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EXHIBIT 10.44
TCI TELEPHONY SERVICES, INC.
OPTION TO PURCHASE COMMON STOCK
THIS AGREEMENT ("AGREEMENT") is made as of the 1st day of
December, 1996, by and among TCI TELEPHONY SERVICES, INC., a Delaware
corporation (the "COMPANY"), GRANTEE and, for purposes of paragraphs 11(b),
11(c) and 12 only, TELE-COMMUNICATIONS, INC., a Delaware corporation ("TCI").
The Company is on the date hereof a subsidiary of TCI. The
Board of Directors of the Company ("COMPANY BOARD") and the Board of Directors
of TCI have each determined that it is in the best interests of the Company to
grant Grantee the rights and option set forth herein in order to provide
Grantee with additional remuneration for services rendered to the Company and
its predecessors, to encourage Grantee to remain in the employ of TCI and/or
one or more of its Subsidiaries, including the Company, and to provide
additional incentive to Grantee by increasing Grantee's proprietary interest in
the continued success and progress of the Company. Capitalized terms used
herein and not otherwise defined are defined in paragraph 19 below.
Accordingly, the Company, Grantee and, for purposes of
paragraphs 11(b), 11(c) and 12 only, TCI hereby agree as follows:
1. GRANT OF OPTION; OPTION TERM. The Company hereby grants to
Grantee the right and option (the "OPTION"), on the terms and subject to the
conditions set forth herein, to purchase the Option Shares from the Company for
a price per Option Share equal to the Option Price. The Option Price and
Option Shares are subject to adjustment pursuant to paragraph 9 below.
Subject to paragraph 2, the Option shall be exercisable in whole at any time
and in part from time to time during the period commencing on the date hereof
and expiring at 5:00 p.m., Denver, Colorado time ("CLOSE OF BUSINESS") on the
tenth anniversary of the Determination Date, or such earlier date as the Option
may be terminated pursuant to paragraph 6 or paragraph 9(c) (the "OPTION
TERM").
2. CONDITIONS OF EXERCISE; VESTING. Except as otherwise provided
in the last sentence of this paragraph 2 or in paragraph 9(c), the Option shall
not be exercisable until the first anniversary of the Determination Date, and,
from the first anniversary of the Determination Date to the fifth anniversary
of the Determination Date, the Option shall be exercisable only to the extent
the Option Shares have become available for purchase in accordance with the
following schedule:
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Anniversary of Percentage of Option Shares
Determination Date Available for Purchase
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1st 20%
2nd 40%
3rd 60%
4th 80%
5th 100%
Notwithstanding the foregoing, all Option Shares shall become
available for purchase if during the Option Term (i) Grantee's employment with
the TCI Group shall terminate by reason of (x) termination by the TCI Group
without Cause, (y) termination by Grantee for Good Reason or (z) Disability,
(ii) Grantee's employment shall terminate pursuant to provisions of a written
employment agreement, if any, between Grantee and the applicable member(s) of
the TCI Group which expressly permits Grantee to terminate such employment upon
the occurrence of specified events (other than the giving of notice and passage
of time) or (iii) Grantee dies while employed by the TCI Group. A change of
employment is not a termination of employment within the meaning of this
paragraph 2, provided that, after giving effect to such change, Grantee is an
employee of, or becomes or continues to be a consultant to, any member of the
TCI Group.
3. MANNER OF EXERCISE. The Option may be exercised only by
delivering to the Company all of the following and shall be considered
exercised (as to the number of shares specified in the notice referred to in
clause (a) below)) on the later of (i) the first business day on which the
Company has received all of the following deliveries and (ii) the date of
exercise designated in the written notice referred to in clause (a) below (or
if such date is not a business day, the first business day thereafter):
(a) written notice, in such form as the Company Board may
reasonably require, stating that Grantee is exercising the Option and
setting forth the date of such exercise, the number of Option Shares
to be purchased, the aggregate Option Price to be paid for such Option
Shares in accordance with this Agreement and the manner in which such
payment is being made ("OPTION EXERCISE NOTICE");
(b) payment of the Option Price for each Option Share to
be purchased upon such exercise, in cash or in such other form or
combination of forms of payment contemplated by paragraph 10, together
with payment of, or other provision acceptable to the Company Board
for, any and all withholding taxes required to be withheld by the
Company upon such exercise, in accordance with paragraph 4;
(c) any other documentation that the Company Board may
reasonably require (including, without limitation, proof satisfactory
to the Company Board that the Option is then exercisable for the
number of Option Shares set forth in such notice); and
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(d) evidence satisfactory to the Company Board that
Grantee is validly and simultaneously exercising the same proportion
of the stock option granted to him by TCI Wireline, Inc. pursuant to
that certain option agreement, dated as of the date hereof, among TCI
Wireline, Inc., Grantee and TCI, as the same may hereafter be amended,
modified or supplemented from time to time.
4. WITHHOLDING FOR TAXES. It shall be a condition precedent to
any exercise of the Option that Grantee make provision acceptable to the
Company for the payment or withholding of any and all federal, state and local
taxes required to be withheld by the Company to satisfy the tax liability
associated with such exercise, as determined by the Company Board.
5. DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all the items required by paragraph 3 with respect to any exercise of the
Option, and subject to the withholding referred to in paragraph 4, the Company
shall deliver or cause to be delivered to Grantee certificates issued in
Grantee's name for the number of whole Option Shares purchased upon such
exercise. If delivery is by mail, delivery of Option Shares shall be deemed
effected for all purposes when the Company or a stock transfer agent of the
Company shall have deposited the certificates in the United States mail,
addressed to Grantee, and any cash payment (for fractional shares or otherwise)
shall be deemed effected when a Company check, payable to Grantee and in an
amount equal to the amount of the cash payment, shall have been deposited in
the United States mail, addressed to Grantee, in each case in accordance with
paragraph 13.
6. EARLY TERMINATION OF OPTION. Unless otherwise determined by
the Company Board in its sole discretion, the Option shall terminate, prior to
the expiration of the ten-year period provided for in paragraph 1, as follows:
(a) If Grantee's employment with the TCI Group terminates
other than (i) by Grantee with Good Reason, (ii) by reason of
Grantee's death or Disability, (iii) with the written consent of the
applicable member(s) of the TCI Group, (iv) without such consent if
such termination is pursuant to provisions of a written employment
agreement, if any, between Grantee and the applicable member(s) of the
TCI Group which expressly permits Grantee to terminate such employment
upon the occurrence of specified events (other than the giving of
notice and passage of time), or (v) by the TCI Group with or without
Cause, then the Option shall terminate at the Close of Business on the
first business day following the expiration of the 90-day period
beginning on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the TCI Group, or
prior to the expiration of a relevant period of time during which the
Option remains exercisable as provided in this paragraph 6, the Option
shall terminate at the Close of Business on the first business day
following the expiration of the one-year period beginning on the date
of death;
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(c) If Grantee's employment with the TCI Group terminates
by reason of Disability, then the Option shall terminate at the Close
of Business on the first business day following the expiration of the
one-year period beginning on the date of termination of Grantee's
employment;
(d) If Grantee's employment with the TCI Group is
terminated by the TCI Group for Cause, then the Option shall terminate
immediately upon such termination of Grantee's employment; and
(e) If Grantee terminates his employment with the TCI
Group (i) with Good Reason, (ii) with the written consent of the
applicable member(s) of the TCI Group or (iii) pursuant to provisions
of a written employment agreement, if any, between Grantee and the
applicable member(s) of the TCI Group which expressly permits Grantee
to terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or if the TCI
Group terminates Grantee's employment with the TCI Group without
Cause, then the Option Term shall not terminate prior to the end of
the ten-year period provided for in paragraph 1, except as otherwise
provided for in paragraph 6(b) or 9(c).
In any event in which the Option remains exercisable for a period of
time following the date of termination of Grantee's employment as provided
above, the Option may be exercised during such period of time only to the
extent it was exercisable as provided in paragraph 2 or paragraph 9(c) on such
date of termination of Grantee's employment. A change of employment is not a
termination of employment within the meaning of this paragraph 6, provided
that, after giving effect to such change, Grantee is an employee of, or becomes
or continues to be a consultant to, any member of the TCI Group. Anything
contained herein to the contrary notwithstanding, the Option shall in any event
terminate upon the expiration of the ten-year period provided for in paragraph
1, if not theretofore terminated.
7. NONTRANSFERABILITY OF OPTION. During Grantee's lifetime, the
Option is not and shall not be transferable (voluntarily or involuntarily)
other than pursuant to a Domestic Relations Order and, except as otherwise
required pursuant to a Domestic Relations Order, is exercisable only by Grantee
or Grantee's court appointed legal representative. Grantee may designate a
beneficiary or beneficiaries to whom the Option shall pass upon Grantee's death
and may change such designation from time to time by filing a written
designation of beneficiary or beneficiaries with the Company on the form
annexed hereto as Exhibit A or such other form as may be prescribed by the
Company Board, provided that no such designation shall be effective unless so
filed prior to the death of Grantee. If no such designation is made or if the
designated beneficiary does not survive Grantee's death, the Option shall pass
by will or the laws of descent and distribution. Following Grantee's death,
the Option, if otherwise exercisable, may be exercised by the person to whom
the Option passes according to the foregoing, and such person shall be deemed
to be Grantee for purposes of any applicable provisions of this Agreement.
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8. NO SHAREHOLDER RIGHTS; NO GUARANTEE OF EMPLOYMENT. (a)
Grantee shall not be deemed for any purpose to be, or to have any of the rights
of, a stockholder of the Company with respect to any Option Shares unless and
until such Option Shares have been issued to Grantee by the Company. The
existence of this Agreement or the Option shall not affect in any way the right
or power of the Company or its stockholders to accomplish any corporate act.
(b) Nothing contained in this Agreement, and no action by
the Company or the Company Board with respect hereto, shall confer or be
construed to confer on Grantee any right to continue in the employ of the TCI
Group or any member thereof or interfere in any way with the right of TCI, the
Company or any employing member of the TCI Group to terminate Grantee's
employment at any time, with or without Cause, except as otherwise expressly
provided in any written employment agreement between the applicable member(s)
of the TCI Group and Grantee.
9. ADJUSTMENTS; ACCELERATION. (a) If, after December 31, 1996,
the Company (i) pays a dividend or makes a distribution on the Company Common
Stock in shares of Company Common Stock; (ii) subdivides the outstanding shares
of Company Common Stock into a greater number of shares or (iii) combines the
outstanding shares of Company Common Stock into a smaller number of shares,
then this Option and the number of Option Shares and the Option Price per share
in effect immediately prior to the opening of business on the record date for
such dividend or distribution or the effective date of such subdivision or
combination shall be adjusted so that Grantee upon exercise thereafter of the
Option may receive the number of shares of Company Common Stock that Grantee
would have owned immediately following such event if Grantee had exercised the
Option immediately prior to the record date for, or effective date of, as the
case may be, such event. The adjustment contemplated by the preceding sentence
shall be made successively whenever any event listed above shall occur. For a
dividend or distribution, the adjustment shall become effective immediately
after the record date for the dividend or distribution. For a subdivision or
combination, the adjustment shall become effective immediately after the
effective date of the subdivision or combination.
(b) The Option shall also be subject to adjustment
(including, without limitation, as to the number of Option Shares and the
Option Price per share) in the sole discretion of the Company Board and in such
manner as the Company Board may deem equitable and appropriate in connection
with the occurrence of any of the following events after December 31, 1996 that
affects the Company Common Stock such that an adjustment would be required in
order to preserve the benefits or potential benefits intended to be made
available under this Agreement: any dividend or distribution on the Company
Common Stock in shares of the Company's capital stock (other than Company
Common Stock); any reclassification of the Company Common Stock into shares of
the Company's capital stock (other than a reclassification by way of an
Approved Transaction); any extraordinary cash dividend; any distribution of any
rights, warrants or options to holders of Company Common Stock; any
distribution of any assets or debt securities (other than cash dividends or
distributions that are not extraordinary cash dividends); any recapitalization,
reorganization, split up or spin off; and any merger, consolidation or binding
share exchange that reclassifies or changes the outstanding Company Common
Stock or other similar corporate event (other than those which
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constitute Approved Transactions). Notwithstanding the foregoing, in the event
of any reclassification or recapitalization of the Company Common Stock into
two or more classes or series of common stock with different voting rights
(however the same may be effected), no adjustment to the Option shall be
required that would entitle Grantee to receive shares of any class or series of
common stock of the Company other than the class or series with the fewest
number of votes per share. Adjustments to the Option Price shall be made on a
per share basis so that the aggregate remaining Option Price is unchanged.
(c) The Company Board may at any time in its sole
discretion determine that the Option shall become exercisable in full, without
regard to paragraph 2, whether immediately, upon the occurrence of specified
events, or otherwise. Without limiting the generality of the foregoing, in the
event of any Board Change, Control Purchase or Approved Transaction that occurs
with respect to TCI following December 31, 1996 and prior to the earlier of
such time as the Company ceases to be a Subsidiary of TCI or such time as the
Company becomes a Public Company, the Option shall become exercisable in full,
without regard to paragraph 2, effective upon the Board Change or Control
Purchase or immediately prior to consummation of the Approved Transaction, as
applicable (or at such earlier time as the Company Board in its sole discretion
may determine); provided, however, that to the extent not theretofore exercised
the Option shall terminate upon the first to occur of the consummation of the
Approved Transaction or the expiration or early termination of the Option Term.
In the event that (i) at any time after December 31, 1996 while the Company is
a Subsidiary of TCI, an Approved Transaction occurs with respect to the Company
after giving effect to which the Company will cease to be a Subsidiary of TCI
or (ii) an Approved Transaction, Board Change or Control Purchase occurs with
respect to the Company at a time following December 31, 1996 that the Company
is no longer a Subsidiary of TCI, then, in any such case, the Option shall
become exercisable in full, without regard to paragraph 2, effective upon the
Board Change or Control Purchase or immediately prior to consummation of the
Approved Transaction, as applicable (or at such earlier time as the Company
Board in its sole discretion may determine); provided, however, that to the
extent not theretofore exercised the Option shall terminate upon the first to
occur of the consummation of the Approved Transaction or the expiration or
early termination of the Option Term. Notwithstanding the foregoing, the
Company Board may, in its discretion, determine that the Option will not become
exercisable on an accelerated basis in connection with an Approved Transaction
and/or will not terminate if not exercised prior to consummation of the
Approved Transaction, if the Board or the surviving or acquiring corporation,
as the case may be, shall have taken or made effective provision for the taking
of such action as in the opinion of the Company Board is equitable and
appropriate to substitute a new stock option for the Option evidenced by this
Agreement or to assume this Agreement and the Option evidenced hereby and in
order to make such new or assumed stock option, as nearly as may be
practicable, equivalent to the Option evidenced by this Agreement as then in
effect (but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Company Board), taking into account,
to the extent applicable, the kind and amount of securities, cash or other
assets into or for which the Company Common Stock may be changed, converted or
exchanged in connection with the Approved Transaction.
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(d) All actions taken by the Company Board with respect
to the Option pursuant to this paragraph 9 shall be consistent with any actions
taken by the Company Board with respect to the Other Options. When an
adjustment to the Option pursuant to paragraph 9(a) or 9(b) becomes effective
immediately after the record date for an event, the Company may defer until the
occurrence of such event issuing to Grantee the additional shares of Company
Common Stock (or cash, securities or other property) issuable or deliverable
upon any exercise of the Option after such record date and before the
occurrence of such event by reason of the adjustment required by such event
over and above the shares of Company Common Stock that would have been issuable
upon such exercise absent such adjustment.
10. MANNER OF PAYMENT. The method or methods of payment of the
Option Price for the shares of Company Common Stock to be purchased upon
exercise of the Option and any amounts required by paragraph 4 shall consist of
(i) cash, (ii) check, (iii) promissory note in such form and with such security
as shall be acceptable to the Company Board in its sole discretion (except that
this method of payment will not be available for amounts required by paragraph
4), (iv) whole shares of Company Common Stock already owned by Grantee, (v) the
withholding of shares of Company Common Stock issuable upon exercise of the
Option, (vi) the delivery, together with a properly executed exercise notice,
of irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds required to pay the purchase price (except that
this method of payment will not be available until the Company is a Public
Company), or (vii) any combination of the foregoing methods of payment, as
Grantee may elect and shall designate in the Option Exercise Notice, subject,
however, to any restrictions or limitations of applicable law or of any
agreement evidencing indebtedness of the Company for borrowed money. Any
shares of Company Common Stock delivered or withheld in payment of any amount
due hereunder shall be valued for such purposes (i) if the Option is exercised
prior to such time as the Company is a Public Company, at the Appraised Public
Trading Value of such shares on the applicable date of exercise of the Option,
determined as provided in paragraph 11(c), and (ii) if the Option is exercised
when the Company is a Public Company, at the Fair Market Value of such shares
on the applicable date of exercise of the Option.
11. RESTRICTIONS IMPOSED BY LAW; CERTAIN PUT RIGHTS; APPRAISAL
PROCEDURES. (a) Grantee acknowledges that neither the Option nor any of the
Option Shares has been registered under the Securities Act of 1933 and that the
Option Shares may not be transferred in the absence of such registration or the
availability of an exemption therefrom under such Act or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Neither the Company nor any other person shall have any obligation to register
any Option Shares, or any transfer of Option Shares, under the Securities Act
of 1933, the Exchange Act or any other state or federal securities law.
Certificates representing Option Shares purchased by Grantee hereunder may bear
such restrictive and other legends as counsel for the Company shall require in
order to insure compliance with any such law or any rule or regulation
promulgated thereunder. Grantee agrees that Grantee will not exercise the
Option (and that the Company shall not be obligated to deliver any Option
Shares upon any exercise of the Option) if counsel for the Company determines
that such exercise or delivery would violate any applicable law or any rule or
regulation of any governmental authority,
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or any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the Company Common Stock is listed or
quoted. The Company shall in no event be obligated to take any affirmative
action in order to cause the exercise of the Option or the resulting delivery
of the shares of Company Common Stock to comply with any such law, rule,
regulation or agreement. Without limiting the generality of the foregoing, but
subject to paragraph 11(b), Grantee acknowledges and agrees that unless and
until the Company becomes a Public Company or, if earlier, ceases to be a
Subsidiary of TCI, the Option Shares may not be transferred to any person
(other than to Grantee's designated beneficiary pursuant to paragraph 7 upon
Grantee's death) without the prior written consent of TCI.
(b) In the event that the Company has not become a Public
Company on or before February 1, 2001, Grantee shall have the right, by written
notice given to TCI at any time thereafter, to require TCI to purchase all, and
not less than all, the Option Shares for a purchase price equal to the
Appraised Public Trading Value of the Option Shares determined as provided in
paragraph 11(c) (the "PUT RIGHT"); provided, however, that the Put Right shall
expire upon the first to occur of the Company's becoming a Public Company and
the Company's ceasing to be a Subsidiary of TCI; and, provided, further, that if
Grantee dies prior to February 1, 2001, the Put Right shall become exercisable
by his beneficiary or beneficiaries pursuant to paragraph 7 or his heirs,
devisees or distributees as applicable, from and after the date of Grantee's
death. Grantee's notice of the exercise of his Put Right (the "PUT EXERCISE
NOTICE") shall set forth the number of Option Shares then owned by Grantee
and/or that remain subject to the Option and shall contain the information
required by paragraph 11(c). In the event that any Option Shares remain
subject to the Option, Grantee shall exercise the balance of the Option in full
prior to the closing of the purchase pursuant to the Put Right. If the Put
Right is exercised, TCI shall have the right to pay the purchase price for the
Option Shares in cash, shares of Tele-Communications, Inc. Series A TCI Group
Common Stock, $1.00 par value per share, or any successor class or series of
TCI's common stock (collectively the "TCI GROUP A STOCK"), or any combination
of cash and shares of TCI Group A Stock as TCI may elect. If TCI elects to pay
all or any portion of the purchase price for the Option Shares in shares of TCI
Group A Stock, said shares shall be valued for such purpose on the basis of the
average of the daily Closing Prices of the TCI Group A Stock during the period
of 10 consecutive trading days commencing 20 trading days prior to the closing
of such purchase. The closing of the purchase of the Option Shares pursuant to
this paragraph 11(b) shall occur on the 10th day following the receipt by
Grantee and TCI of notice pursuant to paragraph 11(c) of the final
determination of the Appraised Public Trading Value of the Option Shares (or on
such other date as the parties may agree). At the closing, if TCI has elected
to pay all or a portion of the purchase price in shares of TCI Group A Stock,
it shall enter into a registration rights agreement with Grantee, providing
Grantee registration rights with respect to the shares so delivered on the
terms and subject to the conditions contained in TCI's standard form of such
agreement with such variations as the parties agree.
(c) Grantee's Put Exercise Notice and any Option Exercise
Notice that provides for the delivery or withholding of shares of Company
Common Stock as a manner of payment of the Option Price or of amounts required
under paragraph 4 shall identify the Public Appraiser selected by Grantee to
make the determination of Appraised Public Trading Value ("FIRST APPRAISER").
Within 10 days after receipt of the Put Exercise Notice or Option Exercise
Notice, as applicable, TCI or the Company, as applicable, shall notify Grantee
in writing of the Applicable Person's selection
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of a Public Appraiser (the "SECOND APPRAISER"). The First Appraiser and the
Second Appraiser shall each submit its determination of the Appraised Public
Trading Value of the Option Shares to Grantee and the Applicable Person within
30 days of the date of its selection. If the respective determinations of
Appraised Public Trading Value by such Public Appraisers vary by less than 10%
of the higher determination, then the Appraised Public Trading Value shall be
the average of the two determinations. If such determinations vary by ten
(10%) or more of the higher determination, the two Public Appraisers shall
promptly designate a third Public Appraiser (the "THIRD APPRAISER"). Neither
Grantee nor the Applicable Person shall provide, and the First Appraiser and
Second Appraiser shall be instructed not to provide, any information to the
Third Appraiser as to the determination of the First Appraiser and Second
Appraiser or otherwise influence such Third Appraiser's determination. The
Third Appraiser shall submit its determination of the Appraised Public Trading
Value to Grantee and the Applicable Person within 30 days of the date of its
selection. The Appraised Public Trading Value shall be equal to the average of
the two closest of the three determinations, provided that, if the difference
between the highest and middle determinations is no more than 105% and no less
than 95% of the difference between the middle and lowest determinations, the
Appraised Public Trading Value shall be equal to the middle determination. The
Public Appraisers shall jointly notify the Applicable Person and Grantee in
writing of their final determination of the Appraised Public Trading Value of
the Option Shares within five (5) days thereafter. Grantee and the Applicable
Person shall each pay the fees and expenses of his or its own Public Appraiser
and one-half of the fees and expenses of the Third Appraiser, if any.
12. SUBSTITUTION OF TRACKING STOCK OPTION. In the event that, at
any time after the date hereof and prior to any exercise by Grantee of its Put
Right, TCI's stockholders authorize the creation of the proposed new series of
TCI's common stock to be designated as Tele-Communications, Inc. Series A
Telephony Group Common Stock, $1.00 par value per share (the "SERIES A
TELEPHONY TRACKING STOCK"), which is designed to reflect the separate
performance of businesses and assets that include the Company and its
subsidiaries and its and their assets, and thereafter TCI issues any shares of
Series A Telephony Tracking Stock, then effective upon such initial issuance,
this Agreement shall be canceled and superseded in its entirety by the
agreement set forth as Exhibit B to this Agreement, and the Option granted
pursuant hereto shall be canceled and the option contemplated by the attached
agreement will be substituted therefor.
13. NOTICE. Unless the Company or TCI, as applicable, notifies
Grantee in writing of a change of address, any notice or other communication to
the Applicable Person with respect to this
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Agreement shall be in writing and shall be delivered personally or sent by
first class mail, postage prepaid and addressed as follows:
If to the Company:
TCI Telephony Services, Inc.
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Attention: General Counsel
If to TCI:
Tele-Communications, Inc.
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Any notice or other communication by the Company or TCI to Grantee with respect
to this Agreement shall be in writing and shall be delivered personally, or
shall be sent by first class mail, postage prepaid, to Grantee's address as
listed in the records of TCI on the date hereof, unless the Company has
received written notification from Grantee of a change of address. Except as
otherwise provided in paragraph 5, all notices and other communications
hereunder, including without limitation any Option Exercise Notice or Put
Exercise Notice, shall be effective when actually received.
14. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
15. CONSTRUCTION. References in this Agreement to "this
Agreement" and the words "herein," "hereof," "hereunder" and similar terms
refer to this Agreement, including all Exhibits, as a whole, unless the context
otherwise requires. The headings of the paragraphs of this Agreement have been
included for convenience of reference only, are not to be considered a part
hereof and shall not modify or restrict any of the terms or provisions hereof.
All decisions of the Company Board upon questions regarding this Agreement
shall be conclusive.
16. DUPLICATE ORIGINALS. The Company, TCI and Grantee may sign
any number of copies of this Agreement. Each signed copy shall be an original,
but all of them together represent the same agreement.
17. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between or among
TCI, the Company and Grantee, or any of them, with respect to the subject
matter hereof. Each of TCI, the Company and Grantee hereby declares and
represents that no promise or agreement not herein expressed has been made and
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that this Agreement contains the entire agreement between and among the parties
hereto with respect to the Option and supersedes and makes null and void any
prior agreements between or among TCI, the Company and Grantee, or any of them,
regarding the Option.
18. AMENDMENT. This Agreement may be amended, modified or
supplemented by the Company, without the consent of the Grantee, (i) to cure
any ambiguity or to correct or supplement any provision herein which may be
defective or inconsistent with any other provision herein or (ii) to make such
other changes as the Company, upon advice of counsel, determines are necessary
or advisable because of the adoption or promulgation of, or change in or of the
interpretation of, any law or governmental rule or regulation, including,
without limitation, any applicable federal or state securities laws. Except as
provided above, this Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto.
19. DEFINITIONS. As used in this Agreement, the following terms
have the corresponding meanings:
"APPLICABLE PERSON" means TCI or the Company, as applicable.
"APPRAISED PUBLIC TRADING VALUE" means the aggregate cash
proceeds, net of underwriters' fees, discounts and commissions and other
selling expenses customarily borne by selling stockholders, that would be
received by Grantee from the sale of the Options Shares in an underwritten
public offering registered under the Securities Act of 1933.
"APPROVED TRANSACTION", when used with respect to TCI or the
Company, as applicable, means any transaction in which the Relevant Board (or,
if approval of the Relevant Board is not required as a matter of law, the
stockholders of the Applicable Person) shall approve (i) any consolidation or
merger of the Applicable Person, or binding share exchange, pursuant to which
shares of common stock of the Applicable Person would be changed or converted
into or exchanged for cash, securities or other property, other than any such
transaction in which the common stockholders of the Applicable Person
immediately prior to such transaction have the same proportionate ownership of
the common stock of, and voting power with respect to, the surviving
corporation immediately after such transaction, (ii) any merger, consolidation
or binding share exchange to which the Applicable Person is a party as a result
of which the persons who are common stockholders of the Applicable Person
immediately prior thereto have less than a majority of the combined voting
power of the outstanding capital stock of the Applicable Person ordinarily (and
apart from the rights accruing under special circumstances) having the right to
vote in the election of directors immediately following such merger,
consolidation or binding share exchange, (iii) the adoption of any plan or
proposal for the liquidation or dissolution of the Applicable Person, or (iv)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Applicable Person. Notwithstanding the foregoing, none of such transactions
that occur with respect to the Company while the Company is a Subsidiary of TCI
and that are effected in connection with a spin off of the Company or rights
offering of
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Company Common Stock to TCI's stockholders or equivalent transaction shall
constitute an Approved Transaction.
"BOARD CHANGE" means, during any period of two consecutive
years, individuals who at the beginning of such period constituted the entire
Relevant Board cease for any reason to constitute a majority thereof unless the
election, or the nomination for election, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
"CAUSE" has the meaning ascribed thereto in any employment
agreement between Grantee and the applicable member of the TCI Group, and in
the absence of any such employment agreement means insubordination, dishonesty,
incompetence, moral turpitude, other misconduct of any kind, or refusal to
perform one's duties and responsibilities for any reason other than illness or
incapacity, or negligence in the performance of any of one's material duties or
responsibilities that continues after written notice from the Company, as
determined conclusively by the Company Board.
"CLOSING PRICE" of a share of TCI Group A Stock on any day
means the last sale price (or, if no last sale is reported, the average of the
high bid and low asked prices) for a share of TCI Group A Stock on such day
(or, if such day is not a trading day, on the next preceding trading day) as
reported on NASDAQ or, if not reported on NASDAQ, as quoted by the National
Quotation Bureau Incorporated, or if the TCI Group A Stock is listed on an
exchange, on the principal exchange on which the TCI Group A Stock is listed.
If for any day the Closing Price of a share of TCI Group A Stock is not
determinable by any of the foregoing means, then the Closing Price for such day
shall be determined in good faith by TCI on the basis of such quotations and
other considerations as TCI may deem appropriate.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute or statutes thereto. Reference to
any specific Code section shall include any successor section.
"COMPANY COMMON STOCK" means the Common Stock, $1.00 par value
per share, of the Company.
"CONTROL PURCHASE" means any transaction (or series of related
transactions) in which (i) any person (as such term is defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity (other
than the Applicable Person, any Subsidiary of the Applicable Person or any
employee benefit plan sponsored by the Applicable Person or any Subsidiary of
the Applicable Person) shall purchase any common stock of the Applicable Person
(or securities convertible into common stock of the Applicable Person) for
cash, securities or any other consideration pursuant to a tender offer or
exchange offer, without the prior consent of the Relevant Board, or (ii) any
person (as such term is so defined), corporation or other entity (other than
the Applicable Person, any Subsidiary of the Applicable Person, any employee
benefit plan sponsored
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by the Applicable Person or any Subsidiary of the Applicable Person, or any
Controlling Person (as defined below)) shall become the "beneficial owner" (as
such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Applicable Person representing 20% or more of
the combined voting power of the then outstanding securities of the Applicable
Person ordinarily (and apart from the rights accruing under special
circumstances) having the right to vote in the election of directors
(calculated as provided in Rule 13d-3(d) under the Exchange Act in the case of
rights to acquire the Applicable Person's securities), other than in a
transaction (or series of related transactions) approved by the Relevant Board.
For purposes of this definition, "Controlling Person" means each of (a) the
Chairman of the Board, the President and each of the directors of the
Applicable Person as of December 31, 1996, (b) the respective family members,
estates and heirs of each of the persons referred to in clause (a) above and
any trust or other investment vehicle for the primary benefit of any of such
persons or their respective family members or heirs and (c) ▇▇▇▇▇▇-Tribune
Corporation, a Delaware corporation. As used with respect to any person, the
term "family member" means the spouse, siblings and lineal descendants of such
person.
"DETERMINATION DATE" means February 1, 1996.
"DISABILITY" means the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that (a) can be expected to result in death or (b) has lasted or can
be expected to last for a continuous period of not less than 12 months.
"DOMESTIC RELATIONS ORDER" means a domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute or statutes thereto, and
the rules and regulations promulgated by the Securities and Exchange Commission
thereunder. References to any specific section of the Exchange Act or rule
thereunder shall include any successor section or rule.
"FAIR MARKET VALUE" of a share of Company Common Stock on any
day means the last sale price (or, if no last sale price is reported, the
average of the high bid and low asked prices) for a share of Company Common
Stock on such day (or, if such day is not a trading day, on the next preceding
trading day) as reported on NASDAQ or, if not reported on NASDAQ, as quoted by
the National Quotation Bureau Incorporated, or if the Company Common Stock is
listed on an exchange, on the principal exchange on which the Company Common
Stock is listed. If for any day the Fair Market Value of a share of Company
Common Stock is not determinable by any of the foregoing means, then the Fair
Market Value for such day shall be determined in good faith by the Company
Board on the basis of such quotations and other considerations as the Company
Board deems appropriate.
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"GOOD REASON" means the occurrence of any of the following
prior to any termination of employment by Grantee:
(i) any involuntary reduction in Grantee's annual rate of
salary;
(ii) a failure by TCI or the Company to continue in effect
any employee benefit plan in which Grantee was participating, or the
taking of any action by TCI or the Company that would adversely affect
Grantee's participation in, or materially reduce Grantee's benefits
under, any such employee benefit plan, unless such failure or such
taking of any action adversely affects the senior members of the
corporate management of TCI or the Company (as applicable) generally;
or
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position on the date hereof.
"NASDAQ" means the Nasdaq Stock Market.
"OPTION PRICE" means $________ per Option Share, plus an
interest factor of 6% per annum on such amount from the date hereof to the date
of exercise (calculated on the basis of a 365-day year and actual days
elapsed), as such amount per Option Share may be adjusted from time to time
pursuant to paragraph 9. Notwithstanding the foregoing, each time TCI makes a
Tax Use the Option Price will be recalculated in accordance with the following
provisions of this definition. The Option Price payable upon an exercise of
the Option during the period following such Tax Use and preceding the next Tax
Use shall be the dollar amount resulting from the following formula ($X), plus
an interest factor of 6% per annum on such amount from the date TCI made the
applicable Tax Use to the date of exercise (calculated on the basis of a
365-day year and actual days elapsed):
$X = .01(A-B) + D.
--------
C
For purposes of the foregoing formula:
"A" = $_________
"B" = as of the date of the Tax Use requiring the
recalculation of the Option Price, the aggregate
amount of the Company tax benefits used in such Tax
Use and all prior Tax Uses.
"C" = the number of Option Shares as of the date of the
applicable Tax Use, determined without regard to any
prior exercise(s) of this Option.
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"D" = that portion of the Option Price that, as of the date
of the applicable Tax Use and before giving effect to
the recalculation of the Option Price, represents
accrued interest on the initial Option Price (i.e.,
the Option Price as of the date hereof) to the date
of such Tax Use.
"OPTION SHARES" means an aggregate number of shares of Company
Common Stock equal to 10 (which number represents 1% of the number of shares of
Company Common Stock issued and outstanding on the date hereof), as such number
of shares may be adjusted from time to time pursuant to paragraph 9.
"OTHER OPTIONS" means the options to purchase shares of
Company Common Stock granted pursuant to those other Option Agreements dated as
of the date hereof among TCI, the Company and the grantees named therein,
respectively.
"PUBLIC APPRAISER" means, as of any date of selection, an
investment banking firm of national reputation that is not affiliated with TCI,
the Company or Grantee and that is one of the 20 leading investment banking
firms based on aggregate proceeds of public offerings of common stock in the
United States for which it acted as a managing underwriter during the preceding
two full calendar years.
"PUBLIC COMPANY" means a person the common equity securities
of which are registered under Section 12(b) or 12(g) of the Exchange Act and
which common equity securities are listed for trading on the New York Stock
Exchange or the NASDAQ National Market.
"RELEVANT BOARD", when used with respect to TCI, means the
Board of Directors of TCI and, when used with respect to the Company, means the
Company Board.
"SUBSIDIARY", when used with respect to TCI or the Company, as
applicable, means any present or future subsidiary (as defined in Section
424(f) of the Code) of the Applicable Person or any business entity in which
the Applicable Person owns, directly or indirectly, 50% or more of the voting,
capital or profits interests. An entity shall be deemed a Subsidiary of the
Applicable Person for purposes of this definition only for such periods as the
requisite ownership or control relationship is maintained.
"TAX SHARING AGREEMENT" means that certain Third Amendment to
the Tax Sharing Agreement, dated as of December 1, 1996, among TCI, TCI
Telephony Holdings, Inc. (the parent corporation of the Company), and certain
other subsidiaries of TCI.
"TAX USE" means the use by TCI in its consolidated return of
tax benefits generated by the Company and its subsidiaries for which TCI,
pursuant to Section C.4.c. of the Tax Sharing Agreement, is not obligated to
provide a credit to or otherwise reimburse the Company. The aggregate amount
of Company tax benefits that may be so used by TCI is $500 million.
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16
"TCI GROUP" means TCI and its Subsidiaries, collectively, or
the applicable of TCI or a Subsidiary of TCI, as the context may require. If
the Company ceases to be a Subsidiary of TCI, the Company and its Subsidiaries
shall, notwithstanding the last sentence of the definition of Subsidiary above,
be deemed for purposes of this definition only to continue to be Subsidiaries
of TCI and, accordingly, members of the TCI Group.
20. RULES BY COMPANY BOARD. The rights of Grantee and
obligations of the Company hereunder shall be subject to such reasonable rules
and regulations as the Company Board may adopt from time to time hereafter.
IN WITNESS WHEREOF, the Company, Grantee and, for purposes of
paragraphs 11(b), 11(c) and 12 only, TCI have caused this Agreement to be duly
executed and delivered as of the date first written above.
ATTEST: TCI TELEPHONY SERVICES, INC.
By:
-------------------------------- ------------------------------------
Assistant Secretary Name:
Title:
---------------------------------------
TELE-COMMUNICATIONS, INC.
By:
------------------------------------
Name:
Title:
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Exhibit A to Agreement
dated as of December 1, 1996
TCI TELEPHONY SERVICES, INC.
Option to Purchase Common Stock
Designation of Beneficiary
I, ___________________________________ (the "Grantee"), hereby declare
that upon my death ____________________________________ (the "Beneficiary") of
Name
______________________________________________________________________________,
Street Address City State Zip Code
who is my ___________________________________________, shall be entitled to the
Relationship to Grantee
Option and all other rights accorded Grantee by the above-referenced grant
agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to Grantee's will or the laws of
descent and distribution.
All prior designations of beneficiary under the Agreement are hereby
revoked. This Designation of Beneficiary may only be revoked in writing, signed
by Grantee, and filed with Tele-Communications, Inc. and TCI Telephony
Services, Inc., prior to Grantee's death.
----------------------- ---------------------------------------
Date Grantee
18
Exhibit B to Agreement
dated as of December 1, 1996
TELE-COMMUNICATIONS, INC.
OPTION TO PURCHASE COMMON STOCK
THIS AGREEMENT ("AGREEMENT") is made as of the ____ day of
__________, 199__, by and among TCI TELEPHONY SERVICES, INC., a Delaware
corporation (the "COMPANY"), GRANTEE and TELE-COMMUNICATIONS, INC., a Delaware
corporation ("TCI").
The Company is on the date hereof a subsidiary of TCI and a
member of the Telephony Group, as defined in TCI's Restated Certificate of
Incorporation. Pursuant to that certain agreement dated as of December 1, 1996
(the "PRIOR OPTION AGREEMENT") among Grantee, the Company and TCI, the Company
granted to Grantee an option to purchase shares of the Company's common stock
(the "PRIOR OPTION") The Board of Directors of the Company (the "COMPANY
BOARD") and the Board of Directors of TCI had each determined that it is in the
best interests of the Company to grant Grantee the rights and option set forth
in the Prior Option Agreement in order to provide Grantee with additional
remuneration for services rendered to the Company and its predecessors, to
encourage Grantee to remain in the employ of TCI and/or one or more of its
Subsidiaries, including the Company, and to provide additional incentive to
Grantee by increasing Grantee's proprietary interest in the continued success
and progress of the Company.
Subsequent to the grant of the Prior Option, the stockholders
of TCI, at a special meeting held on March 12, 1997 (the "MEETING"), approved
an amendment to TCI's Restated Certificate of Incorporation authorizing, among
other things, the creation of two new series of TCI Common Stock--Series A
Telephony Group Common Stock and Series B Telephony Group Common Stock--that
are designed to reflect the separate performance of the Telephony Group, which
consists principally of the Company and its subsidiaries. On _________, 199__,
TCI issued shares of Series A Telephony Group Common Stock to the public. As
required by Section 12 of the Prior Option Agreement, this Agreement is being
entered into, effective as of the closing of such issuance, to replace in its
entirety the Prior Option Agreement and in order to substitute the Option
granted herein for the Prior Option. Capitalized terms used herein and not
otherwise defined are defined in paragraph 18 below.
Accordingly, TCI, the Company and Grantee hereby agree as
follows:
19
1. GRANT OF OPTION; OPTION TERM. The Company hereby grants to
Grantee the right and option (the "OPTION"), on the terms and subject to the
conditions set forth herein, to purchase the Option Shares for a price per
Option Share equal to the Option Price. TCI hereby agrees to issue the Option
Shares to Grantee upon receipt of notice from the Company that the Option has
been validly exercised in accordance with paragraph 3. The parties understand
and agree that the payment of the Option Price will be credited to the
Telephony Group and that the Option Shares issued will reduce the shares of
Telephony Group Common Stock available for issuance for the account of the
Telephony Group. The Option Price and Option Shares are subject to adjustment
pursuant to paragraph 9 below. Subject to paragraph 2, the Option shall be
exercisable in whole at any time and in part from time to time during the
period commencing on the date hereof and expiring at 5:00 p.m., Denver,
Colorado time ("CLOSE OF BUSINESS") on the tenth anniversary of the
Determination Date, or such earlier date as the Option may be terminated
pursuant to paragraph 6 or paragraph 9(c) (the "OPTION TERM"). The Option is
hereby substituted for the Prior Option and the Prior Option is hereby
canceled.
2. CONDITIONS OF EXERCISE; VESTING. Except as otherwise provided
in the last sentence of this paragraph 2 or in paragraph 9(c), the Option shall
not be exercisable until the first anniversary of the Determination Date, and,
from the first anniversary of the Determination Date to the fifth anniversary
of the Determination Date, the Option shall be exercisable only to the extent
the Option Shares have become available for purchase in accordance with the
following schedule:
Anniversary of Percentage of Option Shares
Determination Date Available for Purchase
------------------ ---------------------------
1st 20%
2nd 40%
3rd 60%
4th 80%
5th 100%
Notwithstanding the foregoing, all Option Shares shall become
available for purchase if during the Option Term (i) Grantee's employment with
the TCI Group shall terminate by reason of (x) termination by the TCI Group
without Cause, (y) termination by Grantee for Good Reason or (z) Disability,
(ii) Grantee's employment shall terminate pursuant to provisions of a written
employment agreement, if any, between Grantee and the applicable member(s) of
the TCI Group which expressly permits Grantee to terminate such employment upon
the occurrence of specified events (other than the giving of notice and passage
of time) or (iii) Grantee dies while employed by the TCI Group. A change of
employment is not a termination of employment within the meaning of this
paragraph 2, provided that, after giving effect to such change, Grantee is an
employee of, or becomes or continues to be a consultant to, any member of the
TCI Group.
3. MANNER OF EXERCISE. The Option may be exercised only by
delivering to the Company all of the following and shall be considered
exercised (as to the number of shares specified
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in the notice referred to in clause (a) below)) on the later of (i) the first
business day on which the Company has received all of the following deliveries
and (ii) the date of exercise designated in the written notice referred to in
clause (a) below (or if such date is not a business day, the first business day
thereafter):
(a) written notice, in such form as the Company Board may
reasonably require, stating that Grantee is exercising the Option and
setting forth the date of such exercise, the number of Option Shares
to be purchased, the aggregate Option Price to be paid for such Option
Shares in accordance with this Agreement and the manner in which such
payment is being made ("OPTION EXERCISE NOTICE");
(b) payment of the Option Price for each Option Share to
be purchased upon such exercise, in cash or in such other form or
combination of forms of payment contemplated by paragraph 10, together
with payment of, or other provision acceptable to the Company Board
for, any and all withholding taxes required to be withheld by the
Company upon such exercise, in accordance with paragraph 4;
(c) any other documentation that the Company Board may
reasonably require (including, without limitation, proof satisfactory
to the Company Board that the Option is then exercisable for the
number of Option Shares set forth in such notice); and
(d) evidence satisfactory to the Company Board that
Grantee is validly and simultaneously exercising the same proportion
of the stock option granted to him by TCI Wireline, Inc. pursuant to
that certain option agreement, dated as of December 1, 1996, among TCI
Wireline, Inc., Grantee and TCI, as the same may hereafter be amended,
modified or supplemented from time to time.
4. WITHHOLDING FOR TAXES. It shall be a condition precedent to
any exercise of the Option that Grantee make provision acceptable to the
Company for the payment or withholding of any and all federal, state and local
taxes required to be withheld by the Company to satisfy the tax liability
associated with such exercise, as determined by the Company Board.
5. DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all the items required by paragraph 3 with respect to any exercise of the
Option, and subject to the withholding referred to in paragraph 4, the Company
shall so notify TCI and TCI shall deliver or cause to be delivered to Grantee
certificates issued in Grantee's name for the number of whole Option Shares
purchased upon such exercise. If delivery is by mail, delivery of Option
Shares shall be deemed effected for all purposes when TCI or a stock transfer
agent of TCI shall have deposited the certificates in the United States mail,
addressed to Grantee, and any cash payment (for fractional shares or otherwise)
shall be deemed effected when a Company check, payable to Grantee and in an
amount equal to the amount of the cash payment, shall have been deposited in
the United States mail, addressed to Grantee, in each case in accordance with
paragraph 12.
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6. EARLY TERMINATION OF OPTION. Unless otherwise determined by
the Company Board in its sole discretion, the Option shall terminate, prior to
the expiration of the ten-year period provided for in paragraph 1, as follows:
(a) If Grantee's employment with the TCI Group terminates
other than (i) by Grantee with Good Reason, (ii) by reason of
Grantee's death or Disability, (iii) with the written consent of the
applicable member(s) of the TCI Group, (iv) without such consent if
such termination is pursuant to provisions of a written employment
agreement, if any, between Grantee and the applicable member(s) of the
TCI Group which expressly permits Grantee to terminate such employment
upon the occurrence of specified events (other than the giving of
notice and passage of time), or (v) by the TCI Group with or without
Cause, then the Option shall terminate at the Close of Business on the
first business day following the expiration of the 90-day period
beginning on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the TCI Group, or
prior to the expiration of a relevant period of time during which the
Option remains exercisable as provided in this paragraph 6, the Option
shall terminate at the Close of Business on the first business day
following the expiration of the one-year period beginning on the date
of death;
(c) If Grantee's employment with the TCI Group terminates
by reason of Disability, then the Option shall terminate at the Close
of Business on the first business day following the expiration of the
one-year period beginning on the date of termination of Grantee's
employment;
(d) If Grantee's employment with the TCI Group is
terminated by the TCI Group for Cause, then the Option shall terminate
immediately upon such termination of Grantee's employment; and
(e) If Grantee terminates his employment with the TCI
Group (i) with Good Reason, (ii) with the written consent of the
applicable member(s) of the TCI Group or (iii) pursuant to provisions
of a written employment agreement, if any, between Grantee and the
applicable member(s) of the TCI Group which expressly permits Grantee
to terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or if the TCI
Group terminates Grantee's employment with the TCI Group without
Cause, then the Option Term shall not terminate prior to the end of
the ten-year period provided for in paragraph 1, except as otherwise
provided for in paragraph 6(b) or 9(c).
In any event in which the Option remains exercisable for a period of
time following the date of termination of Grantee's employment as provided
above, the Option may be exercised during such period of time only to the
extent it was exercisable as provided in paragraph 2 or paragraph 9(c) on such
date of termination of Grantee's employment. A change
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of employment is not a termination of employment within the meaning of this
paragraph 6, provided that, after giving effect to such change, Grantee is an
employee of, or becomes or continues to be a consultant to, any member of the
TCI Group. Anything contained herein to the contrary notwithstanding, the
Option shall in any event terminate upon the expiration of the ten-year period
provided for in paragraph 1, if not theretofore terminated.
7. NONTRANSFERABILITY OF OPTION. During Grantee's lifetime, the
Option is not and shall not be transferable (voluntarily or involuntarily)
other than pursuant to a Domestic Relations Order and, except as otherwise
required pursuant to a Domestic Relations Order, is exercisable only by Grantee
or Grantee's court appointed legal representative. Grantee may designate a
beneficiary or beneficiaries to whom the Option shall pass upon Grantee's death
and may change such designation from time to time by filing a written
designation of beneficiary or beneficiaries with the Company on the form
annexed hereto as Exhibit A or such other form as may be prescribed by the
Company Board, provided that no such designation shall be effective unless so
filed prior to the death of Grantee. If no such designation is made or if the
designated beneficiary does not survive Grantee's death, the Option shall pass
by will or the laws of descent and distribution. Following Grantee's death,
the Option, if otherwise exercisable, may be exercised by the person to whom
the Option passes according to the foregoing, and such person shall be deemed
to be Grantee for purposes of any applicable provisions of this Agreement.
8. NO SHAREHOLDER RIGHTS; NO GUARANTEE OF EMPLOYMENT. (a)
Grantee shall not be deemed for any purpose to be, or to have any of the rights
of, a stockholder of TCI with respect to any Option Shares unless and until
such Option Shares have been issued to Grantee by TCI. The existence of this
Agreement or the Option shall not affect in any way the right or power of TCI
or its stockholders to accomplish any corporate act.
(b) Nothing contained in this Agreement, and no action by
TCI, the TCI Board, the Company or the Company Board with respect hereto,
shall confer or be construed to confer on Grantee any right to continue in the
employ of the TCI Group or any member thereof or interfere in any way with the
right of TCI, the Company or any employing member of the TCI Group to terminate
Grantee's employment at any time, with or without Cause, except as otherwise
expressly provided in any written employment agreement between the applicable
member(s) of the TCI Group and Grantee.
9. ADJUSTMENTS; ACCELERATION. (a) If, after December 31, 1996,
TCI (i) pays a dividend or makes a distribution on the Series A Telephony Group
Common Stock in shares of Series A Telephony Group Common Stock; (ii)
subdivides the outstanding shares of Series A Telephony Group Common Stock into
a greater number of shares or (iii) combines the outstanding shares of Series A
Telephony Group Common Stock into a smaller number of shares, then this Option
and the number of Option Shares and the Option Price per share in effect
immediately prior to the opening of business on the record date for such
dividend or distribution or the effective date of such subdivision or
combination shall be adjusted so that Grantee upon exercise thereafter of the
Option may receive the number of shares of Series A Telephony Group Common
Stock that Grantee would
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have owned immediately following such event if Grantee had exercised the Option
immediately prior to the record date for, or effective date of, as the case may
be, such event. The adjustment contemplated by the preceding sentence shall be
made successively whenever any event listed above shall occur. For a dividend
or distribution, the adjustment shall become effective immediately after the
record date for the dividend or distribution. For a subdivision or
combination, the adjustment shall become effective immediately after the
effective date of the subdivision or combination.
(b) The Option shall also be subject to adjustment
(including, without limitation, as to the number of Option Shares and the
Option Price per share) in the sole discretion of the Company Board and in such
manner as the Company Board may deem equitable and appropriate in connection
with the occurrence of any of the following events after December 31, 1996 that
affects the Series A Telephony Group Common Stock such that an adjustment would
be required in order to preserve the benefits or potential benefits intended to
be made available under this Agreement: any dividend or distribution on the
Series A Telephony Group Common Stock in shares of TCI's capital stock (other
than Series A Telephony Group Common Stock); any reclassification of the Series
A Telephony Group Common Stock into shares of TCI's capital stock (other than a
reclassification by way of an Approved Transaction); any extraordinary cash
dividend; any distribution of any rights, warrants or options to holders of
Series A Telephony Group Common Stock; any distribution of any assets or debt
securities (other than cash dividends or distributions that are not
extraordinary cash dividends); any recapitalization, reorganization, split up
or spin off; and any merger, consolidation or binding share exchange that
reclassifies or changes the outstanding Series A Telephony Group Common Stock
or other similar corporate event (other than those which constitute Approved
Transactions). Notwithstanding the foregoing, in the event of any
reclassification or recapitalization of the Series A Telephony Group Common
Stock into two or more classes or series of common stock with different voting
rights (however the same may be effected), no adjustment to the Option shall be
required that would entitle Grantee to receive shares of any class or series of
common stock of TCI other than the class or series with the fewest number of
votes per share. Adjustments to the Option Price shall be made on a per share
basis so that the aggregate remaining Option Price is unchanged.
(c) The Company Board may at any time in its sole
discretion determine that the Option shall become exercisable in full, without
regard to paragraph 2, whether immediately, upon the occurrence of specified
events, or otherwise. Without limiting the generality of the foregoing, in the
event of any Board Change, Control Purchase or Approved Transaction that occurs
with respect to TCI following December 31, 1996, the Option shall become
exercisable in full, without regard to paragraph 2, effective upon the Board
Change or Control Purchase or immediately prior to consummation of the Approved
Transaction, as applicable (or at such earlier time as the Company Board in its
sole discretion may determine); provided, however, that to the extent not
theretofore exercised the Option shall terminate upon the first to occur of the
consummation of the Approved Transaction or the expiration or early termination
of the Option Term. Notwithstanding the foregoing, the Company Board may, in
its discretion, determine that the Option will not become exercisable on an
accelerated basis in connection with an Approved Transaction and/or will not
terminate if not exercised prior to consummation of the Approved Transaction,
if the TCI Board or
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the surviving or acquiring corporation, as the case may be, shall have taken or
made effective provision for the taking of such action as in the opinion of the
TCI Board is equitable and appropriate to substitute a new stock option for the
Option evidenced by this Agreement or to assume this Agreement and the Option
evidenced hereby and in order to make such new or assumed stock option, as
nearly as may be practicable, equivalent to the Option evidenced by this
Agreement as then in effect (but before giving effect to any acceleration of
the exercisability hereof unless otherwise determined by the TCI Board), taking
into account, to the extent applicable, the kind and amount of securities, cash
or other assets into or for which the Series A Telephony Group Common Stock may
be changed, converted or exchanged in connection with the Approved Transaction.
(d) All actions taken by the TCI Board or the Company
Board with respect to the Option pursuant to this paragraph 9 shall be
consistent with any actions taken by such Board with respect to the Other
Options. When an adjustment to the Option pursuant to paragraph 9(a) or 9(b)
becomes effective immediately after the record date for an event, the Company
may defer until the occurrence of such event issuing to Grantee the additional
shares of Series A Telephony Group Common Stock (or cash, securities or other
property) issuable or deliverable upon any exercise of the Option after such
record date and before the occurrence of such event by reason of the adjustment
required by such event over and above the shares of Series A Telephony Group
Common Stock that would have been issuable upon such exercise absent such
adjustment.
10. MANNER OF PAYMENT. The method or methods of payment of the
Option Price for the shares of Series A Telephony Group Common Stock to be
purchased upon exercise of the Option and any amounts required by paragraph 4
shall consist of (i) cash, (ii) check, (iii) promissory note in such form and
with such security as shall be acceptable to the Company Board in its sole
discretion (except that this method of payment will not be available for
amounts required by paragraph 4), (iv) whole shares of TCI Common Stock already
owned by Grantee, (v) the withholding of shares of Series A Telephony Group
Common Stock issuable upon exercise of the Option, (vi) the delivery, together
with a properly executed exercise notice, of irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds
required to pay the purchase price, or (vii) any combination of the foregoing
methods of payment, as Grantee may elect and shall designate in the Option
Exercise Notice, subject, however, to any restrictions or limitations of
applicable law or of any agreement evidencing indebtedness of the Company for
borrowed money. Any shares of capital stock delivered or withheld in payment
of any amount due hereunder shall be valued for such purposes at the Fair
Market Value of such shares on the applicable date of exercise of the Option.
11. RESTRICTIONS IMPOSED BY LAW. Grantee acknowledges that
neither the Option nor any of the Option Shares has been registered under the
Securities Act of 1933 and that the Option Shares may not be transferred in the
absence of such registration or the availability of an exemption therefrom
under such Act or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder. Neither TCI nor any other person shall have
any obligation to register any Option Shares, or any transfer of Option Shares,
under the Securities Act of 1933, the Exchange Act or any other state or
federal securities law. Certificates representing Option Shares purchased by
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25
Grantee hereunder may bear such restrictive and other legends as counsel for
TCI shall require in order to insure compliance with any such law or any rule
or regulation promulgated thereunder. Grantee agrees that Grantee will not
exercise the Option (and that TCI shall not be obligated to issue, and the
Company shall not be obligated to deliver, any Option Shares upon any exercise
of the Option) if counsel for TCI determines that such exercise or delivery
would violate any applicable law or any rule or regulation of any governmental
authority, or any rule or regulation of, or agreement of TCI with, any
securities exchange or association upon which the Series A Telephony Group
Common Stock is listed or quoted. Neither TCI nor the Company shall in any
event be obligated to take any affirmative action in order to cause the
exercise of the Option or the resulting delivery of the shares of Series A
Telephony Group Common Stock to comply with any such law, rule, regulation or
agreement.
12. NOTICE. Unless the Company or TCI, as applicable, notifies
Grantee in writing of a change of address, any notice or other communication to
the Applicable Person with respect to this Agreement shall be in writing and
shall be delivered personally or sent by first class mail, postage prepaid and
addressed as follows:
If to the Company:
TCI Telephony Services, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
If to TCI:
Tele-Communications, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Any notice or other communication by the Company or TCI to Grantee with respect
to this Agreement shall be in writing and shall be delivered personally, or
shall be sent by first class mail, postage prepaid, to Grantee's address as
listed in the records of TCI on the date hereof, unless the Company has
received written notification from Grantee of a change of address. Except as
otherwise provided in paragraph 5, all notices and other communications
hereunder, including without limitation any Option Exercise Notice, shall be
effective when actually received.
13. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
14. CONSTRUCTION. References in this Agreement to "this
Agreement" and the words "herein," "hereof," "hereunder" and similar terms
refer to this Agreement, including all Exhibits, as
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a whole, unless the context otherwise requires. The headings of the paragraphs
of this Agreement have been included for convenience of reference only, are not
to be considered a part hereof and shall not modify or restrict any of the
terms or provisions hereof. All decisions of the Company Board and the TCI
Board, as applicable, upon questions regarding this Agreement shall be
conclusive.
15. DUPLICATE ORIGINALS. The Company, TCI and Grantee may sign
any number of copies of this Agreement. Each signed copy shall be an original,
but all of them together represent the same agreement.
16. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between or among
TCI, the Company and Grantee, or any of them, with respect to the subject
matter hereof. Each of TCI, the Company and Grantee hereby declares and
represents that no promise or agreement not herein expressed has been made and
that this Agreement contains the entire agreement between and among the parties
hereto with respect to the Option and supersedes and makes null and void any
prior agreements between or among TCI, the Company and Grantee, or any of them,
regarding the Option, including, without limitation, the Prior Option
Agreement.
17. AMENDMENT. This Agreement may be amended, modified or
supplemented by TCI and the Company, without the consent of the Grantee, (i) to
cure any ambiguity or to correct or supplement any provision herein which may
be defective or inconsistent with any other provision herein or (ii) to make
such other changes as TCI or the Company, upon advice of counsel, determines
are necessary or advisable because of the adoption or promulgation of, or
change in or of the interpretation of, any law or governmental rule or
regulation, including, without limitation, any applicable federal or state
securities laws. Except as provided above, this Agreement may be amended,
modified or supplemented only by written agreement of the parties hereto.
18. DEFINITIONS. As used in this Agreement, the following terms
have the corresponding meanings:
"APPLICABLE PERSON" means TCI or the Company, as applicable.
"APPROVED TRANSACTION" means any transaction in which the TCI
Board (or, if approval of the TCI Board is not required as a matter of law, the
stockholders of TCI) shall approve (i) any consolidation or merger of TCI, or
binding share exchange, pursuant to which shares of common stock of TCI would
be changed or converted into or exchanged for cash, securities or other
property, other than any such transaction in which the common stockholders of
TCI immediately prior to such transaction have the same proportionate ownership
of the common stock of, and voting power with respect to, the surviving
corporation immediately after such transaction, (ii) any merger, consolidation
or binding share exchange to which TCI is a party as a result of which the
persons who are common stockholders of TCI immediately prior thereto have less
than a majority of the combined voting power of the outstanding capital stock
of TCI ordinarily (and apart from the rights
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accruing under special circumstances) having the right to vote in the election
of directors immediately following such merger, consolidation or binding share
exchange, (iii) the adoption of any plan or proposal for the liquidation or
dissolution of TCI, or (iv) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of TCI.
"BOARD CHANGE" means, during any period of two consecutive
years, individuals who at the beginning of such period constituted the entire
TCI Board cease for any reason to constitute a majority thereof unless the
election, or the nomination for election, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
"CAUSE" has the meaning ascribed thereto in any employment
agreement between Grantee and the applicable member of the TCI Group, and in
the absence of any such employment agreement means insubordination, dishonesty,
incompetence, moral turpitude, other misconduct of any kind, or refusal to
perform one's duties and responsibilities for any reason other than illness or
incapacity, or negligence in the performance of any of one's material duties or
responsibilities that continues after written notice from the Company, as
determined conclusively by the Company Board.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute or statutes thereto. Reference to
any specific Code section shall include any successor section.
"CONTROL PURCHASE" means any transaction (or series of related
transactions) in which (i) any person (as such term is defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity (other
than TCI, any Subsidiary of TCI or any employee benefit plan sponsored by TCI
or any Subsidiary of TCI) shall purchase any common stock of TCI (or securities
convertible into common stock of TCI) for cash, securities or any other
consideration pursuant to a tender offer or exchange offer, without the prior
consent of the TCI Board, or (ii) any person (as such term is so defined),
corporation or other entity (other than TCI, any Subsidiary of TCI, any
employee benefit plan sponsored by TCI or any Subsidiary of TCI, or any
Controlling Person (as defined below)) shall become the "beneficial owner" (as
such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of TCI representing 20% or more of the combined
voting power of the then outstanding securities of TCI ordinarily (and apart
from the rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in Rule 13d-3(d) under the
Exchange Act in the case of rights to acquire TCI's securities), other than in
a transaction (or series of related transactions) approved by the TCI Board.
For purposes of this definition, "Controlling Person" means each of (a) the
Chairman of the Board, the President and each of the directors of TCI as of
December 31, 1996, (b) the respective family members, estates and heirs of each
of the persons referred to in clause (a) above and any trust or other
investment vehicle for the primary benefit of any of such persons or their
respective family members or heirs and (c) ▇▇▇▇▇▇-Tribune Corporation, a
Delaware corporation. As used with respect
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to any person, the term "family member" means the spouse, siblings and lineal
descendants of such person.
"DETERMINATION DATE" means February 1, 1996.
"DISABILITY" means the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that (a) can be expected to result in death or (b) has lasted or can
be expected to last for a continuous period of not less than 12 months.
"DOMESTIC RELATIONS ORDER" means a domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute or statutes thereto, and
the rules and regulations promulgated by the Securities and Exchange Commission
thereunder. References to any specific section of the Exchange Act or rule
thereunder shall include any successor section or rule.
"FAIR MARKET VALUE" of a share of Series A Telephony Group
Common Stock on any day means the last sale price (or, if no last sale price is
reported, the average of the high bid and low asked prices) for a share of
Series A Telephony Group Common Stock on such day (or, if such day is not a
trading day, on the next preceding trading day) as reported on NASDAQ or, if
not reported on NASDAQ, as quoted by the National Quotation Bureau
Incorporated, or if the Series A Telephony Group Common Stock is listed on an
exchange, on the principal exchange on which the Series A Telephony Group
Common Stock is listed. If for any day the Fair Market Value of a share Series
A Telephony Group Common Stock is not determinable by any of the foregoing
means, then the Fair Market Value for such day shall be determined in good
faith by the Company Board on the basis of such quotations and other
considerations as the Company Board deems appropriate.
"GOOD REASON" means the occurrence of any of the following
prior to any termination of employment by Grantee:
(i) any involuntary reduction in Grantee's annual rate of
salary;
(ii) a failure by TCI or the Company to continue in effect
any employee benefit plan in which Grantee was participating, or the
taking of any action by TCI or the Company that would adversely affect
Grantee's participation in, or materially reduce Grantee's benefits
under, any such employee benefit plan, unless such failure or such
taking of any action adversely affects the senior members of the
corporate management of TCI or the Company (as applicable) generally;
or
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(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position on the date hereof.
"NASDAQ" means the Nasdaq Stock Market.
"OPTION PRICE"means $________ per Option Share, plus an
interest factor of 6% per annum on such amount from the date hereof to the date
of exercise (calculated on the basis of a 365-day year and actual days
elapsed), as such amount per Option Share may be adjusted from time to time
pursuant to paragraph 9. Notwithstanding the foregoing, each time TCI makes a
Tax Use the Option Price will be recalculated in accordance with the following
provisions of this definition. The Option Price payable upon an exercise of
the Option during the period following such Tax Use and preceding the next Tax
Use shall be the dollar amount resulting from the following formula ($X), plus
an interest factor of 6% per annum on such amount from the date TCI made the
applicable Tax Use to the date of exercise (calculated on the basis of a
365-day year and actual days elapsed):
$X = .01(A-B) + D.
--------
C
For purposes of the formula:
"A" = $_________
[NOTE: This number shall be the same as the corresponding number in the
definition of "Option Price" in the Prior Option Agreement, unless the Prior
Option was exercised in part in which case such number shall be adjusted
accordingly.]
"B" = as of the date of the Tax Use requiring the
recalculation of the Option Price, the aggregate
amount of the Company tax benefits used in such Tax
Use and all prior Tax Uses.
"C" = the number of Option Shares as of the date of the
applicable Tax Use, determined without regard to any
prior exercise(s) of this Option.
"D" = that portion of the Option Price that, as of the date
of the applicable Tax Use and before giving effect to
the recalculation of the Option Price, represents
accrued interest on the initial Option Price (i.e.,
the Option Price as of the date hereof) to the date
of such Tax Use.
"OPTION SHARES" means an aggregate number of shares of Series
A Telephony Group Common Stock equal to ________, as such number of shares may
be adjusted from time to time pursuant to paragraph 9. [NOTE: This number shall
be 1% of the Number of Shares Issuable With Respect to the Telephony Group
Inter-Group Interest (as defined in the Certificate of Amendment
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to TCI's Restated Certificate of Incorporation authorizing the Series A
Telephony Group Common Stock and Series B Telephony Group Common Stock)
immediately prior to the issuance of any shares of Telephony Group Common Stock
; provided that if, subsequent to the approval of such Certificate of Amendment
by TCI's stockholders at the Meeting and prior to the issuance of any shares of
Telephony Group Common Stock, the composition of the Telephony Group is
expanded from that contemplated by the definitive proxy statement for the
Meeting, then, for purposes of determining the number of Option Shares, the
Number of Shares Issuable With Respect to the Telephony Group Inter-Group
Interest shall be determined solely on the basis of the assets and liabilities
that such definitive proxy statement contemplated would comprise the Telephony
Group. In the event that the Prior Option was exercised in part, the number of
Option Shares shall be adjusted accordingly.]
"OTHER OPTIONS" means the options to purchase shares of Series
A Telephony Group Common Stock granted pursuant to those other Option
Agreements dated as of the date hereof among TCI, the Company and the grantees
named therein, respectively.
"SERIES A TELEPHONY GROUP COMMON STOCK" means the series of
TCI Common Stock designated Tele- Communications, Inc. Series A Telephony Group
Common Stock.
"SERIES B TELEPHONY GROUP COMMON STOCK" means the series of
TCI Common Stock designated Tele- Communications, Inc. Series B Telephony Group
Common Stock.
"SUBSIDIARY", when used with respect to TCI or the Company, as
applicable, means any present or future subsidiary (as defined in Section
424(f) of the Code) of the Applicable Person or any business entity in which
the Applicable Person owns, directly or indirectly, 50% or more of the voting,
capital or profits interests. An entity shall be deemed a Subsidiary of the
Applicable Person for purposes of this definition only for such periods as the
requisite ownership or control relationship is maintained.
"TAX SHARING AGREEMENT" means that certain Third Amendment to
the Tax Sharing Agreement, dated as of December 1, 1996, among TCI, TCI
Telephony Holdings, Inc. (the parent corporation of the Company), and certain
other subsidiaries of TCI.
"TAX USE" means the use by TCI in its consolidated return of
tax benefits generated by the Company and its subsidiaries for which TCI,
pursuant to Section C.4.c. of the Tax Sharing Agreement, is not obligated to
provide a credit to or otherwise reimburse the Company. The aggregate amount
of Company tax benefits that may be so used by TCI is $500 million.
"TCI COMMON STOCK" means the Common Stock, $1.00 par value per
share, of TCI.
"TCI GROUP" means TCI and its Subsidiaries, collectively, or
the applicable of TCI or a Subsidiary of TCI, as the context may require. If
the Company ceases to be a Subsidiary of TCI, the Company and its Subsidiaries
shall, notwithstanding the last sentence of the definition of
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Subsidiary above, be deemed for purposes of this definition only to continue to
be Subsidiaries of TCI and, accordingly, members of the TCI Group.
19. RULES BY COMPANY BOARD. The rights of Grantee and
obligations of TCI and the Company hereunder shall be subject to such
reasonable rules and regulations as the TCI Board or the Company Board may
adopt from time to time hereafter.
IN WITNESS WHEREOF, TCI, the Company and Grantee have caused
this Agreement to be duly executed and delivered as of the date first written
above.
ATTEST: TELE-COMMUNICATIONS, INC.
------------------------------ By:
Assistant Secretary ------------------------------------
Name:
Title:
TCI TELEPHONY SERVICES, INC.
By:
------------------------------------
Name:
Title:
---------------------------------------
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