 $ 716,875
Liberty Series A -- -- 131,250 $ 981,863
SATCo Series A -- -- 36,500 --
Unexercisable
Series A -- -- 210,000 $ 208,125
Liberty Series A -- -- 56,250 $ 364,388
SATCo Series A -- -- 21,000 --
</TABLE>
(continued)
III-12
<PAGE> 15
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at at
December 31, December 31,
1996 (#) 1996 ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- ----- ------------------ ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Bernard Schotters
Exercisable
Series A -- -- 186,250 $ 268,828
Liberty Series A -- -- 51,094 $ 376,396
SATCo Series A -- -- 18,625 --
TINTA Series A -- -- 10,000 --
Unexercisable
Series A -- -- 263,750 $ 78,047
Liberty Series A -- -- 23,906 $ 148,942
SATCo Series A -- -- 26,375 --
TINTA Series A -- -- 40,000 --
Barbara J. Mowry
Exercisable
Series A -- -- 60,000 --
Liberty Series A -- -- 3,750 $ 16,395
SATCo Series A -- -- 6,000 --
Unexercisable
Series A -- -- 215,000 --
Liberty Series A -- -- 5,625 $ 24,593
SATCo Series A -- -- 21,500 --
Gerald W. Gaines
Exercisable
Series A -- -- 65,000 --
Liberty Series A -- -- 7,500 $ 32,790
SATCo Series A -- -- 6,500 --
Telephony -- -- -- --
Wireline -- -- -- --
Unexercisable
Series A -- -- 210,000 --
Liberty Series A -- -- 11,250 $ 49,185
SATCo Series A -- -- 21,000 --
Telephony -- -- 10 $12,443,692
Wireline -- -- 10 --
Bruce W. Ravenel
Exercisable
Series A -- -- 85,500 $ 35,844
Liberty Series A -- -- 13,313 $ 78,604
SATCo Series A -- -- 8,550 --
Internet -- -- -- --
Unexercisable
Series A -- -- 234,500 $ 10,406
Liberty Series A -- -- 12,938 $ 62,486
SATCo Series A -- -- 23,450 --
Internet -- -- 10 $ 3,447,538
</TABLE>
(continued)
III-13
<PAGE> 16
(d) Compensation of directors. There are no arrangements whereby
any of TCIC's directors received compensation for services as a director during
1996.
(e) Employment Contracts and Termination of Employment and Change
of Control Arrangements. The Company has no employment contracts or
termination of employment and change of control arrangements for any of the
named executive officers of TCIC.
(f) Additional information with respect to Compensation Committee
Interlocks and Insider Participation in Compensation Decisions. The members of
TCI's compensation committee are Messrs. Robert A. Naify, John W. Gallivan and
Paul A. Gould, all directors of TCI and, as to Mr. Gallivan, a director of
TCIC. TCIC has no separate compensation committee, and compensation decisions
relative to TCIC are determined by TCI's compensation committee.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security ownership of certain beneficial owners. The
following table sets forth, as of March 1, 1997, information with respect to
the ownership of TCIC Class A common stock ("Class A Stock"), Class B common
stock ("Class B Stock") and Cumulative Exchangeable Preferred Stock, Series A
("Series A Preferred Stock"), by each person known to the Company to own
beneficially more than 5% of any class outstanding on that date. So far as is
known to TCIC, the persons indicated below have sole voting and investment
power with respect to the shares indicated as owned by them. Voting power in
the table is computed with respect to a general election of directors and,
therefore, the Series A Preferred Stock is included in the calculation.
<TABLE>
<CAPTION>
Name and address of Amount and Nature Percent Voting
Title of Class Beneficial Owner of Beneficial Ownership of Class(1) Power(1)
-------------- ---------------------- ----------------------- ----------- ---------
<S> <C> <C> <C> <C>
Class A Tele-Communications, 811,655 100% 97.4%
Class B Inc. 94,447 100%
Series A Pref. 5619 DTC Parkway -- --
Englewood, CO
Class A Salomon Inc. -- -- *
Class B Seven World Trade -- --
Series A Pref. Center 747,300 (2) 16.2%
New York, NY
</TABLE>
________________________
* Less than one percent
(1) Based on 811,655 shares of Class A Stock, 94,447 shares of Class B
Stock and 4,600,000 shares of Series A Preferred Stock outstanding on
March 1, 1997. The Class A Stock has 100 votes per share and the
Class B Stock has 1,000 votes per share.
(2) The numbers in the table are based upon Amendment No. 1, dated March
7, 1997, to a Form 13G filed by Salomon Inc. Such filing indicates
that Salomon Inc. has shared voting and dispositive power over all
such shares.
(continued)
III-14
<PAGE> 17
(b) Security ownership of management. The following table sets
forth, as of March 1, 1997, information with respect to the ownership of TCIC's
voting securities (Class A Stock, Class B Stock and Series A Preferred Stock)
and ownership of TCI's voting securities (Series A Stock, Series B Stock,
Liberty Series A Stock and Liberty Series B Stock (other than directors'
qualifying shares), Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock ("Class B preferred Stock"), Convertible Preferred Stock,
Series C ("Series C Preferred Stock"), Redeemable Convertible TCI Group
Preferred Stock, Series G ("Series G Preferred Stock") and Redeemable
Convertible Liberty Media Group Preferred Stock, Series H ("Series H Preferred
Stock")), by all directors and each of the named executive officers of TCIC,
and by all executive officers and directors of TCIC as a group. Shares
issuable upon exercise or vesting of convertible securities or restricted
shares are deemed to be outstanding for the purpose of computing the percentage
ownership and overall voting power of persons beneficially owning such
securities, but have not been deemed to be outstanding for the purpose of
computing the percentage ownership or overall voting power of any other person.
Voting power in the table is computed with respect to a general election of
directors. The number of Series A Stock, Series B Stock, Liberty Series A
Stock and Liberty Series B Stock in the table include interests of the named
directors or executive officers or of members of the group of directors and
executive officers in shares held by the trustee of TCI's Employee Stock
Purchase Plan ("ESPP") and shares held by the trustee of United Artists
Entertainment, Inc.'s Employee Stock Ownership Plan for their respective
accounts. So far as is known to TCIC, the persons indicated below have sole
voting and investment power with respect to the shares indicated as owned by
them except as otherwise stated in the notes to the table and except for the
shares held by the trustee of TCI's ESPP for the benefit of such person, which
shares are voted at the discretion of the trustee.
<TABLE>
<CAPTION>
Name of Amount and Nature Percent Voting
Title of Class Beneficial Owner of Beneficial Ownership of Class(1) Power(1)
-------------- ---------------- ----------------------- ----------- ---------
<S> <C> <C> <C> <C>
Class A John C. Malone -- -- --
Class B -- --
Series A Pref. -- --
TCI Group
Series A 2,173,166 (2) * 16.9%
TCI Group
Series B 25,287,083 (3)(4) 29.9%
Liberty Series A 3,929,331 (2)(3) 1.7%
Liberty Series B 6,349,270 (3)(4) 30.0%
Class B Pref. 306,000 (3) 18.9%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Class A Donne F. Fisher, -- -- --
Class B individually and as -- --
Series A Pref. co-personal -- --
TCI Group representative to
Series A the Estate of Bob 4,110,681 (5)(6) * 20.8%
TCI Group Magness
Series B 31,034,936 (5) 36.7%
Liberty Series A 5,423,725 (5)(6) 2.4%
Liberty Series B 7,758,734 (5) 36.6%
Class B Pref. 129,299 (5) 8.0%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
</TABLE>
(continued)
III-15
<PAGE> 18
<TABLE>
<CAPTION>
Name of Amount and Nature Percent Voting
Title of Class Beneficial Owner of Beneficial Ownership of Class(1) Power(1)
-------------- ---------------- ----------------------- ----------- ---------
<S> <C> <C> <C> <C>
Class A John W. Gallivan -- -- --
Class B -- --
Series A Pref. -- --
TCI Group
Series A 52,124 (7) * *
TCI Group
Series B -- --
Liberty Series A 19,546 (7) *
Liberty Series B -- --
Class B Pref. 14 (7) *
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Class A Kim Magness, -- -- --
Class B individually and -- --
Series A Pref. as personal -- --
TCI Group representative of
Series A the Estate of 2,155,332 (8)(9) * 4.7%
TCI Group Betsy Magness
Series B 6,864,212 (8) 8.1%
Liberty Series A 1,666,275 (8)(9) *
Liberty Series B 1,716,053 (8) 8.1%
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Class A Leo J. Hindery, Jr. -- -- --
Class B -- --
Series A Pref. -- --
TCI Group
Series A 1,000,000 (10) * *
TCI Group
Series B -- --
Liberty Series A 250,000 (10) *
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Class A Brendan R. Clouston -- -- --
Class B -- --
Series A Pref. -- --
TCI Group
Series A 1,986,498 (11) * *
TCI Group
Series B 230 *
Liberty Series A 332,463 (11) *
Liberty Series B 57 *
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
</TABLE>
(continued)
III-16
<PAGE> 19
<TABLE>
<CAPTION>
Name of Amount and Nature Percent Voting
Title of Class Beneficial Owner of Beneficial Ownership of Class(1) Power(1)
-------------- ---------------- ----------------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Class A Barry Marshall -- -- --
Class B -- --
Series A Pref. -- --
TCI Group
Series A 639,196 (12) * *
TCI Group
Series B -- --
Liberty Series A 205,678 (12) *
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Class A Bernard Schotters -- -- --
Class B -- --
Series A Pref. -- --
TCI Group
Series A 628,739 (13) * *
TCI Group
Series B 1,716 *
Liberty Series A 132,811 (13) *
Liberty Series B 429 *
Class B Pref. 1,022 *
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Class A Barbara J. Mowry -- -- --
Class B -- --
Series A Pref. -- --
TCI Group
Series A 285,954 (14) * *
TCI Group
Series B -- --
Liberty Series A 9,640 (14) *
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Class A Gerald W. Gaines -- -- --
Class B -- --
Series A Pref. -- --
TCI Group
Series A 295,512 (15) * *
TCI Group
Series B -- --
Liberty Series A 19,562 (15) *
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
</TABLE>
(continued)
III-17
<PAGE> 20
<TABLE>
<CAPTION>
Name of Amount and Nature Percent Voting
Title of Class Beneficial Owner of Beneficial Ownership of Class(1) Power(1)
-------------- ---------------- ----------------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Class A Bruce W. Ravenel -- -- --
Class B -- --
Series A Pref. -- --
TCI Group
Series A 342,285 (16) * *
TCI Group
Series B -- --
Liberty Series A 28,998 (16) *
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Class A All directors and -- -- --
Class B executive officers -- --
Series A Pref. as a group -- --
TCI Group (18 persons)
Series A 15,791,463 (5)(7)(8)(17) 2.6% 42.5%
TCI Group
Series B 63,191,177 (3)(4)(5)(8) 74.7%
Liberty Series A 12,600,704 (3)(5)(7)(8)(17) 5.4%
Liberty Series B 15,825,293 (3)(4)(5)(8) 74.7%
Class B Pref. 437,167 (3)(5)(7) 27.0%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
</TABLE>
- ----------------------
* Less than one percent.
(1) Based on 811,655 shares of Class A Stock, 94,447 shares of Class B
Stock, 4,600,000 shares of Series A Preferred Stock, 598,055,198
shares of Series A Stock (after elimination of shares held by
subsidiaries of TCI), 84,647,065 shares of Series B Stock, 228,721,426
shares of Liberty Series A Stock, 21,187,969 shares of Liberty Series
B Stock, 1,620,026 shares of Class B Preferred Stock (after
elimination of shares held by subsidiaries of TCI), 70,575 shares of
Series C Preferred Stock, 6,693,177 shares of Series G Preferred Stock
and 6,693,177 shares of Series H Preferred Stock outstanding on March
1, 1997.
(2) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 1,000,000
shares of TCI Group Series A Stock and 375,000 shares of Liberty Group
Series A Stock. Options to acquire 800,000 and 300,000 shares of TCI
Group Series A Stock and Liberty Group Series A Stock, respectively,
are currently exercisable. Additionally assumes the exercise in full
of stock options granted in tandem with stock appreciation rights in
December of 1995 to acquire 1,000,000 shares of TCI Group Series A
Stock and 375,000 shares of Liberty Group Series A Stock. Options to
acquire 200,000 shares of TCI Group Series A Stock and 75,000 shares
of Liberty Group Series A Stock are currently exercisable.
(continued)
III-18
<PAGE> 21
(3) Includes 1,173,000 shares of TCI Group Series B Stock, 146,625 shares
of Liberty Group Series A Stock, 293,250 shares of Liberty Group
Series B Stock and 6,900 shares of Class B Preferred Stock held by Dr.
Malone's wife, Mrs. Leslie Malone, but Dr. Malone has disclaimed any
beneficial ownership of such shares.
(4) Pursuant to a letter agreement, dated June 17, 1988, the late Mr. Bob
Magness and Kearns each agreed with Dr. Malone that prior to making a
disposition of a significant portion of their respective holdings of
TCI Group Series B Stock or Liberty Group Series B Stock, he or it
would first offer Dr. Malone the opportunity to purchase such shares.
(5) Mr. Fisher, as co-personal representative of the Estate of Bob
Magness, is deemed the beneficial owner of all shares of TCI Group
Series A Stock, TCI Group Series B Stock, Liberty Group Series A Stock
Liberty Group Series B Stock and Class B Preferred Stock held of
record by the Estate of Bob Magness. The number of shares held by Mr.
Fisher includes 1,524,315 shares of TCI Group Series A, 30,785,864
shares of TCI Group Series B, 4,419,304 shares of Liberty Group Series
A, 7,696,466 shares of Liberty Group Series B and 125,000 shares of
Class B Preferred Stock of which Mr. Fisher is deemed beneficial owner
as co-personal representative. Additionally, assumes the exercise in
full by the Estate of Bob Magness of stock options granted in tandem
with stock appreciation rights to Mr. Bob Magness in November of 1992
to acquire 1,000,000 shares of TCI Group Series A Stock and 375,000
shares of Liberty Group Series A Stock. Additionally assumes the
exercise in full by the Estate of Bob Magness of stock options granted
in tandem with stock appreciation rights to Mr. Bob Magness in
December of 1995 to acquire 1,000,000 shares of Series A Stock and
375,000 shares of Liberty Series A Stock. All such options are
currently exercisable.
(6) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights to Mr. Fisher in November of 1994 to acquire
200,000 shares of TCI Group Series A Stock and 75,000 shares Liberty
Group Series A Stock. Options to acquire 80,000 shares of TCI Group
Series A Stock and 30,000 shares of Liberty Group Series A Stock are
currently exercisable. TCI has an option plan for its directors who
are not employees of TCI (the "Director Option Plan"). Assumes the
exercise in full of options granted to Mr. Fisher in January 1996,
pursuant to the Director Stock Option Plan, to acquire 50,000 shares
of TCI Group Series A Stock and 18,750 shares of Liberty Group Series
A Stock. Options to acquire 10,000 shares of Series A Stock and 3,750
shares of Liberty Series A Stock are currently exercisable.
(7) Includes 1,524 shares of TCI Group Series A Stock, 571 shares of
Liberty Group Series A Stock and 14 shares of Class B Preferred Stock
held by Mr. Gallivan's wife. Also, assumes the exercise in full of
options granted, pursuant to the Director Stock Option Plan, to acquire
50,000 shares of TCI Group Series A Stock and 18,750 shares of Liberty
Group Series A Stock. Options to acquire 20,000 shares of TCI Group
Series A Stock and 7,500 shares of Liberty Group Series A Stock are
currently exercisable.
(8) Mr. Kim Magness, as executor of the Estate of Betsy Magness, is the
beneficial owner of all shares of TCI Group Series A Stock, TCI Group
Series B Stock, Liberty Group Series A Stock and Liberty Group Series
B Stock held of record by the Estate of Betsy Magness. The number of
shares held by Mr. Kim Magness includes 2,105,332 shares of TCI Group
Series A Stock, 6,346,212 shares of TCI Group Series B Stock,
1,582,775 shares of Liberty Group Series A Stock and 1,586,553 shares
of Liberty Group Series B Stock of which Mr. Magness is beneficial
owner as executor.
(continued)
III-19
<PAGE> 22
(9) Assumes the exercise in full of options granted to Mr. Kim Magness in
November, 1994, pursuant to the Director Stock Option Plan, to acquire
50,000 shares of TCI Group Series A Stock and 18,750 shares of Liberty
Group Series A Stock. Options to acquire 20,000 shares of TCI Group
Series A Stock and 7,500 shares of Liberty Group Series A Stock are
currently exercisable.
(10) Assumes the exercise in full of options granted in tandem with stock
appreciation rights in February of 1997 to acquire 1,000,000 shares of
TCI Group Series A Stock and 250,000 shares of Liberty Group Series A
Stock. None of the options are exercisable until February of 1998.
(11) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 300,000
shares of TCI Group Series A Stock and 112,500 shares of Liberty Group
Series A Stock. Options to acquire 200,000 shares of TCI Group Series
A Stock and 75,000 shares of Liberty Group Series A Stock are
currently exercisable. Additionally assumes the exercise in full of
stock options granted in tandem with stock appreciation rights in
November of 1993 to acquire 375,000 shares of TCI Group Series A Stock
and 140,625 shares of Liberty Group Series A Stock. Options to
acquire 250,000 shares of TCI Group Series A Stock and 93,750 shares
of Liberty Group Series A Stock are currently exercisable. Also
assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1994 to acquire 200,000
shares of TCI Group Series A Stock and 75,000 shares of Liberty Group
Series A Stock. Options to acquire 80,000 shares of TCI Group Series
A Stock and 30,000 shares of Liberty Group Series A Stock are
currently exercisable. Assumes the exercise in full of stock options
granted in tandem with stock appreciation rights in December of 1995
to purchase 1,000,000 shares of TCI Group Series A Stock. Options to
acquire 200,000 shares of TCI Group Series A Stock are currently
exercisable. Additionally assumes the vesting in full of 100,000 TCI
Group Series A restricted stock. None of the stock is currently
vested.
(12) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 200,000
shares of Series A Stock and 75,000 shares of Liberty Series A Stock.
Options to acquire 160,000 shares of Series A Stock and 60,000 shares
of Liberty Series A Stock are currently exercisable. Additionally
assumes the exercise in full of stock options in tandem with stock
appreciation rights in October of 1993 to acquire 200,000 shares of
Series A Stock and 75,000 shares of Liberty Series A Stock. Options
to acquire 150,000 shares of Series A Stock and 56,250 shares of
Liberty Series A Stock are currently exercisable. Also assumes the
exercise in full of stock options in tandem with stock appreciation
rights in November of 1994 to acquire 100,000 shares of Series A Stock
and 37,500 shares of Liberty Series A Stock. Options to acquire
40,000 shares of Series A Stock and 15,000 shares of Liberty Series A
Stock are currently exercisable. Assumes the exercise in full of
stock options granted in tandem with stock appreciation rights in
December of 1995 to purchase 75,000 shares of Series A Stock. Options
to acquire 15,000 shares of Series A Stock are currently exercisable.
Additionally assumes the vesting in full of 15,000 Series A restricted
stock. None of the stock is currently vested.
(continued)
III-20
<PAGE> 23
(13) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 75,000 shares
of Series A Stock and 28,125 shares of Liberty Series A Stock.
Options to acquire 60,000 shares of Series A Stock and 22,500 shares
of Liberty Series A Stock are currently exercisable. Additionally
assumes the exercise in full of stock options in tandem with stock
appreciation rights in October of 1993 to acquire 75,000 shares of
Series A Stock and 28,125 shares of Liberty Series A Stock. Options
to acquire 56,250 shares of Series A Stock and 21,094 shares of
Liberty Series A Stock are currently exercisable. Also assumes the
exercise in full of stock options in tandem with stock appreciation
rights in November of 1994 to acquire 50,000 shares of Series A Stock
and 18,750 shares of Liberty Series A Stock. Options to acquire
20,000 shares of Series A Stock and 7,500 shares of Liberty Series A
Stock are currently exercisable. Assumes the exercise in full of
stock options granted in tandem with stock appreciation rights in
December of 1995 to purchase 250,000 shares of Series A Stock.
Options to acquire 50,000 shares of Series A Stock are currently
exercisable. Additionally assumes the vesting in full of 25,000
Series A restricted stock. None of the stock is currently vested.
(14) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in 1995 to acquire 25,000 shares of TCI
Group Series A Stock and 9,375 shares of Liberty Group Series A Stock.
Options to acquire 10,000 shares of TCI Group Series A Stock and 3,750
shares of Liberty Group Series A Stock are currently exercisable.
Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in December of 1995 to purchase 250,000
shares of TCI Group Series A Stock. Options to acquire 50,000 shares
of TCI Group Series A Stock are currently exercisable. Additionally
assumes the vesting in full of 10,000 TCI Group Series A restricted
stock. None of the stock is currently vested.
(15) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1994 to acquire 50,000 shares
of TCI Group Series A Stock and 18,750 shares of Liberty Group Series
A Stock. Options to acquire 20,000 shares of TCI Group Series A Stock
and 7,500 shares of Liberty Group Series A Stock are currently
exercisable. Assumes the exercise in full of stock options granted in
tandem with stock appreciation rights in December of 1995 to purchase
225,000 shares of TCI Group Series A Stock. Options to acquire 45,000
shares of TCI Group Series A Stock are currently exercisable.
Additionally assumes the vesting in full of 15,000 TCI Group Series A
restricted stock. None of the stock is currently vested.
(continued)
III-21
<PAGE> 24
(16) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 10,000 shares
of TCI Group Series A Stock and 3,750 shares of Liberty Group Series A
Stock. Options to acquire 8,000 shares of TCI Group Series A Stock
and 3,000 shares of Liberty Group Series A Stock are currently
exercisable. Additionally, assumes the exercise in full of stock
options granted in tandem with stock appreciation rights in October of
1993 to acquire 10,000 shares of TCI Group Series A Stock and 3,750
shares of Liberty Group Series A Stock. Options to acquire 7,500
shares of TCI Group Series A Stock and 2,813 shares of Liberty Group
Series A Stock are currently exercisable. Also assumes the exercise
in full of stock options granted in November of 1994 to acquire 50,000
shares of TCI Group Series A Stock and 18,750 shares of Liberty Group
Series A Stock. Options to acquire 20,000 shares of TCI Group Series
A Stock and 7,500 shares of Liberty Group Series A Stock are currently
exercisable. Assumes the exercise in full of stock options granted in
tandem with stock appreciation rights in December of 1995 to purchase
250,000 shares of TCI Group Series A Stock. Options to acquire
50,000 shares of TCI Group Series A Stock are currently exercisable.
Additionally assumes the vesting in full of 15,000 TCI Group Series A
restricted stock. None of the stock is currently vested.
(17) Certain executive officers and directors of TCIC (9 persons, including
Messrs. Malone, Clouston, Marshall, Schotters and Ravenel) hold
options which were granted in tandem with stock appreciation rights in
November of 1992, to acquire an aggregate of 1,848,500 shares of TCI
Group Series A Stock and an aggregate of 693,187 shares of Liberty
Group Series A Stock at adjusted purchase prices of $10.75 per share
and $11.16 per share, respectively. Options to acquire 1,438,800
shares of TCI Group Series A Stock and 539,550 shares of Liberty
Series A Stock are currently exercisable.
Additionally, certain executive officers (9 persons including Messrs.
Clouston, Marshall, Schotters and Ravenel) hold stock options granted
in tandem with stock appreciation rights in October and November of
1993 to acquire an aggregate of 975,000 shares of TCI Group Series A
Stock and an aggregate of 365,625 shares of Liberty Group Series A
Stock at adjusted purchase prices of $10.75 per share and $11.16 per
share, respectively. Options to acquire 700,000 shares of TCI Group
Series A Stock and 262,500 shares of Liberty Group Series A Stock are
currently exercisable.
Also, certain executive officers and directors (12 persons including
Messrs. Clouston, Fisher, Marshall, Ravenel, Schotters and Gaines and
Ms. Mowry) hold stock options which were granted in tandem with stock
appreciation rights in November of 1994 to acquire an aggregate of
1,075,000 shares of TCI Group Series A Stock and an aggregate of
403,125 shares of Liberty Group Series A Stock at adjusted purchase
prices of $14.19 per share and $14.67 per share, respectively.
Options to acquire 430,000 shares of TCI Group Series A Stock and
161,250 shares of Liberty Group Series A Stock are currently
exercisable.
Additionally, certain executive officers and directors (13 persons,
including Messrs. Malone, Clouston, Marshall, Schotters, Ravenel and
Gaines and Ms. Mowry) hold stock options which were granted, pursuant
to the 1994 Plan and the 1996 Plan in tandem with stock appreciation
rights in December of 1995 to acquire an aggregate of 3,875,000 shares
of TCI Group Series A Stock at $14.62 per share. Options to acquire
775,000 shares of TCI Group Series A Stock are currently exercisable.
(continued)
III-22
<PAGE> 25
Additionally, certain executive officers and directors (2 persons
including Dr. Malone) hold stock options which were granted, pursuant
to the 1994 Plan and the 1996 Plan, in tandem with stock appreciation
rights in December of 1995 to acquire an aggregate of 487,500 shares
of Liberty Group Series A Stock at a purchase price of $16.00 per
share. Options to acquire 97,500 shares of Liberty Group Series A
Stock are currently exercisable.
Also, certain executive officers (11 persons, including Messrs.
Clouston, Marshall, Schotters, Ravenel and Gaines and Ms. Mowry) hold
an aggregate of 260,000 shares of TCI Group Series A restricted stock.
One executive officer holds 15,000 shares of Liberty Group Series A
restricted stock. None of the shares are currently vested.
Mr. Hindery holds options to acquire 1,000,000 shares of TCI Group
Series A Stock and 250,000 shares of Liberty Group Series A Stock as
described in note 10 above.
Two directors, who are also directors of TCI, hold options to purchase
an aggregate of 100,000 shares of TCI Group Series A Stock and an
aggregate of 37,500 shares of Liberty Group Series A Stock at adjusted
purchase prices of $14.19 per share and $14.67 per share,
respectively. Options to purchase 40,000 shares of TCI Group Series A
Stock and 15,000 shares of Liberty Group Series A Stock are currently
exercisable. Mr. Fisher, a director of the Company and of TCI, holds
an option to purchase 50,000 shares of TCI Group Series A Stock and
18,750 shares of Liberty Group Series A Stock at purchase prices of
$16.99 and $16.83 per share, respectively. Options to acquire 10,000
shares of TCI Group Series A Stock and 3,750 shares of Liberty Group
Series A Stock are currently exercisable.
All of the aforementioned options with tandem stock appreciation
rights, options and restricted stock are reflected in this table
assuming the exercise or vesting in full of such securities.
No equity securities in any subsidiary of the Company, other than
directors' qualifying shares, are owned by any of the Company's executive
officers or directors, except that Mr. Fisher, a director of the Company, as
co-personal representative of the Estate of Bob Magness, is deemed to have
beneficial ownership of 944 shares of WestMarc Series C Cumulative Compounding
Redeemable Preferred Stock; Mr. Kim Magness, a director of the Company, owns 31
shares of WestMarc Series C Cumulative Compounding Redeemable Preferred Stock;
and Dr. Malone, a director and an executive officer of the Company, owns, as
trustee for his children, 68 shares of WestMarc Series C Cumulative Compounding
Redeemable Preferred Stock. Mr. Clouston, an executive officer of the Company,
pursuant to a Restricted Stock Award Agreement, owns 62 shares of WestMarc
Series C Cumulative Compounding Redeemable Preferred Stock. (See Item 11(a)
for additional information regarding Mr. Clouston's ownership of such preferred
stock). Mr. Clouston and Mr. Gaines were each granted Telephony Options
representing 1.0% of the Company's common equity in TCI Telephony Services,
Inc. and Wireline Options representing 1.0% of the Company's common equity in
TCI Wireline, Inc. Mr. Clouston and Mr. Ravenel were each granted Internet
Options representing 1.0% of the Company's common equity in TCI.NET, Inc. (See
Item 11(b) for additional information regarding these grants).
(c) Change of control. The Company knows of no arrangements,
including any pledge by any person of securities of the Company, the operation
of which may at a subsequent date result in a change in control of the Company.
(continued)
III-23
<PAGE> 26
Item 13. Certain Relationships and Related Transactions.
(a) Transactions with management and others.
Pursuant to a Restricted Stock Award Agreement dated December 10,
1992, the Company transferred to Mr. Fisher, a director of the Company, 124.03
shares (having a liquidation value of $4 million) of WestMarc Series C
Cumulative Compounding Preferred Stock owned by the Company, subject to
forfeiture in the event of certain circumstances from the date of grant through
February 1, 2002, with the number of shares subject to forfeiture decreasing by
10% on February 1 of each year. Effective January 1, 1996, he acquired vested
title to 37.209 of such shares of WestMarc Series C Cumulative Compounding
Preferred Stock and forfeited the balance of such shares. As described below,
effective as of January 31, 1996, the 37.209 vested shares of WestMarc Series C
Cumulative Compounding Preferred Stock owned by Mr. Fisher were used by one of
his affiliates as the consideration for the purchase of certain partnership
interests held by subsidiaries of the Company.
In 1989, ECP Holdings, Inc., a subsidiary of the Company ("ECP"), and
Halcyon Communications, Inc., an Oklahoma corporation which is not an affiliate
of the Company ("HCI"), formed Halcyon Communications Partners, an Oklahoma
general partnership ("HCP"), for the purpose of acquiring, owning and operating
cable television systems. In 1994, HCI and American Televenture of
Minersville, Inc., a subsidiary of the Company ("ATM"), as general partners,
and three other subsidiaries of the Company, TCI Cablevision of Nevada, Inc.
("TCINV"), and TEMPO Cable, Inc. ("Tempo Cable") and TCI Cablevision of Utah,
Inc. ("TCIU") as limited partners, formed Halcyon Communications Limited
Partnership, an Oklahoma limited partnership ("HCLP"), for the purpose of
acquiring, owning and operating certain other cable television systems.
Effective as of January 31, 1996, Fisher Communication Associates, L.L.C., a
Colorado limited liability company ("Fisher Communications") controlled by Mr.
Donne F. Fisher, a director of the Company purchased one-third of ECP's
partnership interest in HCP and one-third of the partnership interest of each
of ATM, TCINV, TCIU and Tempo Cable in HCLP, a ten- year option to purchase the
balance of ECP's partnership interest in HCP and ten-year options to purchase
the balance of the partnership interest in HCLP of each of ATM, TCINV, TCIU and
Tempo Cable. The purchase price for each such partnership interest purchased
by Fisher Communications consisted of shares of Series C Cumulative Compounding
Preferred Stock of WestMarc Communications, Inc., a subsidiary of the Company
(the "WestMarc Shares"). The purchase price for each such option acquired by
Fisher Communications was $100 in cash, and each such option is exercisable for
cash in a specified amount. The number of WestMarc Shares delivered to each of
the Company's subsidiaries named above as consideration for one-third of its
partnership interest in HCP or HCLP, and the cash exercise price which Fisher
Communications would be required to pay in order to exercise the options
granted by those subsidiaries, are as follows:
<TABLE>
<CAPTION>
Cash Exercise Price
Number of WestMarc Shares Of Option
------------------------- -------------------
<S> <C> <C>
ECP 14.8836 $ 1,200,000
ATM 0.5224 42,120
TCINV 2.8911 233,100
TCIU 4.3557 351,180
Tempo Cable 14.5562 1,173,600
-------- ---------------
37.2090 $ 3,000,000
======== ===============
</TABLE>
(continued)
III-24
<PAGE> 27
The WestMarc Shares are not publicly traded. The dividend,
liquidation, and redemption features of the WestMarc Shares are determined by
reference to "Liquidation Price, " which is defined, per share, as the sum of
(i) $32,250 plus (ii) an amount equal to all dividends which accrued during any
quarterly dividend period and were not paid in full at the end of that period
or subsequently.
The Company has entered into an agreement in principle to acquire (i)
all of the partnership interests (other than a .001 percent general partner
interest) in InterMedia Capital Management, a California limited partnership
("ICM I"), (ii) all of the partnership interests (other than a .001 percent
general partner interest and a .001 percent special limited partner interest)
in InterMedia Capital Management III, L.P. ("ICM III"), and (iii) all of the
partnership interests (other than a .001 percent general partner interest and a
.001 percent special limited partner interest) in InterMedia Capital Management
IV, L.P. ("ICM IV") for total consideration of 2,545,455 shares (the "TCI
Shares") of the Company's TCI Group Series B Stock, $10,000,000 in cash
(subject to certain adjustments) and assumption of certain liabilities totaling
approximately $11,300,000. The partnership interests in ICM IV to be acquired
by the Company were acquired by the sellers of such interests in January and
July 1996 for $21,750. The other interests to be acquired by the Company were
acquired by the sellers of those interests before April 1995. Mr. Hindery, an
executive officer of the Company, is the beneficial owner of a 66.3% interest in
ICM I, a 94.0% interest in ICM III, and a 81.1% interest in ICM IV, and Mr.
Fisher, a director of the Company, is the beneficial owner of a 1.6% interest in
ICM IV. The Company also has agreed in principle that if InterMedia Partners
VI, L.P. ("IP-VI") is formed and fully funded on terms and conditions agreed by
the Company (the "IP-VI Effective Date"), the Company will acquire all of the
partnership interests (other than a .001 percent general partner interest) of
InterMedia Capital Management VI, L.P. ("ICM-VI") in exchange for a number of
shares of Tele-Communications, Inc. Series B common stock (the "Contingent TCI
Shares") determined by dividing $5,000,000 by the average of the closing prices
of the corresponding Tele-Communications, Inc. Series A common stock for the 20
trading days preceding the IP VI Effective Date and $1,000,000 in cash. Mr.
Hindery is the beneficial owner of 100% of ICM-VI and acquired his interest in
ICM-VI in July of 1996 for $10,000. Mr. Fisher will be entitled to a consulting
fee in the approximate amount of $400,000 in cash and 31,030 shares of TCI Group
Series B Stock upon completion of the aforementioned transactions involving ICM
I, ICM III and ICM IV and in connection with the formation of IP VI
(collectively, the "InterMedia Transactions"). These fees will be paid by the
entities receiving payments from the Company in the InterMedia Transactions.
Dr. Malone, an executive officer and director of the Company, will have the
power to direct the voting of the TCI Shares and, if they are issued, the
Contingent TCI Shares pursuant to a voting agreement, and Dr. Malone also will
have a right of first refusal with respect to any proposed transfer of the TCI
Shares and, if they are issued, the Contingent TCI Shares. That right of first
refusal may be exercised by Dr. Malone either by the payment of cash or, subject
to certain exceptions, by exchanging shares of TCI Group Series A Stock for the
TCI Shares or Contingent TCI Shares to be acquired by him. If not exercised by
Dr. Malone, the right of first refusal may be exercised by the Company.
Completion of the InterMedia Transactions is subject to various
conditions, including execution of definitive agreements, receipt of consents
from governmental authorities and other third parties.
The interests of Messrs. Hindery, Fisher and Malone in the InterMedia
Transactions were disclosed to the Company's Board of Directors which approved
the InterMedia Transactions pursuant to a vote in which Messrs. Fisher and
Malone abstained from voting.
(continued)
III-25
<PAGE> 28
(b) Certain business relationships.
Satellite Relationships
John Malone is currently a director of TCIC, Chief Executive Officer,
Chairman of the Board and a director of TCI and is also the Chairman of the
Board and a director of Satellite. Dr. Malone is also a principal stockholder
of both TCI and Satellite.
Since the consummation of the Distribution, Satellite and TCI have
operated independently, and neither has any stock ownership, beneficial or
otherwise, in the other. However, for the purposes of governing certain of the
ongoing relationships between Satellite and TCI after the Distribution, and to
provide mechanisms for an orderly transition, Satellite and TCI have entered
into various agreements, including the "Reorganization Agreement," the
"Transition Services Agreement," an amendment to TCI's existing "Tax Sharing
Agreement," the "Indemnification Agreements," the "Trade Name and Service Mark
Agreement" and the "Share Purchase Agreement," all of which are described
below. In addition, TCIC continues to provide installation, maintenance,
retrieval and other customer fulfillment services for certain customers of
Satellite, pursuant to the "Fulfillment Agreement," and entered into the "TCIC
Credit Facility" with Satellite, both of which are described below.
Reorganization Agreement. On the Distribution date, TCI,
TCIC and a number of other TCI subsidiaries, including Satellite, entered into
the Reorganization Agreement, which provided for, among other things, the
principal corporate transactions required to effect the Distribution, the
conditions thereto and certain provisions governing the relationship between
Satellite and TCI with respect to and resulting from the Distribution.
(continued)
III-26
<PAGE> 29
Certain of Satellite's assets relating to the digital satellite
business were historically owned by subsidiaries of TCI other than Satellite
and its predecessors. These assets include the capital stock of Tempo
Satellite, Inc. ("Tempo") and the 20.86% partnership interests in PRIMESTAR
Partners, L.P. ("PRIMESTAR Partners"). The Reorganization Agreement provided
for, among other things, the transfer of these assets to Satellite and for the
assumption by Satellite of related liabilities. No consideration was payable by
Satellite for these transfers, except that two subsidiaries of Satellite
purchased TCI's partnership interests in PRIMESTAR Partners for consideration
payable by delivery of promissory notes issued by such subsidiaries (the "K-1
Notes"), which promissory notes were assumed by TCI on the Distribution date in
the form of a capital contribution to Satellite. The Reorganization Agreement
also provides for certain cross-indemnities designed to make Satellite
financially responsible for all liabilities relating to the digital satellite
business prior to the Distribution, as well as for all liabilities incurred by
Satellite after the Distribution, and makes TCI financially responsible for all
potential liabilities of Satellite which are not related to the digital
satellite business, including, for example, liabilities arising as a result of
Satellite's having been a subsidiary of TCI. The Reorganization Agreement
further provided for each of Satellite and TCI to preserve the confidentiality
of all confidential or proprietary information of the other party, for five
years following the Distribution, subject to customary exceptions, including
disclosures required by law, court order or government regulation.
Pursuant to the Reorganization Agreement, on the Distribution date,
Satellite issued to TCIC a note in the principal amount of $250,000,000 (the
"Satellite Note") representing a portion of Satellite's intercompany balance
owed to TCIC on such date. See "-TCIC Credit Facility" below. Pursuant to the
Reorganization Agreement, the remainder of Satellite's intercompany balance
owed to TCIC on the Distribution date (other than certain advances to Satellite
made by TCIC in 1996 to fund certain construction and related costs associated
with TCI Satellite Entertainment, Inc.'s Satellites ("SATCo Satellites"), as
described below under "-Reimbursement of Certain Satellite Expenses"), and the
indebtedness represented by the K-1 Notes were assumed by TCI in the form of
(i) a $100 million capital contribution to Satellite, (ii) consideration for
Satellite's assumption of TCI's obligations under options granted to Brendan R.
Clouston, another executive officer of TCI and another employee of TCI to
purchase shares of SATCo Series A Stock representing 1.0%, 1.0% and 0.5%,
respectively, of the shares of Satellite common stock issued and outstanding on
the Distribution date, determined immediately after giving effect to the
Distribution but before giving effect to the issuance of the shares of SATCo
Series A Stock issuable upon exercise of such options, and (iii) consideration
for Satellite's grant of an option to TCI to purchase up to 4,765,000 shares of
SATCo Series A Stock (as such number may be adjusted to reflect stock
dividends, stock splits and the like), for a purchase price equal to the par
value of such shares, as necessary to satisfy TCI's obligations to deliver
shares of SATCo Series A Stock upon conversion of certain convertible
securities of TCI as a result of the Distribution. See "-Other Arrangements"
below.
(continued)
III-27
<PAGE> 30
Transition Services Agreement. Pursuant to the Transition Services
Agreement between TCI and Satellite, TCI is obligated to provide to Satellite
certain services and other benefits, including certain administrative and other
services that were provided by TCI prior to the Distribution. Such services
include (i) tax reporting, financial reporting, payroll, employee benefit
administration, workers' compensation administration, telephone, fleet
management, package delivery, management information systems, billing, lock
box, remittance processing and risk management services, (ii) other services
typically performed by TCI's accounting, finance, treasury, corporate, legal,
tax, benefits, insurance, facilities, purchasing, fleet management and advanced
information technology department personnel, (iii) use of telecommunications
and data facilities and of systems and software developed, acquired or licensed
by TCI from time to time for financial forecasting, budgeting and similar
purposes, including without limitation any such software for use on personal
computers, in any case to the extent available under copyright law or any
applicable third-party contract, (iv) technology support and consulting
services, and (v) such other management, supervisory, strategic planning or
other services as Satellite and TCI may from time to time mutually determine to
be necessary or desirable.
Pursuant to the Transition Services Agreement, TCI has also agreed to
provide Satellite with certain most- favored-customer rights to programming
services that TCI or a wholly owned subsidiary of TCI may own in the future and
access to any volume discounts that may be available to TCI for purchase of
home satellite dishes, satellite receivers and other equipment.
As compensation for services rendered to Satellite and for the
benefits made available to Satellite pursuant to the Transition Services
Agreement, Satellite is required to pay TCI a fee of $1.50 per qualified
subscribing household or other residential or commercial unit (counted as one
subscriber regardless of the number of satellite receivers) per month,
commencing with the Distribution date, up to a maximum of $3 million per month,
and reimburse TCI quarterly for direct, out-of-pocket expenses incurred by TCI
to third parties in providing the services.
The Transition Services Agreement continues in effect until the close
of business on December 31, 1999 and will be renewed automatically for
successive one-year periods thereafter, unless earlier terminated by (i) either
party at the end of the initial term or the then current renewal term, as
applicable, on not less than 180 days' prior written notice to the other party,
(ii) TCI upon written notice to Satellite following certain changes in control
of Satellite, and (iii) either party if the other party is the subject of
certain bankruptcy or insolvency-related events. During the period commencing
with the Distribution date and ending on December 31, 1996, Satellite paid
$763,000 to TCIC pursuant to the Transition Services Agreement.
Tax Sharing Agreement. Through the Distribution date, Satellite's
results of operations were included in TCI's consolidated U.S. federal income
tax returns, in accordance with the existing tax sharing arrangements among TCI
and its consolidated subsidiaries. Effective July 1, 1995, TCI, TCIC and
certain other subsidiaries of TCI entered into the Tax Sharing Agreement, which
formalized such pre-existing tax sharing arrangements and implemented
additional procedures for the allocation of certain consolidated income tax
attributes and the settlement of certain intercompany tax allocations. The Tax
Sharing Agreement encompasses U.S. Federal, state, local and foreign tax
consequences and relies upon the Code and any applicable state, local and
foreign tax law and related regulations. Prior to the Distribution date, the
Tax Sharing Agreement was amended to provide that Satellite be treated as if it
had been a party to the Tax Sharing Agreement, effective July 1, 1995.
Pursuant to the Amended Tax Sharing Agreement, beginning on the July 1, 1995
effective date, Satellite is responsible to TCI for its share of current
consolidated income tax liabilities through the Distribution date; TCI is
responsible to the extent that Satellite's income tax attributes generated
after the effective date and through the Distribution date are utilized by TCI
to reduce its consolidated income tax liabilities.
(continued)
III-28
<PAGE> 31
Indemnification Agreements. On the Distribution date, Satellite
entered into the Indemnification Agreements with TCIC and TCI UA 1. The
Indemnification Agreement with TCIC provides for Satellite to reimburse TCIC
for any amounts drawn under an irrevocable transferable letter of credit issued
by the Bank of New York for the account of TCIC to support Satellite's share of
PRIMESTAR Partners' obligations under the Amended and Restated Memorandum of
Agreement between PRIMESTAR Partners and GE American Communications, Inc. ("GE
Americom"), with respect to PRIMESTAR Partners' use of transponders on the GE
Americom medium power satellite that was launched on January 30, 1997, and
which was declared commercially operational on March 6, 1997 ("GE-2"). At
December 31, 1996, the drawable amount of such letter of credit was
$25,000,000.
The Indemnification Agreement with TCI UA 1 provides for Satellite to
reimburse TCI UA 1 for any amounts drawn under the TCI UA 1 Letter of Credit,
which supports the PRIMESTAR Credit Facility that was obtained by PRIMESTAR
Partners to finance advances to Tempo for payments due in respect of the
construction of SATCo Satellites and that is supported by letters of credit
arranged for by affiliates of the partners of the PRIMESTAR Partners (other
than G.E. Americom Services, Inc.). The amount of the TCI UA 1 Letter of
Credit was $141,250,000 at December 31, 1996.
The Indemnification Agreements further provide for Satellite to
indemnify and hold harmless TCIC and TCI UA 1 and certain related persons from
and against any losses, claims, and liabilities arising out of the respective
letters of credit or any drawings thereunder. The payment obligations of
Satellite to TCIC and TCI UA 1, under such Indemnification Agreements are
subordinated in right of payment with respect to certain future obligations of
Satellite to financial institutions. During the year ended December 31, 1996,
the aggregate amount paid by Satellite to TCI under the Indemnification
Agreements was $1,623,000. Such amount represents the aggregate fees incurred
by TCI with respect to the TCI UA 1 Letter of Credit from the Distribution date
through December 31, 1996.
Trade Name and Service Mark License Agreement. Pursuant to the
Trade Name and Service Mark License Agreement (the "License Agreement"), TCI
granted to Satellite, for an initial term of three years following the
Distribution, a non-exclusive non-assignable license to use certain trade names
and service marks specifically identified in the License Agreement, including
the mark "TCI" in the context of the digital satellite business. The License
Agreement provides, among other things, that all advertising, promotion and use
of certain of TCI's trade names and service marks by Satellite shall be
consistent with TCI guidelines and standards, as well as subject to TCI
approval in certain circumstances.
Fulfillment Agreement. TCIC has historically provided Satellite with
certain customer fulfillment services for PRIMESTAR customers enrolled by
Satellite's direct sales force or the national call center maintained by
Satellite for orders, information and customer service. Charges for such
services have been allocated to Satellite by TCIC based on scheduled rates.
(continued)
III-29
<PAGE> 32
Pursuant to the Fulfillment Agreement entered into by TCIC and
Satellite, TCIC continues to provide fulfillment services to Satellite
following the Distribution with respect to customers of the PRIMESTAR medium
power service. Such services include installation, maintenance, retrieval,
inventory management and other customer fulfillment services. The Fulfillment
Agreement became effective on January 1, 1997. Among other matters, the
Fulfillment Agreement (i) sets forth the responsibilities of TCIC with respect
to fulfillment services, including performance standards and penalties for
nonperformance, (ii) provides for TCIC's fulfillment sites to be connected to
the billing and information systems used by Satellite, allowing for on-line
scheduling and dispatch of installation and other service calls, and (iii)
provides scheduled rates to be charged to Satellite for the various customer
fulfillment services to be provided by TCIC. Satellite retains sole control
under the Fulfillment Agreement to establish the retail prices and other terms
and conditions on which installation and other services are provided to
Satellite's customers. The Fulfillment Agreement also provides that, during the
term of the Fulfillment Agreement, TCIC will not provide fulfillment services
to any other Ku-band, Ka-band, direct broadcast satellite ("DBS"), broadcast
satellite service, fixed satellite service, C- band, wireless or other similar
or competitive provider or distributor of television programming services
(other than traditional cable). The Fulfillment Agreement has an initial term
of two years and is terminable, on 180 days notice to TCIC, by Satellite at any
time during the first six months following the Distribution date. The scheduled
rates for the services to be provided by TCIC under the Fulfillment Agreement
exceed the scheduled rates upon which charges historically have been allocated
to Satellite for such services, reflecting in part the value to Satellite, as
determined by Satellite's management, of the performance standards,
exclusivity, termination right and certain other provisions included in the
Fulfillment Agreement. Satellite and TCIC are currently discussing certain
proposed changes to the Fulfillment Agreement, but there can be no assurance
that any such changes will be agreed to or that Satellite will not exercise its
rights to terminate the Fulfillment Agreement if an acceptable amendment is not
agreed to prior to the end of Satellite's six-month termination window. There
can be no assurance that the terms of the Fulfillment Agreement are not more or
less favorable than those which could be obtained from unaffiliated third
parties, or that comparable services could be obtained by Satellite from third
parties on any terms if the Fulfillment Agreement is terminated. During the
year ended December 31, 1996, the aggregate amount paid by Satellite to TCIC
for fulfillment services was $74,049,000 (including $6,432,000 paid subsequent
to the Distribution date).
TCIC Credit Facility. In connection with the Distribution, Satellite
and TCIC entered into the TCIC Credit Facility to provide for the terms of the
Satellite Note and to provide for a revolving credit facility (the "TCIC
Revolving Loans"). The TCIC Credit Facility required Satellite to use its best
efforts to obtain external debt or equity financing after the Distribution date
and provided for mandatory prepayment of the TCIC Revolving Loans and the
Satellite Note from the proceeds thereof. The initial borrowings under the
Bank Credit Facility were used to repay the Satellite Note in full. In
connection with the February 1997 issuance of the Senior Subordinated Notes and
Senior Subordinated Discount Notes by Satellite and the March 1997
determination that GE-2 was commercially operational, borrowing availability
pursuant to the TCIC Credit Facility was terminated.
Borrowings under the TCIC Revolving Loans bore interest at 10% per
annum, compounded semi-annually. Commitment fees equal to 3/8% of the average
unborrowed availability under the TCIC Credit Facility were payable to TCIC
annually. Commitment fees paid to TCIC during the year ended December 31, 1996
aggregated $141,000. From the Distribution date through December 31, 1996, the
aggregate amount of interest paid by Satellite to TCIC pursuant to the TCIC
Credit Facility was $1,946,000.
(continued)
III-30
<PAGE> 33
Reimbursement of Certain Satellite Expenses. During
1996, TCIC made intercompany advances to Satellite to fund the majority of the
construction and related costs associated with the SATCo Satellites. Prior to
1996, PRIMESTAR Partners had funded substantially all of the construction and
related costs associated with SATCo Satellites. In connection with the
Distribution, a determination was made to provide that such 1996 advances from
TCIC would be repaid by Satellite to TCIC (notwithstanding the Reorganization
Agreement), to the extent (and only to the extent) that Tempo received
corresponding advances from PRIMESTAR Partners.
As a result of negotiations between Satellite and PRIMESTAR Partners,
PRIMESTAR Partners advanced $73,786,000 to Tempo in December 1996 to reimburse
Tempo for all the 1996 costs which previously had been funded by TCIC. Upon
receipt, such advance was paid to TCIC by Tempo in repayment of such 1996
advance by TCIC.
Call Center JV. In March 1997, Satellite and TCI agreed to form a
limited liability company (the "Call Center LLC") through which Satellite and
TCI are expected to conduct various customer call service operations. The
initial ownership interests of Satellite and TCI in the Call Center LLC are
expected to be 28% and 72%, respectively, subject to adjustment based on various
categories of operating data for the last three quarters of 1997, including
call center volume attributable to their customers. The Call Center LLC is
expected to be managed by a four-member board of directors, two members of
which are to be appointed by TCI and two members of which are to be appointed
by Satellite. Any decision by the board of directors is expected to require
approval by all four directors. Initially, the Call Center LLC is expected to
provide customer call services only for TCI cable subscribers and Satellite
DBS subscribers, but it is expected that those services in the future will be
made available to third parties, including, for example, unaffiliated cable
companies. The hourly rates for services provided by the Call Center LLC to
Satellite and TCI through December 31,1997, have been fixed based on their
respective expense budgets for those services. Thereafter, Satellite and TCI
expect that the rates charged to them will be fair market rates, as
established by agreement between Satellite and TCI.
TCI has agreed to contribute assets comprising certain currently
operating call center facilities, as well as a facility under construction.
The assets to be contributed by TCI include two operating call centers and the
facility under construction. Satellite has agreed to contribute assets
comprising two currently operating call center facilities. Transfers of
various of the call center assets to the Call Center LLC will be subject to
receipt of consents of third parties, including governmental authorities.
Pending receipt of any required third-party consents and regulatory approvals,
Satellite and TCI have agreed to provide to the Call Center LLC the use of the
call center assets to be contributed under services agreements or similar
arrangements to the extent feasible. Operating obligations relating to the
contributed assets, including leases of real and personal property (but not
including any indebtedness for borrowed money), are expected to be assumed by
the Call Center LLC.
No definitive agreement has yet been reached regarding the above-
described transaction, and there can be no assurance that any such transaction
will be consummated.
(continued)
III-31
<PAGE> 34
Other Arrangements. On the Distribution date, TCI and Satellite
entered into the Share Purchase Agreement, which obligates TCI and Satellite to
sell to each other from time to time, at the then current market price, shares
of TCI Group Series A Stock and SATCo Series A Stock, respectively, as
necessary to satisfy their respective obligations under TCI Group Series A
Options and SATCo Series A Options held after the Distribution date by their
respective employees and non-employee directors.
Certain officers of Satellite who were officers or directors of TCI
and/or TCIC prior to the Distribution received undertakings of indemnification
from TCI and/or TCIC. Such undertakings survived the Distribution.
National Digital Television Center, Inc. ("NDTC"), an indirect
subsidiary of TCI, has obtained a nontransferable, nonexclusive license to use
certain proprietary technology of Imedia Corporation currently under
development ("Imedia Technology") to provide statistical multiplexing of
digitally compressed video signals. Although there can be no assurance that the
Imedia Technology will be successfully implemented, if successful, such
technology would increase the number of digital program signals that could be
transmitted simultaneously over a single satellite transponder, thus
effectively increasing the digital compression ratio. NDTC has agreed that if,
prior to September 1, 1997, Satellite engages NDTC to provide digitization,
compression and uplinking services for any high power DBS system operated by
Satellite, and NDTC is authorized to use Imedia Technology or other proprietary
technologies to provide multiplexing of digitally compressed video signals for
Satellite, NDTC shall provide such multiplexing services to Satellite for an
agreed fee, based on NDTC's incremental costs and other factors. Satellite's
rights to receive multiplexing services under its agreement with NDTC are
assignable by Satellite to any affiliate of Satellite, including for this
purpose PRIMESTAR Partners.
Other Relationships
TCIC continues to be an obligor under, or a guarantor of the payment
or performance of, certain contractual obligations, including debt obligations,
of certain entities in which International has an interest. International has
entered into an Indemnification Agreement with TCIC, pursuant to which
International has agreed to indemnify TCIC for any payment made by TCIC, or any
claim, loss or liability that TCIC may otherwise incur, by reason of such
obligations. International has not made any payments to TCIC pursuant to he
Indemnification Agreement.
TINTA's Puerto Rico subsidiaries purchase programming services from a
subsidiary of TCIC. The charges, which approximate such TCIC subsidiary's cost
and are based on the aggregate number of subscribers served by such Puerto Rico
subsidiaries, aggregated $4.3 million during the year ended December 31, 1996.
(continued)
III-32
<PAGE> 35
During 1996, TCIC transferred, subject to regulatory approval, certain
distribution equipment to a subsidiary of TINTA in exchange for a L.14,950,000
($23.3 million using the applicable exchange rate) principal amount promissory
note. Such note bears interest at 7% compounded semi-annually. During the
year ended December 31, 1996, the U.S. dollar equivalent of interest expense
incurred with respect to such note was $658,000. The distribution equipment
was subsequently leased back to TCIC over a 5 year term with semi-annual
payments of L.998,000 ($1.7 million), plus expenses. TINTA can require TCIC to
repurchase the equipment at the end of the lease term at an amount equal to the
greater of (i) fair market value or (ii) an amount that when combined with the
rental payments received (excluding executory costs) during the lease term, and
discounted using an interest rate of 7%, would not exceed 89% of the fair
market value of the equipment at the inception of the lease. During the year
ended December 31, 1996, the U.S. dollar equivalent of the lease revenue under
the above-described lease agreement aggregated $1.4 million.
TCIC purchases sports and other programming from certain subsidiaries
of Liberty. Charges to TCIC (which are based upon customary rates charged to
others) for such programming were $76 million for the year ended December 31,
1996.
Certain TCIC corporate general and administrative costs are charged to
subsidiaries of TCI at rates set at the beginning of the year based on
projected utilization for that year. The utilization-based charges are set at
levels that management believes to be reasonable and that approximate the costs
the subsidiaries would incur for comparable services on a stand alone basis.
During the year ended December 31, 1996, Liberty and International were
allocated $3 million in corporate general and administrative costs by TCIC.
Liberty leases satellite transponder facilities from TCIC. Charges by
TCIC for such arrangements for the year ended December 31, 1996 aggregated $12
million.
TCI Starz, Inc., a subsidiary of TCI, has a 50.1% general partnership
interest in QE+ Ltd Limited Partnership ("QE+"), which distributes STARZ!, a
first-run movie premium programming service launched in 1994. Liberty holds
the remaining 49.9% partnership interest.
TCIC has entered into a long-term affiliation agreement with QE+ in
respect to the distribution of the STARZ! service. Rates per subscriber
specified in the agreement are based upon customary rates charged to other
cable system operators. Payments to QE+ for 1996 were approximately $52
million. The affiliation agreement also provides that QE+ will not grant
materially more favorable terms and conditions to other cable system operations
unless such more favorable terms and conditions are made available to TCIC.
The affiliation agreement also requires TCIC to make payments to QE+ with
respect to a guaranteed minimum number of subscribers totaling approximately
$339 million for the years 1997 and 1998.
At December 31, 1996, TCIC had an $203 million intercompany receivable
from TCI Starz, Inc. which represented the net effect of advances to TCI Starz,
Inc., who in turn paid such amount to QE+ offset by TCIC's purchase of
programming from QE+. Such receivable is non-interest bearing for five years
from the date of the advances.
A former consolidated subsidiary of Liberty, Home Shopping Network,
Inc. ("HSN"), paid a commission to TCIC for merchandise sales to customers who
are subscribers of TCIC's cable systems. Aggregate commissions to TCIC were $7
million for the year ended December 31, 1996. Effective December 20, 1996,
Liberty entered into a series of transactions whereby it decreased its
ownership interest in HSN such that Liberty no longer consolidates HSN.
(continued)
III-33
<PAGE> 36
The Company believes that the foregoing business dealings with
management during 1996 were based upon terms no less advantageous to TCIC than
those which would be available in dealing with unaffiliated persons.
(c) Indebtedness of management
None.
III-34
