UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
-----------------------------------------------------
NTL Incorporated
(Name of Issuer)
Common Stock, par value $0.01 per share
----------------------------------------------------
(Title of Class of Securities)
629407107 (Common Stock)
--------------------------------------------------------------
(CUSIP Number)
France Telecom S.A. Compagnie Generale des Communications
Jean-Louis Vinciguerra (COGECOM) S.A.
Senior Executive Vice President Pierre Dauvillaire
6 place d'Alleray Chairman of the Board of Directors
75505 Paris Cedex 15 6 place d'Alleray
France 75505 Paris Cedex 15
(33-1) 44-44-01-59 France
(33-1) 44-44-84-72
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
Copy to:
Alfred J. Ross, Jr.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 848-4000
August 13, 1999
(Date of Event which requires Filing of this Statement)
--------------------------------------------------------------
- --------------------------------------------------------------------------------
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box |_|.
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d- 7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
1 of 12
<PAGE>
CUSIP No. 629407107
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
France Telecom S.A.
IRS Identification Number: N/A
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds (See Instructions)
WC
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e).
|_|
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
France
- --------------------------------------------------------------------------------
7. Sole Voting Power
0
Number of
8. Shares Shared Voting Power
Beneficially
Owned 8,702,703
By
Each
9. Reporting Sole Dispositive Power
Person
With 0
10. Shared Dispositive Power
8,702,703
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
8,702,703
- --------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
|_|
- --------------------------------------------------------------------------------
2 of 12
<PAGE>
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
9.6%
- --------------------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO
- --------------------------------------------------------------------------------
3 of 12
<PAGE>
CUSIP No. 62940710
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Compagnie Generale des Communications (COGECOM) S.A.
IRS Identification Number: N/A
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds (See Instructions)
WC
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e).
|_|
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
France
- --------------------------------------------------------------------------------
7. Sole Voting Power
0
Number of
8. Shares Shared Voting Power
Beneficially
Owned 8,702,703
By
Each
9. Reporting Sole Dispositive Power
Person
With 0
10. Shared Dispositive Power
8,702,703
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
8,702,703
- --------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
|_|
- --------------------------------------------------------------------------------
4 of 12
<PAGE>
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
9.6%
- --------------------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO
- --------------------------------------------------------------------------------
5 of 12
<PAGE>
Item 1. Security and Issuer
The class of equity securities to which this joint statement on
Schedule 13D relates is the common stock, par value $0.01 per share (the "Common
Stock") of NTL Incorporated, a Delaware corporation with its principal executive
offices at 110 East 59th Street, New York, NY 10022 (the "Issuer"). The 5%
Cumulative Participating Convertible Preferred Stock, Series A (the "Series A
Preferred Stock"), also acquired by the persons filing this joint statement, is
convertible into Common Stock at the option of the holder at a conversion price
of $125 per share.
Item 2. Identity and Background
The persons listed in numbers 1 and 2 below are the persons filing this
joint statement.
1. a. France Telecom S.A. ("FT"), a societe anonyme organized under
the laws of France.
b. 6 place d'Alleray, 75505 Paris Cedex 15, France.
c. During the last five years, FT has not been convicted in any
criminal proceeding.
d. During the last five years, FT has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding is or was
subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation
with respect to such laws.
Information regarding the directors and executive officers of FT is set
forth on Schedule I attached hereto, which Schedule is incorporated herein by
reference. Except as set forth on Schedule I, all of the directors and executive
officers of FT are citizens of France. During the last five years, to the best
of the knowledge of FT, no person named on Schedule I has been (a) convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
(b) a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding is or was subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
2. a. Compagnie Generale des Communications (COGECOM) S.A.
("COGECOM"), a societe anonyme organized under the laws of
France.
b. 6 place d'Alleray, 75505 Paris Cedex 15, France.
6 of 12
<PAGE>
c. During the last five years, COGECOM has not been convicted in
any criminal proceeding.
d. During the last five years, COGECOM has not been a party to a
civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding is
or was subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any
violation with respect to such laws.
Information regarding the directors of COGECOM is set forth on Schedule
II attached hereto, which Schedule is incorporated herein by reference. All of
the directors of COGECOM are citizens of France. COGECOM is a wholly owned
subsidiary of FT and has no officers or operations. During the last five years,
to the best of the knowledge of COGECOM, no person named on Schedule II has been
(a) convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
is or was subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
FT assigned to COGECOM its rights to purchase the Common Stock and the
Series A Preferred Stock pursuant to the Purchase Agreement, dated as of July
15, 1999, between the Issuer and FT (the "Purchase Agreement"), attached hereto
as Exhibit 4.1. FT provided all of the necessary funds to the Issuer on behalf
of COGECOM from cash on hand. For any additional acquisitions of Common Stock,
Series A Preferred Stock or the Issuer's 5% Cumulative Participating Convertible
Preferred Stock, Series B (the "Series B Preferred Stock") pursuant to the
Investment Agreement, dated as of July 26, 1999, between the Issuer and FT (the
"Investment Agreement"), attached hereto as Exhibit 4.2, and other future
purchases of securities of the Issuer, if any, FT currently expects that such
funds would be provided by cash on hand, borrowings, other sources, or a
combination thereof. The obligations of FT or its affiliates under the
Investment Agreement are not conditioned on the ability of FT to obtain
financing therefor.
Item 4. Purpose of Transaction
FT has entered into the Purchase Agreement and the Investment Agreement
with the Issuer, as described in Item 6, in order to participate and invest in
the markets in which the Issuer operates and as part of the related transactions
described in Item 6.
7 of 12
<PAGE>
Item 5. Interest in Securities of the Issuer
1. France Telecom S.A.
(a) FT is the joint beneficial owner of 8,702,703 shares of Common
Stock (including the Series A Preferred Stock convertible at any time into
Common Stock), representing 9.6% of the shared voting power of the outstanding
Common Stock. The calculation of the foregoing percentage is based on the number
of shares of Common Stock disclosed to FT by the Issuer as outstanding as of
August 10, 1999.
(b) The shares of Common Stock (including the Common Stock issuable
upon conversion of the Series A Preferred Stock) are subject to the terms and
conditions of the following agreements, documents and instruments, among others,
all as more fully described in Item 6:
i. the Purchase Agreement;
ii. the Investment Agreement;
iii. Registration Rights Agreement, dated August 13, 1999
(the "Registration Rights Agreement"), attached
hereto as Exhibit 4.3;
iv. Form of Certificate of Designation of the Voting
Powers, Designation, Preferences and Relative,
Participating, Optional or Other Special Rights and
Qualifications, Limitations and restrictions of the
Series A Preferred Stock (the "Series A
Certificate"), attached hereto as Exhibit 4.4; and
v. Form of Certificate of Designation of the Voting
Powers, Designation, Preferences and Relative,
Participating, Optional or Other Special Rights and
Qualifications, Limitations and restrictions of the
Series B Preferred Stock, Series B of the Issuer (the
"Series B Certificate"), attached hereto as Exhibit
4.5;
(c) Except as described herein, there have been no transactions by FT
in securities of the Issuer during the past sixty days.
(d) No one other than FT and COGECOM is known to have the right to vote
or to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the shares of Common Stock (including the Common
Stock issuable upon conversion of the Series A Preferred Stock) purchased by FT.
(e) Not applicable.
2. Compagnie Generale des Communications S.A.
8 of 12
<PAGE>
(a) COGECOM is the joint beneficial owner of 8,702,703 shares of Common
Stock (including Series A Preferred Stock convertible into Common Stock),
representing 9.6% of the shared voting power of the outstanding Common Stock.
The calculation of the foregoing percentage is based on the number of shares of
Common Stock disclosed to COGECOM by the Issuer as outstanding as of August 10,
1999.
(b) The shares of Common Stock (including the Series A Preferred Stock)
are subject to the terms and conditions of the following agreements, documents
and instruments, among others, all as more fully described in Item 6:
i. the Purchase Agreement;
ii. the Investment Agreement;
iii. the Registration Rights Agreement;
iv. the Series A Certificate; and
iv. the Series B Certificate.
(c) Except as described herein, there have been no transactions by
COGECOM in securities of the Issuer during the past sixty days.
(d) No one other than COGECOM and FT is known to have the right to vote
or to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the shares of Common Stock (including the Series A
Preferred Stock) purchased by COGECOM.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understanding of Relationships with
Respect to Securities of the Issuer
The Purchase Agreement
On August 13, 1999, pursuant to the Purchase Agreement, FT purchased
2,702,703 shares of Common Stock at $92.5 per share and 750,000 shares of the
Series A Preferred Stock, with a conversion price of $125 per share of Common
Stock, for an aggregate purchase price of $1,000,000,000 in cash. Although the
Issuer, FT and COGECOM currently anticipate that the proceeds of the investment
will be used to consummate the strategic acquisition by the Issuer of
ConsumerCo, a newly formed entity organized for the purpose of holding the
consumer cable telephone, Internet and televisions operations of Cable &
Wireless Communications plc ("ConsumerCo"), the Purchase Agreement does not
specifically limit the Issuer's use of these proceeds to such acquisition.
In accordance with the terms of the Purchase Agreement and based on
FT's holdings as of the record date, FT has exercised its right to elect one
person to the Issuer's board of directors.
9 of 12
<PAGE>
In the Purchase Agreement, the Issuer covenanted that it would, inter
alia, provide FT with financial statements and management reports, file the
necessary documentation with federal and state authorities and the NASDAQ
National Market, amend its Shareholder Rights Agreement (if necessary), limit
future issuances of securities, indemnify FT with respect to certain French tax
liabilities and pay certain expenses.
The Registration Rights Agreement
In connection with the Purchase Agreement, the Issuer and FT entered
into the Registration Rights Agreement. Pursuant to the Registration Rights
Agreement, the Issuer shall be obligated to register for resale the shares of
Common Stock issuable to FT, including those shares of Common Stock issuable
upon conversion of the Series A Preferred Stock (or any dividends paid thereon
in Common Stock).
The Investment Agreement
The Issuer and FT also entered into the Investment Agreement whereby FT
agreed to invest an additional Pounds Sterling 2.8 billion in the Issuer in
exchange for additional Common Stock and Series B Preferred Stock for the
purposes of financing the Issuer's acquisition of ConsumerCo. The Investment
Agreement contains covenants on behalf of the Issuer and FT including
limitations on the use of proceeds, standstill restrictions, limitations on
asset sales and purchases, limitations on additional indebtedness if it would
affect the Issuer's credit rating, corporate governance arrangements, preemptive
rights, commercial strategic coordination, and the right of FT to accelerate the
closing of the transactions contemplated by the Investment Agreement.
For so long as FT or its affiliate is a holder of at least one share of
the Series A Preferred Stock as well as 15% of the shares of Common Stock
outstanding, calculated on a fully diluted basis, FT will have the right to
elect an aggregate of either 3 or 4 persons to the Issuer's board of directors,
depending on the size of the board of directors at that time. If at any point
thereafter, FT or its affiliates ceases to hold any shares of the Series A
Preferred Stock or Series B Preferred Stock but continues to hold at least 15%
of the shares of the Common Stock outstanding, on a fully diluted basis, FT will
have the right to nominate either 3 or 4 persons for election to the Issuer's
board of directors, depending on the size of the board at that time.
Item 7. Material to be Filed as Exhibits
Exhibit 4.1 The Purchase Agreement
Exhibit 4.2 The Investment Agreement
Exhibit 4.3 The Registration Rights Agreement
10 of 12
<PAGE>
Exhibit 4.4 Form of Certificate of Designation of the Voting
Powers, Designation, Preferences and Relative,
Participating, Optional or Other Special Rights and
Qualifications, Limitations and Restrictions of the
5% Cumulative Participating Convertible Preferred
Stock, Series A of the Issuer
Exhibit 4.5 Form of Certificate of Designation of the Voting
Powers, Designation, Preferences and Relative,
Participating, Optional or Other Special Rights and
Qualifications, Limitations and Restrictions of the
5% Cumulative Participating Convertible Preferred
Stock, Series B of the Issuer
All material to be filed as exhibits to this Schedule 13D is attached hereto.
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 25, 1999
France Telecom S.A.
By: /s/ Jean-Louis Vinciguerra
----------------------------------
Name: Jean-Louis Vinciguerra
Title: Senior Executive Vice
President
11 of 12
<PAGE>
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 25, 1999
Compagnie Generale des Communications
(COGECOM) S.A.
By: /s/ Pierre Dauvillaire
-----------------------------------------
Name: Pierre Dauvillaire
Title: Chairman of the Board of Directors
12 of 12
<PAGE>
Schedule I
Directors and Executive Officers of France Telecom S.A.
1. Board of Directors
Christophe AGUITON Pascal COLOMBANI
Employee, France Telecom Director of Technology, Ministry
6 place d'Alleray of Education, Research and
75505 Paris Cedex 15 Technology
France 110 rue Grenelle
75007 Paris
France
Jean-Paul BECHAT
Chairman and Chief Executive Officer, Jean-Francois DAVOUST
SNECMA Employee, France Telecom
2 Boulevard General Martial Valin 6 place d'Alleray
75015 Paris 75505 Paris Cedex 15
France France
Christophe BLANCHARD-DIGNAC
Budget Director, Jean-Pierre DELEZENNE
Ministry of the Economy, Employee, France Telecom
Finance and Industry 6 place d'Alleray
Direction du Budget 75505 Paris Cedex 15
139 rue de Bercy France
75572 Paris Cedex 12
France Yannick d'ESCATHA
Director of French Atomic Energy
Michel BON Commission
Chairman and Chief Executive Officer, 31-33 rue de la Federat
France Telecom 75752 Paris Cedex 15
France Telecom France
6 place d'Alleray
75505 Paris Cedex 15
France
Jean-Claude DESRAYAUD
Francis BRUN-BUISSON Employee, France Telecom
Head of Legal, Technology and Information 6 place d'Alleray
Services of the Prime Minister 75505 Paris Cedex 15
69 rue de Varenne France
75007 Paris
France
I - i
<PAGE>
Raymond DURAND Didier LOMBARD
Employee, France Telecom French Envoy for International
6 place d'Alleray Investments, Ministry of the
75505 Paris Cedex 15 Economy, Finance and Industry
France 139 rue de Bercy
75572 Paris Cedex 12
Pierre GADONNEIX France
President, Gaz de France
23 rue Philibert Delorme Simon NORA
75017 Paris Honorary Inspector General
France of Finance
6 place d'Alleray
Nadine GRANDMOUGIN 75505 Paris Cedex 15
Employee, France Telecom France
6 place d'Alleray
75505 Paris Cedex 15 Pierre PEUCH
France Employee, France Telecom
6 Place d'Alleray
Francois GRAPPOTTE 75505 Paris Cedex 15
Chairman and Chief Executive Officer, LEGRAND France
128 avenue du Marechal de Lattre de Tassigny
87045 Limoges Cedex Jean SIMONIN
France Managing Director,
Residential Agency of Toulouse
Nicolas JACHIET 108 rue de la Peripole
Head of Investment Monitoring Division, BP 5856
Treasury Department, 31506 Toulouse Cedex
Ministry of the Economy, Finance and Industry France
139 rue de Bercy
75572 Paris Cedex 12 Ron SOMMER*
France Chairman
Deutsche Telekom AG
Jacques de LAROSIERE Postfach 20 00
Advisor to Paribas 53105 Bonn
6 place d'Alleray Germany
75505 Paris Cedex 15
France * A citizen of Germany
I - ii
<PAGE>
2. Executive Officers
Michel BON Gerard MOINE
Chairman and Chief Executive Officer Public and Regulatory Affairs
France Telecom France Telecom
6 place d'Alleray 6 place d'Alleray
75505 Paris Cedex 15 75505 Paris Cedex 15
France France
Jacques BURILLON Marie-Claude PEYRACHE
Secretary Corporate Communications
France Telecom France Telecom
6 place d'Alleray 6 place d'Alleray
75505 Paris Cedex 15 75505 Paris Cedex 15
France France
Jacques CHAMPEAUX Jean-Francois PONTAL
Large Business Division Residential and Small Business,
France Telecom Division
6 place d'Alleray France Telecom
75505 Paris Cedex 15 6 place d'Alleray
France 75505 Paris Cedex 15
France
Jean-Jacques DAMLAMIAN
Development Division Jean-Louis VINCIGUERRA
France Telecom Finance and Human Resources
6 place d'Alleray Division
75505 Paris Cedex 15 France Telecom
France 6 place d'Alleray
75505 Paris Cedex 15
France
Jean-Yves GOUIFFES
Network Division
France Telecom
6 place d'Alleray
75505 Paris Cedex 15
France
I - iii
<PAGE>
Schedule II
Directors* of Compagnie Generale des Communications (COGECOM) S.A.
Jacques CHAMPEAUX
Director
France Telecom
6 Place d'Alleray
75505 Paris Cedex 15
France
Jean-Jacques DAMLAMIAN
Director
France Telecom
6 place d'Alleray
75505 Paris Cedex 15
France
Pierre DAUVILLAIRE
Chairman of the Board of Directors
France Telecom
6 place d'Alleray
75505 Paris Cedex 15
France
Jean-Yves GOUIFFES
Director
France Telecom
6 place d'Alleray
75505 Paris Cedex 15
France
* Compagnie Generale des Communications (COGECOM) S.A. has no executive or other
officers.
II - i
EXECUTION VERSION
(CONFORMED COPY)
NTL Incorporated
PURCHASE AGREEMENT
------------------
July 15, 1999
France Telecom, S.A.
6 Place d'Alleray
75505 Paris Cedex 15
France
Ladies and Gentlemen:
NTL Incorporated, a Delaware corporation ("NTL"), proposes, subject to
the terms and conditions set forth herein (including the Schedules, Attachments
and Exhibits hereto), to issue and sell to France Telecom, S.A. (the
"Purchaser"), 2,702,703 shares (the "Common Shares") of NTL's common stock, par
value $0.01 per share (the "Common Stock") and 750,000 shares (the "Preferred
Shares") of 5% Convertible Preferred Stock having an aggregate liquidation
preference of $750,000,000 (the "Preferred Stock") and having the terms set
forth in the Certificate of Designation attached hereto as Attachment I (the
"Certificate of Designation"). All Common Shares and Preferred Shares sold to
the Purchaser hereunder are referred to herein as the "Securities".
1. NTL represents and warrants to, and agrees with, the Purchaser
that:
(a) NTL's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and NTL's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999 have been made available to the Purchaser
in connection with the offering of the Securities. All documents of NTL
filed with the United States Securities and Exchange Commission (the
"Commission") pursuant to the United States Securities Exchange Act of
1934, as amended (the "Exchange Act") are referred to herein as the
"Exchange Act Reports". The Exchange Act Reports, when they were filed
with the Commission, complied in all material respects with the
requirements of the Exchange Act and the applicable rules and
regulations of the Commission thereunder. The Exchange Act Reports did
not, as of their respective dates, contain any untrue statement of
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the
<PAGE>
2
circumstances under which they were made, not misleading. NTL has
timely filed all reports and registration statements and made all
filings required to be made with the Commission under the Exchange Act,
the United States Securities Act of 1933, as amended (the "Securities
Act"), or the applicable rules and regulations of the Commission
thereunder;
(b) There has not been any material adverse change in, or any
adverse development which materially affects, the business, assets,
properties, financial condition or results of operations of NTL and its
subsidiaries taken as a whole since December 31, 1998; and, since
December 31, 1998, there has not been any material change in the
capital stock, long-term debt or any other liability (which would be
required to be reflected on a balance sheet or the notes thereto) of
NTL or any of its subsidiaries not reported in an Exchange Act Report
or any material adverse change or any development involving a
prospective material adverse change, in or affecting the general
affairs, management, financial position, shareholders' equity or
results of operations of NTL and its subsidiaries taken as a whole;
provided, however, that any change resulting from a strategic
acquisition currently being reviewed by NTL of which the Purchaser has
been informed (the "Strategic Acquisition") shall not be deemed a
material change for purposes of this Section 1(b) and Section 7(b);
(c) NTL has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct
its business as described in the Exchange Act Reports, and has been
duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any business, or in
which such qualification is necessary, except where the failure to be
so qualified in any such jurisdiction does not or would not subject NTL
to any material liability or disability; and each significant
subsidiary (as defined in Regulation S-X of the Commission, each a
"Significant Subsidiary") of NTL has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, with corporate power and authority
to own its properties and conduct its business as it has been currently
conducted, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts
any business, or in which such qualification is necessary, except where
the failure to be so qualified in any such jurisdiction does not or
would not subject such Significant Subsidiary to any material liability
or disability;
(d) NTL has an authorized, issued and outstanding
capitalization as set forth in the attached Exhibit A, and all of the
issued shares of capital stock of NTL have been duly and validly
authorized and issued and are fully paid and non-assessable; and all of
the issued shares of capital stock of each Significant Subsidiary of
NTL have been duly and validly authorized and issued, are fully paid
and non-assessable and (except for directors' qualifying
<PAGE>
3
shares) are owned directly or indirectly by NTL, free and clear of all
liens, encumbrances, equities or claims;
(e) The Securities, and the shares of Common Stock issuable
upon conversion or redemption of the Preferred Shares, including any
dividends in the form of shares of Preferred Stock or shares of Common
Stock, have been duly and validly authorized by NTL, and, when issued
and delivered against payment therefor as provided herein, will be duly
and validly issued and fully paid and non-assessable, and the issuance
of the Securities is not subject to preemptive or other similar rights;
(f) The execution and delivery of this Purchase Agreement and
the consummation of the transactions contemplated herein, have been
duly authorized by all necessary corporate action on the part of NTL,
and when executed by NTL and the Purchaser will not conflict with or
result in any breach or violation of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition
of any security interest, lien, charge or encumbrance upon any property
or assets of NTL or its Significant Subsidiaries pursuant to any
indenture, mortgage, deed of trust, loan agreement, lease, contract or
other agreement or instrument to which NTL or any of its Significant
Subsidiaries is a party or by which NTL or any or its Significant
Subsidiaries may be bound or to which any of the property or assets of
NTL or any of its Significant Subsidiaries is subject, nor will such
action result in any violation of the provisions of the Restated
Certificate of Incorporation or the By-laws of NTL or of any of its
Significant Subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over NTL or any of its Significant Subsidiaries or any of
their properties; and other than (i) the listing of the Common Shares
and the shares of Common Stock issuable upon conversion or redemption
of, or as a dividend with respect to, the Preferred Shares, on the
Nasdaq National Market, (ii) the notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act") and
(iii) the filing of the Certificate of Designation with the Secretary
of State of the State of Delaware, no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the issuance and sale of
the Securities and the shares of Common Stock issuable upon conversion
or redemption of, or any dividends paid with respect to, the Preferred
Shares, or the consummation by NTL of the transactions contemplated by
this Purchase Agreement;
(g) Neither NTL nor any of its Significant Subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease, contract or other agreement or instrument
to which it is a party or by which it or any of its properties may be
bound;
<PAGE>
4
(h) There are no claims, actions, suits, arbitration,
proceedings or investigations pending against NTL or any of its
Significant Subsidiaries or of which any property of NTL or any of its
Significant Subsidiaries is the subject which, if determined aversely
to NTL or any of its Significant Subsidiaries, would individually or in
the aggregate have a material adverse effect on the current or future
financial condition, shareholder's equity or results of operations of
NTL and its subsidiaries taken as a whole; and, to the best of NTL's
knowledge, no such claims, actions, suits, arbitration, proceedings or
investigations are threatened or contemplated by governmental
authorities or threatened or contemplated by others;
(i) The audited consolidated balance sheet of NTL and its
subsidiaries for the fiscal years ended as of December 31, 1996,
December 31, 1997, and December 31, 1998, and the related audited
consolidated statements of income, retained earnings, stockholders'
equity and cash flow of NTL and its subsidiaries, together with all
related notes and schedules thereto, and the unaudited consolidated
balance sheet of NTL and its subsidiaries as of March 31, 1999, and the
related unaudited consolidated statements of income, retained earnings,
stockholders' equity and cash flow of NTL and its subsidiaries together
with all related notes and schedules thereto (the "Interim Financial
Statements"), all of which are contained in the respective Exchange Act
Reports (i) were prepared in accordance with the books of account and
other financial records of NTL and its subsidiaries, (ii) present
fairly the consolidated financial condition and results of operations
of NTL and its subsidiaries as of the dates thereof or for the periods
covered thereby, (iii) have been prepared in accordance with U.S.
generally accepted accounting principles and practices applied on a
basis consistent with the past practices of NTL and its subsidiaries
and (iv) in case of the Interim Financial Statements, include all
adjustments (consisting only of normal recurring accruals) that are
necessary for a fair presentation of the consolidated financial
condition and the results of the operations of NTL and its subsidiaries
as of the dates thereof or for the periods covered thereby;
(j) The execution of, and consummation of the transactions
contemplated in, this Purchase Agreement will not (either alone or upon
the occurrence of any additional or subsequent events, other than the
Strategic Acquisition) (i) constitute an event under any NTL Benefit
Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any current,
former or retired employee, officer, consultant, independent
contractor, agent or director of NTL (an "Employee"); or (ii) result in
the triggering or imposition of any restrictions or limitations on the
right of NTL or the Purchaser to amend or terminate any NTL Benefit
Plan. No payment or benefit which will or may be made by NTL, the
Purchaser or any of their respective affiliates with respect to any
Employee will be characterized as an "excess parachute payment", within
the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986,
as amended through the date hereof (the "Code").
<PAGE>
5
For the purposes of this Section 1(j), "Benefit Plan" means each plan,
program, policy payroll practice, contract, agreement or other
arrangement providing for compensation, retirement benefits, severance,
termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, whether formal
or informal, funded or unfunded, written or oral and whether or not
legally binding, including, without limitation, each "employee benefit
plan", within the meaning of Section 3(3) of ERISA and each
"multi-employer plan" within the meaning of Section 3(37) of 4001(a)(3)
of ERISA; "Employee Agreement" means each management, employment,
severance, consulting, non-compete, confidentiality, or similar
agreement or contract between NTL or any ERISA Affiliate and any
Employee pursuant to which NTL has or may have any material liability
contingent or otherwise; "ERISA Affiliate" means each business or
entity which is or was a member of a "controlled group of
corporations", under "common control" or an "affiliated service group"
with NTL within the meaning of Section 414(b), (c) or (m) of the Code,
or required to be aggregated with NTL under Section 414(o) of the Code
or is under "common control" with NTL, within the meaning of Section
4001(a)(14) of ERISA; and
(k) NTL is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
2. Subject to the terms and conditions set forth herein, NTL shall
issue and sell to the Purchaser, and the Purchaser agrees to purchase from NTL,
the Common Shares at an aggregate purchase price of $250,000,000 and the
Preferred Shares at an aggregate purchase price of $750,000,000.
3. The Purchaser hereby acknowledges and agrees with NTL that the
Securities have not been registered under the Securities Act and may not be
offered or sold except pursuant to registration or to an exemption from the
registration requirements of the Securities Act. The Purchaser further agrees
that it has not entered and will not enter into any contractual arrangement with
respect to the distribution or delivery of the Securities or shares of Common
Stock issuable upon conversion or redemption of, or as a dividend with respect
to, the Preferred Shares, other than (i) pursuant to a Registration Rights
Agreement between the parties substantially on the terms set forth in Exhibit B
(the "Registration Rights Agreement"), (ii) pursuant to Rule 144 under the
Securities Act, (iii) pursuant to any transaction that does not require
registration under the Securities Act, (iv) any such arrangements with an
affiliate of the Purchaser or (v) with the prior written consent of NTL.
4. (a) The Securities to be purchased by the Purchaser hereunder will
be represented by one or more stock certificates evidencing the Common Shares
and one or more stock certificates evidencing the Preferred Shares. NTL will
deliver the stock certificates evidencing the Securities to the Purchaser,
against payment by or on behalf of the Purchaser of the purchase price therefor
set forth in Section 2 above by wire transfer of immediately available funds to
an account designated by NTL. The time and date of such delivery and payment is
contemplated to be 10:00 a.m., New
<PAGE>
6
York City time, on July 28, 1999 or such other time and date as the Purchaser
and NTL may agree upon in writing. Such time and date are herein called the
"Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including any
additional documents requested by the Purchaser pursuant to Sections 7(a) and
(d) hereof and the Securities will be delivered at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP ("Skadden Arps"), 919 Third Avenue, New York, New York
10022, all at the Time of Delivery.
5. NTL agrees and covenants:
(a) At any time when NTL is not subject to Section 13 or 15(d)
of the Exchange Act and prior to two years from the Time of Delivery,
for the benefit of the holders from time to time of Securities, to
furnish at its expense, upon request, to holders of Securities
information (the "Additional Issuer Information") satisfying the
requirements of subsection (d)(4)(i) of Rule 144A under the Securities
Act;
(b) To make available to the holders of the Securities as soon
as practicable after the end of each fiscal year, and in any event
within 90 days, an annual report (including a balance sheet and
statements of income, shareholders' equity and cash flows of NTL and
its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the
first three quarters of each fiscal year (beginning with the fiscal
quarter ending after the date hereof), and in any event within 45 days,
consolidated summary financial information of NTL and its subsidiaries
for such quarter in reasonable detail;
(c) So long as the Purchaser or any affiliate of the Purchaser
is a holder of at least 75% of the Securities purchased hereunder (a
"Qualified Holder") (determined based on the aggregate number of Common
Shares and shares of Common Stock issuable upon conversion of the
Preferred Shares held by such Qualified Holder, as such aggregate
number of Common Shares and shares of Common Stock issuable upon
conversion of the Preferred Shares may be adjusted for stock dividends,
stock splits, reclassifications or similar transactions), to make
available to the Purchaser copies of all reports or other
communications (financial or other) furnished to shareholders or
members of the Board of Directors of NTL, and to make available to the
Purchaser (x) as soon as they are generally available, copies of any
reports and financial statements furnished to or filed or required to
be filed with the Commission or any securities exchange on which the
Securities or any class of securities of NTL is listed; and (y) such
additional information concerning the business and financial condition
of NTL as the Purchaser may from time to time reasonably request (such
financial statements to be on a consolidated basis to the extent the
accounts of NTL and its subsidiaries are consolidated in reports
furnished to its shareholders generally or to the Commission);
<PAGE>
7
(d) To file the Certificate of Designation with the Secretary
of State of the State of Delaware at the Time of Delivery;
(e) As soon as practicable after the Time of Delivery, to file
a listing application with the Nasdaq National Market with respect to
the Common Shares and the shares of Common Stock issuable upon
conversion or redemption of, or as a dividend with respect to, the
Preferred Shares and to use its best efforts to have the Common Shares
and such shares of Common Stock so listed;
(f) Prior to the Time of Delivery, to amend, to the extent
necessary, the Shareholder Rights Agreement, dated as of October 1,
1993, between NTL and Continental Stock Transfer & Trust Co., as
amended (the "Rights Agreement") to provide that the ownership by the
Purchaser of the Securities and any shares of Common Stock issued upon
conversion, redemption, exchange, or as a dividend with respect to, the
Preferred Shares will not result in the Purchaser being deemed an
Acquiring Person (as such term is defined in the Rights Agreement) or
result in the occurrence of a Stock Acquisition Date, Section 11(a)(ii)
Event or Section 13 Event (as such terms are defined in the Rights
Agreement);
(g) NTL agrees that from the date hereof and prior to the
six-month anniversary of the Time of Delivery (the "Blackout Period"),
it shall not issue or sell any equity securities of NTL or any of its
subsidiaries, other than (i) issuances of common stock upon the
exercise of stock options or warrants outstanding as of the date
hereof, issuances of stock options pursuant to stock option plans and
employee benefit schemes existing as of the date hereof and issuances
of common stock upon exercise of such stock options; (ii) issuances of
equity securities or any securities convertible into or exchangeable or
exercisable for equity securities as consideration for future
acquisitions; provided, however, that in the event of any such issuance
described in this clause (ii), NTL shall notify the Purchaser in
writing of such issuance and shall offer to the Purchaser the right to
purchase (at the price equal to the value at which such equity
securities shall be included in the consideration paid by NTL in such
acquisition) such number of the equity securities being issued as would
be necessary for the Purchaser to maintain the level of ownership of
NTL's equity securities (on a fully diluted basis) that the Purchaser
shall have immediately prior to consummation of such acquisition (it
being understood that the Purchaser's preemptive rights under this
proviso will be exercised in a manner and based on a timetable that
will not restrict or adversely affect NTL's ability to issue securities
in such acquisition in a flexible and cost effective manner); (iii)
issuances of common stock on conversion of the convertible notes
outstanding as of the date hereof or on conversion or in payment of
dividends on shares of preferred stock outstanding as of the date
hereof, and (iv) with the consent of the Purchaser, which consent shall
not be unreasonably withheld, issuances of equity securities as consent
payments to holders of NTL's or any of its subsidiaries' indebtedness
outstanding as of the date hereof. Notwithstanding anything to the
contrary contained in this Section 5(g), during the Blackout Period,
NTL shall have the right to issue up to an aggregate amount of
$250,000,000 of
<PAGE>
8
equity securities of NTL with the consent of the Purchaser, which
consent shall not be unreasonably withheld;
(h) To file together with the Purchaser as soon as practicable
after the date hereof notifications under the HSR Act and to respond as
promptly as practicable to all inquiries or requests received from the
United States Federal Trade Commission or the Antitrust Division of the
Department of Justice for additional information or documentation and
to respond as promptly as practicable to all inquiries and requests
received from any State Attorney General or other governmental
authority in connection with antitrust matters;
(i) Upon request by the Purchaser, to cooperate in delivering
to the Purchaser or an affiliate thereof (as applicable) within 30 days
after such request a valid statement described in Treasury Regulation
section 1.897-2(g)(1)(ii) and to comply with the notice requirements in
Treasury Regulation section 1.897-2(h); and
(j) To indemnify the Purchaser and each of its affiliates and
hold them harmless against (i) any French tax imposed thereon under
Art. 209 B of the French Tax Code (or any successor provision) as a
result of any activities or investments of NTL or any of its
subsidiaries and (ii) any liability (including penalties, interest and
expenses) arising therefrom. Any such indemnification shall be made on
an after-tax basis and shall be made within 30 days from the date the
Purchaser makes written demand therefor. To the extent that the
Purchaser receives any French tax benefit in respect of an item for
which it received an indemnity payment under this provision, the
Purchaser shall, to the extent it can do so without jeopardizing its
entitlement to such benefit (including any benefit resulting from a
payment by it under this sentence), pay to NTL an amount equal to the
amount of any such tax benefit so realized.
6. NTL covenants and agrees with the Purchaser that NTL will pay or
cause to be paid the following: (i) the cost of producing and, if required,
filing with the Commission of this Purchase Agreement, closing documents
(including any compilations thereof) and any other documents in connection with
the purchase, sale and delivery of the Securities; (ii) the cost of preparing
the stock certificates for the Securities, (iii) the cost of filing the
Certificate of Designation with the Secretary of State of the State of Delaware,
(iv) the cost of filing listing applications with respect to the Common Shares
and the shares of Common Stock issuable upon conversion or redemption of, or as
a dividend with respect to, the Preferred Shares, with the Nasdaq National
Market and (v) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section 6. It is understood, however, that, except as provided in this Section
6, the Purchaser will pay all of its own costs and expenses, including the fees
of its counsel.
7. The obligations of the Purchaser to purchase the Securities shall be
subject to the accuracy of the representations and warranties on the part of NTL
contained herein as of the date hereof and as of the Time of Delivery, to the
accuracy of the statements of NTL made in any
<PAGE>
9
certificates pursuant to the provisions hereof, to the performance by NTL of its
obligations hereunder and to the following additional conditions:
(a) Prior to the Time of Delivery, NTL shall have furnished to
the Purchaser (i) the Certificate of Designation executed by a duly
authorized officer of NTL and duly approved by NTL's Board of Directors
to be filed with the Secretary of State of the State of Delaware, (ii)
the Registration Rights Agreement executed by a duly authorized officer
in form and substance reasonably satisfactory to the Purchaser and its
counsel, and (iii) such further information, certificates and documents
as the Purchaser and its counsel may reasonably request;
(b) (i) There shall not have been any material adverse change
in, or any adverse development which materially affects, the business,
assets, properties, financial condition or results of operations of NTL
and its subsidiaries taken as a whole since the date hereof, and (ii)
since the date hereof there shall not have been any material change in
the capital stock, long-term debt or any other liability (which would
be required to be reflected on a balance sheet or the notes thereto) of
NTL or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
shareholders' equity or results of operations of NTL and its
subsidiaries taken as a whole, other than as set forth or contemplated
herein, except to the extent that any such material adverse change or
adverse development is the result of (x) any change in general economic
conditions in the countries in which NTL and its subsidiaries operate;
(y) any change generally affecting the industry in which NTL and its
subsidiaries operate; or (z) any change in laws and regulations (other
than laws and regulations related to taxation) applicable to the
business of NTL and its subsidiaries;
(c) On or after the date hereof and prior to the Time of
Delivery, there shall not have occurred any of the following: (i) a
suspension or material limitation (except for such limitations as are
in effect as of the date hereof) in trading in securities generally on
the New York Stock Exchange, the London Stock Exchange or the Paris
Stock Exchange; (ii) a suspension or material limitation (except for
such limitations as are in effect as of the date hereof) in trading in
the securities of NTL on the principal exchange or quotation system on
which such securities are traded; (iii) a general moratorium on
commercial banking activities in New York, London or Paris declared by
the relevant authorities; (iv) the imposition of exchange controls by
the United States, the United Kingdom or France; (v) NTL or any
Significant Subsidiary shall have sustained since the date of the
latest audited financial statements included in the Exchange Act
Reports any loss or interference with their business from fire,
explosion, flood, earthquake or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in
such Exchange Act Reports, the effect of which would constitute a
material adverse change for purposes of Section 7(b); (vi) the outbreak
or escalation of hostilities involving the United States, the United
Kingdom or
<PAGE>
10
France, or the declaration by the United States, the United Kingdom or
France of a national emergency or war, if the effect of any such event
specified in this subsection (vi), in the reasonable judgment of the
Purchaser, makes it impracticable or inadvisable to proceed with the
purchase of the Securities on the terms and in the manner contemplated
in this Purchase Agreement; or (vii) the occurrence of any material
adverse change in the existing financial, political or economic
conditions in the United States, the United Kingdom, France or
elsewhere, which, in the judgment of the Purchaser, would materially
and adversely affect the financial markets;
(d) NTL shall have furnished to the Purchaser certificates of
NTL, signed by the Chief Executive Officer, the President or a Senior
Vice President of NTL and by the principal accounting or financial
officer of NTL, as to the accuracy of the representations and
warranties of NTL herein at and as of the Time of Delivery, as to the
performance by NTL of all of its obligations hereunder to be performed
at or prior to such Time of Delivery, and as to such other matters as
the Purchaser and its counsel may reasonably request;
(e) The Purchaser shall have received an opinion of Skadden
Arps regarding the Securities and the shares of Common Stock of NTL
issuable upon conversion or redemption of, or as a dividend with
respect to, the Preferred Shares substantially as set forth as Exhibit
C; and
(f) Any waiting period (and any extension thereof) applicable
to the consummation of the transactions contemplated hereby under the
HSR Act shall have expired or been terminated.
8. (a) As of the Time of Delivery, the Purchaser and their Affiliates
(as defined in the Exchange Act) will have no beneficial ownership (as defined
in Rule 13d-3 promulgated under the Exchange Act) of any securities of NTL other
than as a result of the Purchaser's acquisition of the Securities.
(b) So long as the Purchaser or any affiliate of the Purchaser is a
Qualified Holder and a holder of Preferred Stock, the Purchaser or such
Affiliate of the Purchaser shall have the right in accordance with the
Certificate of Designation to elect one director to the Board of Directors of
NTL. After the time when the Purchaser or any affiliate of the Purchaser shall
no longer be a holder of any shares of Preferred Stock but shall remain a
Qualified Holder, the Purchaser or such affiliate of the Purchaser shall have
the right to nominate one director for election to the Board of Directors of
NTL. NTL shall use best efforts to support election of the Purchaser's (or such
affiliate's) nominee to the Board of Directors of NTL and shall include such
nominee in the list of directors proposed by the Board of Directors of NTL for
election by NTL's stockholders. Further, so long as the Purchaser or any
affiliate of the Purchaser is a Qualified Holder and a holder of Preferred
Stock, NTL shall not increase the total number of its directors to a number that
is greater than ten if such increase would
<PAGE>
11
cause the number of such directors that the holders of the Preferred Stock are
entitled to elect to be less than 10% of the total number of directors of NTL.
(c) In the event NTL and the Purchaser agree that NTL will issue and
sell to the Purchaser any additional shares of Common Stock or Preferred Stock
or any shares of a new class or series of preferred stock of NTL in connection
with the Strategic Acquisition (any such shares being the "New Securities"),
then the purchase by the Purchaser of the Securities and the New Securities will
be deemed to be a single strategic investment, with the purchase of the
Securities to be deemed an interim funding of such strategic investment. NTL and
the Purchaser further agree that any agreement they may enter into (the
"Investment Agreement") for the issuance and sale of the New Securities to the
Purchaser will provide that the Securities will be subject to the same
restrictions on transferability and standstill requirements as the New
Securities.
9. The respective agreements, representations, warranties and other
statements of NTL and the Purchaser, as set forth in this Purchase Agreement or
made by or on behalf of them, respectively, pursuant to this Purchase Agreement,
shall remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of the Purchaser or
any controlling person of any Purchaser, or NTL, or any officer or director or
controlling person of NTL, and shall survive delivery of and payment for the
Securities.
10. This Purchase Agreement may be terminated by mutual agreement of
the parties, in which event, (i) NTL shall not then be under any liability or
obligation to the Purchaser with respect to the Securities except as provided in
Section 6 hereof and (ii) the Purchaser shall not then be under any liability or
obligation to NTL with respect to this Purchase Agreement except as provided in
Section 6 hereof.
11. All statements, requests, notices and agreements hereunder shall be
in writing, and if to the Purchaser shall be delivered or sent by mail, telex or
facsimile transmission to: France Telecom, S.A., 212, rue Raymond Losserand,
75505 Paris Cedex 15, France, Attention: Philippe Mc Allister, with a copy to
Shearman & Sterling, 599 Lexington Avenue, New York, NY 10022, Attention: Alfred
J. Ross, Esq.; and if to NTL shall be delivered or sent by mail, telex or
facsimile transmission to NTL Incorporated, 110 East 59th Street, New York, New
York 10022, Attention: General Counsel, with a copy to Skadden, Arps, Slate,
Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, Attention:
Thomas H. Kennedy, Esq. Any such statements, requests, notices or agreements
shall take effect upon receipt thereof.
12. This Purchase Agreement shall be binding upon, and inure solely to
the benefit of, the Purchaser and NTL and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Purchase Agreement. No purchaser of any of the Securities from the
Purchaser shall be deemed a successor or assign with respect to this Purchase
Agreement by reason merely of such purchase.
<PAGE>
12
13. This Purchase Agreement may not be assigned by the Purchaser
without the express written consent of NTL, except that the Purchaser may assign
this Purchase Agreement to an affiliate of the Purchaser without the consent of
NTL, provided, however, that no such assignment shall release the Purchaser from
its obligations hereunder, provided further, however, that the Purchaser will
not assign this Purchase Agreement to an affiliate if, in the reasonable
judgment of NTL based on a reasonable inquiry of an internationally recognized
credit rating agency or a major investment banking firm specializing in credit
rating advisory work, such assignment would result in an adverse effect on the
credit rating of NTL or NTL Communications Corp.
14. This Purchase Agreement shall be governed by and constructed in
accordance with the laws of the State of New York.
15. This Purchase Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such respective counterparts shall together constitute
one and the same instrument.
<PAGE>
13
If the foregoing is in accordance with your understanding, please sign
and return to us six counterparts hereof, and upon the acceptance hereof by you,
this letter and such acceptance hereof shall constitute a binding agreement
between the Purchaser and NTL.
Very truly yours,
NTL INCORPORATED
By: /s/ J. Barclay Knapp
-----------------------------
Name: J. Barclay Knapp
Title: President and Chief
Executive Officer
Accepted as of the date hereof:
FRANCE TELECOM, S.A.
By: /s/ Jean-Louis Vinciguerra
---------------------------------------
Name: Jean-Louis Vinciguerra
Title: Executive Director - Finance and
Human Resources
<PAGE>
ATTACHMENT I
<PAGE>
EXHIBIT A
---------
CAPITALIZATION
<TABLE>
<CAPTION>
Number of
Fully
Number of Diluted
Par or Number of Issued and Common
Stated Authorized Outstanding Share
Description of Securities Value Shares Shares Equivalents
<S> <C> <C> <C> <C>
Series Preferred Stock: $0.01 10,000,000 N/A N/A
13% Senior Redeemable
Exchangeable Preferred Stock $0.01 " 133,497 N/A
9.9% Non-voting Mandatorily Redeemable
Preferred Stock, Series A $1,000 " 125,280 1,559,785
9.9% Non-voting Mandatorily Redeemable
Preferred Stock, Series B $1,000 " 52,217 650,122
5.25% Convertible Preferred Stock, Series A $1,000 511,069 5,108,861
Common Stock $0.01 400,000,000 81,394,684 81,394,684
Options N/A N/A N/A 18,118,487
Warrants:
$5.566 expire 2000 N/A N/A N/A 741,643
$23.778 expire 2006 N/A N/A N/A 157,760
$43.389 expire 2006 N/A N/A N/A 765,379
$84.00 expire 2004 N/A N/A N/A 1,200,000
Convertible Notes:
7% Convertibles due 2008 N/A N/A N/A 9,795,918
- ------------------------ -------------
Total: 119,492,639
</TABLE>
<PAGE>
EXHIBIT B
---------
REGISTRATION RIGHTS AGREEMENT
PRINCIPAL TERMS
Demand
Registration Rights: The Purchaser may request a total of 3 registrations.
Incidental
Registration Rights: Subject to the provisions of "Cutbacks" below, if at
any time NTL determines that it shall file a
registration statement under the Securities Act of
1933, NTL shall give the Purchaser prompt notice of
such registration. Following such notice, the
Purchaser shall be granted the opportunity to
participate in such registration in proportion to the
percentage ownership of such Securities by the
Purchaser.
Shelf Registration: The Purchaser is entitled to use 2 of its
registration requests to request that NTL file a
shelf registration on behalf of the Purchaser.
Obligations of
the Purchaser: NTL shall use its best efforts to effect any
registration requests, and to comply with the
requirements of all relevant state blue sky and
federal securities laws necessary to effect such
registration requests. NTL shall provide the
Purchaser with such number of registration statements
and prospectus' as the Purchaser shall reasonably
request. NTL shall cooperate in the registration
process and roadshow or other investor meetings in
connection with the sale of the Securities so
registered and shall secure the participation of its
management for such purposes.
Fees and
Expenses: NTL shall pay all fees, expenses, or other costs
incurred with respect to each registration request
made by the Purchaser (other than underwriters'
discounts and commissions and fees and expenses of
Purchaser's counsel), including, without limitation,
all registration, filing and qualification fees, word
processing, duplicating, printers' and accounting
fees, fees of the National Association of Securities
Dealers, Inc. listing fees, messenger and delivery
expenses, all fees necessary to comply with state
blue sky and federal laws, fees and expenses of for
the disbursement of NTL's counsel, auditors or other
advisors.
Indemnification: NTL shall indemnify the Purchaser and its directors
and officers against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser
may become subject insofar as such losses, claims,
damages or liabilities arise out of or are based on
any untrue or alleged untrue
<PAGE>
2
statement of any fact contained in any registration
statement, unless the liability relates to material
furnished in writing by the Purchaser to NTL
specifically for use in the registration statement.
Selection of
Underwriters: The Purchaser shall select any underwriters in
connection with the sale of registered Securities,
with the approval of NTL, such approval not to be
unreasonably withheld.
Assignability: The Purchaser may assign all registration rights.
Delay of
Filing or Sales: If NTL shall furnish to the Purchaser a certificate
signed by its Chairman, Chief Executive Officer or
Chief Financial Officer stating that (i) filing a
registration statement or maintaining effectiveness
of a current registration statement would have a
material adverse effect on NTL or its stockholders
in relation to any material financing, acquisition or
other corporate transaction, and NTL has determined
in good faith that such disclosure is not in the best
interests of NTL and its shareholders, or (ii) NTL
has determined in good faith that the filing or
maintaining effectiveness of a current registration
statement would require disclosure of material
information NTL has a valid business purpose of
retaining as confidential, NTL shall be entitled to
postpone filing or suspend the use by the Purchaser
of the registration statement for a reasonable period
of time, but not in excess of 60 consecutive calendar
days. NTL shall be entitled to exercise such
suspension right more than one time in any calendar
year provided that such exercise shall not prevent
Purchaser from being entitled to at least 240 days of
effective registration rights per year and that no
suspension period may commence if it is less than 30
calendar days from the prior such suspension period.
Cutbacks: If a registration by NTL of its securities involves
an underwritten offering, and the managing or lead
underwriter or underwriters shall advise NTL in
writing (a copy of which shall be provided by NTL to
the Purchaser), that in its or their opinion, the
number of securities requested and otherwise proposed
to be included in such registration exceeds the
number that can be sold in such offering within a
price range acceptable to NTL, then NTL shall
allocate the securities to be included in such
registration as follows: First, NTL shall be entitled
to include all of the securities that they have
proposed to be included, and second, to the extent
that any other securities may be included without
exceeding the limitations recommended by the
underwriter as aforesaid, the Purchaser shall be
entitled to participate in
<PAGE>
3
that registration on a basis no less favorable than
any other holder of NTL's securities.
<PAGE>
EXHIBIT C
FORM OF OPINION OF SKADDEN, ARPS, SLATE MEAGHER & FLOM LLP
EXECUTION VERSION
(CONFORMED COPY)
================================================================================
-------------------------------------------------
INVESTMENT AGREEMENT
-------------------------------------------------
Between
NTL INCORPORATED
and
FRANCE TELECOM, S.A.
Dated July 26, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms...................................................2
1.02. Other Definitions......................................................10
ARTICLE II
SALE AND PURCHASE
2.01. Sale of the New Securities.............................................12
2.02. Purchase Price.........................................................12
2.03. Closing................................................................12
2.04. Closing Deliveries by the Company......................................13
2.05. Closing Deliveries by the Purchaser....................................14
2.06. Acceleration of Closing................................................14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01. Organization, Authority and Qualification of the Company and the
Significant Subsidiaries; Significant Subsidiaries............................15
3.02. Capital Stock of the Company; Ownership of the New Securities..........16
3.03. No Conflict............................................................17
3.04. Governmental Consents and Approvals....................................17
3.05. SEC Filings; Financial Statements......................................17
3.06. No Undisclosed Liabilities.............................................19
3.07. Absence of Certain Changes or Events...................................19
3.08. Litigation.............................................................21
3.09. Compliance with Laws...................................................22
3.10. Environmental Matters..................................................22
3.11. Material Contracts.....................................................23
3.12. Intellectual Property; Company Systems.................................23
3.13. Year 2000 Compliance...................................................24
3.14. Title to Properties; Absence of Encumbrances...........................24
3.15. Employee Benefit Matters; Labor Matters................................25
3.16. Insurance..............................................................27
3.17. Brokers................................................................27
3.18. Taxes..................................................................28
<PAGE>
Section Page
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01. Organization and Authority of the Purchaser............................28
4.02. No Conflict............................................................29
4.03. Governmental Consents and Approvals....................................29
4.04. Investment Purpose.....................................................29
4.05. Status of New Securities; Limitations on Transfer and
Other Restrictions.....................................................29
4.06. Fees and Expenses......................................................30
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business by the Company Pending the Closing.................30
5.02. Access to Information; Confidentiality.................................31
5.03. Public Announcements...................................................32
5.04. Company's Action.......................................................33
5.05. Tax Matters............................................................34
5.06. No Solicitation of Transactions........................................35
5.07. Use of Proceeds........................................................35
5.08. Certain Costs and Expenses.............................................35
5.09. Standstill; Restrictions on Transfer...................................35
5.10. Right to Purchase Equity Securities....................................37
5.11. Level of Ownership at the Time of Delivery.............................38
5.12. Corporate Governance; Issuance of Senior Preferred Stock;
Strategic Transactions.................................................38
5.13. Other Registration Rights..............................................41
5.14. Takeover Statutes......................................................41
5.15. Securities.............................................................41
5.16. Further Action; Consents; Filings......................................41
5.17. Strategic Committee....................................................42
5.18. Employment by the Company of the Purchaser's Employees.................42
5.19. Transaction Agreement..................................................42
5.20. CWC....................................................................42
ARTICLE VI
CONDITIONS
6.01. Conditions to Purchaser's Obligations..................................42
6.02. Provision of Certificate Relating to Satisfaction or Waiver of
Conditions.............................................................45
-ii-
<PAGE>
ARTICLE VII
INDEMNIFICATION
7.01. Survival of Representations and Warranties.............................45
7.02. Indemnification........................................................45
7.03. Limits on Indemnification..............................................47
7.04. Indemnification for ConsumerCo's Liabilities...........................47
ARTICLE VIII
TERMINATION
8.01. Termination............................................................48
8.02. Effect of Termination..................................................49
ARTICLE IX
GENERAL PROVISIONS
9.01. Waiver.................................................................49
9.02. Expenses...............................................................50
9.03. Notices................................................................50
9.04. Headings...............................................................51
9.05. Severability...........................................................51
9.06. Entire Agreement.......................................................51
9.07. Assignment.............................................................51
9.08. Holding Company........................................................52
9.09. No Third Party Beneficiaries...........................................52
9.10. Amendment..............................................................52
9.11. Governing Law..........................................................52
9.12. Counterparts...........................................................52
9.13. Specific Performance...................................................53
9.14. Terms Generally........................................................53
9.15. References to the Company..............................................53
ATTACHMENTS AND EXHIBITS
Attachment I Certificate of Designation of 5% Cumulative Participating
Convertible Preferred Stock, Series B
Exhibit A Pro Forma Capitalization
Exhibit B Principal Terms of the Registration Rights Agreement
Exhibit C Form of Legal Opinion of Skadden, Arps, Slate, Meagher & Flom
LLP
-iii-
<PAGE>
DISCLOSURE SCHEDULE
-iv-
<PAGE>
INVESTMENT AGREEMENT, dated July 26, 1999, between NTL INCORPORATED, a
Delaware corporation (the "Company") and FRANCE TELECOM, S.A., a company
organized under the laws of France (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company is a party to the Transaction Agreement, dated the
date hereof, among the Company, Bell Atlantic Corporation, Cable & Wireless plc
("C&W") and Cable & Wireless Communications plc ("CWC") (the "Transaction
Agreement") providing, among other things, for a series of transactions which
will result in the Company acquiring 100% of the capital stock of ConsumerCo (as
defined in the Transaction Agreement) (the "Strategic Acquisition");
WHEREAS, for purposes of raising a portion of the financing (the
"Funds") for the Strategic Acquisition, including refinancing of any assumed
indebtedness, the Company wishes to issue and sell to the Purchaser certain
equity securities of the Company;
WHEREAS, for purposes of raising the initial portion of the Funds, the
Company and the Purchaser entered into the Purchase Agreement, dated July 15,
1999 (the "Purchase Agreement"), pursuant to which the Company agreed to issue
and sell to the Purchaser and the Purchaser agreed to purchase from the Company,
subject to the terms and conditions contained in the Purchase Agreement, the
Securities (as defined in the Purchase Agreement);
WHEREAS, for purposes of providing for availability of the remainder of
the Funds at the time the Strategic Acquisition is consummated, the Company
wishes to issue and sell to the Purchaser, and the Purchaser wishes to purchase
from the Company, subject to the terms and conditions contained herein, an
aggregate of 27,027,027 shares (the "Common Shares") of the Company's common
stock, par value $0.01 per share (the "Common Stock") and 2,000,000 shares (the
"Preferred Shares") of the Company's 5.0% Cumulative Participating Convertible
Preferred Stock, Series B, having an aggregate stated value of $2,000,000,000
(the "Preferred Stock"), and having the designations, rights and preferences set
forth in the Certificate of Designation (as defined below), upon the terms and
subject to the conditions set forth herein. All shares of Common Stock and
Preferred Stock purchased pursuant to this Agreement are collectively referred
to as the "New Securities"; and
WHEREAS, upon consummation of the Strategic Acquisition, the Company
will continue to pursue a growth strategy as the leading integrated wireline,
Internet and cable operator in the United Kingdom;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Purchaser and the Company
hereby agree as follows:
<PAGE>
2
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Investment Agreement, dated
July 26, 1999, between the Company and the Purchaser (including the Attachments
and the Exhibits hereto and the Disclosure Schedule) and all amendments hereto
made in accordance with the provisions of Section 9.10.
"Alliance" means any joint venture, co-ownership or co-operation
agreement or similar relationship with any telecommunications operator.
"beneficial owner" (including the terms "beneficially own" or
"beneficial ownership") has the meaning given to such terms in Rule 13d-3 of the
Exchange Act.
"Benefit Plan" means each of the Company's and Significant
Subsidiaries' plan, program, policy, payroll practice, contract, agreement or
other arrangement providing for compensation, retirement benefits, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits of any kind, whether formal or informal,
funded or unfunded, written or oral and whether or not legally binding,
including, without limitation, each "employee benefit plan", within the meaning
of Section 3(3) of ERISA and each "multi-employer plan" within the meaning of
Section 3(37) of 4001(a)(3) of ERISA.
"Board" means the board of directors of the Company.
"Business Combination Statute" means Section 203 of the Delaware
General Corporation Law or any other Law prohibiting, restricting, or imposing
conditions with respect to, business combinations or limiting voting powers or
other rights, or imposing any obligations, on any party to a business
combination.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in The City of
New York or Paris.
<PAGE>
3
"By-laws" means the by-laws of the Company as amended as of the date
hereof and as may be amended from time to time, provided that such amendment
does not adversely affect the rights of the Purchaser under this Agreement, the
Purchase Agreement, the Certificate of Designation or the Series A Certificate
of Designation.
"CERCLA" means the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended as of the date hereof.
"Certificate of Designation" means the Certificate of Designation of
the Company's 5% Cumulative Participating Convertible Preferred Stock, Series B,
to be filed with the Secretary of State of the State of Delaware, in the form of
Attachment I attached hereto, setting forth the designations, rights and
preferences of the Preferred Stock.
"Certificate of Incorporation" means the restated certificate of
incorporation of the Company, as amended through the date of this Agreement and
as may be amended from time to time, provided that such amendment does not
adversely affect the rights of the Purchaser under this Agreement, the Purchase
Agreement, the Certificate of Designation or the Series A Certificate of
Designation.
"Code" means the Internal Revenue Code of 1986, as amended through the
date of this Agreement.
"Company Subsidiary" or "Company Subsidiaries" means any Subsidiary or
all of the Subsidiaries of the Company, respectively.
"Company Systems" means all computers, hardware, software, systems,
facilities and equipment (including, without limitation, cable, wireline,
wireless, microwave, satellite and any other telecommunications equipment and
facilities, and embedded microcontrollers in noncomputer equipment) owned,
leased or licensed by the Company or any Significant Subsidiary and material to,
or necessary for, the Company or any Significant Subsidiary to carry on its
business as currently conducted or intended to be conducted.
"Completion" has the meaning given to such term in the Transaction
Agreement.
"Completion Date" has the meaning given to such term in the Transaction
Agreement.
"Conflicting Investment" means any investment of funds or assets of the
Company or any Company Subsidiary directly or indirectly in any French Operator
or in any joint venture entity which is partly owned by any French Operator (the
joint venture entity being known as the "Entity"), in connection with operations
in France of such French Operator or Entity other than any purchase (either in a
stock or asset purchase transaction) for cash by the Company and/or any Company
Subsidiary of not less than 51% (based on the fair market value and voting
power) of any company or business from any French Operator or the investment of
funds or assets in any
<PAGE>
4
Entity in which the Company and/or any Company Subsidiary will, following such
investment, own at least 51% (based on fair market value and voting power) of
such Entity.
"ConsumerCo Companies" means the companies listed in Schedule 5 of the
Transaction Agreement.
"ConsumerCo Material Adverse Effect" means (i) any circumstance,
development, change in, or effect on the ConsumerCo Companies or their
businesses that, individually or in the aggregate with any other circumstances,
developments, changes in, or effects on any one or more of the ConsumerCo
Companies or their businesses is, or is reasonably expected to be, materially
adverse to the business of the ConsumerCo Companies, taken as a whole, or the
financial condition, results of operations, assets or properties of the
ConsumerCo Companies, taken as a whole, and (ii) any material adverse change or
any development involving a prospective material adverse change in or affecting
the general affairs, management, financial positions, shareholders' equity or
results of operations of the ConsumerCo Companies, taken as a whole; provided,
however, that any change or development resulting from: (i) general economic
conditions in the countries in which the ConsumerCo Companies operate; (ii)
changes generally affecting the industry in which the ConsumerCo Companies
operate; or (iii) any change in law and regulations (other than laws and
regulations related to Taxes) applicable to the business of the ConsumerCo
Companies, shall not be deemed a ConsumerCo Material Adverse Effect.
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Conversion Shares" means new shares of Common Stock issued or issuable
upon conversion, redemption of, or as a dividend with respect to, the shares of
Preferred Stock.
"Convertible Debentures" means the 7% Convertible Subordinated Notes
due 2008 of NTL Communications Corp., a Delaware corporation.
"Core Business Assets" means assets that are used in a business that
operates directly or indirectly, or holds a license to operate (i) a cable
system or service, (ii) a fixed-line telephone or telecommunications system or
service or (iii) a broadcasting transmission system or service.
"Diluted Shares" means, as of any applicable time, shares of Common
Stock issued and outstanding as of such time plus shares of Common Stock
issuable upon conversion, redemption, exchange, exercise of, or as a dividend
declared as of the time of measurement with
<PAGE>
5
respect to, any shares of preferred stock, options, warrants, debentures and
other securities or any subscription rights.
"Director" means a member of the Board.
"Disclosure Schedule" means the Disclosure Schedule delivered in
connection with this Agreement dated as of the date hereof and incorporated
herein by reference.
"Employee Agreement" means each management, employment, severance,
consulting, non-compete, confidentiality, or similar agreement or contract
between the Company or any ERISA Affiliate and any Employee pursuant to which
the Company has or may have any material liability contingent or otherwise.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership, but
excluding Permitted Encumbrances.
"Environmental Law" means any Law and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to pollution or protection of the environment,
health, safety or natural resources, including, without limitation, those
relating to the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"Environmental Permits" means any permit, approval, identification
number, license and other authorization required under any applicable
Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each business or entity which is or was a
member of a "controlled group of corporations", under "common control" or an
"affiliated service group" with the Company within the meaning of Section
414(b), (c) or (m) of the Code, or required to be aggregated with the Company
under Section 414(o) of the Code or is under "common control" with the Company,
within the meaning of Section 4001(a)(14) of ERISA.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
"Existing Agreements" means the following registration rights
agreements: the Registration Rights Agreement, dated March 5, 1999, between the
Company and stockholders of Diamond Cable Communications Plc, the Registration
Rights Agreement, dated January 28, 1999, between the Company and Microsoft
Corporation, the Registration Rights Agreement, dated October 29, 1998, between
the Company and Comcast Corporation and Warburg Pincus
<PAGE>
6
and the Registration Rights Agreement, dated September 22, 1998, between the
Company and Vision Networks B.V., copies of which have been made available to
the Purchaser.
"French Operator" means any significant provider of telecommunications
services in France (or that provider's Affiliates) or any Person whose primary
line of business in France is to provide telecommunications services (or such
Person's Affiliates) other than the Company or its Affiliates.
"GAAP" means United States generally accepted accounting principles and
practices as in effect from time to time and applied consistently throughout the
periods involved.
"Governmental Authority" means any United States or foreign federal,
state, provincial, local, supranational government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" means (i) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (ii) any chemical, material or
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means (a) indebtedness for borrowed money, (b)
obligations evidenced by bonds, notes, debentures or other similar instruments
or by letters of credit, including purchase money obligations or other
obligations relating to the deferred purchase price of property (other than
trade payables incurred in the ordinary course of business), (c) obligations as
lessee under leases which have been or should have been, in accordance with
GAAP, recorded as capital leases, (d) obligations under direct or indirect
guarantees in respect of Liabilities of others, including indebtedness of others
secured by an Encumbrance on any asset of such Person, whether or not such
indebtedness is assumed by such Person, (e) obligations in respect of
outstanding or unpaid checks or drafts or overdraft obligations and (f) accrued
interest, if any, on and all other amounts owed in respect of any of the
foregoing.
"Indentures" means the indentures of the Company or a Company
Subsidiary listed in Section 1.01 of the Disclosure Schedule.
"knowledge of the Company" means, with respect to any matter in
question, the actual knowledge, after due inquiry, of J. Barclay Knapp, Richard
Lubasch, John Gregg, Bret Richter, Leigh Wood, Gregg Gorelick and Robert
Mackenzie.
<PAGE>
7
"Law" means any supranational, United States or foreign federal,
national, state, regional or local statute, law, ordinance, regulation, rule,
code, order, other requirement or rule of law.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Material Adverse Effect" means (i) any circumstance, development,
change in, or effect on the Company, any Company Subsidiary or their businesses
that, individually or in the aggregate with any other circumstances,
developments, changes in, or effects on, the Company, any Company Subsidiary or
their businesses is, or is reasonably expected to be, materially adverse to the
business of the Company and the Company Subsidiaries, taken as a whole, or the
financial condition, results of operations, assets or properties of the Company
and the Company Subsidiaries, taken as a whole, and (ii) any material adverse
change or any development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position, shareholders'
equity or results of operations of the Company and the Company Subsidiaries,
taken as a whole; provided, however, that any change or development resulting
from (i) the Strategic Acquisition; (ii) general economic conditions in the
countries in which the Company and the Significant Subsidiaries operate; (iii)
changes generally affecting the industry in which the Company and the
Significant Subsidiaries operate; or (iv) any change in laws and regulations
(other than laws and regulations related to Taxes) applicable to the business of
the Company and Significant Subsidiaries, shall not be deemed a Material Adverse
Effect.
"Nasdaq" means the Nasdaq Stock Market, Inc., the electronic securities
market regulated by the National Association of Securities Dealers, Inc.
"Nasdaq National Market" has the meaning set forth in Rule 4200(a)(23)
of the rules of the National Association of Securities Dealers, Inc.
"New Crown Shares" has the meaning given to such term in the
Transaction Agreement.
"Paying Agent" means the bank or the financial institution to be
mutually agreed upon by the Company and the Purchaser to make payments of the
consideration to the holders of the New Crown Shares under the Transaction
Agreement.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced or is reasonably expected to commence: (a) liens for taxes,
assessments and governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been
<PAGE>
8
made therefor; (b) Encumbrances imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other similar liens
arising in the ordinary course of business; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or to secure
public or statutory obligations or other obligations of a like nature incurred
in the ordinary course of business; (d) minor survey exceptions, reciprocal
easement agreements and other customary encumbrances on title to real property
that (i) were not incurred in connection with any indebtedness, (ii) do not
render title to the property encumbered thereby unmarketable and (iii) do not,
individually or in the aggregate, materially adversely affect the value or use
of such property for its current and anticipated purposes; (e) Encumbrances
permitted under any of the Indentures; (f) purchase money security interests in
supplier equipment; (g) precautionary liens filed by lessors with respect to
leased equipment; and (h) any single or series of related Encumbrances which are
not in excess of $2,500,000 and do not materially impair the value or use of the
property subject thereto or the operation of the Company's business as currently
conducted.
"Person" shall mean any individual, partnership, association, joint
venture, corporation, business, trust, joint stock company, limited liability
company, any unincorporated organization, any other entity, a "group" of such
persons, as that term is defined in Rule 13d-5(b) under the Exchange Act, or a
government or political subdivision thereof.
"Posting Date" has the meaning given to such term in the Transaction
Agreement.
"Purchaser Directors" means Directors elected by the Purchaser as a
holder of Preferred Stock in accordance with the Certificate of Designation or
otherwise nominated in accordance with this Agreement.
"Purchaser Law and Decrees" means (a) Act No. 83-675 of July 23, 1983
concerning the democratization of the public sector, (b) Act No. 90-568 of July
2, 1990 concerning the organization of the Post Office and Telecommunications
public service as amended by Act No. 96-660 of July 26, 1996 concerning the
national undertaking of France Telecom, S.A. and (c) Decree No. 96-1174 of
December 27, 1996 approving the constitution of France Telecom, S.A., including
miscellaneous provisions concerning the operation of France Telecom, S.A.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
into or upon any land or water or air or otherwise entering into the
environment.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the United States Securities Act of 1933, as
amended.
<PAGE>
9
"Senior Preferred Stock" means (i) the Company's 13% Senior Redeemable
Exchangeable Preferred Stock, par value $0.01 per share; and (ii) 5.25%
Convertible Preferred Stock.
"Series A Certificate of Designation" means the Certificate of
Designation for the Series A Preferred Stock to be filed with the Secretary of
State of the State of Delaware in accordance with the Purchase Agreement.
"Series A Preferred Stock" means the 5% Cumulative Participating
Convertible Preferred Stock, Series A of the Company to be issued pursuant to
the Purchase Agreement.
"Significant Subsidiary" shall have the meaning given to such term in
Regulation S- X under the Exchange Act.
"Subsidiaries" of any Person means any corporation, partnership, joint
venture, limited liability company, trust, estate or other Person of which (or
in which), directly or indirectly, more than 50% of (a) the issued and
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency), (b) the interest in
the capital or profits of such partnership, joint venture or limited liability
company or other Person or (c) the beneficial interest in such trust or estate
is at the time owned by such first Person, or by such first Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Tax" or "Taxes" means any federal, state, county, local, foreign and
other taxes (including, without limitation, income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance,
capital levy, production, transfer, withholding, employment, unemployment
compensation, payroll and property taxes, import duties and other governmental
charges and assessments), whether or not measured in whole or in part by net
income, and including deficiencies, interest, additions to tax or interest, and
penalties with respect thereto, whether disputed or not, imposed by any
Governmental Authority or other Tax authority or arising under any Tax law or
agreement, including, without limitation, any joint venture or partnership
agreement.
"Tax Claim" means any claim arising out of or otherwise in respect of
any inaccuracy in or any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement relating to Taxes.
"Tax Return" means any return, declaration, report, claim for refund,
form, or information or return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendments thereof.
"U.K. Competition Law" means the Competition Act of 1998 of the United
Kingdom and all competition or antitrust Laws applicable to the business of the
Company or
<PAGE>
10
Company Subsidiaries, whether of the United Kingdom, European Union or any other
jurisdiction.
"U.K. Takeover Code" means The City Code on Takeovers and Mergers.
"Unconditional Time" means the time when the transactions contemplated
by the Transaction Agreement become unconditional in accordance with the terms
thereof and all conditions of the parties to the Transaction Agreement contained
therein are deemed waived.
"Vendors" means any and all vendors who are unaffiliated with the
Company who supply raw materials, components, spare parts, supplies, goods,
merchandise or services to the Company or any Company Subsidiary.
"Year 2000 Compliant" means that the Company Systems provide
uninterrupted millennium functionality in that (i) the Company Systems will
record, store, process and present calendar dates falling on or after January 1,
2000, in the same manner and with the same functionality and accuracy as the
Company Systems record, store, process and present calendar dates falling on or
before December 31, 1999; (ii) the Company Systems operate accurately in all
material respects, to the extent necessary in connection with the conduct of the
business of the Company as currently conducted, with other software and hardware
that use standard date format (four digits) for representation of the year; and
(iii) the occurrence of the calendar year 2000 will not materially adversely
affect the Company Systems.
SECTION 1.02. Other Definitions. Terms defined in the Transaction
Agreement and not otherwise defined in this Agreement have the meanings given to
them in the Transaction Agreement. The meanings of the following terms can be
found in the Sections of this Agreement indicated below:
Term Section
---- -------
Accelerated Closing..........................2.06
Accelerated Time of Delivery.................2.06
Assignee.....................................5.05(c)
Audited Financial Statements.................3.05(b)
Additional Issuer Information................5.02(b)
Bankruptcy Proceeding........................3.07(b)
Blackout Period..............................5.01(d)
C&W..........................................Recitals
Closing......................................2.03
Common Shares................................Recitals
Common Stock.................................Recitals
Company......................................Preamble
Company Balance Sheet........................3.05(b)
Company Loss.................................7.02(b)
<PAGE>
11
Company Permits..............................3.09(b)
Confidentiality Agreement....................5.02(f)
ConsumerCo...................................Recitals
CWC..........................................Recitals
Designated Bank Account......................2.03
Employee.....................................3.15(d)
Equity Securities............................5.10
Exchange Act Reports.........................3.05(a)
Expected Date................................2.03
First Stockholder Meeting....................2.06
Funds........................................Recitals
HoldCo.......................................9.08
Improvements.................................3.14(d)
Indemnified Party............................7.02(c)
Indemnifying Party...........................7.02(c)
Intellectual Property........................3.12(a)
Interim Financial Statements.................3.05(b)
IRS..........................................3.15(b)
Lease........................................3.14(c)
Leased Real Property.........................3.14(a)
Loss.........................................7.02(b)
Market Value.................................5.12(e)
Material Contracts...........................3.11(a)
Morgan Stanley...............................3.17
New Securities...............................Recitals
NTL Communications...........................3.05
Owned Real Property..........................3.14(a)
Preferred Shares.............................Recitals
Preferred Stock..............................Recitals
Pro Forma Capitalization Table...............3.02(a)
Pro Forma Financial Statements...............3.05(b)
Pro Forma Rating.............................5.12(f)
Proxy Statement..............................5.04(a)
Purchase Agreement...........................Recitals
Purchase Price...............................2.02
Purchaser....................................Preamble
Purchaser Loss...............................7.02(a)
Qualified Holding Condition..................5.02(d)
Real Property................................3.14(a)
Relevant Time................................6.01
Registration Rights Agreement................4.05
Representatives..............................5.02(a)
Rights Agreement.............................5.04(d)
Salomon Brothers.............................4.06
<PAGE>
12
Second Stockholders Meeting..................2.06
Securities...................................Recitals
Securities Act...............................3.05(a)
Strategic Acquisition........................Recitals
Third Party Claims...........................7.02(c)
Third-Party Offer............................5.09(b)
Time of Delivery.............................2.03
Transaction Agreement........................Recitals
ARTICLE II
SALE AND PURCHASE
SECTION 2.01. Sale of the New Securities. Upon the terms and subject to
the conditions set forth in this Agreement, the Company shall duly issue and
sell to the Purchaser, and the Purchaser shall purchase from the Company, the
New Securities.
SECTION 2.02. Purchase Price. The purchase price to be paid by the
Purchaser to the Company for the Common Shares shall be $2,500,000,000 and the
purchase price to be paid by the Purchaser for the Preferred Shares shall be
$2,000,000,000 (the aggregate purchase price payable hereunder for the Common
Shares and the Preferred Shares shall be the "Purchase Price"). The parties will
consult with each other regarding the advisability of providing that the
Purchase Price will be payable in Sterling and the equal sharing of any currency
exchange risk in connection therewith using mutually agreed upon hedging
strategy. The parties will use their reasonable best efforts to reach a
conclusion on the matter by August 15, 1999.
SECTION 2.03. Closing. The New Securities to be purchased by the
Purchaser will be represented by one or more stock certificates evidencing the
Common Shares and one or more certificates evidencing the Preferred Shares. The
Company will deliver the certificates evidencing the Preferred Shares and the
Common Shares to the Purchaser against payment of the Purchase Price as
hereinafter provided. The delivery of and payment for the New Securities
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at the offices of Travers Smith Braithwaite at 10:00 a.m. (London time)
on the Completion Date.
The time and date upon which the Closing occurs is referred to herein
as the "Time of Delivery". The Company shall notify the Purchaser, at least 10
Business Days prior to the date on which the New Crown Call Option (as defined
in the Transaction Agreement) is expected to be exercised, of (i) the date on
which such option is expected to be exercised (such date or such later date as
the Company may indicate by a written notice to the Purchaser after the initial
notice was given, being the "Expected Date"); and (ii) the bank account
(including the sort code and address) established with the Paying Agent (the
"Designated Bank Account") into which the Purchaser shall transfer the Purchase
Price. The Purchaser shall transfer to the
<PAGE>
13
Designated Bank Account the Purchase Price in US Dollars by wire transfer in
immediately available funds on the Business Day immediately preceding the
Expected Date.
The Purchaser shall instruct the Paying Agent to hold the Purchase
Price (and any interest accrued thereon) for the account and for the benefit of
the Purchaser on interest-bearing overnight deposit until the date on which the
New CWC Put Option or the New CWC Call Option is exercised (the "Option Exercise
Date"), at which time the Purchaser shall instruct the Paying Agent to apply
such amount of the Purchase Price as the Company shall specify in writing to the
Paying Agent in satisfaction of the consideration payable at Completion by the
Company to the shareholders in New CWC pursuant to the Transaction Agreement or
the New CWC Tag-Along Rights in respect of their shares in New CWC but
otherwise to continue to hold the Purchase Price for the account and for the
benefit of the Purchaser. If Completion shall not have taken place within three
Business Days after the Option Exercise Date, the Purchaser shall be entitled to
withdraw its instruction to the Paying Agent; provided however, that if
Completion did not occur because of the failure of any Closing Condition, the
Purchaser will upon three Business Days' notice be required to redeposit the
Purchase Price with the Paying Agent for disbursement as provided above.
SECTION 2.04. Closing Deliveries by the Company. At the Closing, the
Company shall deliver or cause to be delivered to the Purchaser:
(a) newly issued certificates for each of the Common Shares and the
Preferred Shares, issued to and registered in the name of the Purchaser and
evidencing the Common Shares and Preferred Shares being purchased hereunder;
(b) a receipt for the Purchase Price;
(c) a true and complete copy, certified by the Secretary or an
Assistant Secretary of the Company, of the resolutions duly and validly
adopted by the Board evidencing (i) its authorization of the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and the filing of the Certificate of Designation with
the Secretary of State of the State of Delaware and the issuance of the
Securities, (ii) the amendment of the Rights Agreement as required by this
Agreement, and (iii) the amendment of the By-laws as required by this
Agreement;
(d) a legal opinion, addressed to the Purchaser and dated the Time of
Delivery from Skadden, Arps, Slate, Meagher & Flom LLP, substantially in the
form of Exhibit C;
(e) a copy of (i) the Certificate of Incorporation, certified by the
Secretary of State of the State of Delaware, as of a date not earlier than
five Business Days prior to the Time of Delivery and accompanied by a
certificate of the Secretary or Assistant Secretary or other authorized
officer of the Company, dated as of the Time of Delivery, stating that no
amendments, other than the filing of the Certificate of Designation, have
been made to
<PAGE>
14
such Certificate of Incorporation since such date, and (ii) the By-laws,
certified by the Secretary or Assistant Secretary of the Company;
(f) a good standing certificate for the Company from the Secretary of
State of the State of Delaware dated as of a date not earlier than five
Business Days prior to the Time of Delivery; and
(g) on Completion (or at such later time when the consideration payable
to the holders of the New Crown Shares (or, if earlier, C&W) under the
Transaction Agreement is to be paid), joint instructions to the Receiving
Agent referred to in Section 2.03.
SECTION 2.05. Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Company the items specified below:
(a) a receipt acknowledging delivery by the Company of the stock
certificates specified in Section 2.04(a); and
(b) on Completion (or at such later time when the consideration payable
to the holders of the New Crown Shares (or, if earlier, C&W) under the
Transaction Agreement is to be paid), joint instructions to the Receiving
Agent referred to in Section 2.03.
SECTION 2.06. Acceleration of Closing. (a) Notwithstanding any other
provision of this Agreement, the Purchaser shall have the right to accelerate
the issuance, sale and purchase of the New Securities by giving written notice
(an "Acceleration Notice") to the Company of its election to exercise such
right.
(b) An Acceleration Notice shall specify the date on which the closing
(the "Accelerated Closing") of the purchase and sale of the New Securities is to
occur (the "Accelerated Time of Delivery"), which date shall be at least five
Business Days after the date of such notice.
(c) At least three Business Days before the Accelerated Time of
Delivery, the Company shall give written notice to the Purchaser of the bank
account (including the sort code and address) into which the Purchaser shall
transfer the Purchase Price at the Accelerated Closing.
(d) The Accelerated Closing shall occur at 10:00 a.m., London time, at
the offices of Travers Smith Braithwaite at the Accelerated Time of Delivery (or
such later time as the parties agree in writing). At the Accelerated Closing,
the Company shall deliver certificates, evidencing the Common Stock and the
Preferred Stock comprising the New Securities, registered in the name of the
Purchaser against payment of the Purchase Price.
<PAGE>
15
(e) The Purchaser's obligation to purchase the New Securities at the
Accelerated Time of Delivery shall be subject to the following conditions being
satisfied (or waived by the Purchaser):
(i) the conditions in Sections 6.01(a), (b), (c), (d), (e) and (g)
shall have been satisfied as if the Accelerated Time of Delivery was the
Posting Date; and
(ii) receipt by the Purchaser of the certificates and opinions set
forth in Sections 2.04(c), (d), (e) and (f) as if the references in those
sections to the Time of Delivery were to the Accelerated Time of Delivery.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to the Purchaser to enter into this Agreement, the
Company hereby represents and warrants to the Purchaser as follows:
SECTION 3.01. Organization, Authority and Qualification of the Company
and the Significant Subsidiaries; Significant Subsidiaries. (a) The Company and
each Significant Subsidiary is a corporation duly incorporated, validly existing
and in good standing (in jurisdictions recognizing the concept) under the laws
of the jurisdiction of its incorporation, and the Company has all necessary
corporate power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The Company and each Significant Subsidiary is duly qualified to do business
(and is in good standing in each jurisdiction that recognizes the concept) in
which (x) it owns or leases properties or conducts any business or (y) such
qualification is necessary, except where the failure to be so qualified or in
good standing (with respect to jurisdictions recognizing the concept) in any
such jurisdiction does not or would not subject the Company or the Significant
Subsidiary, as the case may be, to any material liability or disability. The
execution and delivery of this Agreement by the Company, the performance by the
Company of its obligations hereunder and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of the Company (other than, with respect to the approval of
this Agreement and the transactions contemplated hereby, by the requisite action
of the holders of voting securities of the Company in accordance with Delaware
General Corporation Law and the Certificate of Incorporation and By-laws, which
approval shall be obtained prior to the Posting Date). This Agreement has been
duly executed and delivered by the Company, and (assuming due authorization,
execution and delivery by the Purchaser) this Agreement constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (A) such enforcement may be subject to
(i) any bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar law now or hereafter in effect relating to
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity)
<PAGE>
16
and (B) rights to indemnification and contribution may be limited by public
policy. Neither the Company nor any Significant Subsidiary is in violation of
any of the provisions of their respective articles of incorporation, by-laws or
equivalent organizational documents in any material respect.
(b) Section 3.01(b) of the Disclosure Schedule sets forth a complete
and accurate list of each Company Subsidiary, together with its jurisdiction of
incorporation or organization. Except as disclosed in Section 3.01(b) of the
Disclosure Schedule, each such Company Subsidiary is directly or indirectly
wholly owned by the Company.
SECTION 3.02. Capital Stock of the Company; Ownership of the New
Securities. (a) As of the date hereof, the authorized capital stock of the
Company consists of (x) 400,000,000 shares of Common Stock, of which (i)
81,470,850 shares are outstanding, (ii) 2,702,703 shares of Common Stock are
reserved for issuance pursuant to the Purchase Agreement and 6,000,000 shares of
Common Stock are reserved as of the date of closing of the Purchase Agreement
for issuance on conversion of the Series A Preferred Stock, (iii) 27,027,027
shares are reserved as the Common Shares for issuance at Closing and 16,000,000
shares are reserved as of the date of Closing for issuance as the Conversion
Shares, (iv) 54,400,000 shares are reserved for issuance pursuant to the
Transaction Agreement, (v) 7,318,768 shares are reserved for issuance upon
conversion of the Senior Preferred Stock, (vi) 9,795,918 shares are reserved for
issuance upon conversion of the Convertible Debentures, and (vii) 21,093,980
shares are reserved for issuance upon the exercise of stock options and warrants
in the amounts and at the exercise prices disclosed in Section 3.02(a)(vii) of
the Disclosure Schedule, except for options to be issued pursuant to the
Transaction Agreement; and (y) 10,000,000 shares of preferred stock, par value
$0.01 per share, of which (i) 750,000 shares will be designated the Series A
Preferred Stock and 2,000,000 will be designated as Preferred Stock and will be
sold to the Purchaser pursuant to this Agreement and (ii) an aggregate of
822,063 shares have been designated as various series or classes of Senior
Preferred Stock, of which an aggregate of 822,063 shares are issued and
outstanding. All of the outstanding shares of the Company's capital stock are
duly and validly issued, fully paid and nonassessable. None of the issued and
outstanding shares of capital stock of the Company was issued in violation of
any preemptive rights. As of the date hereof, except as described above or as
disclosed in Section 3.02(a) of the Disclosure Schedule, there are no options,
warrants, subscriptions, calls, convertible securities or other rights,
agreements, arrangements or commitments relating to the capital stock of the
Company or obligating the Company to issue or sell any shares of capital stock
of, or any other equity interest in, the Company. Except as disclosed in Section
3.02(a) of the Disclosure Schedule, there are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or make any investment (in the form of a loan,
capital contribution or otherwise) in any other Person other than a Company
Subsidiary. The New Securities and the Conversion Shares have been duly and
validly authorized by the Company and, upon consummation of the Closing or the
Accelerated Closing, as the case may be, as contemplated hereby, the New
Securities purchased by the Purchaser will be duly and validly issued, fully
paid and nonassessable, and the issuance of the New Securities is not subject to
preemptive or other similar rights. The Conversion Shares, if and when issued,
<PAGE>
17
will be duly and validly issued, fully paid and nonassessable. Exhibit A hereto
contains a true and complete copy of the pro forma capitalization table as of
the date hereof (the "Pro Forma Capitalization Table") of the Company and the
Company Subsidiaries, giving effect to consummation of the transactions
contemplated by the Transaction Agreement, this Agreement and the Purchase
Agreement. The Pro Forma Capitalization Table has been prepared by senior
management of the Company based on the reasonable assumptions and best currently
available information, estimates and judgment of the Company's senior
management.
(b) Except as disclosed in Section 3.02(b) of the Disclosure Schedule,
all of the outstanding shares of capital stock of each Significant Subsidiary
that is a corporation are duly and validly issued, fully paid and nonassessable.
Except for directors' qualifying shares, all of the outstanding shares of
capital stock of, or other ownership interest in, each Significant Subsidiary
are owned, directly or indirectly, by the Company free and clear of any
Encumbrances. No Significant Subsidiary has outstanding options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating the Significant Subsidiary to issue, transfer or sell any
securities of any Significant Subsidiary.
SECTION 3.03. No Conflict. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 3.04, and except as may arise from facts or circumstances
relating solely to the Purchaser, the execution, delivery and performance of
this Agreement by the Company do not and will not (a) violate, conflict with or
result in the breach of any provision of the articles of incorporation or
by-laws (or similar organizational documents) of the Company or any Significant
Subsidiary, (b) conflict with or violate any Law or Governmental Order
applicable to the Company, any Significant Subsidiary or any of their respective
assets, properties or businesses, except for such conflicts or violations that,
individually or in the aggregate, would not result in a Material Adverse Effect,
or (c) except as disclosed in Section 3.03(c) of the Disclosure Schedule,
conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the assets or properties of the
Company or any Significant Subsidiary pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument, obligation or arrangement to which the Company or any
Significant Subsidiary is a party or by which any of its assets or properties is
bound or affected, except for such conflicts, breaches or defaults that,
individually or in the aggregate, would not result in a Material Adverse Effect.
SECTION 3.04. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement, or the consummation of the
transactions contemplated hereby, by the Company do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority, except (i) for the applicable
requirements, if any, of the Exchange Act, state securities or "blue sky" laws,
(ii) the notification requirements of the HSR Act, (iii) the listing of the
Common Shares and the Conversion Shares on the Nasdaq National Market, (iv) the
filing of the Certificate of
<PAGE>
18
Designation with the Secretary of State of the State of Delaware, and (v) such
actions and measures that are required to satisfy the conditions set forth in
Section 6.01(c).
SECTION 3.05. SEC Filings; Financial Statements. (a) The Annual Report
on Form 10-K of NTL Communications Corp., formerly known as NTL Incorporated or
International CableTel Incorporated ("NTL Communications"), for the fiscal year
ended December 31, 1998 and Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999 have been made available to the Purchaser in connection with the
offering of the New Securities. All documents of NTL Communications filed with
the SEC prior to the formation of the Company and documents of the Company filed
with the SEC pursuant to the Exchange Act are referred to herein as the
"Exchange Act Reports". The Exchange Act Reports, when they were filed with the
SEC, complied in all material respects with the requirements of the Exchange Act
and the applicable rules and regulations of the SEC thereunder. The Exchange Act
Reports did not, as of their respective dates, contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Company has timely
filed all reports and registration statements and made all filings required to
be made with the SEC under the Exchange Act, the Securities Act, or the
applicable rules and regulations of the SEC thereunder.
(b) The audited consolidated balance sheets of NTL Communications and
its subsidiaries for the fiscal years ended as of December 31, 1996, December
31, 1997, and December 31, 1998, and the related audited consolidated statements
of income, retained earnings, stockholders' equity and cash flow of NTL
Communications and its subsidiaries together with all related notes and
schedules thereto (the "Audited Financial Statements"), the unaudited
consolidated balance sheet of NTL Communications and its subsidiaries as of
March 31, 1999, and the related unaudited consolidated statements of income,
retained earnings, stockholders' equity and cash flow of NTL Communications and
its subsidiaries together with all related notes and schedules thereto (the
"Interim Financial Statements"), all of which Audited Financial Statements and
Interim Financial Statements are contained in the respective Exchange Act
Reports, (i) were prepared in accordance with the books of account and other
financial records of NTL Communications and its subsidiaries, (ii) present
fairly the consolidated financial condition and results of operations of NTL
Communications and its subsidiaries as of the dates thereof or for the periods
covered thereby, (iii) have been prepared in accordance with GAAP applied on a
basis consistent with the past practices of NTL Communications and (iv) in case
of the Interim Financial Statements, include all adjustments (consisting only of
normal recurring accruals) that are necessary for a fair presentation of the
consolidated financial condition and the results of the operations of NTL
Communications as of the dates thereof or for the periods covered thereby. The
balance sheet of NTL Communications contained in its Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 is hereinafter referred to as the
"Company Balance Sheet". The unaudited pro forma condensed consolidated
statement of operations of NTL Communications together with all related notes
and schedules thereto (the "Pro Forma Financial Statements") included in the
Company's and NTL Communications Corp.'s registration statement on Form S-3, S-2
(File No. 333-81397, 81395) present fairly the
<PAGE>
19
information shown therein, have been prepared in accordance with the SEC rules,
regulations and guidelines with respect to pro forma financial statements and
have been properly compiled on the basis described therein, and the assumptions
used and adjustments made in the preparation thereof are reasonable, and the
adjustments made in preparation thereof give effect to the transactions and
circumstances referred to therein.
(c) The Company has heretofore furnished to the Purchaser a complete
and correct copy of any material amendment or modification, that has not yet
been filed with the SEC, to agreements, documents or other instruments that
previously had been filed by the Company with the SEC (except as may be required
with respect to the transactions contemplated hereby), pursuant to the
Securities Act or the Exchange Act.
SECTION 3.06. No Undisclosed Liabilities. Except as set forth in
Section 3.06 of the Disclosure Schedule and except as set forth in the financial
statements of the Company included in the Exchange Act Reports filed and
publicly available prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
(including liabilities and obligations incurred in the ordinary course of
business by businesses or companies acquired by the Company since the date of
the Company Balance Sheet and prior to the date hereof) since the date of the
most recent consolidated balance sheet included in the Exchange Act Reports
filed and publicly available prior to the date of this Agreement, neither the
Company nor any of the Company Subsidiaries has any Liabilities required by GAAP
to be set forth on a consolidated balance sheet of the Company and the Company
Subsidiaries or in the notes thereto; provided, however, that there are no
undisclosed liabilities which are reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company, whether or not
arising in the ordinary course of business since the date of the most recent
consolidated balance sheet included in the Exchange Act Reports filed and
publicly available prior to the date of this Agreement. Section 1.01 of the
Disclosure Schedule contains a true and complete list of all Indentures to which
the Company or any Company Subsidiary is a party and which have not been filed
with any Exchange Act Report or registration statements filed with the SEC under
the Securities Act.
SECTION 3.07. Absence of Certain Changes or Events. (a) Except as
disclosed in Section 3.07 of the Disclosure Schedule, since the date of the
Company Balance Sheet, except as contemplated by this Agreement, the Purchase
Agreement or the Transaction Agreement, or disclosed in any Exchange Act Report
filed after the date of the Company Balance Sheet and prior to the date hereof,
the Company has conducted its business only in the ordinary course and in a
manner consistent with past practices and there has not been any
(i) Material Adverse Effect;
(ii) material change by the Company in its accounting methods,
principles or policies, except as may be required by GAAP;
<PAGE>
20
(iii) material change in the capital stock of the Company or any
Company Subsidiary;
(iv) material revaluation by the Company of any asset (including,
without limitation, any writing down of the value of inventory or
writing-off of notes or accounts receivable), other than in the ordinary
course of business consistent with past practices;
(v) declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any optional
redemption, purchase or other acquisition of any of its securities;
(vi) increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit-sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers or key
employees of the Company or any Company Subsidiary, except in the ordinary
course of business consistent with past practices;
(vii) amendment of any term of any outstanding security of the Company
or any Company Subsidiary that would materially increase the obligations of
the Company or such Company Subsidiary under such security;
(viii) damage, destruction or other casualty loss with respect to any
asset or property owned, leased or otherwise used by the Company or any
Company Subsidiary, except for such damage, destruction or loss that,
individually or in the aggregate, has not resulted, or would not reasonably
be expected to result, in a Material Adverse Effect;
(ix) incurrence, assumption or guarantee by the Company or any Company
Subsidiary of any Indebtedness other than in the ordinary course of business
and consistent with past practices;
(x) making of any loan, advance or capital contribution to or
investment in any Person by the Company or any Company Subsidiary other than
(A) loans, advances or capital contributions to or investments in any wholly
owned Company Subsidiary, (B) loans or advances to the Company by any
Company Subsidiary or (C) loans or advances to employees of the Company or
any Company Subsidiary made in the ordinary course of business consistent
with past practices;
(xi) (A) transactions, commitments, contracts or agreements entered
into by the Company or any Company Subsidiary relating to any material
disposition of any assets or business or (B) modification, amendment,
assignment, termination or relinquishment by the Company or any Company
Subsidiary of any contract, license or other right that would be reasonably
likely to have a Material Adverse Effect, other than, in either case,
<PAGE>
21
transactions, commitments, contracts or agreements in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(xii) amendment, alteration or repeal (by merger, consolidation or
otherwise) of any provision of the Certificate of Incorporation or the
By-laws, that would adversely affect the relative rights, preferences,
qualifications, limitations or restrictions of the Purchaser as the holder
of the Preferred Stock at the Time of Delivery or the rights of the
Purchaser under this Agreement, other than the amendments to the Certificate
of Incorporation by filing of one or more certificates of designation in
connection with the issuance of Senior Preferred Stock as a payment of
dividends to holders thereof in accordance with the terms thereof;
(xiii) creation of any new class of capital stock that would have a
preference with respect to dividends and/or liquidation over or on parity
with the Preferred Stock;
(xiv) reclassification of any of the Company's capital stock into
shares that would have a preference over or on parity with the Preferred
Stock;
(xv) sale of (or an agreement to sell) Core Business Assets of the
Company or the Company Subsidiaries, or any merger, consolidation or
combination of the Company or any Company Subsidiary with another entity;
(xvi) increase in the authorized number of shares of Common Stock or
shares of preferred stock of the Company;
(xvii) increase in the authorized number of shares of or issuance of
any additional Senior Preferred Stock other than the issuance of Senior
Preferred Stock as a dividend to holders thereof in accordance with the
terms thereof;
(xviii) initiation of a voluntary liquidation, dissolution or winding
up of the Company or of any Significant Subsidiary;
(xix) commencement of any tender or exchange offer involving the
Company's equity securities or any security convertible into, exchangeable
for, or otherwise giving the holder thereof the right to obtain, equity
securities of the Company;
(xx) any material acquisitions, other than the Strategic Acquisition,
or an agreement to consummate any material acquisition, other than the
Transaction Agreement; or
(xxi) any material amendments to any Material Contracts.
(b) Neither the Company nor any Company Subsidiary has made a general
assignment for the benefit of creditors, and no proceeding (a "Bankruptcy
Proceeding") has been
<PAGE>
22
instituted by or against the Company or any Company Subsidiary seeking to
adjudicate any of them a bankrupt or insolvent, or seeking liquidation, winding
up or reorganization, arrangement, adjustment, protection, relief or composition
of its debts under any Law relating to bankruptcy, insolvency or reorganization.
SECTION 3.08. Litigation. There are no Actions by or against the
Company or any Company Subsidiary or affecting any of the assets of the Company
or any of the Significant Subsidiaries, pending before any Governmental
Authority or, to the knowledge of the Company, threatened or contemplated to be
brought by or before any Governmental Authority which has, has had or is
reasonably expected to have a Material Adverse Effect. None of the Company, the
Company Subsidiaries or any of the assets of the Company or the Company
Subsidiaries is subject to any Governmental Order (or, to the knowledge of the
Company, are there any such Governmental Orders threatened or contemplated to be
imposed by any Governmental Authority) which has, has had or is reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.09. Compliance with Laws. (a) Except as disclosed in Section
3.09(a) of the Disclosure Schedule or as disclosed in any Exchange Act Report,
neither the Company nor any Company Subsidiary is in default or violation of any
Law (including, without limitation, the U.K. Competition Law) or Governmental
Order, except for such defaults or violations that would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) Except as disclosed in Section 3.09(b) of the Disclosure Schedule,
(i) the Company and each Company Subsidiary are in possession of all material
franchises, grants, authorizations, licenses, permits, memoranda of
understanding, agreements, easements, variances, exceptions, consents,
certificates, approvals and orders of or with any Governmental Authority (the
"Company Permits") necessary or required for the Company or any Company
Subsidiary to own, lease and operate its properties or to carry on its business
as it is now being conducted and the Company Permits are in full force and
effect, are not subject to any unusual or onerous conditions and have been
complied with in all material respects, (ii) no suspension or cancellation or
revocation of any of the Company Permits is pending or, to the knowledge of the
Company, threatened nor has any of the Company Permits expired and, with respect
to any such Company Permit which will expire prior to the Time of Delivery, the
Company is not aware of any circumstance which would reasonably be expected to
cause such Company Permit not to be renewed or extended upon expiration, except
as would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and (iii) neither the Company nor any Company
Subsidiary is in default under any Company Permit, except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.10. Environmental Matters. Except as disclosed in Section
3.10 of the Disclosure Schedule or as disclosed in any Exchange Act Report and
as would not reasonably be expected to have a Material Adverse Effect:
<PAGE>
23
(a) the Company and the Company Subsidiaries (i) are in compliance with
all applicable Environmental Laws, (ii) hold all necessary Environmental
Permits and (iii) are in compliance with their respective Environmental
Permits;
(b) neither the Company nor any Company Subsidiary has received any
written request for information, or been notified in writing that it is a
potentially responsible party, under CERCLA, or any similar Law of any
country, state, province, municipality, locality or any other jurisdiction;
(c) neither the Company nor any Company Subsidiary has entered into or
agreed to any consent decree or order or is subject to any judgment, decree
or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Materials and, to the knowledge
of Company, no investigation, litigation or other proceeding is pending or
threatened with respect thereto, and, to the knowledge of Company, no
condition exists on any property currently or formerly owned or operated by
the Company that is reasonably likely to lead to such investigation,
litigation or proceeding;
(d) none of the real property currently or formerly owned or leased by
the Company or any Company Subsidiary is listed or, to the knowledge of the
Company, proposed for listing on the "National Priorities List" under
CERCLA, as updated through the date of this Agreement, or any similar list
of sites in the United States, United Kingdom or any other jurisdiction
requiring investigation or cleanup; and
(e) the Purchaser has been provided access to all material reports in
the Company's possession or control assessing the environmental condition of
the Company's and the Company Subsidiaries current and former properties.
SECTION 3.11. Material Contracts. (a) Section 3.11(a) of the Disclosure
Schedule sets forth a complete list of all contracts, agreements, licenses,
notes, bonds, mortgages, guarantees, security agreements and commitments,
including all amendments and modifications thereto, to which the Company or any
Company Subsidiary is a party that are material to the Company and the Company
Subsidiaries, taken as a whole, and that have not been filed with any Exchange
Act Report or a registration statement under the Securities Act (together,
"Material Contracts").
(b) Except as disclosed in Section 3.11(b) of the Disclosure Schedule,
each Material Contract: (i) is valid and binding on the Company or the Company
Subsidiary that is a party thereto, as the case may be, and is in full force and
effect and (ii) upon consummation of the transactions contemplated by this
Agreement, except to the extent that any consents disclosed in Section 3.04 of
the Disclosure Schedule are not obtained, shall continue in full force and
effect without penalty or other adverse consequence.
<PAGE>
24
(c) Except as disclosed in Section 3.11(c) of the Disclosure Schedule,
(i) neither the Company nor any Company Subsidiary is in material breach of, or
default under, any Material Contract, and (ii) to the knowledge of the Company,
no other party to any Material Contract is in material breach thereof or default
thereunder.
SECTION 3.12. Intellectual Property; Company Systems. (a) Section
3.12(a) of the Disclosure Schedule sets forth a true and complete list
(including, to the extent applicable, registration, application or file numbers)
of each material trademark, trade name, patent, service mark, brand mark, brand
name, industrial design, and copyright owned by the Company or the Company
Subsidiaries as well as a true and complete list of all registrations thereof
and pending applications therefor, including any additions thereto or
extensions, continuations, renewals or divisions thereof (setting forth the
registration, issue or serial number and a description of the same)
(collectively, the "Intellectual Property"). All of the Intellectual Property is
owned or used pursuant to a valid license by the Company or the Company
Subsidiaries free and clear of any and all Encumbrances, and the Company or one
of the Company Subsidiaries has good, marketable and exclusive title to or
license for, and the valid right to use all of the Intellectual Property. Except
as disclosed in Section 3.12(a) of the Disclosure Schedule, to the knowledge of
the Company, neither the Company nor any of the Significant Subsidiaries has
received any complaint, assertion, threat or allegation or otherwise has notice
of any claim, lawsuit, demand, proceeding or investigation involving any such
matters or the Intellectual Property or otherwise knows that any of the
Intellectual Property is invalid or conflicts with the rights of any third party
that would individually or in the aggregate, have a Material Adverse Effect.
(b) Each of the Company and each Significant Subsidiary owns or has a
right to use all Intellectual Property used in the operation of its business as
presently conducted.
(c) Except as disclosed in Section 3.12(c) of the Disclosure Schedule,
each of the Company and each Significant Subsidiary owns free and clear of all
Encumbrances or has a valid license to use all Company Systems.
(d) Except as disclosed in Section 3.12(d) of the Disclosure Schedule,
the Company Systems have been maintained in accordance with good business
practice, are in good operating condition and repair and are suitable for the
purposes for which they are used and intended.
SECTION 3.13. Year 2000 Compliance. The Company (i) has undertaken an
assessment of all Company Systems that could be adversely affected by a failure
to be Year 2000 Compliant, (ii) has developed a plan and timeline for rendering
such Company Systems Year 2000 Compliant and (iii) expects to comply with the
plan and timeline for rendering the Company Systems Year 2000 Compliant. The
Company has made available for review to the Purchaser copies of all material
documents related to such assessment and plan implementation efforts and all
plans, time lines and cost estimates for rendering the Company Systems Year 2000
Compliant. All Company Systems presently are Year 2000 Compliant or are expected
to be Year 2000 Compliant.
<PAGE>
25
SECTION 3.14. Title to Properties; Absence of Encumbrances. (a) Section
3.14(a) of the Disclosure Schedule lists the real property interests owned by
the Company and the Company Subsidiaries in the United Kingdom (together with
all other material real property interests of the Company and the Company
Subsidiaries in other countries, being "Owned Real Property") and lists all
leases relating to real property in the United Kingdom to which the Company or
any Company Subsidiary is a party as a lessee (together with all other material
leases and licenses relating to real property in other countries to which the
Company or any Company Subsidiaries, being "Leased Real Property," and together
with the Owned Real Property, the "Real Property"). All leases for Leased Real
Property are in full force and effect, are valid and effective in accordance
with their respective terms, and there is not, under any of such leases, any
existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a default) that would reasonably be expected to
have a Material Adverse Effect.
(b) Except as disclosed in Section 3.14(b) of the Disclosure Schedule,
each of the Company and the Company Subsidiaries has good and marketable fee
title to, or, in the case of leased properties and assets, has good and valid
leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in, or which are necessary to conduct,
the respective business of the Company and each Company Subsidiary as currently
conducted, free and clear of any Encumbrances, except where such failure would
not, individually or in the aggregate, have a Material Adverse Effect.
(c) Section 3.14(c) of the Disclosure Schedule sets forth all material
leases, subleases and other agreements (each, a "Lease" and collectively, the
"Leases") granting to any Person or entity other than the Company or any Company
Subsidiary any right to the possession, use, occupancy or enjoyment of the Real
Property or any portion thereof. Each such Lease is valid, binding and in full
force and effect, all rent and other sums and charges payable by the tenant
thereunder are current, no notice of default or termination under any Lease is
outstanding, no termination event or condition or uncured default on the part of
the Company or any Company Subsidiary or, to the knowledge of the Company, the
tenant, exists under any Lease, and no event has occurred and no condition
exists that, with the giving of notice or the lapse of time, or both, would
constitute such a default or termination event or condition, except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(d) To the knowledge of the Company, all components of all buildings,
structures, fixtures, facilities and other improvements in, on or within the
Real Property (the "Improvements") are in good operating condition and repair,
subject to continued repair and replacement in accordance with past practice,
except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(e) The Company and each Company Subsidiary has not received notice of
and, to the knowledge of the Company, there is no pending, threatened or
contemplated condemnation proceeding, action or Governmental Order affecting the
Real Property or any part thereof, nor any sale or other disposition of the Real
Property or any part thereof in lieu of
<PAGE>
26
condemnation. Since December 31, 1998, no portion of the Real Property has
suffered any material damage by fire, flood or other casualty that has not
heretofore been completely repaired and restored, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 3.15. Employee Benefit Matters; Labor Matters. (a) Each Benefit
Plan has been operated in material compliance with its terms and the
requirements of all applicable Laws, including, without limitation, ERISA and
the Code. Each of the Company and the Company Subsidiaries has performed all
obligations required to be performed by it under, and is not in any respect in
default under or in violation of, any Benefit Plan, except where such failure to
perform obligations, default or violation would not have a Material Adverse
Effect. No action, claim or proceeding is pending or, to the knowledge of the
Company, threatened with respect to any Benefit Plan (other than claims for
benefits in the ordinary course).
(b) Except as disclosed in Section 3.15(b) of the Disclosure Schedule,
each Benefit Plan that is intended to be qualified under Section 401(a) of the
Code (or a similar provision under the applicable Law in a foreign jurisdiction)
has received a favorable determination letter from the Internal Revenue Service
(the "IRS") or other applicable Governmental Authority and each trust
established in connection with any Benefit Plan which is intended to be exempt
from federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS, Inland Revenue Service or other applicable
Governmental Authority that it is so exempt and, to the knowledge of the
Company, nothing has occurred since the date of such letter that has or is
reasonably likely to adversely affect such qualification or exemption.
(c) Neither the Company, any Company Subsidiary nor any ERISA Affiliate
has, within the last six years, sponsored or made contributions to or had any
obligations, whether absolute or contingent, direct or indirect, under any
Benefit Plan subject to Title IV of ERISA, and the Company has not incurred, nor
could it reasonably be expected to incur, any Liability under, arising out of or
by operation of Title IV of ERISA, including, without limitation, any Liability
in connection with (i) the termination or reorganization of any employee benefit
plan subject to Title IV of ERISA or (ii) the withdrawal from any (A)
"Multiemployer Plan" (within the meaning of Section 3(37) or 4001(a)(3) of
ERISA) or (B) single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) for which the Company or any Company Subsidiary could
incur liability under Section 4063 or 4064 of ERISA.
(d) Except as provided in Section 3.15(d) of the Disclosure Schedule,
the execution of, and consummation of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events, other than the Strategic Acquisition) (i) constitute an event
under any Benefit Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any current, former or retired
employee, officer, consultant, independent contractor, agent or director of the
Company or a Company Subsidiary (an
<PAGE>
27
"Employee"); or (ii) result in the triggering or imposition of any restrictions
or limitations on the right of the Company or the Purchaser to amend or
terminate any Benefit Plan. No payment or benefit which will or may be made by
the Company, the Purchaser or any of their respective Affiliates with respect to
any Employee will be characterized as an "excess parachute payment", within the
meaning of Section 280G(b)(1) of the Code.
(e) Except as disclosed in Section 3.15(e) of the Disclosure Schedule,
neither the Company nor any Company Subsidiary has any obligation to provide, or
has any direct or indirect liability, whether contingent or otherwise, with
respect to the post-termination provision of health or death benefits to any
employee or former employee, except as may be required pursuant to Section 4980B
of the Code (or a similar provision under the applicable Law in a foreign
jurisdiction) and the costs of which are fully paid by such former employees.
(f) Except as disclosed in Section 3.15(f) of the Disclosure Schedule,
neither the Company nor any Company Subsidiary is a party to any collective
bargaining or other labor union contract applicable to persons employed by the
Company or any Company Subsidiary and no collective bargaining agreement is
being negotiated by the Company or any Company Subsidiary. Except as disclosed
in Section 3.15(f) of the Disclosure Schedule, to the knowledge of the Company,
there is no labor dispute, strike or work stoppage against the Company or any
Company Subsidiary pending or threatened in writing which may interfere with the
respective business activities of the Company or any Company Subsidiary, except
where such dispute, strike or work stoppage would not result in a Material
Adverse Effect. To the knowledge of the Company, none of the Company, any
Company Subsidiary, or any of their respective representatives or employees has
violated any Law regarding the terms and conditions of employment of employees,
former employees or prospective employees or other labor-related matters or
committed any unfair labor practices in connection with the operation of the
respective businesses of the Company or any Company Subsidiary, and there is no
charge or complaint against the Company or any Company Subsidiary by the United
States National Labor Relations Board or a similar Governmental Authority in a
foreign jurisdiction or any comparable state agency pending or threatened in
writing, except where such unfair labor practice, charge or complaint would not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.16. Insurance. All material policies or binders of fire,
liability, workmen's compensation, vehicular or life insurance held by the
Company or the Significant Subsidiaries or other types of policies customary for
the industry in which the businesses of the Company and the Significant
Subsidiaries are operated are in full force and effect. Neither the Company nor
any Company Subsidiary is in default with respect to any provision contained in
any such policy or binder and neither has failed to give any notice or present
any claim under such policy or binder in due and timely fashion, except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. There are no material outstanding unpaid claims under any such
policy or binder. Neither the Company nor any Significant Subsidiary has
received a notice of cancellation or non-renewal of any such policy or binder.
The Company has not received notice of any inaccuracy in any application for
such policies or binders, any failure to pay premiums when due or any similar
state of facts which
<PAGE>
28
might form the basis for termination of any such insurance, except as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.17. Brokers. Except for Morgan Stanley & Co. International
Limited ("Morgan Stanley"), no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company is solely responsible for the fees and
expenses of Morgan Stanley.
SECTION 3.18. Taxes. (a) (i) Except as disclosed in Section 3.18 of the
Disclosure Schedule, the Company and each Company Subsidiary has filed or caused
to be filed, or has properly filed extensions for, all material Tax Returns that
are required to be filed and has paid or caused to be paid all Taxes as shown on
such returns and on all material assessments received by it to the extent that
such Taxes have become due, except any Tax the validity or amount of which is
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves, in accordance with GAAP, have been set aside; (ii) such
Tax Returns are true and correct in all material respects; (iii) the Company has
paid or caused to be paid, or has established reserves in accordance with GAAP
for all material Tax liabilities applicable to the Company for all fiscal years
that have not been examined and reported on by the taxing authorities (or closed
by applicable statutes); and (iv) no additional Tax assessment against the
Company or any Company Subsidiary has been heretofore proposed by any
Governmental Authority or Tax authority for which provision deemed adequate by
the Company in its reasonable judgment has not been made on its balance sheet.
(b) Except as disclosed in Schedule 3.18, with respect to all material
Tax Returns of the Company and the Company Subsidiaries, (i) no audit is in
progress and no extension of time is in force with respect to any date on which
any Tax Return was or is to be filed and no waiver or agreement is in force for
the extension of time for the assessment or payment of any Tax and (ii) there is
no unassessed deficiency proposed or threatened against the Company or any of
the Company Subsidiaries.
(c) The Company knows of no change in the rates or basis of assessment
of any Tax (other than federal income tax) of the Company and the Company
Subsidiaries that would reasonably be expected to result in a Material Adverse
Effect.
(d) The Company is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
<PAGE>
29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Company to enter into this Agreement, the
Purchaser hereby represents and warrants to the Company as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The
Purchaser is a company duly organized, validly existing and in good standing
under the laws of the Republic of France. The Purchaser has all necessary power
and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Purchaser, the performance by the
Purchaser of its obligations hereunder and the consummation by the Purchaser of
the transactions contemplated hereby have been duly authorized by all requisite
action on the part of the Purchaser. This Agreement has been duly executed and
delivered by the Purchaser, and (assuming due authorization, execution and
delivery by the Company) this Agreement constitutes a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms.
SECTION 4.02. No Conflict. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.03 and except as may result from any facts or
circumstances relating solely to the Company, the execution, delivery and
performance of this Agreement by the Purchaser does not (a) violate, conflict
with or result in the breach of any provision of Purchaser Law and Decrees, (b)
conflict with or violate any Law or Governmental Order applicable to the
Purchaser or (c) conflict with, or result in any breach of, constitute a default
(or event which with the giving of notice or lapse or time, or both, would
become a default) under, require any consent or waiver under, or give to others
any rights of termination, amendment, acceleration, suspension, revocation, or
cancellation of, or result in the creation of any Encumbrance on any of the
assets or properties of the Purchaser pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which the Purchaser is a party or by which
any of such assets or properties are bound or affected, except in the case of
clauses (b) and (c) above, as would not have a material adverse effect on the
Purchaser.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Purchaser does not require any
consent, approval, authorization or other order of, action by, filing with, or
notification to, any Governmental Authority, except (i) for the applicable
requirements, if any, of the Exchange Act, (ii) the notification requirements of
the HSR Act and (iii) for such other consents, waivers, approvals,
authorizations, orders, actions, filings or notifications, which if not obtained
or made would not be reasonably likely to affect performance by the Purchaser of
its obligations hereunder or the consummation of the transactions contemplated
hereby.
<PAGE>
30
SECTION 4.04. Investment Purpose. The Purchaser is acquiring the New
Securities for its own account solely for the purpose of investment and not with
a view to, or for offer or sale in connection with, any distribution thereof.
SECTION 4.05. Status of New Securities; Limitations on Transfer and
Other Restrictions. The Purchaser hereby acknowledges and agrees with the
Company that the New Securities have not been registered under the Securities
Act and may not be offered or sold except pursuant to registration or to an
exemption from the registration requirements of the Securities Act and that the
certificates evidencing the New Securities will bear a legend to that effect.
The Purchaser further agrees that it has not entered and will not enter into any
contractual arrangement with respect to the distribution or delivery of the New
Securities or the Conversion Shares, other than (i) pursuant to a Registration
Rights Agreement between the parties substantially on the terms set forth in
Exhibit B (the "Registration Rights Agreement"), (ii) pursuant to Rule 144 under
the Securities Act, (iii) pursuant to any transaction that does not require
registration under the Securities Act, (iv) any such arrangements with an
Affiliate of the Purchaser or (v) with the prior written consent of the Company.
SECTION 4.06. Fees and Expenses. Except for Salomon Brothers
International Limited ("Salomon Brothers"), no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Purchaser. The Purchaser is solely
responsible for the fees and expenses of Salomon Brothers.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business by the Company Pending the Closing.
The Company agrees that it shall not, directly or indirectly, between the date
of this Agreement and the Time of Delivery, except as specifically contemplated
by any other provision of this Agreement or the Transaction Agreement, unless
the Purchaser shall otherwise consent in writing:
(a) take any action which would (i) be reasonably likely to result in
the circumstances described in clauses (i) through (xxi) of Section 3.07(a)
having a Material Adverse Effect (except that for purposes of this Section
5.01(a), the circumstances that are qualified by "materiality, "material" or
"Material Adverse Effect", shall be deemed not to be so qualified) or (ii)
materially affect the rights of the Purchaser under the Certificate of
Designation, assuming for purposes of this clause (ii) that the Closing had
occurred, it being understood that the actions permitted by, and in
accordance with, Section 5.01(d) shall not be deemed to materially affect
such rights of the Purchaser;
<PAGE>
31
(b) take any action to cause the Company's representations and
warranties set forth in Article III (except those set forth in Section 3.07,
which shall be subject to the provisions of Section 5.01(a) hereof) to be
untrue in any material respect;
(c) agree to take any of the actions described in Sections 5.01(a) and
(b) above; or
(d) from the date hereof and prior to the Time of Delivery (the
"Blackout Period"), issue or sell any equity securities or securities
exercisable or convertible into equity securities of the Company or any
Company Subsidiary, other than (i) issuances of common stock upon the
exercise of stock options or warrants outstanding as of the date hereof,
issuances of stock options pursuant to stock option plans and employee
benefit schemes existing as of the date hereof (as such plans or schemes may
be amended or replaced, provided that such amended or replaced plans and
schemes shall have terms similar to and consistent with the terms of
existing plans and schemes) and issuances of common stock upon exercise of
such stock options; (ii) issuances of equity securities or any securities
convertible into or exchangeable or exercisable for equity securities as
consideration for future acquisitions; provided, however, that, in the event
of any such issuance described in this clause (ii), the Company shall notify
the Purchaser in writing of such issuance and shall offer to the Purchaser
the right to purchase (at the price equal to the value at which such equity
securities shall be included in the consideration paid by the Company in
such acquisition) such number of the equity securities being issued as would
be necessary for the Purchaser to maintain the level of ownership of the
Diluted Shares that the Purchaser shall have immediately prior to
consummation of such acquisition (it being understood that the Purchaser's
preemptive rights under this proviso will be exercised in a manner and based
on a timetable that will not restrict or adversely affect the Company's
ability to issue securities in such acquisition in a flexible and cost
effective manner); (iii) issuances of common stock on conversion of the
convertible notes outstanding as of the date hereof and issuances of common
stock or preferred stock on conversion or redemption or in payment of
dividends on shares of preferred stock outstanding as of the date hereof or
of Series A Preferred Stock or issued as dividends on such preferred stock
subsequent to the date hereof, and (iv) with the consent of the Purchaser,
which consent shall not be unreasonably withheld, issuances of equity
securities as consent payments to holders of debt securities outstanding as
of the date hereof issued under any of the Indentures of the Company or the
Company Subsidiaries; it being understood that notwithstanding anything to
the contrary contained in this Section 5.01(d), during the Blackout Period,
the Company shall have the right to issue up to an aggregate amount of
$400,000,000 of equity securities of the Company with the consent of the
Purchaser, which consent shall not be unreasonably withheld, it being
further understood that the provisions of this Section 5.01(d) shall
supercede the provisions of Section 5(g) of the Purchase Agreement.
SECTION 5.02. Access to Information; Confidentiality. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which the
<PAGE>
32
Company or any Company Subsidiary is a party or pursuant to any applicable Law,
from the date of this Agreement to the Time of Delivery, the Company shall, and
shall cause the Company Subsidiaries to: (i) provide to the Purchaser (and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, "Representatives")) access at
reasonable times upon reasonable prior notice to the officers, employees,
agents, properties, offices and other facilities of the Company and Company
Subsidiaries and to the books and records thereof and (ii) furnish promptly such
information concerning the business, properties, contracts, assets, liabilities,
personnel and other aspects of the Company and the Company Subsidiaries as the
Purchaser or its Representatives may reasonably request.
(b) At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act and prior to two years from the Time of Delivery, the
Company shall, for the benefit of the holders from time to time of the New
Securities, furnish at its expense, upon request, to holders of the New
Securities information (the "Additional Issuer Information") satisfying the
requirements of subsection (d)(4)(i) of Rule 144A under the Securities Act.
(c) The Company agrees to make available to the holders of the New
Securities as soon as practicable after the end of each fiscal year, and in any
event within 90 days, an annual report (including a balance sheet and statements
of income, shareholders' equity and cash flows of the Company and the Company
Subsidiaries on a consolidated basis certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter ending
after the Time of Delivery), and in any event within 45 days, consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail in accordance with past practice.
(d) So long as after the Time of Delivery or the Accelerated Time of
Delivery, as the case may be, the Purchaser or any Affiliate of the Purchaser is
a holder of at least 15% of Diluted Shares (the "Qualified Holding Condition"),
the Company shall make available to the Purchaser copies of all reports or other
communications (financial or other) furnished to shareholders or members of the
Board of Directors of the Company, and to make available to the Purchaser (x) as
soon as they are generally available, copies of any reports and financial
statements furnished to or filed or required to be filed with the SEC or any
securities exchange on which the New Securities or any class of securities of
the Company is listed; and (y) such additional information concerning the
business and financial condition of the Company as the Purchaser may from time
to time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and the Company Subsidiaries are
consolidated in reports furnished to its shareholders generally or to the SEC).
(e) The Company shall provide or cause to be provided to the Purchaser
and its Representatives all relevant information (including, without limitation
any documents or correspondence relating thereto) concerning ConsumerCo, the
Strategic Acquisition, the Transaction Agreement and other transactions
contemplated by the Transaction Agreement available to the Company, and shall,
cause its Representatives to, notify the Purchaser of the status of and new
developments with respect to the Strategic Acquisition and the Transaction
<PAGE>
33
Agreement and such transactions, and respond on a timely basis to questions and
inquiries that the Purchaser or its advisors may reasonably have.
(f) The parties shall comply with, and shall cause their respective
Representatives to comply with, all of their obligations under the
confidentiality agreement dated July 1, 1999 (the "Confidentiality Agreement")
between the Company and the Purchaser.
SECTION 5.03. Public Announcements. The initial press release relating
to this Agreement shall be a joint press release the text of which has been
agreed to by the Purchaser and the Company. Thereafter, unless otherwise
required by applicable Law or the requirements of the Nasdaq or any stock
exchange, neither the Purchaser nor the Company shall make, or cause to be made,
any press release or public announcement in respect of this Agreement, the
Transaction Agreement or the transactions contemplated hereby and thereby,
without the prior consent of the other party hereto, and the parties shall
cooperate as to the timing and contents of any such press release or public
announcement.
SECTION 5.04. Company's Action. (a) To the extent required by any
applicable Law or requirements of Nasdaq or any stock exchange, as soon as
practicable after the date hereof, the Company shall prepare and file with the
SEC one or more proxy statements in connection with the transactions
contemplated by this Agreement and the Transaction Agreement (each such proxy
statement, together with any amendments or supplements thereto, in each case in
the form mailed to the Company stockholders, being a "Proxy Statement"). Each
Proxy Statement shall not, at the date such Proxy Statement is first mailed to
the Company's stockholders, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All documents that the Company will file with
the SEC in connection with the transactions contemplated herein will comply as
to form and substance in all material respects with the applicable requirements
of the Exchange Act and the rules and regulations thereunder. The Company shall
promptly after the date hereof take all action necessary in accordance with the
Delaware General Corporation Law and the Certificate of Incorporation and
By-laws to convene two stockholders meetings, the first of which (the "First
Stockholders Meeting") to vote on the issuance of the New Securities to the
Purchaser at any time at the option of the Purchaser prior to Completion, shall
be held as promptly as practicable after the date hereof, and the second of
which (the "Second Stockholders Meeting") to vote on the transactions
contemplated by the Transaction Agreement shall be held subsequent to the
Posting Date but in no event prior to the last to occur of any of the
shareholders meetings (other than the Company's) required to be held under
Transaction Agreement. The Company shall use its reasonable best efforts to
solicit from stockholders of the Company proxies in favor of the transactions to
be voted on at each of the stockholders meetings. The Company shall use its best
efforts to ensure that the Proxy Statement includes the unconditional
recommendation of the Board in favor of the transactions to be voted on at each
of the stockholders meetings. The Company shall provide to the Purchaser and its
Representatives drafts of any materials to be filed with the SEC or mailed to
the Company's stockholders and, prior to submitting or filing such materials
with the SEC, shall accept reasonable comments from the Purchaser and its
Representatives.
<PAGE>
34
(b) The Company shall file the Certificate of Designation with the
Secretary of State of the State of Delaware prior to the Time of Delivery or the
Accelerated Time of Delivery, as the case may be.
(c) As soon as practicable after the Time of Delivery or the
Accelerated Time of Delivery, as the case may be, the Company shall file a
listing application with the Nasdaq National Market with respect to the Common
Shares and the Conversion Shares and shall use its best efforts to have the
Common Shares and the Conversion Shares so listed.
(d) Prior to the Time of Delivery or the Accelerated Time of Delivery
as the case may be, the Company shall amend the Shareholder Rights Agreement,
dated as of October 1, 1993, between the Company and Continental Stock Transfer
& Trust Co., as amended (the "Rights Agreement") to provide that the ownership
by the Purchaser of the New Securities, the Securities, any Conversion Shares
and any other securities purchased by the Purchaser in accordance with this
Agreement and the Purchase Agreement will not result in the Purchaser being
deemed an Acquiring Person (as such term is defined in the Rights Agreement) or
result in the occurrence of a Stock Acquisition Date, Section 11(a)(ii) Event or
Section 13 Event (as such terms are defined in the Rights Agreement), or
otherwise as may be necessary.
(e) The Company shall file together with the Purchaser as soon as
practicable after the date hereof notifications under the HSR Act and to respond
as promptly as practicable to all inquiries or requests received from the United
States Federal Trade Commission or the Antitrust Division of the Department of
Justice for additional information or documentation and to respond as promptly
as practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters.
The Company shall take such action as may be necessary to ensure that any
necessary notifications or filings that are required to satisfy the conditions
set forth in Section 6.01(c) are made and that all inquiries and requests
received from the relevant Governmental Authorities are responded to as promptly
as practicable.
(f) The Company shall not enter into, or otherwise agree to, an
amendment of the Transaction Agreement (except for amendments that are
insignificant, insubstantial or minor or amendments that do not adversely affect
the Purchaser or the value of the Purchaser's investment in the Company or the
Purchaser's rights assuming that the transactions contemplated by this Agreement
have been consummated), without the written consent of the Purchaser, and shall
comply with all of its obligations under the Transaction Agreement, unless
performance of such obligations shall have been waived by the other parties to
the Transaction Agreement.
SECTION 5.05. Tax Matters. (a) Upon request by the Purchaser, the
Company shall cooperate in delivering to the Purchaser or an affiliate thereof
(as applicable) within 30 days after such request a valid statement described in
Treasury Regulation section 1.897-2(g)(1)(ii) and to comply with the notice
requirements in Treasury Regulation section 1.897-2(h).
(b) The Company shall indemnify the Purchaser and each of its
affiliates and hold them harmless against (i) any French Tax imposed thereon
under Art. 209 B of the French
<PAGE>
35
Tax Code (or any successor provision) as a result of any activities or
investments of the Company or any of the Company Subsidiaries and (ii) any
liability (including penalties, interest and expenses) arising therefrom. Any
such indemnification shall be made on an after-tax basis and shall be made
within 30 days from the date the Purchaser makes written demand therefor. To the
extent that the Purchaser receives any French Tax benefit in respect of an item
for which it received an indemnity payment under this provision, the Purchaser
shall, to the extent it can do so without jeopardizing its entitlement to such
benefit (including any benefit resulting from a payment by it under this
sentence), pay to the Company an amount equal to the amount of any such Tax
benefit so realized.
(c) If, and to the extent that, the Purchaser transfers or assigns
(including an assignment pursuant to Section 9.07 of this Agreement) its rights
under this Agreement to a person (the "Assignee"), any payment to the Company
with respect to the New Securities purchased by the Assignee shall either be
paid (i) directly by the Assignee, or (ii) by the Purchaser on behalf of the
Assignee and shall be reflected as a capital contribution or as an intercompany
obligation on the books of Purchaser and the Assignee. In addition, the
Purchaser or, where the Purchaser has assigned its rights under this Agreement
pursuant to Section 9.07 of this Agreement, the Assignee shall provide to the
Company on the Completion Date a representation that, as of such date, it has
not entered into any understanding and is under no binding obligation to sell,
exchange or otherwise dispose of any of the New Securities, the Securities or
other shares of capital stock of the Company that it owns and the
representations set forth in Sections 4.04 and 4.05.
SECTION 5.06. No Solicitation of Transactions. (a) The Company shall
not, directly or indirectly, and will instruct the Company Subsidiaries and its
Representatives not to, directly or indirectly, solicit, initiate, facilitate or
encourage (including by means of furnishing nonpublic information) the making of
any proposal or offer that constitutes, or may reasonably be expected to lead
to, any Conflicting Investment; provided, however, that, if the Board shall have
consulted with and obtained the advice of outside counsel in respect of its
fiduciary duties under Delaware Law and such outside counsel believes that such
action is advisable in order for the Board to fulfill its fiduciary duties under
Delaware Law and if a written notice thereof is given (unless such outside
counsel believes that such written notice is not advisable) to the Purchaser,
the Company may take any action to respond to inquiries or enter into or
maintain or continue discussions or negotiate with any Person in furtherance of
such inquiries or to obtain a Conflicting Investment, or agree to or endorse any
Conflicting Investment.
(b) Before entering into any Alliance to provide telecommunications
services in any country in the European Union the Company shall consult with the
Purchaser with a view to mutually cooperating in such venture.
SECTION 5.07. Use of Proceeds. The Company shall use the Purchase Price
solely for the purpose of consummating the Strategic Acquisition, including,
without limitation, refinancing of any assumed indebtedness.
<PAGE>
36
SECTION 5.08. Certain Costs and Expenses. The Company covenants and
agrees with the Purchaser that the Company will pay or cause to be paid the
following: (i) the cost of producing and, if required, filing with the SEC of
this Agreement, closing documents (including any compilations thereof) and any
other documents in connection with the purchase, sale and delivery of the New
Securities; (ii) the cost of preparing the stock certificates for the New
Securities, (iii) the cost of filing the Certificate of Designation with the
Secretary of State of the State of Delaware, (iv) the cost of filing listing
applications with respect to the Common Shares and the Conversion Shares, with
the Nasdaq National Market and (v) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 5.08.
SECTION 5.09. Standstill; Restrictions on Transfer. (a) The Purchaser
and its successors and permitted assigns shall not without the prior written
consent of the Company or the Board:
(i) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or direct or
indirect rights to acquire any voting securities or any assets of the
Company;
(ii) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in the rules
promulgated by the SEC under the Exchange Act); or
(iii) form, join or in any way participate in a "group" as defined in
Section 13(d)(3) of the Exchange Act or act in concert with other
shareholders in connection with the activities described in clauses (i) and
(ii) above.
(b) Notwithstanding anything to the contrary contained herein, none of
the restrictions contained in Section 5.09(a)(i) shall apply under any of the
following circumstances:
(i) if the Purchaser or any of its Affiliates makes an offer to acquire
or purchase 100% of the capital stock of the Company, in a transaction or
series of related transactions involving a contractual sale or other
acquisition of 100% of the capital stock of the Company, provided that such
transaction is definitive or provides for a make-whole premium or similar
significant penalty payable to shareholders of the Company other than the
Purchaser in the event the Purchaser does not complete such a transaction;
or
(ii) if the Company or the Board enters into a definitive agreement
with a third party or accepts, approves or recommends an offer from a third
party to acquire more than 15% of the Diluted Shares (the "Third-Party
Offer"), or amends or waives provisions of the Rights Agreement with respect
thereto or with respect to the Person making such Third Party Offer, in
which case the Company shall give the Purchaser reasonable prior written
notice of any of the above circumstances or events, and the Purchaser shall
have the right to offer to acquire the number of shares of the Common Stock
that is equal to or greater than the number of shares contemplated to be
acquired pursuant to the Third-Party
<PAGE>
37
Offer, and the Company shall not amend or waive the Rights Agreement in a
manner that would provide a timing advantage to the Person making the Third
Party Offer.
(c) Without the prior written approval by the Company or the Board, the
Purchaser shall not (or in case of a tender offer, shall use its best efforts
not to) sell the New Securities or the Conversion Shares to any Person that is
not an Affiliate of the Purchaser if as a result of such sale, such person shall
beneficially own 12.5% or more of the Diluted Shares.
(d) The Purchaser shall not sell or transfer (i) any shares of
Preferred Stock to any Person, other than a wholly owned direct or indirect
Subsidiary of the Purchaser based in one of the countries of the European Union
meeting the requirements with respect to credit rating described in Section
5.12(f), provided that such transfer to such Affiliate will not (x) in the
reasonable judgment of the Purchaser, result in an adverse effect on the credit
rating of the Company or NTL Communications, and (y) adversely affect the
Company from a regulatory perspective, and (ii) the Common Shares and any
Conversion Shares for 12 months after the Time of Delivery or the Accelerated
Time of Delivery, with any sale or transfer thereafter to be made in blocks of
not more than five percent of the aggregate Common Shares and Conversion Shares
held by the Purchaser. Notwithstanding the above, the Purchaser shall have the
right to pledge any and all shares of Preferred Stock and Common Stock as
security or collateral pursuant to a bona fide financing transaction.
(e) The Purchaser shall not, without the prior written consent of the
Company, acquire more than 1% of equity interest in any of TeleWest
Communications plc, British Telecommunications plc, Eurobell Holdings Plc, ESAT
Telecom Group Plc, Telecom Eireann plc or Scottish Power Telecommunications Ltd.
In addition, the Purchaser shall not acquire any interest in Energis plc without
offering the Company the right to participate together with the Purchaser in
such acquisition on the same terms and conditions and at the same time as the
Purchaser.
(f) Following the earlier to occur of (i) 30-month anniversary of the
Time of Delivery or the Accelerated Time of Delivery or (ii) June 30, 2002, in
the event that the Board of Directors approves a transaction with a third party
that would result in a change of control, the Purchaser shall tender its shares
in, or vote its shares in favor of, such transaction, unless (after reasonable
prior written notice of such transaction) the Purchaser makes an offer to the
Board that the Board determines (after consultation with its financial and legal
advisors) to be superior to an offer made by such third party.
(g) Restrictive provisions contained in this Section 5.09 shall not
apply to the Purchaser after the earliest to occur of: (i) consummation of a
transaction that would constitute a "change of control" transaction for purposes
of any of the Indentures; (ii) any Person acquiring beneficial ownership of 25%
or more of the Diluted Shares; (iii) majority of Directors on the Board who were
not nominated for election by the existing Directors, being elected to the Board
as a result of a proxy solicitation by a Person other than the Company or the
Purchaser; and (iv) the date of the three-month anniversary of the date on which
the Qualified Holding Condition ceases to be satisfied.
<PAGE>
38
(h) Nothing contained in this Agreement shall prohibit the Purchaser
from acquiring (i) at any time prior to the earliest to occur of (A) the
30-month anniversary of the Time of Delivery, or the Accelerated Time of
Delivery, as the case may be, and (B) June 30, 2002, up to 25% of the Diluted
Stock and (ii) at any time after the earliest date specified in clause (i) above
up to 34% of the Diluted Shares.
SECTION 5.10. Right to Purchase Equity Securities. The Company shall
not issue, sell, transfer to any Person or grant to any Person a right to
acquire any shares of capital stock or options, warrants or similar instrument
or any other security convertible or exchangeable for shares of capital stock of
the Company (other than (i) through exercise of any options, warrants,
Convertible Debentures or Senior Preferred Stock or the 9.9% Non-Voting
Mandatorily Redeemable Preferred Stock, Series A and B outstanding on the date
hereof and other than issuance of options to the employees or directors of the
Company and the Company Subsidiaries pursuant to Benefit Plans existing on the
date hereof, as such Benefit Plans may be amended or replaced, provided that
such amended or replaced Benefit Plans shall have terms similar to and
consistent with the terms of existing Benefit Plans, and the exercise of such
options, (ii) as consent payments contemplated by and in accordance with Section
5.01(d)(iv), (iii) as contemplated by the Transaction Agreement, or (iv) as
dividends on or on conversion or in redemption of shares of preferred stock
contemplated by and in accordance with Section 5.01(d)(iii) (the "Equity
Securities")), unless the Purchaser is notified in writing of any such issuance,
sale or transfer and is offered the right to purchase at the sale price and on
the terms of the sale and conditions such quantity of Equity Securities as would
be necessary for the Purchaser to maintain the then current beneficial ownership
level of the Diluted Shares. The Purchaser's preemptive rights pursuant to this
Section 5.10 will be exercised in a manner and based on a timetable that will
not restrict or adversely affect the Company's ability to raise equity capital
in a flexible and cost-effective manner.
SECTION 5.11. Level of Ownership at the Time of Delivery. The Company
agrees that it will not issue, sell or transfer any shares of its capital stock
or any options, warrants, convertible securities, nor shall the Company grant
any subscription rights to acquire any of the above, if as a result thereof, any
Person shall own more than 12.5% of the Diluted Shares at the Time of Delivery.
SECTION 5.12. Corporate Governance; Issuance of Senior Preferred Stock;
Strategic Transactions. (a) So long as the Qualified Holding Condition is
satisfied, the Purchaser or its Affiliate shall have the right in accordance
with the Certificate of Designation and the Series A Certificate of Designation
to elect to the Board of Directors of the Company an aggregate of (i) three
Purchaser Directors (if the Board consists of 12 or fewer Directors) and (ii)
four Purchaser Directors (if the Board consists of 14 Directors or more). The
Company shall use its best efforts to cause the Board to be comprised of no more
than 16 Directors at any time. If the Purchaser and its Affiliates are no longer
the holders of any shares of Preferred Stock or Series A Preferred Stock but the
Qualified Holding Condition is still satisfied, the Purchaser or such Affiliate
of the Purchaser shall have the right to nominate to the Board of Directors of
the Company an aggregate of (i) three Purchaser Directors (if the Board consists
of 12 or fewer Directors) and (ii) four Purchaser Directors (if the Board
consists of 14 Directors or more). The
<PAGE>
39
Company shall use best efforts to support election of the Purchaser's (or such
Affiliate's) nominee to the Board of Directors of the Company and shall include
such nominees in the list of Directors proposed by the Board of Directors of the
Company for election by the Company's stockholders. Further, so long as the
Qualified Holding Condition is satisfied, the Company shall use its best efforts
to maintain the total number of Directors at a level which would enable the
holders of the Preferred Stock and the Series A Preferred Stock to elect at
least 10% of the total number of Directors of the Company.
(b) So long as the Qualified Holding Condition is satisfied, the
Company shall use best efforts and shall take such action as may be necessary
(including amending the By-laws) to ensure that (i) at least one of the
Purchaser Directors shall be a member of each committee of the Board (other than
a committee formed to evaluate a transaction between the Company and the
Purchaser); (ii) the Purchaser Directors are elected as members of the boards of
directors of the Company's Subsidiaries, if such boards of directors include
substantially all of the other Directors; and (iii) the Company's By-laws
contain provisions (A) requiring notices to be given to Directors in a
reasonable and customary form and allowing Directors enough time to take any
action that Directors may deem necessary with respect to such notice and (B)
allowing participation of Directors in any meeting of the Board and any
committee thereof by means of telephonic conference.
(c) The Company shall not, without the prior written consent of the
Purchaser (which consent shall be granted or withheld at the sole discretion of
the Purchaser), issue additional shares of any of "Senior Securities" or "Parity
Securities" (each as defined in the Certificate of Designation) or any
additional shares of the Preferred Stock (except pursuant to the terms thereof
as dividends). In the event of refinancing of any of the Senior Preferred Stock,
the maximum value of the new securities issued by the Company in such
refinancing as shall be reflected on the Company's consolidated balance sheet
prepared in accordance with GAAP applied on the basis consistent with the
Company's prior practice, shall not exceed the aggregate value of the Senior
Preferred Stock reflected on the Company's consolidated balance sheet as
contained in the Exchange Act Report that is most recent prior to such
refinancing.
(d) So long as the Qualified Holding Condition is satisfied, the
Company shall not offer, issue, sell or transfer any securities to any Person or
amend or waive the Rights Agreement to permit a transaction with any Person, if
as a result of such offer, issuance, sale or transfer such Person will
beneficially own 15% or more of the Diluted Shares; provided, however, that the
restrictions contained in this Section 5.12(d) shall not apply to a transaction
or series of related transactions involving a contractual sale or other
acquisition of 100% of the capital stock of the Company, provided that such
transaction is definitive or provides for a make-whole premium or similar
significant penalty payable to shareholders of the Company other than the
Purchaser in the event the Purchaser does not complete such a transaction, if
the transactions contemplated by the agreement are approved by the Board and are
either (i) submitted for
<PAGE>
40
approval by the holders of Common Stock or (ii) are subject to the tender offer
rules under the Exchange Act. If the Company offers, issues, sells or transfers
any securities to any Person that would result in such Person beneficially
owning less than 15% of the Diluted Shares, the Company shall comply with
provisions contained in Section 5.10 and shall not (i) grant to such Person a
right to elect more than one Director, and (ii) agree to standstill or transfer
restrictions more favorable than the respective provisions contained in this
Agreement and shall not grant any rights that the Purchaser does not have
pursuant to this Agreement.
(e) So long as the Qualified Holding Condition is satisfied:
(i) The Company shall not consummate without the approval of a majority
of holders of the Common Stock or the unanimous approval by the Board or a
committee thereof (if such committee includes a Purchaser Director) any
transaction or a series of transactions involving (x) an acquisition (either
in an asset or stock purchase transaction) of Core Business Assets or (y) a
sale or transfer (either in an asset or stock purchase transaction) (other
than a spin-off of the Company's and the Company Subsidiaries' broadcast
assets and assets located outside of the United Kingdom to the Company's
stockholders) of any of the Company's Core Business Assets, if the fair
market value of the Core Business Assets to be so acquired, sold or
transferred exceeds 10% of the Market Value (as defined below) of the
Company. For purposes of this Section 5.12(e), "Market Value" shall mean (A)
the market value of the Company's outstanding shares of capital stock plus
(B) the market value of any debt securities of the Company for which quotes
are available from brokerage companies of national reputation plus (C) with
respect to shares of preferred stock for which no such quotes are available,
the aggregate amount of liquidation preference thereof and the amount of
accumulated and unpaid dividends with respect thereto plus (D) the principal
amount and the amount of accrued and unpaid interest with respect to any
borrowings of the Company and the Company Subsidiaries. In the case of a
spin-off of the Company's or Company Subsidiaries' broadcast assets, it is
understood that all rights of the Purchaser shall be maintained in the
spun-off entity to the extent set forth in Section 5.10, Section 5.12
(except for Section 5.12(f)) and Section 5.13 of this Agreement. In
addition, in the case of such a spin-off, the Purchaser will be subject to
the restrictions in respect of the spun-off entity contained in Section
5.09(f) (other than that in Section 5.09(f), under which the obligations of
the Purchaser shall commence only on June 1, 2001 and in the case of Section
5.09(h), the restrictions on acquiring shares of the spun-off entity shall
be set at 34% as of June 1, 2001). In the case of a spin-off of other assets
located outside of the United Kingdom, the Purchaser will be entitled to all
rights of the Purchaser in Section 5.10, Section 5.12 and Section 5.13 and
the Purchaser will be subject to all the restrictions contained in Section
5.09, in each case in respect of the spun-off entity. Notwithstanding the
foregoing, none of the above rights or obligations will apply if the Company
shall distribute the non-U.K. assets in a split-off pursuant to which the
Company's shareholders can exchange their Common Stock for the split-off
entities' shares (or a transaction that is agreed by the parties to be
substantially similar in effect).
<PAGE>
41
(ii) The Company shall not consummate without the approval of holders
of two-thirds of shares of Common Stock or the unanimous approval by the
Board or a committee thereof (if such committee includes a Purchaser
Director), any transaction or series of transactions in which the Company
would acquire any assets or stock of a business that does not constitute
Core Business Assets and that, individually or in the aggregate during the
24-month period prior thereto, shall have the fair market value equal to 10%
of the Market Value of the Company prior to such acquisition. For purposes
of this Section 5.12(e), a transaction will be considered to be part of the
series of related transactions if it shall have been completed (in which
case the fair market value of the acquired assets shall be determined at the
time of completion) or announced pursuant to a definitive agreement (in
which case the fair market value of the acquired assets shall be determined
at the time of such announcement).
(f) So long as the Qualified Holding Condition is satisfied, the
Company shall not, without the unanimous approval by the Board or a committee
thereof (if such committee includes a Purchaser Director), incur any
Indebtedness (other than any refinancing of any existing Indebtedness that would
not result in a material increase of the principal amount of such existing
Indebtedness) after the Company receives its first credit rating from a rating
agency of national reputation giving effect to the Strategic Acquisition (the
"Pro Forma Rating"), if the Board has reason to believe (after reasonable
inquiry of an internationally recognized rating agency or a major investment
bank having expertise in credit rating advisory work) that the effect of
incurring such Indebtedness would reduce the credit rating of NTL Communications
Corp. below (i) the lower of (x) the equivalent of Standard & Poor's rating of
BB- or (y) the Pro Forma Rating, if such Indebtedness is incurred prior to
January 1, 2001 or (ii) the equivalent of Standard & Poor's rating of BB, if the
Indebtedness is incurred after January 1, 2001.
(g) So long as the Qualified Holding Condition is satisfied, the
Company or any Company Subsidiary shall not (i) consummate any reclassification,
combination, stock dividend or any similar transaction that may adversely affect
the rights of holders of the Preferred Stock; (ii) give effect to an amendment
of the Certificate of Incorporation or By-laws of the Company that may adversely
affect the rights of holders of the Preferred Stock; (iii) make a voluntary
filing of a petition for bankruptcy, insolvency or appointment of a receiver or
a custodian or commence a Bankruptcy Proceeding; (iv) issue any security that
would adversely affect the rights of holders of the Preferred Stock; or (v)
enter into an agreement with respect to a Conflicting Investment.
SECTION 5.13. Other Registration Rights. Except for the Existing
Agreements and "cut-back" provisions in registration rights granted referred to
in the Transaction Agreement, the Company has not granted, and has not agreed to
grant, any demand or incidental registration rights to any Person other than (a)
rights to be granted pursuant to the Registration Rights Agreement, and (b)
rights that will not adversely affect the registration rights to be granted to
the Purchaser in the Registration Rights Agreement.
<PAGE>
42
SECTION 5.14. Takeover Statutes. The Board of Directors has taken
appropriate action so that the provisions of the Business Combination Statute
will not, prior to the termination of this Agreement, apply to the Purchaser or
any Person who as of the date hereof is an Affiliate of the Purchaser.
SECTION 5.15. Securities. The Securities to be purchased by the
Purchaser pursuant to the Purchase Agreement shall be subject to the provisions
applicable to the New Securities set forth in Sections 5.09.
SECTION 5.16. Further Action; Consents; Filings. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to (i) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or advisable
under applicable Law to consummate the transactions contemplated by this
Agreement, (ii) obtain from Governmental Authorities and any third parties, as
may be necessary, any consents, licenses, permits, waivers, approvals,
authorizations, orders or estoppel certificates required to be obtained or made
by the Purchaser or the Company or any of their Subsidiaries in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby and (iii) make all necessary filings,
and thereafter make any other required submissions, with respect to this
Agreement and the transactions contemplated hereby that are required under any
applicable Law. The parties hereto shall cooperate with each other in connection
with the making of all such filings, including by providing copies of all such
documents to the nonfiling party and its advisors prior to filing and, if
requested, by accepting all reasonable additions, deletions or changes suggested
in connection therewith.
SECTION 5.17. Strategic Committee. The Company and the Purchaser shall
create a joint Strategic Committee for purposes of investigating and
implementing mutually beneficial commercial initiatives and for discussing
strategic initiatives and industry developments. The Strategic Committee shall
have meetings at least three times per year.
SECTION 5.18. Employment by the Company of the Purchaser's Employees.
The parties intend that employees of the Purchaser, selected on merit, will be
employed, from time to time, by the Company on the terms that the parties may
mutually agree.
SECTION 5.19. Transaction Agreement. (a) Nothing in Article III or V of
this Agreement shall prevent the Company from complying with its obligations
under the Transaction Agreement, provided such obligations are performed in
accordance with the terms of the Transaction Agreement, this Agreement and the
Purchase Agreement.
(b) Nothing contained in this agreement shall prevent the Company or
any of the Company Subsidiaries from acquiring from or disposing to TeleWest
Communications Plc shares of capital stock of Cable London PLC in accordance
with the Settlement Agreement, dated August 1998.
<PAGE>
43
SECTION 5.20. CWC. The Purchaser covenants to the Company that up to
and including Completion, neither the Purchaser nor any of its Affiliates shall
acquire or sell any securities of Cable & Wireless Communications plc or any
derivatives or other instruments based thereon.
ARTICLE VI
CONDITIONS
SECTION 6.01. Conditions to Purchaser's Obligations. The obligations of
the Purchaser under this Agreement are subject to the following conditions
having been satisfied (or waived by the Purchaser) as at 6:00 p.m. (London time)
on the business day immediately preceding the Posting Date (for the purposes of
this Section 6, the "Relevant Time"):
(a) No Order. No Governmental Authority shall have enacted, threatened,
issued, promulgated, enforced or entered any Governmental Order that is then
in effect, pending or threatened and has, or would have, the effect of
prohibiting consummation of the transactions contemplated by this Agreement;
(b) Antitrust Waiting Periods. Any waiting period (and any extension
thereof) applicable to the consummation of the transactions contemplated by
this Agreement under the HSR Act shall have expired or been terminated; and
(c) U.K. Antitrust and Other Regulatory Requirements. (i) (A) It shall
have been determined that the Secretary of State for Trade and Industry (the
"SOS") has not and will not refer the transactions contemplated by this
Agreement or any matter arising therefrom or related thereto to the United
Kingdom Competition Commission (the "CC"); or (B) if the SOS has indicated
that he intends to refer the transactions contemplated hereby, or any matter
arising therefrom or related thereto, to the CC unless suitable undertakings
are obtained from the Purchaser, such undertakings shall be acceptable to
the Purchaser and given by the Purchaser; or (C) if the SOS has made a
reference to the CC either (a) the CC has concluded that neither the
transactions contemplated hereby nor any matter arising therefrom or related
thereto may be expected to operate against the public interest or (b) the
SOS has allowed the transactions contemplated hereby to proceed on terms
satisfactory to the Purchaser; or (D) the transactions contemplated hereby
shall have been subject to a decision made by the European Commission
pursuant to Article 6 (1) (a) or (b) or Article 8(2) of Council Regulation
(EEC) 4064/89 concerning the control of concentrations between undertakings
(as amended by Council Regulation (EC) No. 1310/97) (the "ECMR") and, if a
request under Article 9(2) of the ECMR has been made by one or more EEA
States, the European Commission either has not acceded to any such request
or, if it has, the competent authority in the EEA State or States concerned
has adopted a decision satisfactory to the Purchaser.
<PAGE>
44
(ii) subject to clause (i) above, all other clearances required from
any merger control, competition or antitrust authority, which has
jurisdiction over the transactions contemplated by this Agreement shall have
been obtained;
(iii) subject to clause (i) above, no relevant authority shall have
intervened, or indicated that it is contemplating intervening, in a way that
would or might reasonably be expected to make the transactions contemplated
by this Agreement or their implementation void, unenforceable and/or illegal
or directly or indirectly restrain, restrict, prohibit, delay or otherwise
interfere with the implementation thereof, or impose additional conditions
or obligations with respect thereto, or otherwise challenge or hinder the
transactions or their implementation;
(iv) all requisite notifications shall have been given to the relevant
United Kingdom Governmental Authorities, including, without limitation, the
Secretary of State for Trade and Industry, the Director General of
Telecommunications, the Independent Television Commission and the
Radiocommunications Agency regarding change of shareholding in the Company
as a result of the purchase of the New Securities in accordance with the
terms of any relevant licenses, and no indications shall have been received
from the Secretary of State or any other regulatory body that any such
license has been, will be or is likely to be revoked or materially modified;
and
(v) all other necessary notifications and filings in respect of the
transactions contemplated by this Agreement shall have been made and all
other consents, approvals or other authorizations with respect to such
transactions shall have been obtained whether in the United Kingdom or
elsewhere.
(d) Representations, Warranties and Covenants. The representations and
warranties of the Company contained in this Agreement (except for the
representations and warranties contained in Section 3.07 to the extent
permitted by Section 5.01(a)) shall have been true and correct when made and
true and correct in all material respects as of the Relevant Time, with the
same force and effect as if made as of the Relevant Time, other than such
representations and warranties as are made as of another date, which shall
be true and correct as of such date, if earlier than the Relevant Time
(provided, however, that if any portion of any representation or warranty is
already qualified by materiality, for purposes of determining whether this
Section 6.01(d) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty
as so qualified must be true and correct in all respects), and the covenants
and agreements contained in this Agreement to be complied with by the
Company on or before the Relevant Time shall have been complied with in all
material respects, and the Purchaser shall have received a certificate of
the Company to such effect signed by a duly authorized officer thereof;
(e) Transaction Agreement. The Transaction Agreement shall not have
been amended without the prior written consent of the Purchaser (except for
amendments that
<PAGE>
45
are insignificant, insubstantial or minor or amendments that do not
adversely affect the Purchaser or the value of the Purchaser's investment in
the Company or the Purchaser's rights, assuming that the transactions
contemplated by this Agreement have been consummated) or terminated, and all
of the obligations of the parties to the Transaction Agreement required to
be performed on or prior to the Posting Date, shall have been performed or,
with respect to the obligations of the Company performance thereof, shall
have been waived by the other parties to the Transaction Agreement;
(f) Pre-conditions Under the Transaction Agreement. The Pre-conditions
(as defined in the Transaction Agreement) to the obligations of the parties
to the Transaction Agreement shall have been satisfied and shall not have
been waived or modified without the prior written consent of the Purchaser;
and
(g) The Stockholders of the Company shall have approved the matters
submitted to them at the First Stockholders Meeting.
SECTION 6.02. Provision of Certificate Relating to Satisfaction or
Waiver of Conditions. At or before 12:01 a.m. (London time) on the Posting Date,
subject to the prior delivery by the Company to the Purchaser of a certificate
signed by a duly authorized officer of the Company to the effect that all
Pre-Conditions set forth in the Transaction Agreement (other than the
Pre-condition relating to the Purchaser's certificate referred to below) have
been satisfied or waived in accordance with this Agreement and assuming that all
conditions set forth in Section 6.01 above have been satisfied (or waived by the
Purchaser), the Purchaser shall deliver to the Company a certificate signed by a
duly authorized officer thereof, dated and effective as of the Relevant Time, to
the effect that all of the conditions set forth in Section 6.01 above are either
satisfied (or waived by the Purchaser).
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties. The
representations and warranties of the Company and the Purchaser contained in
this Agreement shall survive until 90 days after date on which the first annual
audited consolidated financial statements of the Company and the Company
Subsidiaries are filed with the SEC after the Time of Delivery, except that (i)
all representations and warranties contained in Section 3.02 shall survive
indefinitely; and (ii) all representations and warranties of the Company as to
any Tax Claim shall survive until 30 days after assessment of the liability to
which any such Tax Claim may relate is barred by all applicable statutes of
limitation (taking into account any applicable waivers or extensions). If
written notice of a claim has been given prior to the expiration of the
applicable representations and warranties by the Company or the Purchaser, then
the relevant representations and warranties of the other party shall survive as
to such claim, until such claim has been finally resolved.
<PAGE>
46
SECTION 7.02. Indemnification. (a) The Purchaser, its Affiliates and
its successors and assigns and the officers, directors, employees and agents of
the Purchaser, its Affiliates and its successors and assigns shall be
indemnified and held harmless by the Company for any and all Liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, reasonable attorneys' fees and
expenses) actually suffered or incurred by them (including, without limitation,
any Action brought or otherwise initiated by any of them) (hereinafter, a
"Purchaser Loss") arising out of or resulting from:
(i) the breach of any representation or warranty made by the Company
contained in this Agreement; or
(ii) the breach of any covenant or agreement by the Company contained
in this Agreement.
The amounts of any indemnification pursuant to this Section 7.02(a)
shall be increased by an additional amount to reflect an appropriate gross-up to
compensate the Purchaser for its indirect participation as a holder of capital
stock of the Company in any indemnification payment made pursuant to this
Section 7.02(a).
(b) The Company, its Affiliates and its successors and assigns and the
officers, directors, employees and agents of the Company, its Affiliates and its
successors and assigns shall be indemnified and held harmless by the Purchaser
for any and all Liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including, without limitation,
reasonable attorneys' fees and expenses) actually suffered or incurred by them
(including, without limitation, any Action brought or otherwise initiated by any
of them) (hereinafter, a "Company Loss", and each of a Company Loss and a
Purchaser Loss is hereinafter referred to as a "Loss" with respect to such
party) arising out of or resulting from:
(i) the breach of any representation or warranty made by the Purchaser
contained in this Agreement; or
(ii) the breach of any covenant or agreement by the Purchaser contained
in this Agreement.
(c) Whenever a claim shall arise for indemnification under this Article
VII, the party entitled to indemnification (the "Indemnified Party") shall give
notice to the other party (the "Indemnifying Party") of any matter that the
Indemnified Party has determined has given or could give rise to a right of
indemnification under this Agreement promptly, but in no event later than 30
days after the Indemnified Party first learns of such claim, stating the amount
of the Loss, if known, and method of computation thereof, and containing a
reference to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises. The obligations and Liabilities of the
Indemnifying Party under this Article VII with respect to Losses arising from
claims of any third party which are subject to the indemnification provided for
in
<PAGE>
47
this Article VII ("Third Party Claims") shall be governed by and contingent upon
the following additional terms and conditions: if an Indemnified Party shall
receive notice of any Third Party Claim, the Indemnified Party shall give the
Indemnifying Party notice of such Third Party Claim following receipt by the
Indemnified Party of such notice in the time frame provided above; provided,
however, that the failure to provide such notice shall not release the
Indemnifying Party from any of its obligations under this Article VII and shall
not relieve the Indemnifying Party from any other obligation or Liability that
it may have to any Indemnified Party otherwise than under this Article VII. The
Indemnifying Party shall be entitled to assume and control the defense of such
Third Party Claim at its expense and through counsel of its choice if it gives
notice of its intention to do so to the Indemnified Party within ten days of the
receipt of such notice from the Indemnified Party; provided, however, that, if
there exists or is reasonably likely to exist a conflict of interest that would
prevent the same counsel from representing both the Indemnified Party and the
Indemnifying Party, then the Indemnified Party shall be entitled to retain its
own counsel at the expense of the Indemnifying Party. In the event the
Indemnifying Party exercises the right to undertake any such defense against any
such Third Party Claim as provided above, the Indemnified Party shall cooperate
with the Indemnifying Party in such defense and make available to the
Indemnifying Party, at the Indemnifying Party's expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or under the Indemnified Party's control relating thereto as is
reasonably required by the Indemnifying Party. Similarly, in the event the
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Indemnifying Party shall cooperate with the
Indemnified Party in such defense and make available to the Indemnified Party,
at the Indemnifying Party's expense, all such witnesses, records, materials and
information in the Indemnifying Party's possession or under the Indemnifying
Party's control relating thereto as is reasonably required by the Indemnified
Party. No such Third Party Claim may be settled by the Indemnifying Party
without the prior written consent of the Indemnified Party. No party shall be
entitled to indemnification under this Section 7.02 if such party receives
reasonable express written notice of a breach of any representation, warranty,
covenant or agreement and such party would be entitled to terminate this
Agreement pursuant to the terms hereof in respect of such breach and fails to do
so.
SECTION 7.03. Limits on Indemnification. Notwithstanding anything to
the contrary contained in this Agreement, (i) the maximum amount of
indemnifiable Purchaser Losses which may be recovered by the Purchaser from the
Company arising out of or resulting from the causes enumerated in Section
7.02(b) with respect to it shall be an amount equal to the Purchase Price, and
(ii) no claim may be made against the Company for indemnification pursuant to
Section 7.02(b) with respect to any individual item of a Purchaser Loss, unless
such item of Purchaser Losses exceed $1 million, and no claim may be made
against the Company pursuant to Section 7.02(a) unless the aggregate of all such
Purchaser Losses shall exceed $100 million, in which case the Company shall then
be required to pay or be liable for the full amount of Purchaser Losses.
SECTION 7.04. Indemnification for ConsumerCo's Liabilities. In the
event the Company incurs any Liabilities, losses, damages, claims, costs and
expenses, interests, awards,
<PAGE>
48
judgments and penalties (including, without limitation, reasonable attorneys'
fees and expenses) actually suffered or incurred by it (including, without
limitation, any Action brought or otherwise initiated by it) as a result of any
Liability of ConsumerCo (other than a Liability of ConsumerCo that is subject to
indemnification of the Company by C&W under Schedule 23 of the Transaction
Agreement) which either (i) is not disclosed in Section 7.04 of the Disclosure
Schedule or (ii) is not reflected or reserved against in the pro forma balance
sheet of ConsumerCo as of March 31, 1999, in accordance with GAAP, (iii) is not
disclosed in reasonable express written notice to the Purchaser and the
Purchaser would be entitled to terminate this Agreement pursuant to the terms
hereof at such time and fails to do so, or (iv) is not reflected or reserved
against in the Net Asset Statement (as defined in the Transaction Agreement),
the Company will give a written notice to the Purchaser and will indemnify the
Purchaser by issuing to the Purchaser a number of shares of Common Stock with a
market value (based on the weighted average price of the Common Stock for the 25
trading days prior to issuance of such shares pursuant to this Section 7.04 but
in any event subsequent to the date such Loss is determined and such Liability
has been publicly disclosed) equal to a percentage of such Loss, which
percentage shall be the sum of (i) the percentage of Diluted Shares owned by the
Purchaser as of the date which is one trading day after such Liability becomes
generally known in the market and (ii) an additional percentage of Diluted
Shares to reflect an appropriate gross-up of the percentage determined pursuant
to clause (i) above to compensate the Purchaser for its indirect participation
as a holder of capital stock of the Company in any indemnification payment made
pursuant to this Section 7.04; provided, however, that any Loss must exceed
(pound)400 million in the aggregate (and each individual item of Loss must
exceed (pound)1 million to be included) after which, the entire amount of such
Loss shall be included. Any claim under this Section 7.04 must be made no later
than six months after the date of the first audited financial statements of
ConsumerCo prepared subsequent to the Time of Delivery.
ARTICLE VIII
TERMINATION
SECTION 8.01. Termination. This Agreement may be terminated and the
other transactions contemplated by this Agreement may be abandoned at any time
prior to the time at which the Company incurs an obligation to pay the
consideration payable to the holders of the New Crown Shares or, if earlier,
C&W, under the Transaction Agreement (or such other time as provided below),
notwithstanding any requisite approval and adoption of this Agreement and the
transactions contemplated by this Agreement, as follows:
(a) by mutual written consent of the Purchaser and the Company;
(b) by the Purchaser if prior to Completion (A) (i) the Company shall
have agreed to any amendment (other than insignificant, insubstantial or
minor amendments or amendments that do not adversely affect the Purchaser or
the value of the Purchaser's investment in the Company or the Purchaser's
rights, assuming that the transactions
<PAGE>
49
contemplated by this Agreement have been consummated) to the Transaction
Agreement without the prior written consent of the Purchaser or (ii) the
Company shall (to the extent permitted by the Transaction Agreement) have
waived any Pre-Conditions, Conditions or Closing Conditions (as such terms
are defined in the Transaction Agreement) or any other provision of the
Transaction Agreement (other than insignificant, insubstantial or minor
provisions the waiver of which does not adversely affect the Purchaser or
the value of the Purchaser's investment in the Company or the Purchaser's
rights, assuming that the transactions contemplated by this Agreement have
been consummated) without the prior written consent of the Purchaser; or (B)
the representations and warranties of the Company contained in Sections
3.01(a) (with respect to the Company) and 3.07(b) (with respect to a general
assignment for the benefit of creditors by, or actual insolvency of, the
Company only) hereof shall not be true and correct as of the Time of
Delivery;
(c) by the Purchaser if prior to the obtaining of the approval of the
Company's stockholders referred to in Condition 3 of Part B of Schedule 4 of
the Transaction Agreement is to be sought, a Material Adverse Effect shall
have occurred, or if prior to such approval of stockholders the Company
shall not have delivered to the Purchaser a certificate signed by a duly
authorized officer thereof that a Material Adverse Effect had not occurred;
(d) by the Purchaser if prior to the sanctioning by the U.K. High Court
of the Scheme of Arrangement (as defined in the Transaction Agreement), a
ConsumerCo Material Adverse Effect shall have occurred or if prior to such
sanctioning CWC shall not have delivered to the Purchaser a certificate
signed by a duly authorized officer thereof that a ConsumerCo Material
Adverse Effect had not occurred;
(e) by either the Purchaser or the Company if prior to Completion the
Transaction Agreement shall have been terminated;
(f) by either the Purchaser or the Company if Completion shall not have
occurred on or prior to March 31, 2001;
(g) by the Purchaser if Completion shall not have occurred on or prior
to the day which is 165 days after the Posting Date; and
(h) by either the Purchaser or the Seller in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
nonappealable.
The right of the Purchaser to terminate this Agreement pursuant to
Section 8.01(c) or 8.01(d) after the Posting Date are subject to the U.K. Panel
on Takeovers and Mergers consenting to the Purchaser invoking such right.
<PAGE>
50
SECTION 8.02. Effect of Termination. In the event of termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, there shall be no liability under this Agreement on the part of the
Purchaser or the Company or any of their respective officers or directors, and
all rights and obligations of each party hereto shall cease; provided, however,
that nothing herein shall relieve any party from liability for the breach of any
of its representations, warranties, covenants or agreements set forth in this
Agreement. Except as expressly provided in this Article VIII, the Purchaser does
not have any other rights under this Agreement, the breach of which will give
the Purchaser the right to terminate this Agreement.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Waiver. Either party to this Agreement may (i) extend the
time for the performance of any of the obligations or other acts of the other
party, (ii) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (iii) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the party
to be bound thereby. Any waiver of any term or condition shall not be construed
as a waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any of such rights.
SECTION 9.02. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
SECTION 9.03. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy, by e-mail or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties at
the following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 9.03):
<PAGE>
51
(a) If to the Company:
NTL Incorporated
110 East 59th Street
New York, NY 10022
Telecopy: (212) 906-8497
Attention: Richard J. Lubasch, Esq.
(e-mail: [email protected])
with copies (which shall not constitute notice to the Company) to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Telecopy: (212) 735-2000
Attention: Thomas Kennedy, Esq.
(e-mail: [email protected])
(b) If to the Purchaser:
France Telecom, S.A.
208-212, rue Raymond Losserand
75505 Paris Cedex 15, France
Telecopy: (331) 44-44-21-54
Attention: Philippe Mc Allister
(e-mail: [email protected])
with a copy (which shall not constitute notice to the Purchaser)
to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
Attention: Alfred J. Ross, Esq.
SECTION 9.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
<PAGE>
52
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 9.06. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, among the Company and the Purchaser with respect to the subject matter
hereof and thereof. The parties hereto agree that, except to the extent
otherwise expressly provided in this Agreement, the Purchase Agreement shall
continue to constitute the entire agreement between the parties with respect to
the subject matter thereof and, except to the extent otherwise expressly
provided in this Agreement, the provisions thereof shall remain in full force
and effect in accordance with their terms notwithstanding the execution and
delivery of this Agreement or any subsequent termination of this Agreement.
SECTION 9.07. Assignment. This Agreement may not be assigned by the
Purchaser without the express written consent of the Company, except that the
Purchaser may assign this Agreement to an Affiliate of the Purchaser without the
consent of the Company; provided, however, that no such assignment shall release
the Purchaser of its obligations hereunder, provided further, however, that the
Purchaser will not assign this Agreement to an Affiliate of the Purchaser if, in
the reasonable judgment of the Purchaser, such assignment would not result in an
adverse effect on the credit rating of the Company or NTL Communications.
SECTION 9.08. Holding Company. If, in connection with the consummation
of the transactions contemplated by the Transaction Agreement, the parties
thereto determine that it is desirable that a holding company be organized which
would own all of the capital stock of the Company ("HoldCo"), then HoldCo shall
succeed to and assume all of the Company's obligations under this Agreement and
the Purchase Agreement, and the obligation to deliver to the Purchaser the New
Securities hereunder shall be the obligation to deliver equivalent securities of
HoldCo, provided that (i) HoldCo shall be incorporated under the Delaware
General Corporation Law and be based in the United States, (ii) the Purchaser
shall receive with respect to such securities of HoldCo rights in or with
respect to HoldCo identical to the rights that the Purchaser would have
otherwise had in or with respect to the Company, with respect to the New
Securities and Securities and other rights that the Purchaser may have under
this Agreement, under the Purchase Agreement or otherwise and (iii) to the
extent permitted by applicable law, the certificates representing the Securities
and the New Securities prior to the formation of HoldCo shall be deemed to
represent the equivalent securities in HoldCo issued to the Purchaser, and the
Purchaser shall not be required to surrender or exchange its certificates
representing the Securities or the New Securities. The Company shall, and shall
cause HoldCo to, execute and deliver to the Purchaser such documents,
instruments, agreements or certificates as may be necessary to transfer the
obligations of the Company under this Agreement and under the Purchase Agreement
to HoldCo.
<PAGE>
53
SECTION 9.09. No Third Party Beneficiaries. Except for the provisions
of Article VII relating to Indemnified Parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their respective
successors and assigns, and nothing herein, express or implied, is intended to
or shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement. No
purchaser of any of the New Securities from the Purchaser shall be deemed a
successor or assign with respect to this Agreement by reason merely of such
purchase.
SECTION 9.10. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by the Company and the Purchaser
or (b) by a waiver in accordance with Section 9.01.
SECTION 9.11. Governing Law. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed entirely in that state and without
regard to any applicable conflicts of law principles.
(b) All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in any New York state or federal court
sitting in The City of New York.
SECTION 9.12. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 9.13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.14. Terms Generally. References in this Agreement to
articles, sections, paragraphs, clauses, schedules, annexes and exhibits are to
articles, sections, paragraphs, clauses, schedules, annexes and exhibits in or
to this Agreement unless otherwise indicated. Whenever the context may require,
any pronoun includes the corresponding masculine, feminine and neuter forms. Any
term defined by reference to any agreement, instrument or document has the
meaning assigned to it whether or not such agreement, instrument or document is
in effect. The words "include", "includes" and "including" are deemed to be
followed by the phrase "without limitation". Unless the context otherwise
requires, any agreement, instrument or other document defined or referred to
herein refers to such agreement, instrument or other document as from time to
time amended, supplemented or otherwise modified from time to time. Unless the
context otherwise requires, references herein to any Person include its
successors and assigns.
<PAGE>
54
SECTION 9.15. References to the Company. Any references to the Company
in this Agreement and in the Purchase Agreement, as such references apply to the
periods prior to April 1, 1999 or such other time when the Company became the
holding company of NTL Communications, shall be references to NTL
Communications. Notwithstanding anything to the contrary contained herein, all
representations, warranties and covenants of the Company in this Agreement and
in the Purchase Agreement are representations, warranties and covenants of the
Company.
<PAGE>
55
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
NTL INCORPORATED
By: /s/ J. Barclay Knapp
---------------------------------------------
Name: J. Barclay Knapp
Title: President and Chief Executive Officer
FRANCE TELECOM, S.A.
By: /s/ Jean-Louis Vinciguerra
---------------------------------------------
Name: Jean-Louis Vinciguerra
Title: Executive Director - Finance and
Human Resources
<PAGE>
ATTACHMENT I
<PAGE>
EXHIBIT A
PRO FORMA CAPITALIZATION
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
PRINCIPAL TERMS
<PAGE>
EXHIBIT C
FORM OF LEGAL OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Execution Copy
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of this 13th day of August, 1999, between NTL Incorporated, a Delaware
corporation (the "Company"), and France Telecom S.A., a societe anonyme
organized under the laws of France (the "Purchaser").
WHEREAS, the Purchaser intends to purchase (a) 750,000 shares of 5%
Cumulative Participating Convertible Preferred Stock, Series A, par value, $.0l
per share (the "Preferred Stock") of the Company, and (b) 2,702,703 shares of
Common Stock, par value $.0l of the Company (the "Common Stock"), each pursuant
to the terms and conditions of a Purchase Agreement dated as of July 15, 1999
between the Company and the Purchaser (the "Purchase Agreement");
WHEREAS, each share of Preferred Stock is initially convertible into
eight shares of Common Stock; and
WHEREAS, as a condition to the Purchaser's obligation to close the
transactions contemplated under the Purchase Agreement, the Company must enter
into this Agreement with the Purchaser;
NOW, THEREFORE, in consideration of the foregoing, the parties to this
Agreement hereby agree as follows:
ARTICLE ONE
DEFINITIONS
Capitalized terms used but not defined herein shall have the meaning
ascribed thereto in the Purchase Agreement.
"Blackout Period" shall have the meaning set forth in Section 3.01(b).
"Cogecom" shall have the meaning set forth in Section 6.06.
"Demand" shall have the meaning set forth in Section 2.01.
"Exchange Act" shall mean the United States Securities Exchange Act of
1934, as amended, or any United States federal statute then in effect that has
replaced such statute, and a reference to a particular section thereof shall be
deemed to include a reference to the comparable section, if any, of any such
replacement United States federal statute.
<PAGE>
"Existing Agreements" means (i) the Registration Rights Agreement,
dated January 28, 1999, between the Company and Microsoft Corporation, (ii) the
Registration Rights Agreement, dated September 22, 1998, between the Company and
Vision Networks III B.V., (iii) the Registration Rights Agreement, dated March
8, 1999, by and among the Company and the various Shareholders Listed in Annex A
thereto, and (iv) the Registration Rights Agreement, dated October 28, 1998, by
and among the Company, Comcast Corporation and Warburg, Pincus Investors, L.P.
"Existing Holders" shall have the meaning set forth in Section 2.05.
"5% Preferred Stock" means the Preferred Stock and any other shares of
preferred stock of the Company having substantially identical terms to the
Preferred Stock and issued as dividends on the Preferred Stock or shares of
preferred stock issued as dividends thereon.
"Indemnified Person" shall have the meaning set forth in Section
5.01(a).
"indemnifying parties" shall have the meaning set forth in Section
5.01(c).
"Investment Agreement" means the Investment Agreement dated July 26,
1999, between the Company and the Purchaser.
"Losses" shall have the meaning set forth in Section 5.01(a).
"Maximum Number" shall have the meaning set forth in Section 2.05.
"Person" shall mean an individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other entity.
"Preliminary Prospectus" shall mean any preliminary Prospectus or
preliminary Prospectus supplement that may be included in any Registration
Statement.
"Proceedings" and "Proceeding" shall have the meaning set forth in
Section 5.01(c).
"Prospectus" shall mean the Prospectus included in any Registration
Statement, as amended or supplemented by any Prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement, and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
"Public Offering" shall mean the offer of shares of Common Stock or
securities convertible into or exchangeable for Common Stock on a
broadly-distributed basis, not limited to sophisticated investors (except for
qualified institutional buyers pursuant to Rule 144A under the Securities Act),
pursuant to a firm-commitment or best-efforts underwriting or purchase
arrangement.
2
<PAGE>
"Registrable Securities" means (a) the Common Shares, (b) any shares of
Common Stock issued upon the conversion or redemption of 5% Preferred Stock, and
(c) any shares of Common Stock issued as dividends upon the 5% Preferred Stock.
If as a result of any reclassification, stock split, stock dividend, business
combination, exchange offer or other transaction or event, any capital stock,
evidences of indebtedness, warrants, options, rights or other securities
(collectively "Other Securities") are issued or transferred to the Purchaser in
respect of Registrable Securities held by the Purchaser, references herein to
Registrable Securities shall be deemed to include such Other Securities.
"Registration Expenses" has the meaning set forth in Section 4.01.
"Registration Statement" shall mean any registration statement of the
Company under the Securities Act that covers any of the Registrable Securities,
including the Prospectus, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
Registration Statement.
"Regulations" shall mean the General Rules and Regulations of the SEC
under the Securities Act.
"Rule 144" shall mean Rule 144 of the Regulations, as such rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders of such securities being free of the registration and
prospectus delivery requirements of the Securities Act.
"SEC" shall mean the United States Securities and Exchange Commission
or any other United States federal agency at the time administering the
Securities Act or the Exchange Act.
"Seller" and "Sellers" shall have the meaning set forth in Section
2.06.
ARTICLE TWO
REGISTRATION UNDER THE SECURITIES ACT
SECTION 2.01. Demand Registration. If at any time the Purchaser shall
request the Company in writing (each, a "Demand") to register under the
Securities Act a specified number of Registrable Securities, the Company shall
use its best efforts to effect the registration under the Securities Act of the
Registrable Securities which the Company has been so requested to register as
soon as reasonably practicable so as to permit the sale thereof, and in
connection therewith shall prepare and file a Registration Statement with the
SEC under the Securities Act to effect such registration; provided, that each
such request shall (i) specify the number of shares of Registrable Securities
intended to be offered and sold, (ii) describe the nature or method of the
proposed offer
3
<PAGE>
and sale thereof, and (iii) contain the undertaking of the Purchaser to provide
all such information and materials and take all such action as may be required
in order to permit the Company to comply with all applicable requirements of the
SEC and to obtain any desired acceleration of the effective date of such
Registration Statement. The Company agrees not to grant to any other person
registration rights pursuant to which such person would have the right to
register shares of Common Stock on a Registration Statement filed by the Company
pursuant to the exercise of the Purchaser's rights under this Agreement.
SECTION 2.02. Limits on Demand Registrations. The Company shall not be
required to effect any registration pursuant to Section 2.01 after three Demands
requested by the Purchaser pursuant to Section 2.01 shall have been effected
unless, after such three Demands have been effected, the Purchaser has not sold
all shares of Registrable Securities then held by it. In that event, the
Purchaser and the Company shall negotiate in good faith the provision by the
Company of additional Demands pursuant to this Agreement as are reasonably
appropriate.
SECTION 2.03. Withdrawal. The Purchaser shall have the right to request
withdrawal of any Registration Statement filed with the SEC pursuant to Section
2.01 or Section 2.07 (and the Company shall so withdraw such Registration
Statement) so long as such Registration Statement has not become effective,
provided that, in such case, the Purchaser shall pay all related out-of-pocket
Registration Expenses reasonably incurred by the Company unless a Registration
Statement shall be effected pursuant to Section 2.01 within 270 days after such
withdrawal.
SECTION 2.04. Effective Registration Statement. A registration
requested pursuant to Section 2.01 shall not be deemed to be effected (i) if a
Registration Statement with respect thereto shall not have become effective
under the Securities Act and remained effective for at least 90 days or until
the completion of the distribution of the Registrable Securities thereunder,
whichever is earlier (including, without limitation, because of a withdrawal of
such Registration Statement by the Purchaser prior to the effectiveness thereof
pursuant to Section 2.03 hereof), (ii) if, after it has become effective, such
registration is interfered with for any reason by any stop order, injunction or
other order or requirement of the SEC or any other governmental authority, or as
a result of the initiation of any proceeding for such a stop order by the SEC
through no fault of the Purchaser and the result of such interference is to
prevent the Purchaser from disposing of such Registrable Securities proposed to
be sold in accordance with the intended methods of disposition, (iii) the
Company exercises its rights under Section 3.01(b) and the result is a delay in
the proposed distribution of any Registrable Securities and the Purchaser
determines not to sell such Registrable Securities pursuant to such registration
as a result of such delay, or (iv) if the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with any
underwritten offering shall not be satisfied or waived with the consent of the
Purchaser, other than as a result of any breach by the Purchaser or any
underwriter of its obligations thereunder or hereunder.
SECTION 2.05. "Piggy-Back" Rights. If the Company proposes to register
any shares of Common Stock for itself or any of its stockholders (the "Existing
Holders") under the Securities Act
4
<PAGE>
on a Registration Statement on Form S-1, Form S-2 or Form S-3 (or an equivalent
general registration form then in effect) for purposes of a Public Offering of
such shares, the Company shall give written notice of such proposal at least 20
days before the anticipated filing date, with notice shall include the intended
method of distribution of such shares, to the Purchaser. Such notice shall
specify at a minimum the number of shares of Common Stock proposed to be
registered, the proposed filing date of such Registration Statement, any
proposed means of distribution of such shares and the proposed managing
underwriter, if any. Subject to Section 2.06, upon the written request of the
Purchaser, given within 10 days after the receipt of any such written notice by
facsimile confirmed by mail (which request shall specify the Registrable
Securities intended to be disposed of by the Purchaser), the Company will use
its best efforts to include in the Registration Statement with respect to such
Public Offering the Registrable Securities referred to in the Purchaser's
request; provided, however, that any participation in such Public Offering by
the Purchaser shall be on substantially the same terms as the Company's (or its
other stockholders') participation therein; and provided further that the amount
of Registrable Securities to be included in any such Public Offering shall not
exceed the maximum number which the managing underwriter of such Public Offering
considers in good faith to be appropriate based on market conditions and other
relevant factors (the "Maximum Number"). The Purchaser shall have the right to
withdraw a request to include Registrable Securities in any Public Offering
pursuant to this Section 2.05 by giving written notice to the Company of its
election to withdraw such request at least five business days prior to the
proposed effective date of such Registration Statement.
SECTION 2.06. (a) Allocation of Securities Included in a Public
Offering. If the lead managing underwriter for any Public Offering to be
effected pursuant to Section 2.05 of this Agreement shall advise the Company and
the Purchaser (each, a "Seller" and, collectively, the "Sellers") in writing
that the number of shares of Common Stock sought to be included in such Public
Offering (including those sought to be offered by the Company, those sought to
be offered by the Sellers and those sought to be offered by Existing Holders) is
more than the Maximum Number, the shares of Common Stock to be included in such
Public Offering shall be allocated pursuant to the following procedures: First,
the Company shall be entitled to include all of the securities that it has
proposed to include, and second, to the extent that any other securities may be
included without exceeding the Maximum Number, and subject to rights of any
parties under the Existing Agreements, the Purchaser shall be entitled to
participate in that registration on a basis no less favorable than that of any
other holder of the Company's securities.
(b) Notwithstanding anything to the contrary in Section 2.05 and
Section 2.06, the Purchaser shall be entitled to participate in a Public
Offering effected by the Company pursuant to a request under an Existing
Agreement only to the extent that the terms of such Existing Agreement permits
an Existing Holder to so participate. The Company agrees that in any
modification or amendment of an Existing Agreement, the rights of the Purchaser
as granted under this Agreement will not be adversely affected, and that
registration rights granted by the Company under any future registration rights
agreement that the Company may enter into will be on a basis no more favorable
than the rights granted to the Purchaser herein, unless the Company also grants
equivalent rights to the Purchaser at the time of such other agreement.
5
<PAGE>
SECTION 2.07. Shelf Registration. (a) If at any time the Purchaser
shall request to the Company in writing, the Company shall use its best efforts
to file and cause to be declared effective a "shelf" Registration Statement on
any appropriate form pursuant to Rule 415 (or similar rule that may be adopted
by the SEC) under the Securities Act for Registrable Securities, which form
shall be available for the sale of the Registrable Securities in accordance with
the intended method or methods of distribution thereof. The Company agrees to
use its best efforts to keep such Registration Statement continuously effective
and usable for resale of Registrable Securities, for a period of twenty-four
months from the date on which the SEC declares such Registration Statement
effective or such shorter period which will terminate at such time as the
Purchaser has sold all the Registrable Securities covered by such Registration
Statement; provided, however, that the Company may elect that such Registration
Statement not be filed or usable during any Blackout Period (as defined in
Section 3.01(b)). Any request by the Purchaser to effect a "shelf" registration
statement pursuant to this Section 2.07 shall count as one Demand for purposes
of the limitations on Demands set forth in Section 2.02.
ARTICLE THREE
OBLIGATIONS OF THE COMPANY
SECTION 3.01. (a) Whenever the Company is required by the provisions of
this Agreement to use its best efforts to effect the registration of any Common
Stock under the Securities Act, the Company shall (i) prepare and, as soon as
reasonably possible and in any event within 45 days following receipt of a
notice from the Purchaser to that effect, file with the SEC a Registration
Statement with respect to such Registrable Securities, and shall use its best
efforts to cause such Registration Statement to become effective and to remain
effective until the sale of all of the shares of Registrable Securities so
registered or, in the case of a "shelf" registration statement filed pursuant to
Section 2.07, for the period specified in that Section; (ii) prepare and file
with the SEC such amendments and supplements to such Registration Statement and
the Prospectus used in connection therewith as may be reasonably necessary to
make and to keep such Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all securities proposed to be registered pursuant to such Registration
Statement until the sale of all of the shares of Registrable Securities so
registered or, in the case of a "shelf" registration statement filed pursuant to
Section 2.07, for the period specified in that Section; and (iii) take all such
other action either necessary or desirable to permit the shares of Registrable
Securities held by the Purchaser to be registered and disposed of in accordance
with the method of disposition described herein.
(b) Notwithstanding the foregoing, if the Company shall furnish to the
Purchaser a certificate signed by its Chairman, Chief Executive Officer or Chief
Financial Officer stating that (i) filing a Registration Statement or
maintaining effectiveness of a current Registration Statement would have a
material adverse effect on the Company or its stockholders in relation to any
material financing, acquisition or other corporate transaction, and the Company
has determined in good faith that such disclosure is not in the best interests
of the Company and its shareholders, or (ii) the Company has determined in good
faith that the filing or maintaining effectiveness of a current
6
<PAGE>
Registration Statement would require disclosure of material information the
Company has a valid business purpose of retaining as confidential, the Company
shall be entitled to postpone filing or suspend the use by the Purchaser of the
Registration Statement for a reasonable period of time, but not in excess of 60
consecutive calendar days (a "Blackout Period"). The Company shall be entitled
to exercise such suspension rights more than one time in any calendar year;
provided that such exercise shall not prevent the Purchaser from being entitled
to at least 240 days of effective registration rights per year and that no
suspension period may commence if it is less than 30 calendar days from the
prior such suspension period.
(c) In connection with any Registration Statement, the following
provisions shall apply:
(1) The Company shall furnish to the Purchaser, prior to the filing
thereof with the SEC, a copy of any Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein and shall afford the Purchaser, the managing
underwriters, and their respective counsel, if any, a reasonable opportunity
within a reasonable time period to review and comment on copies of all such
documents (including a reasonable opportunity to review copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed.
(2) The Company shall take such action as may be necessary so that: (i)
any Registration Statement and any amendment thereto and any Prospectus
forming part thereof and any amendment or supplement thereto (and each
report or other document incorporated therein by reference) complies in all
material respects with the Securities Act and the Exchange Act and the
respective rules and regulations thereunder, (ii) any Registration Statement
and any amendment thereto does not, when it becomes effective, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and (iii) any Prospectus forming part of any Registration
Statement, and any amendment or supplement to such Prospectus, does not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(3) (A) The Company shall advise the Purchaser and, if requested by the
Purchaser, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto has
been filed with the SEC and when the Registration Statement or any
post-effective amendment thereto has become effective; and
(ii) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus included therein or for
additional information.
7
<PAGE>
(B) The Company shall advise the Purchaser and, if requested by the
Purchaser, confirm such advice in writing of:
(i) the issuance by the SEC of any stop order suspending
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(ii) the receipt by the Company of any notification with respect
to the suspension of the qualification of the securities included
therein for sale in any jurisdiction or the initiation of any
proceeding for such purpose; and
(iii) the happening of any event that requires the making of any
changes in the Registration Statement or the Prospectus so that, as of
such date, the Registration Statement and the Prospectus do not contain
an untrue statement of a material fact and do not omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading (which advice
shall be accompanied by an instruction to suspend the use of the
Prospectus relating to such Registrable Securities until the requisite
changes have been made).
(4) The Company shall use its best efforts to prevent the issuance, and
if issued to obtain the withdrawal, of any order suspending the
effectiveness of the Registration Statement relating to such Registrable
Securities at the earliest possible time.
(5) The Company shall furnish to the Purchaser with respect to the
Registration Statement relating to such Registrable Securities, without
charge, such number of copies of such Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and all reports, other documents and exhibits (including those
incorporated by reference) as the Purchaser shall reasonably request.
(6) The Company shall furnish to the Purchaser such number of copies of
any Prospectus (including any preliminary Prospectus and any amended or
supplemented Prospectus) relating to such Registrable Securities, in
conformity with the requirements of the Securities Act, as the Purchaser may
reasonably request in order to effect the offering and sale of the shares of
such Registrable Securities to be offered and sold, but only while the
Company shall be required under the provisions hereof to cause the
Registration Statement to remain effective, and the Company consents (except
during a Blackout Period or event contemplated by Section
3.01(c)(3)(B)(iii)) to the use of the Prospectus or any amendment or
supplement thereto by the Purchaser in connection with the offering and sale
of the Registrable Securities covered by the Prospectus or any amendment or
supplement thereto.
(7) Prior to any offering of Registrable Securities pursuant to any
Registration Statement, the Company shall use its best efforts to register
or qualify the Registrable Securities covered by such Registration Statement
under the securities or blue sky laws of
8
<PAGE>
such states as the Purchaser shall reasonably request, maintain any
such registration or qualification current until the earlier of the sale of
the Registrable Securities so registered or 90 days subsequent to the
effective date of the Registration Statement, and do any and all other acts
and things either reasonably necessary or advisable to enable the Purchaser
to consummate the public sale or other disposition of the Registrable
Securities in jurisdictions where the Purchaser desires to effect such sales
or other disposition; provided that the Company shall not be required to
take any action that would subject it to the general jurisdiction of the
courts of any jurisdiction in which it is not so subject or to qualify as a
foreign corporation in any jurisdiction where the Company is not so
qualified.
(8) In connection with any offering of Registrable Securities
registered pursuant to this Agreement, the Company shall (x) furnish the
Purchaser, at the Company's expense, on a timely basis with certificates
free of any restrictive legends representing ownership of the Registrable
Securities being sold in such denominations and registered in such names as
the Purchaser shall request and (y) instruct the transfer agent and
registrar of the Registrable Securities to release any stop transfer orders
with respect to the Registrable Securities.
(9) Upon the occurrence of any event contemplated by Section
3.01(c)(3)(B)(iii) above, the Company shall promptly prepare a
post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Registrable Securities
included therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. If the Company notifies the Purchaser of the
occurrence of any Blackout Period or any event contemplated by Section
3.01(c)(3)(B)(iii) above, the Purchaser shall suspend the use of the
Prospectus, for a period not to exceed thirty calendar days in accordance
with Section 3.01(b), until the requisite changes to the Prospectus have
been made.
(10) The Company shall make generally available to its security holders
or otherwise provide in accordance with Section 11(a) of the Securities Act
as soon as practicable after the effective date of the applicable
Registration Statement an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act.
(11) The Company shall, if requested, promptly include or incorporate
in a Prospectus supplement or post-effective amendment to a Registration
Statement, such information as the managing underwriters administering an
underwritten offering of the Registrable Securities registered thereunder
reasonably request to be included therein and to which the Company does not
reasonably object and shall make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after they are
notified of the matters to be included or incorporated in such Prospectus
supplement or post-effective amendment.
9
<PAGE>
(12) If requested, the Company shall enter into an underwriting
agreement with a nationally recognized investment banking firm or firms
selected by the Purchaser and reasonably acceptable to the Company
containing representations, warranties, indemnities and agreements then
customarily included by an issuer in underwriting agreements with respect to
secondary underwritten distributions, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures substantially identical to those
set forth in Article Five (or such other provisions and procedures
acceptable to the managing underwriters, if any) with respect to all parties
to be indemnified pursuant to Article Five and take all such other actions
as are reasonably requested by the managing underwriters for such
underwritten offering in order to expedite or facilitate the registration or
the disposition of such Registrable Securities.
(13) In the event the Purchaser proposes to conduct an underwritten
Public Offering, then the Company shall: (i) make reasonably available for
inspection by the Purchaser and its counsel, any underwriter participating
in any distribution pursuant to such Registration Statement, and any
attorney, accountant or other agent retained by the Purchaser or any such
underwriter, all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries as shall be
reasonably necessary to enable them to conduct a "reasonable" investigation
for purposes of Section 11(a) of the Securities Act; (ii) cause the
Company's officers, directors and employees to make reasonably available for
inspection all relevant information reasonably requested by the Purchaser or
any such underwriter, attorney, accountant or agent in connection with any
such Registration Statement, in each case, as is customary for similar due
diligence examinations; provided that any information that is designated in
writing by the Company, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by the Purchaser,
such underwriter, or any such, attorney, accountant or agent, unless such
disclosure is made in connection with a court proceeding or required by law,
or such information becomes available to the public generally or through a
third party without an accompanying obligation of confidentiality; (iii)
obtain opinions of counsel to the Company and updates thereof (which counsel
and opinions (in form, scope and substance) shall be reasonably satisfactory
to the managing underwriters, if any, addressed to the Purchaser and the
underwriters, if any, covering such matters as are customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by the Purchaser and underwriters (it being agreed
that the matters to be covered by such opinion or written statement by such
counsel delivered in connection with such opinions shall include in
customary form, without limitation, as of the date of the opinion and as of
the effective date of the Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from such
Registration Statement and the Prospectus included therein, as then amended
or supplemented, including the documents incorporated by reference therein,
of an untrue statement of a material fact or the omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; (iv) obtain "cold comfort" letters and
updates thereof from the independent public accountants of the Company (and,
if necessary, any other independent
10
<PAGE>
public accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial data
are, or are required to be, included in the Registration Statement),
addressed to the Purchaser and the underwriters, if any, in customary form
and covering matters of the type customarily covered in "cold comfort"
letters in connection with primary underwritten offerings; and (v) deliver
such documents and certificates as may be reasonably requested by the
Purchaser and the managing underwriters, if any, and with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company. The foregoing actions set forth in clauses
(iii), (iv) and (v) of this Section 3.01(c)(13) shall be performed at each
closing under any underwritten offering to the extent required thereunder.
(14) The Company will use its best efforts to cause such Registrable
Securities to be admitted for quotation on the Nasdaq National Market or
other stock exchange or trading system on which the Common Stock primarily
trades on or prior to the effective date of any Registration Statement
hereunder.
(15) The Company shall use its best efforts to take all other steps
reasonably necessary to effect the registration, offering and sale of the
Registrable Securities covered by a Registration Statement contemplated
hereby and enter into any other customary agreements and take such other
actions, including participation in"roadshows" as are reasonably required in
order to expedite or facilitate the disposition of such Registrable
Securities, and the Company shall secure the participation of its management
for such purposes.
(16) The Company shall, at the reasonable request of the Purchaser,
hold periodic meetings with representatives of the Purchaser to report on
the market for the Company's securities and opportunities for the Purchaser
to effect sales of such Registrable Securities.
(d) With a view to making available the benefits of certain
rules and regulations of the SEC which may at any time permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to:
(1) Make and keep public information available, as those terms are
understood and defined in and interpreted under Rule 144, at all times;
(2) During the term of this Agreement, furnish to the Purchaser upon
request: (i) a written statement by the Company as to its compliance with
the reporting requirements of Rule 144, (ii) a copy of the most recent
annual or quarterly report of the Company, and (iii) such other reports and
documents of the Company as the Purchaser may reasonably request in availing
itself of any rule or regulation of the SEC allowing the Purchaser to sell
any such securities without registration.
11
<PAGE>
ARTICLE FOUR
EXPENSES
SECTION 4.01. Expenses Payable by the Company. Except as provided in
Section 4.02 below, all fees and expenses incident to the registration and sale
of Registrable Securities shall be borne by the Company whether or not a
Registration Statement is filed or becomes effective, including, without
limitation, (i) all registration, qualification and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD and (B) fees and expenses of compliance with state securities or blue
sky laws (including, without limitation, fees and disbursements of counsel for
the Company or the underwriters, or both, in connection with blue sky
qualifications of the Registrable Securities)), (ii) messenger and delivery
expenses, word processing, duplicating and printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities in a
form eligible for deposit with The Depository Trust Company, printing
Preliminary Prospectuses, Prospectuses, Prospectus supplements, including those
delivered to or for the account of the Purchaser as provided in this Agreement,
and printing or preparing any underwriting agreement, agreement among
underwriters and related syndicate or selling group agreements, pricing
agreements and blue sky memoranda), (iii) fees and disbursements of counsel for
the Company, (iv) fees and disbursements of all independent certified public
accountants for the Company (including, without limitation, the expenses of any
"comfort letters" required by or incident to such performance), (v) the fees and
expenses of any "qualified independent underwriter" or other independent
appraiser participating in an offering pursuant to Section 3 of Rule 2720 of the
Conduct Rules of the NASD (unless such qualified independent underwriter is
required as a result of an affiliation between an underwriter selected by the
Purchaser and the Purchaser, in which case such fees and expenses will be borne
by the Purchaser), (vi) Securities Act liability insurance, if the Company so
desires such insurance, (vii) all out-of-pocket expenses of the Company
(including, without limitation, expenses incurred by the Company, its officers,
directors, employees and agents performing legal or accounting duties or
preparing or participating in "roadshow" presentations or of any public
relations, investor relations or other consultants or advisors retained by the
Company in connection with any roadshow, including travel and lodging expenses
of such roadshows), and (viii) the fees and expenses incurred in connection with
the quotation or listing of shares of Common Stock on any securities exchange or
automated securities quotation system. The fees and expenses set forth in this
Section 4.01 are collectively referred to as "Registration Expenses".
SECTION 4.02. Expenses Payable by the Purchaser. The Purchaser shall
pay all underwriting discounts and commissions or broker's commissions incurred
in connection with the sale or other disposition of Registrable Securities for
or on behalf of the Purchaser's account as well as the fees and expenses of the
Purchaser's counsel.
12
<PAGE>
ARTICLE FIVE
INDEMNIFICATION AND CONTRIBUTION
SECTION 5.01. (a) Indemnification by the Company. The Company shall,
without limitation as to time, indemnify and hold harmless, to the fullest
extent permitted by law, the Purchaser and any underwriter participating in the
distribution, their respective officers, directors, partners and agents and
employees of each of them, each Person who controls the Purchaser or any such
underwriter (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act) and the officers, directors, partners, agents and
employees of each such controlling person (individually, an "Indemnified
Person") from and against any and all losses, claims, damages, liabilities,
costs (including, without limitation, costs of investigating, preparing to
defend, defending and appearing as a third-party witness and attorneys' fees and
disbursements) and expenses, including any amounts paid in respect of any
settlements (collectively, "Losses"), joint or several, without duplication, as
incurred, arising out of or based upon any untrue or alleged untrue statement of
a material fact contained in any Registration Statement, Prospectus or form of
prospectus, or in any amendment or supplements thereto or in any Preliminary
Prospectus, or arising out of or based upon, in the case of the Registration
Statement or any amendments thereto, any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and, in the case of the Prospectus or form of
prospectus, or in any amendments or supplements thereto, or in any Preliminary
Prospectus, any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading except, in either case,
(i) to the extent, but only to the extent, that such untrue or alleged untrue
statement or omission or alleged omission has been made therein in reliance upon
and in conformity with information furnished in writing to the Company by such
Indemnified Person expressly for use therein and (ii) if the Person asserting
any such Losses who purchased the Registrable Securities which are the subject
thereof did not receive a copy of an amended Preliminary Prospectus or the final
Prospectus (or the final Prospectus as amended or supplemented) at or prior to
the written confirmation of the sale of such Registrable Securities to such
person (if it is determined that the Company has provided such Preliminary
Prospectus and it was the responsibility of such Indemnified Person to provide
such person with a current copy of the Prospectus or amended or supplemented
Prospectus, as the case may be) and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact made in such
Preliminary Prospectus was corrected in the amended Preliminary Prospectus or
the final Prospectus (or the final Prospectus as amended and supplemented).
(b) Indemnification by Purchaser. In connection with any
Registration Statement in which the Purchaser as a holder of Registrable
Securities is participating, the Purchaser shall severally but not jointly,
without limitation as to time, indemnify and hold harmless, to the fullest
extent permitted by law, the Company, any underwriter participating in the
distribution and their respective directors, officers, agents and employees,
each Person who controls the Company or any such underwriter (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling person, from and
against any and all Losses, as incurred, arising out of or based upon (i) any
untrue or alleged untrue
13
<PAGE>
statement of a material fact contained in any Registration Statement,
Prospectus, or form of prospectus, or in any amendment or supplement thereto or
in any Preliminary Prospectus, or arising out of or based upon, in the case of
the Registration Statement or any amendments thereto, any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, and, in the case of the Prospectus, or
form of prospectus, or in any amendments or supplements thereto, or in any
Preliminary Prospectus, any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, in
either case, to the extent, but only to the extent, that such untrue or alleged
untrue statement or omission or alleged omission has been made therein in
reliance upon and in conformity with information furnished in writing to the
Company by the Purchaser expressly for use therein or (ii) the failure of the
Purchaser (if it is determined that it was the responsibility of the Purchaser)
at or prior to the written confirmation of the sale of the Registrable
Securities to send or deliver a copy of an amended Preliminary Prospectus or the
final Prospectus (or the final Prospectus as amended or supplemented) to the
Person asserting any such Losses who purchased the Registrable Securities which
are the subject thereof and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact made in such Preliminary
Prospectus was corrected in the amended Preliminary Prospectus or the final
Prospectus (or the final Prospectus as amended and supplemented). In no event
shall the liability of the Purchaser hereunder be, or be claimed by the Company
to be, greater in amount than the dollar amount of the proceeds actually
received by the Purchaser upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Each Indemnified
Person shall give prompt notice to the party or parties from which such
indemnity is sought (the "indemnifying parties") of the commencement of any
action or proceeding (including any governmental investigation) (collectively
"Proceedings" and individually a "Proceeding") with respect to which such
Indemnified Person seeks indemnification or contribution pursuant hereto;
provided, however, that the failure so to notify the indemnifying parties shall
not relieve the indemnifying parties from any obligation or liability except to
the extent that the indemnifying party was otherwise unaware of such Proceeding
and the indemnifying parties shall have been materially prejudiced by such
failure. The indemnifying parties shall have the right, exercisable by giving
written notice to an indemnified party promptly after the receipt of written
notice from such indemnified party of such Proceeding, to assume, at the
indemnifying parties' expense, the defense of any such proceeding, with counsel
reasonably satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such Proceeding; provided,
however, that an indemnified party or parties (if more than one such indemnified
party is named in any Proceeding) shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless: (i) the indemnifying party or parties agree
to pay such fees and expenses; or (ii) the indemnifying parties fail promptly to
assume the defense of such Proceeding or fail promptly to employ counsel
reasonably satisfactory to such indemnified party or parties; or (iii) the named
parties to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party, and the indemnified party or
parties shall have been advised by counsel that
14
<PAGE>
there may be a conflict between the positions of the indemnifying party or an
affiliate of the indemnifying party and such indemnified party or parties in
conducting the defense of such action or proceeding or that there may be legal
defenses available to such indemnified party or parties different from or in
addition to those available to the indemnifying party or such affiliate, in
which case, if such indemnified party or parties notifies the indemnifying
parties in writing that it elects to employ separate counsel at the expense of
the indemnifying parties, the indemnifying parties shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
indemnifying parties, it being understood, however, that the indemnifying
parties shall not, in connection with any one such Proceeding or separate but
substantially similar or related Proceedings in the same jurisdiction, arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. Whether or not such defense is assumed by the indemnifying parties,
such indemnifying parties or indemnified party or parties will not be subject to
any liability for any settlement made without its or their consent (but such
consent will not be unreasonably withheld). No indemnifying party shall be
liable for any settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent each indemnifying party
jointly and severally agrees, subject to the exception and limitations set forth
above, to indemnify and hold harmless each indemnified party from and against
any loss or liability by reason of such settlement. No indemnification provided
for in Section 5.01(a) or 5.01(b) shall be available to any party who shall fail
to give notice as provided in this Section 5.01(c) if the party to whom notice
was not given was unaware of the proceeding to which such notice would have
related and was materially prejudiced by the failure to give such notice, but
the failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified party
otherwise than on account of the provisions of Section 5.01(a) or 5.01(b). No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation.
(d) Contribution. If the indemnification provided for in this
Section 5.01 is unavailable to an indemnified party or is insufficient to hold
such indemnified party harmless for any Losses in respect to which this Section
5.01 would otherwise apply by its terms, except by reasons of Section 5.01(a)(i)
or (ii) hereof or the failure of the indemnified party to give notice as
required in Section 5.01(c) hereof (provided that the indemnifying party was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice), then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall have
an obligation to contribute to the amount paid or payable by such indemnified
party as a result of such Losses, in such proportion as is appropriate to
reflect the relative fault of the indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the actions, statements
or omissions that resulted in such Losses as well as any other relevant
equitable considerations. Where the indemnified party is an underwriter
participating in the distribution of Registrable Securities, however, each
indemnifying party, and, in addition, if the indemnifying party is the
Purchaser, the Company, shall have an obligation to contribute to the
15
<PAGE>
amount paid or payable by such indemnified part as the result of such Losses in
such proportion as is appropriate to reflect not only (i) the relative fault of
the Company, the Purchaser and the underwriters in connection with the actions,
statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations, but also (ii) the relative benefits received
by the Purchaser on the one hand and the underwriters on the other hand from the
distribution of the Registrable Securities. The relative benefit derived by the
parties shall be determined by reference to, among other things, the fact that
the Company entered into this Agreement to induce the Purchaser to engage in the
transaction pursuant to which the Registrable Securities were acquired. The
relative benefits received by the Purchaser on the one hand and the underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from any such offering (before deducting expenses) received by the
Purchaser bear to the total underwriting discounts or commissions received by
the underwriters. The relative fault of such indemnifying party, on the one
hand, and indemnified party, on the other hand, shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been taken by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with any Proceeding, to the extent such
party would have been indemnified for such expenses if the indemnification
provided for in Section 5.01(a) or Section 5.01(b) were available to such party.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.01(d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5.01(d), if the
Purchaser is an indemnifying party, it shall not be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities sold by such indemnifying party and distributed to the public were
offered to the public (net of any underwriting discounts and commissions and
expenses) exceeds the amount of any damages that such indemnifying party has
otherwise been required to pay or has paid by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(e) Remedies Cumulative. The indemnity, contribution and
expense reimbursement obligations under this Section 5.01 shall be in addition
to any liability each indemnifying person may otherwise have and shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any indemnified party.
(f) Underwriting Agreement Controls. In the event of any
conflict between the indemnification and contribution terms as herein set forth
and as set forth in any underwriting agreement entered pursuant hereto, the
underwriting agreement shall control.
16
<PAGE>
(g) The obligations of the Company and the Purchaser under this Section
5.01 shall survive the completion of any offering of Registrable Securities
in a Registration Statement.
ARTICLE SIX
GENERAL PROVISIONS
SECTION 6.01. Notices. Except as otherwise provided in this Agreement,
any notice or other communication given under this Agreement shall be sufficient
if in writing and sent by registered or certified mail, return receipt
requested, postage prepaid, to a party at its address set forth below (or at
such other address as shall be designated for such purpose by such party in a
written notice to the other party hereto):
(a) If to the Company:
NTL Incorporated
110 East 59th Street
New York, NY 10022
Telecopy: (212) 906-8497
Attention: Richard J. Lubasch, Esq.
(e-mail: [email protected])
with copies (which shall not constitute notice to the Company) to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Telecopy: (212) 735-2000
Attention: Thomas Kennedy, Esq.
(e-mail: [email protected])
(b) If to the Purchaser:
France Telecom, S.A.
208-212, rue Raymond Losserand
75505 Paris Cedex 15, France
Telecopy: (331) 44-44-21-54
Attention: Philippe Mc Allister
(e-mail: [email protected])
17
<PAGE>
with a copy (which shall not constitute notice to the Purchaser) to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
Attention: Alfred J. Ross, Esq.
All such notices and communications shall be effective when received by the
addressee.
SECTION 6.02. Governing Law. This Agreement shall be governed in all
respects by the internal laws of the State of New York as applied to contracts
entered into solely between residents of, and to be performed entirely within,
such state, and without reference to principles of conflicts of laws or choice
of laws.
SECTION 6.03. Entire Agreement; Amendments. This Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subject matter hereof and supersedes all prior agreements and
understandings among the parties relating to the subject matter hereof. Neither
this Agreement nor any term hereof may be amended, waived, discharged or be
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
SECTION 6.04. Successor and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 6.05. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restriction of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
SECTION 6.06. Transfer or Assignment of Registration Rights. The
registration rights set forth in this Agreement shall be transferable or
assignable by the Purchaser, in whole or in part and from time to time; provided
that each transferee agrees in writing to be subject to all the terms and
conditions of this Agreement. The parties understand and agree that Compagnie
Generale des Communications (COGECOM) S.A. ("Cogecom") shall be entitled to
exercise any right granted hereunder to the Purchaser, so long as Cogecom (a)
remains a wholly-owned subsidiary of the Purchaser and (b) holds any Registrable
Securities.
SECTION 6.07. Remedies. In the event of a breach by any party of any of
its obligations under this Agreement, the other parties, in addition to being
entitled to exercise all rights provided herein or granted by law, including
recovery of damages, will be entitled to specific performance of their rights
under this Agreement. The Company and the Purchaser agree that monetary damages
18
<PAGE>
would not be adequate compensation for any loss incurred by reason of a breach
by the Company or the Purchaser, as the case may be, of any of the provisions of
this Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, the Company or the Purchaser, as
the case may be, shall waive the defense that a remedy at law would be adequate.
No failure or delay on the part of the Company or the Purchaser in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy.
SECTION 6.08. Subsequent Agreement. The parties agree that when a
registration rights agreement is executed and delivered by the parties as
contemplated by the Investment Agreement, such registration rights agreement
will supersede this agreement and this agreement shall be of no further force
and effect.
[The balance of this page intentionally left blank.]
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date set forth above.
NTL INCORPORATED
By:
---------------------------------
Name:
Title:
FRANCE TELECOM S.A.
By:
---------------------------------
Name:
Title:
20
CERTIFICATE OF DESIGNATION
OF THE VOTING POWERS, DESIGNATION,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF THE
5% CUMULATIVE PARTICIPATING CONVERTIBLE
PREFERRED STOCK, SERIES A OF
NTL INCORPORATED
------------------------------
PURSUANT TO SECTION 151(g) OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------------------
The undersigned, Executive Vice President, General Counsel and
Secretary of NTL Incorporated, a Delaware corporation (the "Corporation"),
HEREBY CERTIFIES that the Board of Directors, in accordance with Article FOURTH,
Section B of the Corporation's Restated Certificate of Incorporation and Section
151(g) of the Delaware General Corporation Law (the "DGCL"), has authorized the
creation of the series of Preferred Stock hereinafter provided for and has
established the dividend, redemption, conversion and voting rights thereof and
has adopted the following resolution, creating the following new series of the
Corporation's Preferred Stock:
"BE IT RESOLVED that, pursuant to authority expressly granted to the
Board of Directors by the provisions of Article FOURTH, Section B of the
Restated Certificate of Incorporation of the Corporation and Section 151(g) of
the DGCL, there is hereby created and authorized the issuance of a new series of
the Corporation's Preferred Stock, par value $.01 per share ("Preferred Stock"),
with the following powers, designations, dividend rights, voting powers, rights
on liquidation, conversion rights, redemption rights and other preferences and
relative, participating, optional or other special rights and with the
qualifications, limitations or restrictions on the shares of such series (in
addition to the powers, designations, preferences and relative, participating,
optional or other special rights and the qualifications, limitations or
restrictions thereof set forth in the Restated Certificate of Incorporation that
are applicable to each series of Preferred Stock) hereinafter set forth.
(1) Number and Designation. 750,000 shares of the Preferred Stock of
the Corporation shall be designated as 5% Cumulative Participating Convertible
Preferred Stock, Series A (the "5% Preferred Stock") and no other shares of
Preferred Stock shall be designated as 5% Preferred Stock.
(2) Definitions. For purposes of the 5% Preferred Stock, the
following terms shall have the meanings indicated:
<PAGE>
"Additional Preferred" shall have the meaning set forth in
paragraph (4)(a) hereof.
"All But One Outstanding Share" shall have the meaning set forth in
paragraph (6)(c) hereof.
"Bankruptcy Event" shall mean any of the following: (I) a court
having jurisdiction in the premises enters a decree or order for (A)
relief in respect of any Major Entity in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereinafter
in effect, (B) appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of any Major Entity or for all
or substantially all of the property and assets of any Major Entity or (C)
the winding up or liquidation of the affairs of any Major Entity; or (II)
any Major Entity (A) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereinafter in effect,
or consents to the entry of an order for relief in an involuntary case
under any such law, (B) consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of any Major Entity, or for all or
substantially all of the property and assets of any Major Entity or (C)
effects any general assignment for the benefit of creditors.
"Board of Directors" shall mean the board of directors of the
Corporation. Except as such term is used in paragraph (9), "Board of
Directors" shall also mean the Executive Committee, if any, of such board
of directors or any other committee duly authorized by such board of
directors to perform any of its responsibilities with respect to the 5%
Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New
York, New York are not required to be open.
"Common Stock" shall mean the Corporation's Common Stock, par value
$.01 per share.
"Constituent Person" shall have the meaning set forth in
paragraph (8)(e)(i) hereof.
"Conversion Rate" shall have the meaning set forth in
paragraph (8)(a) hereof.
"Current Market Price" of publicly traded shares of Common Stock or
any other class of capital stock or other security of the Corporation or
any other issuer for any day shall mean the last reported sale price for
such security on the principal exchange or quotation system on which such
security is listed or traded. If the security is not admitted for trading
on any national securities exchange or the Nasdaq National Market,
"Current Market Price" shall mean the average of the last reported closing
bid and asked prices reported by the Nasdaq as furnished by any member in
good standing of the National
2
<PAGE>
Association of Securities Dealers, Inc., selected from time to time by the
Corporation for that purpose or as quoted by the National Quotation Bureau
Incorporated. In the event that no such quotation is available for such
day, the Current Market Price shall be the average of the quotations for
the last five Trading Days for which a quotation is available within the
last 30 Trading Days prior to such day. In the event that five such
quotations are not available within such 30-Trading Day period, the Board
of Directors shall be entitled to determine the Current Market Price on
the basis of such quotations as it reasonably considers appropriate.
"Determination Date" shall have the meaning set forth in
paragraph (8)(d)(ii) hereof.
"Dividend Payment Date" shall mean ___________, ___________,
___________ and ___________ of each year, commencing on ___________, 1999;
provided, however, that if any Dividend Payment Date falls on any day
other than a Business Day, the dividend payment due on such Dividend
Payment Date shall be paid on the Business Day immediately following such
Dividend Payment Date.
"Dividend Periods" shall mean quarterly dividend periods commencing
on _____________, ____________, __________ and ___________ of each year
and ending on and including the day preceding the first day of the next
succeeding Dividend Period (other than the initial Dividend Period which
shall commence on the Issue Date and end on and include ________, 1999).
"Exchange Act"" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulation thereunder.
"Expiration Time" shall have the meaning set forth in paragraph
(8)(d)(v) hereof.
"5% Preferred Stock" shall have the meaning set forth in
paragraph (1) hereof.
"5 1/4% Preferred" shall have the meaning set forth in paragraph
(3)(d) hereof.
"5 1/4% Series A" shall have the meaning set forth in paragraph
(3)(d) hereof.
"Investment Securities" shall mean any of the following: (a)
shares of Common Stock, and (b) shares of 5% Preferred Stock. For purposes
of calculating ownership of Investment Securities, each share of Common
Stock equals one Investment Security (adjusted for stock dividends, stock
splits, reclassifications or similar transactions that have occurred since
the Issue Date), and each share of 5% Preferred Stock equals eight
Investment Securities, adjusted in accordance with adjustments to the
Conversion Rate as provided in paragraph (8)(d).
3
<PAGE>
"Issue Date" shall mean the date on which shares of 5% Preferred
Stock are first issued.
"Junior Securities" shall have the meaning set forth in
paragraph (3)(c) hereof.
"Junior Securities Distribution" shall have the meaning set
forth in paragraph (4)(f) hereof.
"Liquidation Right" shall mean, for each share of 5% Preferred
Stock, the greater of (i) an amount equal to $1,000 per share, plus an
amount equal to all dividends (whether or not earned or declared) accrued
and unpaid thereon to the date of final distribution to such holders, and
(ii) the amount that would be received in liquidation following conversion
of a share of 5% Preferred Stock into Common Stock.
"Major Entity" shall mean any of the Corporation, NTL Communications
Corp., Diamond Cable Communications Limited, Diamond Holdings Limited, NTL
(Bermuda) Limited or any Significant Subsidiary.
"Mandatory Redemption Date" shall have the meaning set forth in
paragraph (6)(c) hereof.
"Mandatory Redemption Obligation" shall have the meaning set
forth in paragraph (6)(d) hereof.
"Nasdaq" means the Nasdaq Stock Market, Inc., the electronic
securities market regulated by the National Association of Securities
Dealers, Inc.
"Nasdaq National Market" shall have the meaning set forth in Rule
4200(a)(23) of the rules of the National Association of Securities
Dealers, Inc.
"9.9% Series A Preferred" shall have the meaning set forth in
paragraph (3)(d) hereof.
"9.9% Series B Preferred" shall have the meaning set forth in
paragraph (3)(d) hereof.
"non-electing share" shall have the meaning set forth in
paragraph (8)(e)(i) hereof.
"NYSE" means the New York Stock Exchange.
"outstanding", when used with reference to shares of stock, shall
mean issued shares, excluding shares held by the Corporation or a
subsidiary.
"Parity Securities" shall have the meaning set forth in
paragraph (3)(b) hereof.
4
<PAGE>
"Person" shall mean any individual, partnership, association, joint
venture, corporation, business, trust, joint stock company, limited
liability company, any unincorporated organization, any other entity, a
"group" of such persons, as that term is defined in Rule 13d-5(b) under
the Exchange Act, or a government or political subdivision thereof.
"Preferred Shares" has the meaning set forth in paragraph (9)(c).
"Preferred Stock" shall have the meaning set forth in the first
resolution above.
"Purchase Shares" shall have the meaning set forth in paragraph
(8)(d)(v) hereof.
"Qualified Holding Condition" means France Telecom S.A., a societe
anonyme formed under the laws of France, or an affiliate, is the holder of
at least 6,527,027 Investment Securities, provided that this number shall
be adjusted in accordance with the adjustments made to the components of
Investment Securities, as set forth above.
"Record Date" shall have the meaning set forth in paragraph
(8)(d)(iv) hereof.
"Relevant Compounding Factor" shall mean, with respect to each share
of 5% Preferred Stock, upon initial issuance 1.00, and shall on each
Dividend Payment Date be increased to equal the product of the Relevant
Compounding Factor in effect immediately prior to such Dividend Payment
Date and 1.0125.
"Rights" shall have the meaning set forth in paragraph (11)
hereof.
"Securities" shall have the meaning set forth in
paragraph (8)(d)(iii) hereof.
"Senior Securities" shall have the meaning set forth in
paragraph (3)(a) hereof.
"set apart for payment" shall be deemed to include, without any
action other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to a declaration of dividends or other distribution by the Board
of Directors, the allocation of funds to be so paid on any series or class
of capital stock of the Corporation; provided, however, that if any funds
for any class or series of Junior Securities or any class or series of
Parity Securities are placed in a separate account of the Corporation or
delivered to a disbursing, paying or other similar agent, then "set apart
for payment" with respect to the 5% Preferred Stock shall mean placing
such funds in a separate account or delivering such funds to a disbursing,
paying or other similar agent, as the case may be.
"Significant Subsidiary" shall have the meaning given to such term
in Regulation S-X under the Exchange Act.
5
<PAGE>
"13% Preferred" shall have the meaning set forth in paragraph
(3)(d) hereof.
"Trading Day" shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such securities are listed or admitted, or if not listed or admitted
for trading on any national securities exchange, on the Nasdaq National
Market, or if such securities are not quoted thereon, in the applicable
securities market in which the securities are traded.
"Transaction" shall have the meaning set forth in
paragraph (8)(e)(i) hereof.
"Trigger Event" shall have the meaning set forth in paragraph
(9)(b) hereof.
"Trigger Event Cure" shall have the meaning set forth in paragraph
(9)(b) hereof.
"25-Day Average Market Price" shall mean, for any security, the
volume-weighted average of the Current Market Prices of that security for
the twenty-five Trading Days immediately preceding the date of
determination.
(3) Rank. Any class or series of stock of the Corporation shall be
deemed to rank:
(a) prior to the 5% Preferred Stock, either as to the payment of
dividends or as to distribution of assets upon liquidation, dissolution or
winding up, or both, if the holders of such class or series shall be entitled by
the terms thereof to the receipt of dividends and of amounts distributable upon
liquidation, dissolution or winding up, in preference or priority to the holders
of 5% Preferred Stock ("Senior Securities");
(b) on a parity with the 5% Preferred Stock, either as to the
payment of dividends or as to distributions of assets upon liquidation,
dissolution or winding up, or both, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share thereof be different
from those of the 5% Preferred Stock, if the holders of the 5% Preferred Stock
and of such class of stock or series shall be entitled by the terms thereof to
the receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, or both, in proportion to their respective amounts of
accrued and unpaid dividends per share or liquidation preferences, without
preference or priority one over the other and such class of stock or series is
not a class of Senior Securities ("Parity Securities"); and
(c) junior to the 5% Preferred Stock, either as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, or both, if such stock or series shall be Common Stock or if the
holders of the 5% Preferred Stock shall be entitled to receipt of dividends, and
of amounts distributable upon liquidation, dissolution or winding up, in
preference or priority to the holders of shares of such stock or series ("Junior
Securities").
6
<PAGE>
(d) Each of (i) the 13% Series B Senior Redeemable Exchangeable
Preferred Stock (the "13% Preferred") and (ii) the 5 1/4% Convertible Preferred
Stock, Series A, (the "5 1/4% Series A") and any dividends paid on the 5 1/4%
Series A in accordance with its terms, to the extent that such dividends are
paid in preferred stock having terms substantially identical to the 5 1/4%
Series A and any dividends paid on preferred stock issued as in-kind dividends
thereon, to the extent such dividends are paid in preferred stock having terms
substantially identical to the 5 1/4% Series A (the 5 1/4% Series A and all such
in-kind dividends being hereinafter referred to as the "5 1/4% Preferred") is a
Senior Security. Each of the 9.9% Non-Voting Mandatorily Redeemable Preferred
Stock, Series A ("9.9% Series A Preferred"), and 9.9% Non-Voting Mandatorily
Redeemable Preferred Stock, Series B ("9.9% Series B Preferred"), is a Junior
Security. One or more classes of Additional Preferred (as defined below) shall
be Parity Securities; provided, however, that there shall be no issue of other
Senior Securities, Parity Securities or rights or options exercisable for or
convertible into any such securities, except as approved by the holders of the
5% Preferred Stock pursuant to paragraph 9(f).
(e) The respective definitions of Senior Securities, Junior
Securities and Parity Securities shall also include any rights or options
exercisable for or convertible into any of the Senior Securities, Junior
Securities and Parity Securities, as the case may be. The 5% Preferred Stock
shall be subject to the creation of Junior Securities, Parity Securities and
Senior Securities as set forth herein.
(4) Dividends. (a) Subject to paragraph (8)(b)(ii), the holders of
shares of 5% Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available for the
payment of dividends, dividends at the quarterly rate of $12.50 per share
(assuming a $1,000.00 face amount) payable in cash, shares of Common Stock (such
Common Stock for this purpose to be assigned a value equal to the 25-Day Average
Market Price as of the record date for such Dividend Payment Date) or additional
shares of Preferred Stock of a class to be designated by the Board of Directors
having terms substantially identical to the 5% Preferred Stock except as
follows: (A) the Conversion Rate (as set forth in Section 8(a)) on such
Preferred Stock initially shall be the quotient resulting from the division of
the Conversion Rate (as then in effect on the 5% Preferred Stock) by the
Relevant Compounding Factor (except that for purposes of additional shares of
Preferred Stock payable as a dividend for the initial Dividend Period, the
Conversion Rate shall be the quotient resulting from the division of the
Conversion Rate (as then in effect) by [(90 - (# days in initial Dividend
Period)/90) x Relevant Compounding Factor]) and (B) the number of shares of such
Preferred Stock payable as a dividend on any Dividend Payment Date shall
increase for each Dividend Payment Date from the first Dividend Payment Date by
the Relevant Compounding Factor (such classes of Preferred Stock singularly and
collectively, the "Additional Preferred"). All dividends on the 5% Preferred
Stock, in whatever form, shall be payable in arrears quarterly on each Dividend
Payment Date and shall be cumulative from the Issue Date (except that dividends
on Additional Preferred shall accrue from the date such Additional Preferred is
issued or would have been issued in accordance with this Certificate of
Designation if such dividends had been declared), whether or not in any Dividend
Period or Dividend Periods there shall be funds of the Corporation legally
available for the payment of such dividends. Each such dividend shall be payable
to the holders of record of
7
<PAGE>
shares of the 5% Preferred Stock, as they appear on the stock records of the
Corporation at the close of business on the record date for such dividend. Upon
the declaration of any such dividend, the Board of Directors shall fix as such
record date on the fifth Business Day preceding the relevant Dividend Payment
Date and shall give notice on or prior to the record date of the form of payment
of such dividend. Accrued and unpaid dividends for any past Dividend Payment
Date may be declared and paid at any time, without reference to any Dividend
Payment Date, to holders of record on such record date, not more than 45 days
nor less than five Business Days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(b) In addition to the dividends described in the preceding
paragraph, holders of shares of the 5% Preferred Stock shall be entitled to
receive an amount equal to the amount (and in the form of consideration) that
such holders would be entitled to receive if, pursuant to paragraph (8), they
had converted such 5% Preferred Stock fully into Common Stock immediately before
the record date for the payment of any such dividends on Common Stock. Each such
dividend shall be payable to the holders of record of shares of the 5% Preferred
Stock as they appear on the stock records of the Corporation at the close of
business on the record date for such dividend on Common Stock, and the
Corporation shall pay each such dividend on the applicable payment date for such
dividend on the Common Stock.
(c) For the purpose of determining the number of Additional
Preferred to be issued pursuant to paragraph (4)(a), each such Additional
Preferred shall be valued at $1,000.00. Holders of such Additional Preferred
shall be entitled to receive dividends payable at the rates specified in
paragraph (4)(a).
(d) The dividends payable for the initial Dividend Period, or any
other period shorter than a full Dividend Period, on the 5% Preferred Stock
shall accrue daily and be computed on the basis of a 360-day year and the actual
number of days in such period. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on the 5%
Preferred Stock that may be in arrears except as otherwise provided herein.
(e) So long as any shares of the 5% Preferred Stock are outstanding,
no dividends, except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment on Parity Securities or Junior
Securities, for any period, nor shall any Parity Securities or Junior Securities
be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of any
such Parity Securities or Junior Securities) by the Corporation (except for
conversion into or exchange into other Parity Securities or Junior Securities,
as the case may be) unless, in each case, (i) full cumulative dividends on all
outstanding shares of the 5% Preferred Stock for all Dividend Periods
terminating on or prior to the date of such redemption, repurchase or other
acquisition shall have been paid or set apart for payment, (ii) sufficient funds
shall have been paid or set apart for the payment of the dividend for the
current Dividend Period with respect to the 5% Preferred Stock and (iii) the
Corporation is not in default with respect to any redemption of shares of 5%
Preferred Stock by the Corporation pursuant to paragraph (6) below. When
8
<PAGE>
dividends are not fully paid in Common Stock or Additional Preferred or are not
paid in full in cash or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon shares of the 5% Preferred Stock and all
dividends declared upon Parity Securities shall be declared ratably in
proportion to the respective amounts of dividends accumulated and unpaid on the
5% Preferred Stock and accumulated and unpaid on such Parity Securities.
(f) So long as any shares of the 5% Preferred Stock are outstanding,
no dividends (other than (i) any rights issued pursuant to a shareholder rights
plan as provided in paragraph (11) and (ii) dividends or distributions paid in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, Junior Securities) shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase, or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan of the Corporation or any
subsidiary) (all such dividends, distributions, redemptions or purchases being
hereinafter referred to as "Junior Securities Distributions") for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation, directly or
indirectly (except by conversion into or exchange for Junior Securities,
including pursuant to paragraph 4(c) of the 9.9% Series A Preferred and
paragraph 4(d) of the 9.9% Series B Preferred), unless in each case (A) full
cumulative dividends on all outstanding shares of the 5% Preferred Stock and all
other Parity Securities shall have been paid or set apart for payment for all
past Dividend Periods and dividend periods for such other stock, (B) sufficient
funds shall have been paid or set apart for the payment of the dividend for the
current Dividend Period with respect to the 5% Preferred Stock and all other
Parity Securities, (C) the Corporation is not in default with respect to any
redemption of shares of 5% Preferred Stock by the Corporation pursuant to
paragraph (6) below, (D) the Corporation has fully performed its obligations
under paragraphs (4)(b) and (6) hereof.
(5) Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, the holders of the shares of 5% Preferred Stock shall be entitled to
receive the Liquidation Right. If, upon any liquidation, dissolution or winding
up of the Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of the shares of 5% Preferred Stock shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any Parity Securities, then such assets, or the proceeds thereof,
shall be distributed among the holders of shares of 5% Preferred Stock and any
such other Parity Securities ratably in accordance with the respective amounts
that would be payable on such shares of 5% Preferred Stock and any such other
stock if all amounts payable thereon were paid in full. For the purposes of this
paragraph (5), (i) a consolidation or merger of the Corporation with one or more
corporations, or (ii) a sale or transfer of all or substantially all of the
Corporation's assets, shall not be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, of the Corporation.
9
<PAGE>
(b) Subject to the rights of the holders of any Parity Securities,
upon any liquidation, dissolution or winding up of the Corporation, after
payment shall have been made in full to the holders of the 5% Preferred Stock,
as provided in this paragraph (5), any other series or class or classes of
Junior Securities shall, subject to the respective terms and provisions (if any)
applying thereto, be entitled to receive any and all assets remaining to be paid
or distributed, and the holders of the 5% Preferred Stock shall not be entitled
to share therein.
(6) Redemption. (a) On and after the first Business Day following
the earlier to occur of (i) the seventh anniversary of the Issue Date or (ii)
the date on which both (A) the 25-Day Average Market Price of the Common Stock
shall have exceeded $150.00 and (B) the fourth anniversary of the Issue Date, to
the extent the Corporation shall have funds legally available for such payment,
the Corporation may redeem at its option shares of 5% Preferred Stock, from time
to time in part, All But One Outstanding Share or, if the Qualified Holding
Condition is not satisfied, in whole, payable at the option of the Corporation
in (A) cash, at a redemption price of $1,000.00 per share, (B) in shares of
Common Stock, at a redemption price of $1,000.00 per share, or (C) in a
combination of cash and Common Stock, at a redemption price based on the
respective combination of consideration, together in each case with accrued and
unpaid dividends thereon, whether or not declared, to, but excluding, the date
fixed for redemption, without interest. For purposes of determining the number
of shares of Common Stock to be issued pursuant to this paragraph (6)(a), the
price per share of Common Stock shall be the 25-Day Average Market Price.
(b) On and after the first Business Day following the tenth
anniversary of the Issue Date, each holder of shares of 5% Preferred Stock shall
have the right to require the Corporation, to the extent the Corporation shall
have funds legally available therefor, to redeem such holder's shares of 5%
Preferred Stock, from time to time in part, All But One Outstanding Share or, if
the Qualified Holding Condition is not satisfied, in whole, at a redemption
price of $1,000.00 per share, payable at the option of the Corporation in cash,
shares of Common Stock or a combination thereof, together with accrued and
unpaid dividends thereon to, but excluding, the date fixed for redemption,
without interest. For purposes of determining the number of shares of the Common
Stock to be issued pursuant to this paragraph (6)(b), the price per share of
Common Stock shall equal the 25-Day Average Market Price. Any holder of shares
of 5% Preferred Stock who elects to exercise its rights pursuant to this
paragraph (6)(b) shall deliver to the Corporation a written notice of election
not less than 20 days prior to the date on which such holder demands redemption
pursuant to this paragraph 6(b), which notice shall set forth the name of the
Holder, the number of shares of 5% Preferred Stock to be redeemed and a
statement that the election to exercise a redemption right is being made
thereby; and, subject to paragraph (10)(d), shall deliver to the Corporation on
or before the date of redemption certificates evidencing the shares of 5%
Preferred Stock to be redeemed, duly endorsed for transfer to the Corporation.
(c) If the Corporation shall not have redeemed all outstanding
shares of 5% Preferred Stock pursuant to paragraphs (6)(a) or (6)(b), on the
twentieth anniversary of the Issue Date (the "Mandatory Redemption Date"), to
the extent the Corporation shall have funds legally available for such payment,
the Corporation shall redeem All But One Outstanding Share
10
<PAGE>
of 5% Preferred Stock, or, if the Qualified Holding Condition is not satisfied,
all outstanding shares of 5% Preferred Stock, at a redemption price of $1,000.00
per share, payable at the option of the Corporation in cash, shares of Common
Stock or a combination thereof, together with accrued and unpaid dividends
thereon to, but excluding, the Mandatory Redemption Date, without interest. For
purposes of determining the number of shares of the Common Stock to be issued
pursuant to this paragraph (6)(c), the price per share of Common Stock shall be
the 25-Day Average Market Price. For purposes of the 5% Preferred Stock, "All
But One Outstanding Share" means all but one share of 5% Preferred Stock
outstanding at the relevant time. For the avoidance of doubt, so long as the
Qualified Holding Condition is satisfied, at least one share of 5% Preferred
Stock shall remain outstanding in perpetuity. As soon as (i) the Qualified
Holding Condition is no longer satisfied, and (ii) there is only one share of 5%
Preferred Stock that has not been redeemed pursuant to this paragraph (6) or
converted pursuant to paragraph (8), that one outstanding share of 5% Preferred
Stock shall be redeemed, payable, at the option of the holder, in cash or in
Common Stock.
(d) If the Corporation is unable or shall fail to discharge its
obligation to redeem all outstanding shares or All But One Outstanding Share of
5% Preferred Stock pursuant to paragraphs 6(b) or 6(c) (each, a "Mandatory
Redemption Obligation"), the Mandatory Redemption Obligation shall be discharged
as soon as the Corporation is able to discharge such Mandatory Redemption
Obligation. If and so long as any Mandatory Redemption Obligation with respect
to the 5% Preferred Stock shall not be fully discharged, the Corporation shall
not (i) directly or indirectly, redeem, purchase, or otherwise acquire any
Parity Security or discharge any mandatory or optional redemption, sinking fund
or other similar obligation in respect of any Parity Securities (except in
connection with a redemption, sinking fund or other similar obligation to be
satisfied pro rata with the 5% Preferred Stock) or (ii) declare or make any
Junior Securities Distribution (other than dividends or distributions paid in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, Junior Securities), or, directly or indirectly, discharge any mandatory or
optional redemption, sinking fund or other similar obligation in respect of the
Junior Securities.
(e) Upon any redemption of 5% Preferred Stock, the Corporation shall
pay the redemption price and any accrued and unpaid dividends in arrears to, but
excluding, the applicable redemption date.
(f) For purposes of paragraph (6)(a) only, unless full cumulative
dividends (whether or not declared) on all outstanding shares of 5% Preferred
Stock and any Parity Securities shall have been paid or contemporaneously are
declared and paid or set apart for payment for all Dividend Periods terminating
on or prior to the applicable redemption date and notice has been given in
accordance with paragraph (7), none of the shares of 5% Preferred Stock shall be
redeemed, and no sum shall be set aside for such redemption, unless shares of 5%
Preferred Stock are redeemed pro rata and notice has previously been given in
accordance with paragraph (7).
11
<PAGE>
(7) Procedure for Redemption. (a) If the Corporation shall redeem
shares of 5% Preferred Stock pursuant to paragraph 6(a), notice of such
redemption shall be given by certified mail, return receipt requested, postage
prepaid, mailed not less than 30 days nor more than 60 days prior to the
redemption date, to each holder of record of the shares to be redeemed at such
holder's address as the same appears on the stock register of the Corporation
and confirmed by facsimile transmission to each holder of record if the
Corporation has been furnished with such facsimile address by the holder(s);
provided, however, that neither the failure to give such notice nor confirmation
nor any defect therein or in the mailing thereof, to any particular holder,
shall affect the sufficiency of the notice or the validity of the proceedings
for redemption with respect to the other holders. Any notice that was mailed in
the manner herein provided shall be conclusively presumed to have been duly
given on the date mailed whether or not the holder receives the notice. Each
such notice shall state: (i) the redemption date; (ii) the number of shares of
5% Preferred Stock to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of shares to be redeemed from such holder;
(iii) the amount payable, whether such amount shall be paid in Common Stock or
in cash and if the payment is in Common Stock an explanation of the
determination of the amount to be paid; (iv) the place or places where
certificates for such shares are to be surrendered or the notice under paragraph
(10)(d) should be sent for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date, except as otherwise provided herein.
(b) If notice has been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in providing
for the payment of the redemption price of the shares called for redemption and
dividends accrued and unpaid thereon, if any), (i) except as otherwise provided
herein, dividends on the shares of 5% Preferred Stock so called for redemption
shall cease to accrue, (ii) said shares shall no longer be deemed to be
outstanding, and (iii) all rights of the holders thereof as holders of the 5%
Preferred Stock shall cease (except the right to receive from the Corporation
the redemption price without interest thereon, upon surrender and endorsement
(or a constructive surrender under paragraph (10)(d)) of their certificates if
so required, and to receive any dividends payable thereon).
(c) Upon surrender (including a constructive surrender under
paragraph (10)(d)) in accordance with notice given pursuant to this paragraph
(7) of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be redeemed by the
Corporation at the redemption price aforesaid, plus any dividends payable
thereon. If fewer than all the outstanding shares of 5% Preferred Stock are to
be redeemed, the number of shares to be redeemed shall be determined by the
Board of Directors and the shares to be redeemed shall be selected pro rata
(with any fractional shares being rounded to the nearest whole share). In case
fewer than all the shares represented by any such certificate are redeemed, a
new certificate shall be issued, subject to a holder=s election under paragraph
(10)(d), representing the surrendered shares without cost to the holder thereof.
12
<PAGE>
(8) Conversion. (a) Subject to and upon compliance with the
provisions of this paragraph (8), a holder of shares of 5% Preferred Stock shall
have the right, at any time and from time to time, at such holder's option, to
convert any or All But One Outstanding Share or, if the Qualified Holding
Condition is not satisfied, all outstanding shares, of 5% Preferred Stock held
by such holder, but not fractions of shares, into fully paid and non-assessable
shares of Common Stock by surrendering such shares to be converted, such
surrender to be made in the manner provided in paragraph (8)(b) hereof. The
number of shares of Common Stock deliverable upon conversion of each share of 5%
Preferred Stock shall be equal to $1,000.00 divided by 125.00 (such quotient, as
adjusted as provided herein, the "Conversion Rate"). The Conversion Rate is
subject to adjustment from time to time pursuant to paragraph (8)(d) hereof. The
right to convert shares called for redemption pursuant to paragraph 6(a) shall
terminate at the close of business on the date immediately preceding the date
fixed for such redemption unless the Corporation shall default in making payment
of the amount payable upon such redemption, in which case such right of
conversion shall be reinstated. Upon conversion, any accrued and unpaid
dividends on the 5% Preferred Stock at the date of conversion shall be paid to
the holder thereof in accordance with the provisions of paragraph (4), except
that, upon conversion of All But One Outstanding Share or, if the Qualified
Holding Condition is not satisfied, all outstanding shares, of 5% Preferred
Stock held by such holder, all such accrued and unpaid dividends at the date of
conversion shall be paid in Common Stock at the applicable Conversion Rate.
(b) (i) In order to exercise the conversion privilege, the holder of
each share of 5% Preferred Stock to be converted shall surrender (or
constructively surrender in accordance with paragraph (10)(d)) the certificate
representing such share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Corporation, or to any transfer agent of the
Corporation previously designated by the Corporation to the holders of the 5%
Preferred Stock for such purposes, with a written notice of election to convert
completed and signed, specifying the number of shares to be converted. Such
notice shall state that the holder has satisfied any legal or regulatory
requirement for conversion, including compliance with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976; provided, however, that the Corporation
shall use its best efforts in cooperating with such holder to obtain such legal
or regulatory approvals to the extent its cooperation is necessary. Such notice
shall also state the name or names (with address and social security or other
taxpayer identification number, if applicable) in which the certificate or
certificates for Common Stock are to be issued. Unless the shares issuable on
conversion are to be issued in the same name as the name in which such share of
5% Preferred Stock is registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the Corporation,
duly executed by the holder or the holder's duly authorized attorney and an
amount sufficient to pay any transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have been paid).
All certificates representing shares of 5% Preferred Stock surrendered for
conversion shall be canceled by the Corporation or the transfer agent.
(ii) Subject to the last sentence of paragraph (8)(a), holders of
shares of 5% Preferred Stock at the close of business on a dividend payment
record date shall not be entitled to receive the dividend payable on such shares
on the corresponding Dividend Payment
13
<PAGE>
Date if such holder shall have surrendered (or made a constructive surrender
under paragraph (10)(d)) for conversion such shares at any time following the
preceding Dividend Payment Date and prior to such Dividend Payment Date.
(iii) Subject to a holder=s election under paragraph (10)(d), as
promptly as practicable after the surrender (including a constructive surrender
under paragraph (10)(d)) by a holder of the certificates for shares of 5%
Preferred Stock as aforesaid, the Corporation shall issue and shall deliver to
such holder, or on the holder's written order, a certificate or certificates
(which certificate or certificates shall have the legend set forth in paragraph
(10)(c)) for the whole number of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock issuable upon the conversion of such
shares in accordance with the provisions of this paragraph (8), and any
fractional interest in respect of a share of Common Stock arising on such
conversion shall be settled as provided in paragraph (8)(c). Upon conversion of
only a portion of the shares of 5% Preferred Stock represented by any
certificate, a new certificate shall be issued representing the unconverted
portion of the certificate so surrendered without cost to the holder thereof.
Subject to a holder's election under paragraph (10)(d), upon the surrender
(including a constructive surrender under paragraph (10)(d)) of certificates
representing shares of 5% Preferred Stock to be converted, such shares shall no
longer be deemed to be outstanding and all rights of a holder with respect to
such shares so surrendered shall immediately terminate except the right to
receive the Common Stock and other amounts payable pursuant to this paragraph
(8).
(iv) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the certificates
for shares of 5% Preferred Stock shall have been surrendered (or deemed
surrendered pursuant to an election under paragraph (10)(d)) and such notice
received by the Corporation as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall shall be deemed to have become the holder
or holders of record of the shares of Common Stock represented thereby at such
time on such date and such conversion shall be into a number of shares of Common
Stock equal to the product of the number of shares of 5% Preferred Stock
surrendered times the Conversion Rate in effect at such time on such date,
unless the stock transfer books of the Corporation shall be closed on that date,
in which event such Person or Persons shall be deemed to have become such holder
or holders of record at the close of business on the next succeeding day on
which such stock transfer books are open, but such conversion shall be based
upon the Conversion Rate in effect on the date upon which such shares shall have
been surrendered and such notice received by the Corporation.
(c) (i) No fractional shares or scrip representing fractions of
shares of Common Stock shall be issued upon conversion of the 5% Preferred
Stock. Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of 5% Preferred Stock,
the Corporation shall pay to the holder of such share an amount in cash based
upon the Current Market Price of Common Stock on the Trading Day immediately
preceding the date of conversion. If more than one share shall be surrendered
for conversion (or deemed surrendered under paragraph (10)(d)) at one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed
14
<PAGE>
on the basis of the aggregate number of shares of 5% Preferred Stock surrendered
(or deemed surrendered under paragraph (10)(d)) for conversion by such holder.
(ii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the certificates
for shares of 5% Preferred Stock shall have been surrendered (or deemed
surrendered under paragraph (10)(d)) and such notice received by the Corporation
as aforesaid, and the Person or Persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of the
shares of Common Stock represented thereby at such time on such date and such
conversion shall be into a number of shares of Common Stock equal to the product
of the number of shares of 5% Preferred Stock surrendered times the Conversion
Rate in effect at such time on such date, unless the stock transfer books of the
Corporation shall be closed on that date, in which event such Person or Persons
shall be deemed to have become such holder or holders of record at the close of
business on the next succeeding day on which such stock transfer books are open,
but such conversion shall be based upon the Conversion Rate in effect on the
date upon which such shares shall have been surrendered (or deemed surrendered
under paragraph (10)(d)) and such notice received by the Corporation.
(d) The Conversion Rate shall be adjusted from time to time as
follows:
(i) If the Corporation shall after the Issue Date (A) declare a
dividend or make a distribution on its Common Stock in shares of its Common
Stock, (B) subdivide its outstanding Common Stock into a greater number of
shares, (C) combine its outstanding Common Stock into a smaller number of
shares, or (D) effect any reclassification of its outstanding Common Stock, the
Conversion Rate in effect on the record date for such dividend or distribution,
or the effective date of such subdivision, combination or reclassification, as
the case may be, shall be proportionately adjusted so that the holder of any
share of 5% Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number and kind of shares of Common Stock that such
holder would have owned or have been entitled to receive after the happening of
any of the events described above had such share been converted immediately
prior to the record date in the case of a dividend or distribution or the
effective date in the case of a subdivision, combination or reclassification. An
adjustment made pursuant to this subparagraph (i) shall become effective
immediately after the opening of business on the Business Day next following the
record date (except as provided in paragraph (8)(h)) in the case of a dividend
or distribution and shall become effective immediately after the opening of
business on the Business Day next following the effective date in the case of a
subdivision, combination or reclassification. Adjustments in accordance with
this paragraph (8)(d)(i) shall be made whenever any event listed above shall
occur.
(ii) If the Corporation shall after the Issue Date fix a record date
for the issuance of rights or warrants (in each case, other than any rights
issued pursuant to a shareholder rights plan) to all holders of Common Stock
entitling them (for a period expiring within 45 days after such record date) to
subscribe for or purchase Common Stock (or securities convertible into
15
<PAGE>
Common Stock) at a price per share (or, in the case of a right or warrant to
purchase securities convertible into Common Stock, having an effective exercise
price per share of Common Stock, computed on the basis of the maximum number of
shares of Common Stock issuable upon conversion of such convertible securities,
plus the amount of additional consideration payable, if any, to receive one
share of Common Stock upon conversion of such securities) less than the 25-Day
Average Market Price on the date on which such issuance was declared or
otherwise announced by the Corporation (the "Determination Date"), then the
Conversion Rate in effect at the opening of business on the Business Day next
following such record date shall be adjusted so that the holder of each share of
5% Preferred Stock shall be entitled to receive, upon the conversion thereof,
the number of shares of Common Stock determined by multiplying (I) the
Conversion Rate in effect immediately prior to such record date by (II) a
fraction, the numerator of which shall be the sum of (A) the number of shares of
Common Stock outstanding on the close of business on the Determination Date and
(B) the number of additional shares of Common Stock offered for subscription or
purchase pursuant to such rights or warrants (or in the case of a right or
warrant to purchase securities convertible into Common Stock, the aggregate
number of additional shares of Common Stock into which the convertible
securities so offered are initially convertible), and the denominator of which
shall be the sum of (A) the number of shares of Common Stock outstanding on the
close of business on the Determination Date and (B) the number of shares that
the aggregate proceeds to the Corporation from the exercise of such rights or
warrants for Common Stock would purchase at such 25-Day Average Market Price on
such date (or, in the case of a right of warrant to purchase securities
convertible into Common Stock, the number of shares of Common Stock obtained by
dividing the aggregate exercise price of such rights or warrants for the maximum
number of shares of Common Stock issuable upon conversion of such convertible
securities, plus the aggregate amount of additional consideration payable, if
any, to convert such securities into Common Stock, by such 25-Day Average Market
Price). Such adjustment shall become effective immediately after the opening of
business on the Business Day next following such record date (except as provided
in paragraph (8)(h)). Such adjustment shall be made successively whenever such a
record date is fixed. In the event that after fixing a record date such rights
or warrants are not so issued, the Conversion Rate shall be readjusted to the
Conversion Rate which would then be in effect if such record date had not been
fixed. In determining whether any rights or warrants entitle the holders of
Common Stock to subscribe for or purchase shares of Common Stock at less than
such 25-Day Average Market Price, there shall be taken into account any
consideration received by the Corporation upon issuance and upon exercise of
such rights or warrants, the value of such consideration, if other than cash, to
be determined by the Board of Directors in good faith. In case any rights or
warrants referred to in this subparagraph (ii) shall expire unexercised after
the same have been distributed or issued by the Corporation (or, in the case of
rights or warrants to purchase securities convertible into Common Stock once
exercised, the conversion right of such securities shall expire), the Conversion
Rate shall be readjusted at the time of such expiration to the Conversion Rate
that would have been in effect if no adjustment had been made on account of the
distribution or issuance of such expired rights or warrants.
(iii) If the Corporation shall fix a record date for the making of a
distribution to
16
<PAGE>
all holders of its Common Stock of evidences of its indebtedness, shares of its
capital stock or assets (excluding regular cash dividends or distributions
declared in the ordinary course by the Board of Directors and dividends payable
in Common Stock for which an adjustment is made pursuant to paragraph (8)(d)(i))
or rights or warrants (in each case, other than any rights issued pursuant to a
shareholder rights plan) to subscribe for or purchase any of its securities
(excluding those rights and warrants issued to all holders of Common Stock
entitling them (for a period expiring within 45 days after such record date) to
subscribe for or purchase Common Stock or securities convertible into shares of
Common Stock, which rights and warrants are referred to in and treated under
subparagraph (ii) above) (any of the foregoing being hereinafter in this
subparagraph (iii) called the "Securities"), then in each such case the
Conversion Rate shall be adjusted so that the holder of each share of 5%
Preferred Stock shall be entitled to receive, upon the conversion thereof, the
number of shares of Common Stock determined by multiplying (I) the Conversion
Rate in effect immediately prior to the close of business on such record date by
(II) a fraction, the numerator of which shall be the 25-Day Average Market Price
per share of the Common Stock on such record date, and the denominator of which
shall be the 25-Day Average Market Price per share of the Common Stock on such
record date less the then-fair market value (as determined by the Board of
Directors in good faith, whose determinations shall be conclusive) of the
portion of the assets, shares of its capital stock or evidences of indebtedness
so distributed or of such rights or warrants applicable to one share of Common
Stock. Such adjustment shall be made successively whenever such a record date is
fixed; and in the event that after fixing a record date such distribution is not
so made, the Conversion Rate shall be readjusted to the Conversion Rate which
would then be in effect if such record date had not been fixed. Such adjustment
shall become effective immediately at the opening of business on the Business
Day next following (except as provided in paragraph (8)(h)) the record date for
the determination of shareholders entitled to receive such distribution. For the
purposes of this subparagraph (iii), the distribution of a Security, which is
distributed not only to the holders of the Common Stock on the date fixed for
the determination of shareholders entitled to such distribution of such
Security, but also is distributed with each share of Common Stock delivered to a
Person converting a share of 5% Preferred Stock after such determination date,
shall not require an adjustment of the Conversion Rate pursuant to this
subparagraph (iii); provided, however, that on the date, if any, on which a
Person converting a share of 5% Preferred Stock would no longer be entitled to
receive such Security with a share of Common Stock (other than as a result of
the termination of all such Securities), a distribution of such Securities shall
be deemed to have occurred and the Conversion Rate shall be adjusted as provided
in this subparagraph (iii) (and such day shall be deemed to be "the date fixed
for the determination of shareholders entitled to receive such distribution" and
"the record date" within the meaning of the three preceding sentences). If any
rights or warrants referred to in this subparagraph (iii) shall expire
unexercised after the same shall have been distributed or issued by the
Corporation, the Conversion Rate shall be readjusted at the time of such
expiration to the Conversion Rate that would have been in effect if no
adjustment had been made on account of the distribution or issuance of such
expired rights or warrants.
(iv) In case the Corporation shall, by dividend or otherwise,
distribute to all
17
<PAGE>
holders of its Common Stock cash in the amount per share that, together with the
aggregate of the per share amounts of any other cash distributions to all
holders of its Common Stock made within the 12 months preceding the date of
payment of such distribution and in respect of which no adjustment pursuant to
this paragraph (iv) has been made exceeds 5.0% of the 25-Day Average Market
Price immediately prior to the date of declaration of such dividend or
distribution (excluding any dividend or distribution in connection with the
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, and any cash that is distributed upon a merger, consolidation or
other transaction for which an adjustment pursuant to paragraph 8(e) is made),
then, in such case, the Conversion Rate shall be adjusted so that the same shall
equal the rate determined by multiplying the Conversion Rate in effect
immediately prior to the close of business on the Record Date for the cash
dividend or distribution by a fraction the numerator of which shall be the
Current Market Price of a share of the Common Stock on the Record Date and the
denominator shall be such Current Market Price less the per share amount of cash
so distributed during the 12-month period applicable to one share of Common
Stock, such adjustment to be effective immediately prior to the opening of
business on the Business Day following the Record Date; provided, however, that
in the event the denominator of the foregoing fraction is zero or negative, in
lieu of the foregoing adjustment, adequate provision shall be made so that each
holder of 5% Preferred Stock shall have the right to receive upon conversion, in
addition to the shares of Common Stock to which the holder is entitled, the
amount of cash such holder would have received had such holder converted each
share of 5% Preferred Stock at the beginning of the 12-month period. In the
event that such dividend or distribution is not so paid or made, the Conversion
Rate shall again be adjusted to be the Conversion Rate which would then be in
effect if such dividend or distribution had not been declared. Notwithstanding
the foregoing, if any adjustment is required to be made as set forth in this
paragraph (8)(d)(iv), the calculation of any such adjustment shall include the
amount of the quarterly cash dividends paid during the 12-month reference period
only to the extent such dividends exceed the regular quarterly cash dividends
paid during the 12 months preceding the 12-month reference period. For purposes
of this paragraph (8)(d)(iv), "Record Date" shall mean, with respect to any
dividend or distribution in which the holders of Common Stock have the right to
receive cash, the date fixed for determination of shareholders entitled to
receive such cash.
In the event that at any time cash distributions to holders of
Common Stock are not paid equally on all series of Common Stock, the provisions
of this paragraph 8(d)(iv) will apply to any cash dividend or cash distribution
on any series of Common Stock otherwise meeting the requirements of this
paragraph, and shall be deemed amended to the extent necessary so that any
adjustment required will be made on the basis of the cash dividend or cash
distribution made on any such series.
(v) In case of the consummation of a tender or exchange offer (other
than an odd-lot tender offer) made by the Corporation or any subsidiary of the
Corporation for all or any portion of the outstanding shares of Common Stock to
the extent that the cash and fair market value (as determined in good faith by
the Board of Directors of the Corporation, whose determination shall be
conclusive and shall be described in a resolution of such Board) of any other
consideration included in such payment per share of Common Stock at the last
time (the
18
<PAGE>
"Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as amended) exceed by more than 5.0%, with any smaller excess
being disregarded in computing the adjustment to the Conversion Rate provided in
this paragraph (8)(d)(v), the first reported sale price per share of the Common
Stock on the Trading Day next succeeding the Expiration Time, then the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to the
Expiration Time by a fraction the numerator of which shall be the sum of (x) the
fair market value (determined as aforesaid) of the aggregate consideration
payable to shareholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchase Shares")
and (y) the product of the number of shares of Common Stock outstanding (less
any Purchase Shares) on the Expiration Time and the first reported sale price of
the Common Stock on the Trading Day next succeeding the Expiration Time, and the
denominator of which shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the Expiration Time multiplied
by the first reported sale price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such adjustment to become effective immediately
prior to the opening of business on the day following the Expiration Time.
(vi) No adjustment in the Conversion Rate shall be required unless
such adjustment would require a cumulative increase or decrease of at least 1%
in the Conversion Rate; provided, however, that any adjustments that by reason
of this subparagraph (vi) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment until made, and provided
further that any adjustment shall be required and made in accordance with the
provisions of this paragraph (8) (other than this subparagraph (vi)) not later
than such time as may be required in order to preserve the tax-free nature of a
distribution for United States income tax purposes to the holders of shares of
5% Preferred Stock or Common Stock. Notwithstanding any other provisions of this
paragraph (8), the Corporation shall not be required to make any adjustment of
the Conversion Rate for the issuance of any shares of Common Stock pursuant to
any plan providing for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of additional optional amounts
in shares of Common Stock under such plan. All calculations under this paragraph
(8) shall be made to the nearest dollar or to the nearest 1/1,000 of a share, as
the case may be. Anything in this paragraph (8)(d) to the contrary
notwithstanding, the Corporation shall be entitled, to the extent permitted by
law, to make such adjustments in the Conversion Rate, in addition to those
required by this paragraph (8)(d), as it in its discretion shall determine to be
advisable in order that any stock dividends subdivision of shares,
reclassification or combination of shares, distribution or rights or warrants to
purchase stock or securities, or a distribution of other assets (other than cash
dividends) hereafter made by the Corporation to its shareholders shall not be
taxable.
(vii) In the event that, at any time as a result of shares of any
other class of capital stock becoming issuable in exchange or substitution for
or in lieu of shares of Common Stock or as a result of an adjustment made
pursuant to the provisions of this paragraph (8)(d), the holder of 5% Preferred
Stock upon subsequent conversion shall become entitled to receive any
19
<PAGE>
shares of capital stock of the Corporation other than Common Stock, the number
of such other shares so receivable upon conversion of any shares of 5% Preferred
Stock shall thereafter be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions contained
herein.
(e) (i) If the Corporation shall be a party to any transaction
(including without limitation, a merger, consolidation, sale of all or
substantially all of the Corporation's assets or recapitalization of the Common
Stock and excluding any transaction as to which paragraph (8)(d)(i) applies)
(each of the foregoing being referred to herein as a "Transaction"), in each
case as a result of which shares of Common Stock shall be converted into the
right to receive stock, securities or other property (including cash or any
combination thereof), there shall be no adjustment to the Conversion Rate but
each share of 5% Preferred Stock which is not converted into the right to
receive stock, securities or other property in connection with such Transaction
shall thereafter be convertible into the kind and amount of shares of stock,
securities and other property (including cash or any combination thereof)
receivable upon the consummation of such Transaction by a holder of that number
of shares or fraction thereof of Common Stock into which one share of 5%
Preferred Stock was convertible immediately prior to such Transaction, assuming
such holder of Common Stock (i) is not a Person with which the Corporation
consolidated or into which the Corporation merged or which merged into the
Corporation or to which such sale or transfer was made, as the case may be
("Constituent Person"), or an affiliate of a Constituent Person and (ii) failed
to exercise his rights of election, if any, as to the kind or amount of stock
securities and other property (including cash) receivable upon such Transaction
(provided that if the kind or amount of stock, securities and other property
(including cash) receivable upon such Transaction is not the same for each share
of Common Stock of the Corporation held immediately prior to such Transaction by
other than a Constituent Person or an affiliate thereof and in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purpose of this paragraph (8)(e) the kind and amount of stock,
securities and other property (including cash) receivable upon such Transaction
by each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). The provisions
of this paragraph (8)(e) shall similarly apply to successive Transactions.
(ii) Notwithstanding anything herein to the contrary , if the
Corporation is reorganized such that the Common Stock is exchanged for the
common stock of a new entity ("Holdco") whose common stock is traded on the
Nasdaq National Market or another recognized securities exchange or automated
quotation system, then the Corporation, by notice to and consultation with the
holders of the 5% Preferred Stock, may cause the exchange of this 5% Preferred
Stock for preferred stock of Holdco having the same terms and conditions as set
forth herein; provided that the rights attaching to the preferred stock of
Holdco shall be adjusted so as to comply with the local law of the country of
incorporation of Holdco or the new share structure of Holdco subject to such
rights effectively giving the same economic rights as the 5% Preferred Stock
(including for these purposes any resultant change in the tax treatment for the
holders of such stock).
20
<PAGE>
(f) If:
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock; or
(ii) the Corporation shall authorize the granting to the holders of
the Common Stock of rights or warrants to subscribe for or purchase any
shares of any class or any other rights or warrants; or
(iii) there shall be any subdivision, combination or
reclassification of the Common Stock or any consolidation or merger to
which the Corporation is a party and for which approval of any
shareholders of the Corporation is required, or the sale or transfer of
all or substantially all of the assets of the Corporation as an entirety;
or
(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
then the Corporation shall cause to be filed with any transfer agent designated
by the Corporation pursuant to paragraph (8)(b) and shall cause to be mailed to
the holders of shares of the 5% Preferred Stock at their addresses as shown on
the stock records of the Corporation, as promptly as possible, but at least ten
days prior to the applicable date hereinafter specified, a notice stating (A)
the date on which a record is to be taken for the purpose of such dividend (or
such other distribution) or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights or warrants are to be determined or (B)
the date on which such subdivision, combination, reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up or
other action is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such subdivision, combination, reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution or winding up. Failure to give
or receive such notice or any defect therein shall not affect the legality or
validity of any distribution, right, warrant subdivision, combination,
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, winding up or other action, or the vote upon any of the foregoing.
(g) Whenever the Conversion Rate is adjusted as herein provided, the
Corporation shall prepare an officer's certificate with respect to such
adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and
the effective date of such adjustment and shall mail a copy of such officer's
certificate to the holder of each share of 5% Preferred Stock at such holder's
last address as shown on the stock records of the Corporation. If the
Corporation shall have designated a transfer agent pursuant to paragraph (8)(b),
it shall also promptly file with such transfer agent an officer's certificate
setting forth the Conversion Rate after such adjustment and setting forth a
brief statement of the facts requiring such adjustment which certificate shall
be conclusive evidence of the correctness of such adjustment.
21
<PAGE>
(h) In any case in which paragraph (8)(d) provides that an
adjustment shall become effective on the day next following a record date for an
event, the Corporation may defer until the occurrence of such event (i) issuing
to the holder of any share of 5% Preferred Stock converted after such record
date and before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment required by such
event over and above the Common Stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such holder any amount in
cash in lieu of any fraction pursuant to paragraph (8)(c).
(i) For purposes of this paragraph (8), the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Corporation. The
Corporation shall not pay a dividend or make any distribution on shares of
Common Stock held in the treasury of the Corporation.
(j) There shall be no adjustment of the Conversion Rate in case of
the issuance of any stock of the Corporation in a reorganization, acquisition or
other similar transaction except as specifically set forth in this paragraph
(8). If any single action would require adjustment of the Conversion Rate
pursuant to more than one subparagraph of this paragraph (8), only one
adjustment shall be made and such adjustment shall be the amount of adjustment
that has the highest absolute value.
(k) If the Corporation shall take any action affecting the Common
Stock, other than action described in this paragraph (8), that in the opinion of
the Board of Directors materially adversely affects the conversion rights of the
holders of the shares of 5% Preferred Stock, the Conversion Rate may be
adjusted, to the extent permitted by law, in such manner, if any, and at such
time, as the Board of Directors may determine to be equitable in the
circumstances; provided that the provisions of this paragraph (8)(k) shall not
affect any rights the holders of 5% Preferred Stock may have at law or in
equity.
(l) (i) The Corporation covenants that it will at all times reserve
and keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, for the purpose of effecting conversion of
the 5% Preferred Stock, the full number of shares of Common Stock deliverable
upon the conversion of all outstanding shares of 5% Preferred Stock not
theretofore converted. For purposes of this paragraph (8)(l) the number of
shares of Common Stock that shall be deliverable upon the conversion of all
outstanding shares of 5% Preferred Stock shall be computed as if at the time of
computation all such outstanding shares were held by a single holder.
(ii) The Corporation covenants that any shares of Common Stock
issued upon conversion of the 5% Preferred Stock shall be duly authorized,
validly issued, fully paid and non-assessable. Before taking any action that
would cause an adjustment increasing the Conversion Rate such that the quotient
of $1,000.00 and the Conversion Rate (which quotient initially shall
22
<PAGE>
be $125.00) would be reduced below the then-par value of the shares of Common
Stock deliverable upon conversion of the 5% Preferred Stock, the Corporation
will take any corporate action that, in the opinion of its counsel, may be
necessary in order that the Corporation may validly and legally issue fully paid
and non-assessable shares of Common Stock based upon such adjusted Conversion
Rate.
(iii) Prior to the delivery of any securities that the Corporation
shall be obligated to deliver upon conversion of the 5% Preferred Stock, the
Corporation shall comply with all applicable federal and state laws and
regulations which required action to be taken by the Corporation.
(m) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock or other securities or property on conversion of the 5%
Preferred Stock pursuant hereto; provided, however, that the Corporation shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock or other securities
or property in a name other than that of the holder of the 5% Preferred Stock to
be converted and no such issue or delivery shall be made unless and until the
Person requesting such issue or delivery has paid to the Corporation the amount
of any such tax or established, to the satisfaction of the Corporation, that
such tax has been paid.
(n) No adjustment in the Conversion Rate need be made for a
transaction referred to in paragraph (8)(d)(i) through (v) above to the extent
that all holders of 5% Preferred Stock are entitled to participate in such
transaction pursuant to paragraph 4(b).
(9) Voting Rights. (a) The holders of record or shares of 5%
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this paragraph (9) or as otherwise provided by law.
(b) If and whenever either (i) six quarterly dividends (whether or
not consecutive) payable on the 5% Preferred Stock have not been paid in full,
(ii) the Corporation shall have failed to discharge its Mandatory Redemption
Obligation, or (iii) there occurs a Bankruptcy Event (any such event described
in the preceding subparagraphs (i) through (iii) being hereinafter referred to
as a "Trigger Event"), a vote of the holders of shares of 5% Preferred Stock,
voting as a single class, will be required on all matters brought to
shareholders of the Corporation. Whenever all arrears in dividends on the 5%
Preferred Stock then outstanding shall have been paid and dividends thereon for
the current quarterly dividend period shall have been paid or declared and set
apart for payment, the Corporation shall have fulfilled its Mandatory Redemption
Obligation, and all Bankruptcy Events shall have been cured (the "Trigger Event
Cure"), then the right of the holders of the 5% Preferred Stock to vote as
described in the this paragraph 9(b) shall cease (but subject always to the same
provisions for the vesting of such voting rights if any Trigger Event occurs).
23
<PAGE>
(c) In addition to the power to elect a director in accordance with
paragraph (9)(d), upon the occurrence of any Trigger Event, the number of
directors then constituting the Board of Directors shall be increased by two and
the holders of shares of 5% Preferred Stock, together with the holders of shares
of every other series of preferred stock (including, without limitation,
Additional Preferred) upon which like rights to vote for the election of two
additional directors have been conferred and are exercisable (resulting from
either the failure to pay dividends or the failure to redeem) (any such other
series is referred to as the "Preferred Shares"), voting as a single class
regardless of series, shall be entitled to elect the two additional directors to
serve on the Board of Directors at any annual meeting of stockholders or special
meeting held in place thereof, or at a special meeting of the holders of 5%
Preferred Stock and the Preferred Shares, called as hereinafter provided.
Whenever all arrears in dividends on the Preferred Shares then outstanding shall
have been paid and dividends thereon for the current quarterly dividend period
shall have been paid or declared and set apart for payment, the Corporation
shall have fulfilled any redemption obligation in respect of the Preferred
Shares, and the Trigger Event Cure has occurred, then the right of the holders
of the 5% Preferred Stock and the Preferred Shares to elect such additional two
directors shall cease (but subject always to the same provisions for the vesting
of such voting rights if any Trigger Event occurs), and the terms of office of
all persons elected as directors by the holders of 5% Preferred Stock and the
Preferred Shares shall forthwith terminate and the number of members of the
Board of Directors shall be reduced accordingly. At any time after such voting
power shall have been so vested in holders of shares of 5% Preferred Stock and
the Preferred Shares, the Secretary of the Corporation may, and upon the written
request of any holder of 5% Preferred Stock (addressed to the secretary at the
principal office of the Corporation) shall, call a special meeting of the
holders of the 5% Preferred Stock and of the Preferred Shares for the election
of the two directors to be elected by them as herein provided, such call to be
made by notice similar to that provided in the Bylaws of the Corporation for a
special meeting of the stockholders or as required by law. If any such special
meeting required to be called as above provided shall not be called by the
Secretary of the Corporation within 20 days after receipt of any such request,
then any holder of shares of 5% Preferred Stock may call such meeting, upon the
notice above provided, and for that purpose shall have access to the stock books
of the Corporation. The directors elected at any such special meeting shall hold
office until the next annual meeting of the stockholders or special meeting held
in lieu thereof if such office shall not have previously terminated as above
provided. If any vacancy shall occur among the directors elected by the holders
of the 5% Preferred Stock and the Preferred Shares, a successor shall be elected
by the Board of Directors, upon the nomination of the then-remaining director
elected by the holders of the 5% Preferred Stock and the Preferred Shares or the
successor of such remaining director, to serve until the next annual meeting of
the stockholders or special meeting held in place thereof if such office shall
not have previously terminated as provided above.
(d) (i) In addition to any other rights granted in this paragraph
(9) to elect directors or to vote on any matter submitted to stockholders, all
holders of shares of 5% Preferred Stock, voting separately as a class, shall
have the right to elect one director to serve on the Board of Directors, so long
as the Qualified Holding Condition is satisfied. Immediately upon failure of
24
<PAGE>
the Qualified Holding Condition, this paragraph (9)(d) shall be of no further
effect and the rights granted herein to the holders of the 5% Preferred Stock
shall cease to apply.
(ii) Such voting rights of the holders of shares of 5% Preferred
Stock may be exercised initially at a special meeting called pursuant to
subparagraph (iii) of this paragraph (9)(d) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders, provided that
such voting rights may not be exercised at any meeting unless holders of
one-third of the outstanding shares of 5% Preferred Stock shall be present at
such meeting in person or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of shares of 5%
Preferred Stock of such rights. At any meeting at which the holders of shares of
5% Preferred Stock shall exercise such voting rights initially, they shall have
the right, voting separately as a class, to elect one director to fill one
vacancy in the Board of Directors, if any such vacancy may then exist, or, if
such right is exercised at an annual meeting, to elect one director. If
necessary, the holders of the shares of 5% Preferred Stock shall have the right
to make such increase in the number of members of the Board of Directors as
shall be necessary to permit them to so elect one director.
(iii) Unless the holders of shares of 5% Preferred Stock shall have
previously exercised their right to elect one director, the Board of Directors
shall order, and any stockholder or stockholders owning in the aggregate not
less than 25% of the total number of the shares of 5% Preferred Stock
outstanding may request, the calling of a special meeting of the holders of
shares of 5% Preferred Stock, which meeting shall thereupon promptly be called
by the Secretary of the Corporation. Notice of such meeting and of any annual
meeting at which holders of shares of 5% Preferred Stock are entitled to vote
pursuant to this paragraph (9)(d) shall be given to each holder of record of
shares of 5% Preferred Stock by mailing a copy of such notice to him at his last
address as the same appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than 20 days and not later then 60 days after
such order or request or in default of the calling of such meeting within 60
days after such order or request, such meeting may be called on similar notice
by any stockholder or stockholders owning in the aggregate not less than 25% of
the total number of outstanding shares of 5% Preferred Stock.
(iv) The holders of shares of Common Stock and shares of 5%
Preferred Stock, and other classes or series of stock of the Corporation, if
applicable, shall continue to be entitled to elect all the directors until
holders of the shares of 5% Preferred Stock shall have exercised their right to
elect one director, voting as a separate class, after the exercise of which
right (x) the director so elected by the holders of shares of 5% Preferred Stock
shall continue in office until his successor shall have been elected by such
holders, and (y) any vacancy in the Board of Directors may (except as provided
in paragraph (9)(d)(ii)) be filled by vote of a majority of the remaining
directors theretofore elected by the holders of the class of capital stock which
elected the director whose office shall have become vacant. References in this
paragraph (9)(d)(iv) to directors elected by the holders of a particular class
of capital stock shall include directors elected by such directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
25
<PAGE>
(e) Without the written consent of the holders of at least 66 2/3%
in liquidation preference of the outstanding shares of 5% Preferred Stock or the
vote of holders of at least 66 2/3% in liquidation preference of the outstanding
shares of 5% Preferred Stock at a meeting of the holders of 5% Preferred Stock
called for such purpose, the Corporation will not amend, alter or repeal any
provision of the Certificate of Incorporation (by merger or otherwise) so as to
adversely affect the preferences, rights or powers of the 5% Preferred Stock;
provided that any such amendment that changes the dividend payable on, the
Conversion Rate with respect to, or the liquidation preference of the 5%
Preferred Stock shall require the affirmative vote at a meeting of holders of 5%
Preferred Stock called for such purpose or written consent of the holder of each
share of 5% Preferred Stock.
(f) Without the written consent of the holders of at least 66 2/3%
in liquidation preference of the outstanding shares of 5% Preferred Stock or the
vote of holders of at least 66 2/3% in liquidation preference of the outstanding
shares of 5% Preferred Stock at a meeting of such holders called for such
purpose, the Corporation will not issue any additional 5% Preferred Stock or
create, authorize or issue any Parity Securities or Senior Securities or
increase the authorized amount of any such other class or series; provided that
this paragraph 9(f) shall not limit the right of the Corporation to (i) issue
Additional Preferred as dividends pursuant to paragraph 4 or (ii) to issue
Parity Securities or Senior Securities in order to refinance, redeem or refund
the 13% Preferred or the 5 1/4% Preferred, provided that the maximum accrual
value (i.e., the sum of stated value and maximum amount payable in kind over the
term from issuance to first date of mandatory redemption or redemption at the
option of the holder) of such Parity Securities may not exceed the maximum
accrual value of the 13% Preferred or the 5 1/4% Preferred, respectively.
(g) In exercising the voting rights set forth in this paragraph (9),
each share of 5% Preferred Stock shall have one vote per share, except that when
any other series of preferred stock shall have the right to vote with the 5%
Preferred Stock as a single class on any matter, then the 5% Preferred Stock and
other series shall have with respect to such matters one vote per $1,000 of
stated liquidation preference. Except as otherwise required by applicable law or
as set forth herein, the shares of 5% Preferred Stock shall not have any
relative, participating, optional or other special voting rights and powers and
the consent of the holders thereof shall not be required for the taking of any
corporate action.
(h) Nothing in this paragraph (9) shall be in derogation of any
rights that a holder of shares of 5% Preferred Stock may have in his capacity as
a holder of shares of Common Stock.
(10) General Provisions. (a) The headings of the paragraphs,
subparagraphs, clauses and subclauses of this Certificate of Designation are for
convenience of reference only and shall not define, limit or affect any of the
provisions hereof.
(b) If the Corporation shall have failed to declare or pay dividends
as required pursuant to paragraph (4) hereof or shall have failed to discharge
any obligation to redeem shares
26
<PAGE>
of 5% Preferred Stock pursuant to paragraph (6) hereof, the holders of shares of
5% Preferred Stock shall be entitled to receive, in addition to all other
amounts required to be paid hereunder, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of dividends, cash
dividends on the aggregate dividends which the Corporation shall have failed to
declare or pay or the redemption price, together with accrued and unpaid
dividends thereon, as the case may be, at a rate of 2% per quarter, compounded
quarterly, for the period during which the failure to pay dividends or failure
to discharge an obligation to redeem shares of 5% Preferred Stock shall
continue.
(c) The shares of 5% Preferred Stock shall bear the following
legend:
THE SHARES OF PREFERRED STOCK, PAR VALUE $.01, OF THE COMPANY (THE
"PREFERRED STOCK") (AND THE SHARES OF COMMON STOCK, PAR VALUE $.01,
OF THE COMPANY (THE "COMMON STOCK") INTO WHICH THE PREFERRED STOCK
MAY BE CONVERTED) REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM REGISTRATION
REQUIREMENTS. THE TRANSFER OF THE PREFERRED STOCK (OR COMMON STOCK,
IF THE PREFERRED STOCK HAS BEEN CONVERTED) EVIDENCED BY THIS
CERTIFICATE IS SUBJECT TO THE RESTRICTIONS ON TRANSFER PROVIDED FOR
IN THE PURCHASE AGREEMENT, DATED JULY 15, 1999, AS MAY BE AMENDED,
AMONG THE CORPORATION AND FRANCE TELECOM, A COPY OF WHICH IS ON FILE
AT THE EXECUTIVE OFFICES OF THE CORPORATION AND WILL BE FURNISHED
WITHOUT CHARGE TO THE HOLDER OF SUCH PREFERRED STOCK UPON WRITTEN
REQUEST TO THE CORPORATION.
THE SHARES OF PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE
CONVERTED INTO COMMON STOCK, PAR VALUE $.01, OF THE COMPANY (THE
"COMMON STOCK") OR REDEEMED IN EXCHANGE FOR COMMON STOCK WITHOUT THE
SURRENDER AND EXCHANGE OF THIS CERTIFICATE FOR CERTIFICATES
REPRESENTING SUCH COMMON STOCK. A NOTICE OF SUCH CONVERSION EVENT,
IF ANY, IS ON FILE AT THE EXECUTIVE OFFICES OF THE CORPORATION AND
WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF THIS CERTIFICATE
UPON WRITTEN REQUEST TO THE CORPORATION.
The shares of Common Stock issuable upon conversion of the 5%
Preferred Stock shall bear the following legend:
27
<PAGE>
THE SHARES OF COMMON STOCK, PAR VALUE $.01, OF THE COMPANY (THE
"COMMON STOCK") REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM REGISTRATION
REQUIREMENTS. THE TRANSFER OF THE COMMON STOCK EVIDENCED BY THIS
CERTIFICATE IS SUBJECT TO THE RESTRICTIONS ON TRANSFER PROVIDED FOR
IN THE PURCHASE AGREEMENT, DATED JULY 15, 1999, AS MAY BE AMENDED,
AMONG THE CORPORATION AND FRANCE TELECOM, A COPY OF WHICH IS ON FILE
AT THE EXECUTIVE OFFICES OF THE CORPORATION AND WILL BE FURNISHED
WITHOUT CHARGE TO THE HOLDER OF SUCH COMMON STOCK UPON WRITTEN
REQUEST TO THE CORPORATION.
(d) (i) Whenever in connection with any conversion or redemption of
the 5% Preferred Stock in exchange for Common Stock the holder is required to
surrender certificates representing such shares of 5% Preferred Stock, such
holder may, by written notice to the Corporation and its transfer agent, elect
to retain such certificates. In such case, the certificates so retained by the
holder thereof shall be deemed to represent, at and from the date of such
conversion or redemption, the number of shares of Common Stock issuable upon
such conversion or redemption (subject to paragraph (8)(c), if applicable), and
shall be so reflected upon the books of the Corporation and its transfer agent.
(ii) (A) A holder who has previously elected to retain certificates
representing the 5% Preferred Stock in accordance with paragraph (10)(d)(i) upon
conversion or redemption may subsequently elect to receive certificates
representing the shares of Common Stock issued upon such conversion or
redemption. To receive certificates representing such shares of Common Stock,
the holder of such certificate shall surrender it, duly endorsed or assigned to
the Corporation or in blank, at the office of the Corporation, or to any
transfer agent of the Corporation previously designated by the Corporation for
such purposes, with a written notice of that election.
(B) Unless the certificates to be issued shall be registered in the
same name as the name in which such surrendered certificates are registered,
each certificate so surrendered shall be accompanied by instruments of transfer,
in form satisfactory to the Corporation, duly executed by the holder or the
holder's duly authorized attorney and an amount sufficient to pay any transfer
or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid). All certificates so surrendered
shall be canceled by the Corporation or the transfer agent.
(C) As promptly as practicable after the surrender by a holder of
such certificates, the Corporation shall issue and shall deliver to such holder,
or on the holder's written
28
<PAGE>
order, a certificate or certificates (which certificate or certificates shall
have the legend set forth in paragraph (10)(c)) for the number of duly
authorized, validly issued, fully paid and non-assessable shares of Common Stock
represented by the certificates so surrendered.
(11) Shareholder Rights Plan. The shares of 5% Preferred Stock shall
be entitled to the benefits of a number of rights issuable under the Rights
Agreement, dated as of October 1, 1993, as amended, between the Company and
Continental Stock Transfer & Trust Company or any successor plan of similar
purpose and effect ("Rights") equal to the number of shares of Common Stock then
issuable upon conversion of the 5% Preferred Stock at the prevailing Conversion
Rate. Any shares of Common Stock deliverable upon conversion of a share of 5%
Preferred Stock or upon payment of a dividend shall be accomplished by a Right."
29
EXECUTION VERSION
CONFORMED COPY
CERTIFICATE OF DESIGNATION
OF THE VOTING POWERS, DESIGNATION,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF THE
5% CUMULATIVE PARTICIPATING CONVERTIBLE
PREFERRED STOCK, SERIES B OF
NTL INCORPORATED
------------------------------
PURSUANT TO SECTION 151(g) OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------------------
The undersigned, Executive Vice President, General Counsel
and Secretary of NTL Incorporated, a Delaware corporation (the "Corporation"),
HEREBY CERTIFIES that the Board of Directors, in accordance with Article FOURTH,
Section B of the Corporation's Restated Certificate of Incorporation and Section
151(g) of the Delaware General Corporation Law (the "DGCL"), has authorized the
creation of the series of Preferred Stock hereinafter provided for and has
established the dividend, redemption, conversion and voting rights thereof and
has adopted the following resolution, creating the following new series of the
Corporation's Preferred Stock:
"BE IT RESOLVED that, pursuant to authority expressly granted
to the Board of Directors by the provisions of Article FOURTH, Section B of the
Restated Certificate of Incorporation of the Corporation and Section 151(g) of
the DGCL, there is hereby created and authorized the issuance of a new series of
the Corporation's Preferred Stock, par value $.01 per share ("Preferred Stock"),
with the following powers, designations, dividend rights, voting powers, rights
on liquidation, conversion rights, redemption rights and other preferences and
relative, participating, optional or other special rights and with the
qualifications, limitations or restrictions on the shares of such series (in
addition to the powers, designations, preferences and relative, participating,
optional or other special rights and the qualifications, limitations or
restrictions thereof set forth in the Restated Certificate of Incorporation that
are applicable to each series of Preferred Stock) hereinafter set forth.
(1) Number and Designation. 2,000,000 shares of the Preferred
Stock of the Corporation shall be designated as 5% Cumulative Participating
Convertible Preferred Stock, Series B (the "5% Preferred Stock, Series B"), and
no other shares of Preferred Stock shall be designated as 5% Preferred Stock,
Series B.
<PAGE>
(2) Definitions. For purposes of the 5% Preferred Stock,
Series B, the following terms shall have the meanings indicated:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Additional Preferred" shall have the meaning set forth in
paragraph (4)(a) hereof.
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with such specified Person.
"All But One Outstanding Share" shall have the meaning set
forth in paragraph (6)(c) hereof.
"Alliance" means any joint venture, co-ownership or
cooperation agreement or similar relationship with any
telecommunications provider.
"Authorized Officer" includes any of the following officers
of France Telecom S.A.: the Chief Executive Officer, the Chief
Financial Officer, the General Counsel, the Executive Director -
Finance and Human Resources, or the Treasurer.
"Bankruptcy Event" shall mean either of the following: (I) a
court having jurisdiction in the premises entering a decree or order
for (A) relief in respect of any Major Entity in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now
or hereinafter in effect, (B) appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of any
Major Entity or for all or substantially all of the property and
assets of any Major Entity or (C) the winding up or liquidation of the
affairs of any Major Entity; or (II) any Major Entity (A) commencing a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereinafter in effect, or consenting to the entry
of an order for relief in an involuntary case under any such law, (B)
consenting to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of any Major Entity, or for all or substantially all of the
property and assets of any Major Entity or (C) effecting any general
assignment for the benefit of creditors.
"Benefit Plan" means each of the Company's and Significant
Subsidiaries' plan, program, policy, payroll practice, contract,
agreement or other arrangement providing for compensation, retirement
benefits, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits of
any kind, whether formal or informal, funded or unfunded, written or
oral and whether or not legally binding, including, without
limitation, each "employee benefit plan", within the meaning
2
<PAGE>
of Section 3(3) of ERISA and each "multi-employer plan" within the
meaning of Section 3(37) of 4001(a)(3) of ERISA.
"Board of Directors" shall mean the board of directors of the
Corporation. Except as such term is used in paragraph (9), "Board of
Directors" shall also mean the Executive Committee, if any, of such
board of directors or any other committee duly authorized by such
board of directors to perform any of its responsibilities with respect
to the 5% Preferred Stock, Series B.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which state or federally chartered banking
institutions in New York, New York or Paris, France are not required
to be open.
"By-laws" means the by-laws of the Corporation as amended as
of the date hereof and as may be amended from time to time, provided
that such amendment does not adversely affect the rights of the
holders of the 5% Preferred Stock, Series B.
"Common Stock" shall mean the Corporation's Common Stock, par
value $.01 per share.
"Conflicting Investment" means any investment of funds or
assets of the Corporation or any Corporation Subsidiary directly or
indirectly in any French Operator or in any joint venture entity which
is partly owned by any French Operator (the joint venture entity being
known as the "Entity"), in connection with operations in France of
such French Operator or Entity other than any purchase (either in a
stock or asset purchase transaction) for cash by the Corporation
and/or any Corporation Subsidiary of not less than 51% (based on the
fair market value and voting power) of any company or business from
any French Operator or the investment of funds or assets in any Entity
in which the Corporation and/or any Corporation Subsidiary will,
following such investment, own at least 51% (based on fair market
value and voting power) of such Entity.
"Constituent Person" shall have the meaning set forth in
paragraph (8)(e)(i) hereof.
"Conversion Rate" shall have the meaning set forth in
paragraph (8)(a) hereof.
"Convertible Debentures" means the 7% Convertible
Subordinated Notes due 2008 of NTL Communications Corp., a Delaware
corporation.
"Core Business Assets" means assets that are used in a
business that operates directly or indirectly, or holds a license to
operate (i) a cable system or service, (ii) a
3
<PAGE>
fixed-line telephone or telecommunications system or service or (iii)
a broadcasting transmission system or service.
"Corporation" shall have the meaning set forth in the
preamble.
"Corporation Subsidiary" or "Corporation Subsidiaries" means
any Subsidiary or all of the Subsidiaries of the Corporation,
respectively.
"Corporation Systems" means all computers, hardware,
software, systems, facilities and equipment (including, without
limitation, cable, wireline, wireless, microwave, satellite and any
other telecommunications equipment and facilities, and embedded
microcontrollers in noncomputer equipment) owned, leased or licensed
by the Corporation or any Significant Subsidiary and material to, or
necessary for, the Corporation or any Significant Subsidiary to carry
on its business as currently conducted or intended to be conducted.
"Current Market Price" of publicly traded shares of Common
Stock or any other class of capital stock or other security of the
Corporation or any other issuer for any day shall mean the last
reported sale price for such security on the principal exchange or
quotation system on which such security is listed or traded. If the
security is not admitted for trading on any national securities
exchange or the Nasdaq National Market, "Current Market Price" shall
mean the average of the last reported closing bid and asked prices
reported by the Nasdaq as furnished by any member in good standing of
the National Association of Securities Dealers, Inc., selected from
time to time by the Corporation for that purpose or as quoted by the
National Quotation Bureau Incorporated. In the event that no such
quotation is available for such day, the Current Market Price shall be
the average of the quotations for the last five Trading Days for which
a quotation is available within the last 30 Trading Days prior to such
day. In the event that five such quotations are not available within
such 30-Trading Day period, the Board of Directors shall be entitled
to determine the Current Market Price on the basis of such quotations
as it reasonably considers appropriate.
"Determination Date" shall have the meaning set forth in
paragraph (8)(d)(ii) hereof.
"Diluted Shares" means, as of any applicable time, shares of
Common Stock issued and outstanding as of such time plus shares of
Common Stock issuable upon conversion, redemption, exchange, exercise
of, or as a dividend declared as of the time of measurement with
respect to, any shares of preferred stock, options, warrants,
debentures and other securities or any subscription rights.
"Dividend Payment Date" shall mean ___________, ___________,
___________ and ___________ of each year, commencing on ___________,
1999; provided, however,
4
<PAGE>
that, if any Dividend Payment Date falls on any day other than a
Business Day, the dividend payment due on such Dividend Payment Date
shall be paid on the Business Day immediately following such Dividend
Payment Date.
"Dividend Periods" shall mean quarterly dividend periods
commencing on _____________, ____________, __________ and ___________
of each year and ending on and including the day preceding the first
day of the next succeeding Dividend Period (other than the initial
Dividend Period which shall commence on the Issue Date and end on and
include ________, 1999).
"Encumbrance" means any security interest, pledge, mortgage,
lien (including, without limitation, environmental and tax liens),
charge, encumbrance, adverse claim, preferential arrangement or
restriction of any kind, including, without limitation, any
restriction on the use, voting, transfer, receipt of income or other
exercise of any attributes of ownership, but excluding Permitted
Encumbrances.
"Equity Securities" shall have the meaning set forth in
paragraph (10).
"ERISA" means Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder.
"Expiration Time" shall have the meaning set forth in
paragraph (8)(d)(v) hereof.
"5 1/4% Preferred" shall have the meaning set forth in
paragraph (3)(d) hereof.
"5% Preferred Stock, Series A" shall have the meaning set
forth in paragraph (3)(d) hereof.
"5% Preferred Stock, Series B" shall have the meaning set
forth in paragraph (1) hereof.
"5% Series A" shall have the meaning set forth in paragraph
(3)(d) hereof.
"5 1/4% Series A" shall have the meaning set forth in
paragraph (3)(d) hereof.
"French Operator" means any significant provider of
telecommunications services in France (or that provider's Affiliates)
or any Person whose primary line of business in France is to provide
telecommunications services (or such Person's Affiliates) other than
the Corporation or its Affiliates.
5
<PAGE>
"GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time and applied
consistently throughout the periods involved.
"Governmental Authority" means any United States or foreign
federal, state, provincial, local, supranational government,
governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"Holdco" shall have the meaning set forth in paragraph
8(e)(ii) hereof.
"Indebtedness" means (a) indebtedness for borrowed money, (b)
obligations evidenced by bonds, notes, debentures or other similar
instruments or by letters of credit, including purchase money
obligations or other obligations relating to the deferred purchase
price of property (other than trade payables incurred in the ordinary
course of business), (c) obligations as lessee under leases which have
been or should have been, in accordance with GAAP, recorded as capital
leases, (d) obligations under direct or indirect guaranties in respect
of Liabilities of others, including indebtedness of others secured by
an Encumbrance on any asset of such Person, whether or not such
indebtedness is assumed by such Person, (e) obligations in respect of
outstanding or unpaid checks or drafts or overdraft obligations and
(f) accrued interest, if any, on and all other amounts owed in respect
of any of the foregoing.
"Investment Agreement" means the agreement, dated July 26,
1999, between France Telecom S.A. and the Corporation, to which an
agreed form of this Certificate of Designation has been attached as
Attachment I.
"Issue Date" shall mean the date on which shares of 5%
Preferred Stock, Series B are first issued.
"Junior Securities" shall have the meaning set forth in
paragraph (3)(c) hereof.
"Junior Securities Distributions" shall have the meaning set
forth in paragraph (4)(f) hereof.
"Law" means any supranational, United States or foreign
federal, national, state, regional or local statute, law, ordinance,
regulation, rule, code, order, other requirement or rule of law.
"Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured
or unmatured or determined or determinable,
6
<PAGE>
including, without limitation, those arising under any Law, Action or
Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Liquidation Right" shall mean, for each share of 5%
Preferred Stock, Series B, the greater of (i) an amount equal to
$1,000 per share, plus an amount equal to all dividends (whether or
not earned or declared) accrued and unpaid thereon to the date of
final distribution to such holders, and (ii) the amount that would be
received in liquidation following conversion of a share of 5%
Preferred Stock, Series B into Common Stock.
"Major Entity" shall mean any of the Corporation, NTL
Communications Corp., Diamond Cable Communications Limited, Diamond
Holdings Limited, NTL (Bermuda) Limited or any Significant Subsidiary.
"Mandatory Redemption Date" shall have the meaning set forth
in paragraph (6)(c) hereof.
"Mandatory Redemption Obligation" shall have the meaning set
forth in paragraph (6)(d) hereof.
"Market Value" shall mean (A) the market value of the
Corporation's outstanding shares of capital stock plus (B) the market
value of any debt securities of the Corporation for which quotes are
available from brokerage companies of national reputation plus (C)
with respect to shares of preferred stock for which no such quotes are
available, the aggregate amount of liquidation preference thereof and
the aggregate amount of accumulated and unpaid dividends with respect
thereto plus (D) the principal amount and the amount of accrued and
unpaid interest with respect to any borrowings of the Corporation and
the Corporation Subsidiaries.
"Nasdaq" means the Nasdaq Stock Market, Inc., the electronic
securities market regulated by the National Association of Securities
Dealers, Inc.
"Nasdaq National Market" shall have the meaning set forth in
Rule 4200(a)(23) of the rules of the National Association of
Securities Dealers, Inc.
"9.9% Series A Preferred" shall have the meaning set forth in
paragraph (3)(d) hereof.
"9.9% Series B Preferred" shall have the meaning set forth in
paragraph (3)(d) hereof.
"non-electing share" shall have the meaning set forth in
paragraph (8)(e)(i) hereof.
7
<PAGE>
"NYSE" means the New York Stock Exchange.
"outstanding", when used with reference to shares of stock,
shall mean issued shares, excluding shares held by the Corporation or
a subsidiary.
"Parity Securities" shall have the meaning set forth in
paragraph (3)(b) hereof.
"Permitted Encumbrances" means such of the following as to
which no enforcement, collection, execution, levy or foreclosure
proceeding shall have been commenced or is reasonably expected to
commence: (a) liens for taxes, assessments and governmental charges or
claims that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and diligently
conducted, provided that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made
therefor; (b) Encumbrances imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business; (c) pledges
or deposits to secure obligations under workers' compensation laws or
similar legislation or to secure public or statutory obligations or
other obligations of a like nature incurred in the ordinary course of
business; (d) minor survey exceptions, reciprocal easement agreements
and other customary encumbrances on title to real property that (i)
were not incurred in connection with any indebtedness, (ii) do not
render title to the property encumbered thereby unmarketable and (iii)
do not, individually or in the aggregate, materially adversely affect
the value or use of such property for its current and anticipated
purposes; (e) Encumbrances permitted under any of the indentures to
which the Corporation or a Corporation Subsidiary is a party as of the
date of the Investment Agreement; (f) purchase money security
interests in supplier equipment; (g) precautionary liens filed by
lessors with respect to leased equipment; and (h) any single or series
of related Encumbrances which are not in excess of $2,500,000 and do
not materially impair the value or use of the property subject thereto
or the operation of the Corporation's business at the relevant date.
"Person" shall mean any individual, partnership, association,
joint venture, corporation, business, trust, joint stock company,
limited liability company, any unincorporated organization, any other
entity, a "group" of such persons, as that term is defined in Rule
13d-5(b) under the Exchange Act, or a government or political
subdivision thereof.
"Preferred Shares" has the meaning set forth in paragraph
(9)(c).
"Preferred Stock" shall have the meaning set forth in the
first resolution above.
"Pro Forma Rating" has the meaning set forth in paragraph
(9)(h)(ix).
8
<PAGE>
"Purchase Shares" shall have the meaning set forth in
paragraph (8)(d)(v) hereof.
"Qualified Holder" shall mean France Telecom, a societe
anonyme formed under the laws of France, or an Affiliate, so long as
such Person holds at least one share of the 5% Preferred Stock, Series
B.
"Qualified Holding Condition" shall be satisfied so long as a
Qualified Holder is the holder of at least 15.0% of the Diluted
Shares.
"Record Date" shall have the meaning set forth in paragraph
(8)(d)(iv) hereof.
"Relevant Compounding Factor" shall mean, with respect to
each share of 5% Preferred Stock, Series B, upon initial issuance
1.00, and shall on each Dividend Payment Date be increased to equal
the product of the Relevant Compounding Factor in effect immediately
prior to such Dividend Payment Date and 1.0125.
"Rights" shall have the meaning set forth in paragraph (12)
hereof.
"Rights Agreement" shall have the meaning set forth in
paragraph (12) hereof.
"Securities" shall have the meaning set forth in paragraph
(8)(d)(iii) hereof.
"Senior Securities" shall have the meaning set forth in
paragraph (3)(a) hereof.
"Series A Certificate" means the Certificate of Designation
in respect of the 5% Preferred Stock, Series A.
"set apart for payment" shall be deemed to include, without
any action other than the following, the recording by the Corporation
in its accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other
distribution by the Board of Directors, the allocation of funds to be
so paid on any series or class of capital stock of the Corporation;
provided, however, that, if any funds for any class or series of
Junior Securities or any class or series of Parity Securities are
placed in a separate account of the Corporation or delivered to a
disbursing, paying or other similar agent, then "set apart for
payment" with respect to the 5% Preferred Stock, Series B shall mean
placing such funds in a separate account or delivering such funds to a
disbursing, paying or other similar agent, as the case may be.
"Significant Subsidiary" shall have the meaning given to such
term in Regulation S- X under the Exchange Act.
"Strategic Acquisition" has the meaning set forth in the
Investment Agreement.
9
<PAGE>
"Subsidiaries" of any Person means any corporation,
partnership, joint venture, limited liability company, trust, estate
or other Person of which (or in which), directly or indirectly, more
than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at the time capital stock of
any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency), (b) the interest
in the capital or profits of such partnership, joint venture or
limited liability company or other Person or (c) the beneficial
interest in such trust or estate is at the time owned by such first
Person, or by such first Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"13% Preferred" shall have the meaning set forth in paragraph
(3)(d) hereof.
"Trading Day" shall mean any day on which the securities in
question are traded on the NYSE or, if such securities are not listed
or admitted for trading on the NYSE, on the principal national
securities exchange on which such securities are listed or admitted
or, if not listed or admitted for trading on any national securities
exchange, on the Nasdaq National Market or, if such securities are not
quoted thereon, in the applicable securities market in which the
securities are traded.
"Transaction" shall have the meaning set forth in paragraph
(8)(e)(i) hereof.
"Transaction Agreement" shall mean the agreement, dated July
26, 1999, among the Corporation, Bell Atlantic Corporation, Cable &
Wireless plc and Cable & Wireless Communications plc.
"Trigger Event" shall have the meaning set forth in paragraph
(9)(b) hereof.
"Trigger Event Cure" shall have the meaning set forth in
paragraph (9)(b) hereof.
"25-Day Average Market Price" shall mean, for any security,
the volume-weighted average of the Current Market Prices of that
security for the twenty-five Trading Days immediately preceding the
date of determination.
(3) Rank. Any class or series of stock of the Corporation
shall be deemed to rank:
(a) prior to the 5% Preferred Stock, Series B, either as to
the payment of dividends or as to distribution of assets upon liquidation,
dissolution or winding up, or both, if the holders of such class or series shall
be entitled by the terms thereof to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding up, in preference or
priority to the holders of 5% Preferred Stock, Series B ("Senior Securities");
10
<PAGE>
(b) on a parity with the 5% Preferred Stock, Series B, either
as to the payment of dividends or as to distribution of assets upon liquidation,
dissolution or winding up, or both, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share thereof be different
from those of the 5% Preferred Stock, Series B, if the holders of the 5%
Preferred Stock, Series B and of such class of stock or series shall be entitled
by the terms thereof to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, or both, in proportion to their
respective amounts of accrued and unpaid dividends per share or liquidation
preferences, without preference or priority one over the other and such class of
stock or series is not a class of Senior Securities ("Parity Securities"); and
(c) junior to the 5% Preferred Stock, Series B, either as to
the payment of dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, or both, if such stock or series shall be Common
Stock or if the holders of the 5% Preferred Stock, Series B shall be entitled to
receipt of dividends, and of amounts distributable upon liquidation, dissolution
or winding up, in preference or priority to the holders of shares of such stock
or series ("Junior Securities").
(d) Each of (i) the 13% Series B Senior Redeemable
Exchangeable Preferred Stock (the "13% Preferred") and (ii) the 5 1/4%
Convertible Preferred Stock, Series A (the "5 1/4% Series A") and any dividends
paid on the 5 1/4% Series A in accordance with its terms, to the extent that
such dividends are paid in preferred stock having terms substantially identical
to the 5 1/4% Series A and any dividends paid on preferred stock issued as
in-kind dividends thereon, to the extent such dividends are paid in preferred
stock having terms substantially identical to the 5 1/4% Series A (the 5 1/4%
Series A and all such in-kind dividends being hereinafter referred to as the "5
1/4% Preferred") is a Senior Security. Each of the 9.9% Non-Voting Mandatorily
Redeemable Preferred Stock, Series A ("9.9% Series A Preferred") and 9.9%
Non-Voting Mandatorily Redeemable Preferred Stock, Series B ("9.9% Series B
Preferred") is a Junior Security. The 5% Cumulative Participating Convertible
Preferred Stock, Series A (the "5% Series A") and any dividends paid on the 5%
Series A in accordance with its terms, to the extent that such dividends are
paid in preferred stock having terms substantially identical to the 5% Series A
and any dividends paid on preferred stock issued as in-kind dividends thereon,
to the extent such dividends are paid in preferred stock having terms
substantially identical to the 5% Series A (the 5% Series A and all such in-kind
dividends being hereinafter referred to as the "5% Preferred Stock, Series A")
is a Parity Security. One or more classes of Additional Preferred (as defined
below) shall be Parity Securities; provided, however, that there shall be no
issue of other Senior Securities, Parity Securities or rights or options
exercisable for or convertible into any such securities, except as approved by
the holders of the 5% Preferred Stock, Series B pursuant to paragraph 9(f).
(e) The respective definitions of Senior Securities, Junior
Securities and Parity Securities shall also include any rights or options
exercisable for or convertible into any of the Senior Securities, Junior
Securities and Parity Securities, as the case may be. The 5% Preferred
11
<PAGE>
Stock, Series B shall be subject to the creation of Junior Securities, Parity
Securities and Senior Securities as set forth herein.
(4) Dividends. (a) Subject to paragraph (8)(b)(ii), the
holders of shares of 5% Preferred Stock, Series B shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends at the quarterly rate of
$12.50 per share (assuming a $1,000.00 face amount) payable in cash, shares of
Common Stock (such Common Stock for this purpose to be assigned a value equal to
the 25-Day Average Market Price as of the record date for such Dividend Payment
Date) or additional shares of Preferred Stock of a class to be designated by the
Board of Directors having terms substantially identical to the 5% Preferred
Stock, Series B except as follows: (A) the Conversion Rate (as set forth in
Section 8(a)) on such Preferred Stock initially shall be the quotient resulting
from the division of the Conversion Rate (as then in effect on the 5% Preferred
Stock, Series B) by the Relevant Compounding Factor (except that for purposes of
additional shares of Preferred Stock payable as a dividend for the initial
Dividend Period, the Conversion Rate shall be the quotient resulting from the
division of the Conversion Rate (as then in effect) by [(90 - (# days in initial
Dividend Period)/90) x Relevant Compounding Factor]) and (B) the number of
shares of such Preferred Stock payable as a dividend on any Dividend Payment
Date shall increase for each Dividend Payment Date from the first Dividend
Payment Date by the Relevant Compounding Factor (such classes of Preferred Stock
singularly and collectively, the "Additional Preferred"). All dividends on the
5% Preferred Stock, Series B, in whatever form, shall be payable in arrears
quarterly on each Dividend Payment Date and shall be cumulative from the Issue
Date (except that dividends on Additional Preferred shall accrue from the date
such Additional Preferred is issued or would have been issued in accordance with
this Certificate of Designation if such dividends had been declared), whether or
not in any Dividend Period or Dividend Periods there shall be funds of the
Corporation legally available for the payment of such dividends. Each such
dividend shall be payable to the holders of record of shares of the 5% Preferred
Stock, Series B, as they appear on the stock records of the Corporation at the
close of business on the record date for such dividend. Upon the declaration of
any such dividend, the Board of Directors shall fix as such record date on the
fifth Business Day preceding the relevant Dividend Payment Date and shall give
notice on or prior to the record date of the form of payment of such dividend.
Accrued and unpaid dividends for any past Dividend Payment Date may be declared
and paid at any time, without reference to any Dividend Payment Date, to holders
of record on such record date, not more than 45 days nor less than five Business
Days preceding the payment date thereof, as may be fixed by the Board of
Directors.
(b) In addition to the dividends described in the preceding
paragraph, holders of shares of the 5% Preferred Stock, Series B shall be
entitled to receive an amount equal to the amount (and in the form of
consideration) that such holders would be entitled to receive if, pursuant to
paragraph (8), they had converted such 5% Preferred Stock, Series B fully into
Common Stock immediately before the record date for the payment of any such
dividends on Common Stock. Each such dividend shall be payable to the holders of
record of shares of the 5% Preferred Stock, Series B as they appear on the stock
records of the Corporation at the close of
12
<PAGE>
business on the record date for such dividend on Common Stock, and the
Corporation shall pay each such dividend on the applicable payment date for such
dividend on the Common Stock.
(c) For the purpose of determining the number of Additional
Preferred to be issued pursuant to paragraph (4)(a), each such Additional
Preferred shall be valued at $1,000.00. Holders of such Additional Preferred
shall be entitled to receive dividends payable at the rates specified in
paragraph (4)(a).
(d) The dividends payable for the initial Dividend Period, or
any other period shorter than a full Dividend Period, on the 5% Preferred Stock,
Series B shall accrue daily and be computed on the basis of a 360-day year and
the actual number of days in such period. No interest, or sum of money in lieu
of interest, shall be payable in respect of any dividend payment or payments on
the 5% Preferred Stock, Series B that may be in arrears except as otherwise
provided herein.
(e) So long as any shares of the 5% Preferred Stock, Series B
are outstanding, no dividends, except as described in the next succeeding
sentence, shall be declared or paid or set apart for payment on Parity
Securities or Junior Securities, for any period, nor shall any Parity Securities
or Junior Securities be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any such Parity Securities or Junior Securities) by the
Corporation (except for conversion into or exchange into other Parity Securities
or Junior Securities, as the case may be) unless, in each case, (i) full
cumulative dividends on all outstanding shares of the 5% Preferred Stock, Series
B for all Dividend Periods terminating on or prior to the date of such
redemption, repurchase or other acquisition shall have been paid or set apart
for payment, (ii) sufficient funds shall have been paid or set apart for the
payment of the dividend for the current Dividend Period with respect to the 5%
Preferred Stock, Series B and (iii) the Corporation is not in default with
respect to any redemption of shares of 5% Preferred Stock, Series B by the
Corporation pursuant to paragraph (6) below. When dividends are not fully paid
in Common Stock or Additional Preferred or are not paid in full in cash or a sum
sufficient for such payment is not set apart, as aforesaid, all dividends
declared upon shares of the 5% Preferred Stock, Series B and all dividends
declared upon Parity Securities shall be declared ratably in proportion to the
respective amounts of dividends accumulated and unpaid on the 5% Preferred
Stock, Series B and accumulated and unpaid on such Parity Securities.
(f) So long as any shares of the 5% Preferred Stock, Series B
are outstanding, no dividends (other than (i) any rights issued pursuant to a
shareholder rights plan as provided in paragraph (12) and (ii) dividends or
distributions paid in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Junior Securities) shall be declared or paid or set apart
for payment or other distribution declared or made upon Junior Securities, nor
shall any Junior Securities be redeemed, purchased or otherwise acquired (other
than a redemption, purchase, or other acquisition of shares of Common Stock made
for purposes of an employee incentive or benefit plan of the Corporation or any
subsidiary) (all such dividends, distributions, redemptions
13
<PAGE>
or purchases being hereinafter referred to as "Junior Securities Distributions")
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any shares of any such stock) by the Corporation,
directly or indirectly (except by conversion into or exchange for Junior
Securities, including pursuant to paragraph 4(c) of the 9.9% Series A Preferred
and paragraph 4(d) of the 9.9% Series B Preferred), unless in each case (A) full
cumulative dividends on all outstanding shares of the 5% Preferred Stock, Series
B and all other Parity Securities shall have been paid or set apart for payment
for all past Dividend Periods and dividend periods for such other stock, (B)
sufficient funds shall have been paid or set apart for the payment of the
dividend for the current Dividend Period with respect to the 5% Preferred Stock,
Series B and all other Parity Securities, (C) the Corporation is not in default
with respect to any redemption of shares of 5% Preferred Stock, Series B by the
Corporation pursuant to paragraph (6) below, (D) the Corporation has fully
performed its obligations under paragraphs (4)(b) and (6) hereof.
(5) Liquidation Preference. (a) In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of the Corporation
(whether capital or surplus) shall be made to or set apart for the holders of
Junior Securities, the holders of the shares of 5% Preferred Stock, Series B
shall be entitled to receive the Liquidation Right. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of the shares of 5% Preferred
Stock, Series B shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any Parity Securities, then such assets,
or the proceeds thereof, shall be distributed among the holders of shares of 5%
Preferred Stock, Series B and any such other Parity Securities ratably in
accordance with the respective amounts that would be payable on such shares of
5% Preferred Stock, Series B and any such other stock if all amounts payable
thereon were paid in full. For the purposes of this paragraph (5), (i) a
consolidation or merger of the Corporation with one or more corporations, or
(ii) a sale or transfer of all or substantially all of the Corporation's assets,
shall not be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Corporation.
(b) Subject to the rights of the holders of any Parity
Securities, upon any liquidation, dissolution or winding up of the Corporation,
after payment shall have been made in full to the holders of the 5% Preferred
Stock, Series B, as provided in this paragraph (5), any other series or class or
classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of the 5% Preferred Stock,
Series B shall not be entitled to share therein.
(6) Redemption. (a) On and after the first Business Day
following the earlier to occur of (i) the seventh anniversary of the Issue Date
and (ii) the date on which both (A) the 25-Day Average Market Price of the
Common Stock shall have exceeded $150.00 and (B) the fourth anniversary of the
Issue Date, to the extent the Corporation shall have funds legally available for
such payment, the Corporation may redeem at its option shares of 5% Preferred
Stock, Series B, from time to time in part, All But One Outstanding Share or, if
the Qualified
14
<PAGE>
Holding Condition is not satisfied, in whole, payable at the option of the
Corporation in (A) cash, at a redemption price of $1,000.00 per share, (B) in
shares of Common Stock, at a redemption price of $1,000.00 per share, or (C) in
a combination of cash and Common Stock, at a redemption price based on the
respective combination of consideration, together in each case with accrued and
unpaid dividends thereon, whether or not declared, to, but excluding, the date
fixed for redemption, without interest. For purposes of determining the number
of shares of Common Stock to be issued pursuant to this paragraph (6)(a), the
price per share of Common Stock shall be the 25-Day Average Market Price.
(b) On and after the first Business Day following the tenth
anniversary of the Issue Date, each holder of shares of 5% Preferred Stock,
Series B shall have the right to require the Corporation, to the extent the
Corporation shall have funds legally available therefor, to redeem such holder's
shares of 5% Preferred Stock, Series B, from time to time in part, All But One
Outstanding Share or, if the Qualified Holding Condition is not satisfied, in
whole, at a redemption price of $1,000.00 per share, payable at the option of
the Corporation in cash, shares of Common Stock or a combination thereof,
together with accrued and unpaid dividends thereon to, but excluding, the date
fixed for redemption, without interest. For purposes of determining the number
of shares of the Common Stock to be issued pursuant to this paragraph (6)(b),
the price per share of Common Stock shall equal the 25-Day Average Market Price.
Any holder of shares of 5% Preferred Stock, Series B who elects to exercise its
rights pursuant to this paragraph (6)(b) shall deliver to the Corporation a
written notice of election not less than 20 days prior to the date on which such
holder demands redemption pursuant to this paragraph 6(b), which notice shall
set forth the name of the Holder, the number of shares of 5% Preferred Stock,
Series B to be redeemed and a statement that the election to exercise a
redemption right is being made thereby, and, subject to paragraph (11)(d), shall
deliver to the Corporation on or before the date of redemption certificates
evidencing the shares of 5% Preferred Stock, Series B to be redeemed, duly
endorsed for transfer to the Corporation.
(c) If the Corporation shall not have redeemed all
outstanding shares of 5% Preferred Stock, Series B pursuant to paragraphs (6)(a)
or (6)(b), on the twentieth anniversary of the Issue Date (the "Mandatory
Redemption Date"), to the extent the Corporation shall have funds legally
available for such payment, the Corporation shall redeem All But One Outstanding
Share of 5% Preferred Stock, Series B, or, if the Qualified Holding Condition is
not satisfied, all outstanding shares of 5% Preferred Stock, Series B, at a
redemption price of $1,000.00 per share, payable at the option of the
Corporation in cash, shares of Common Stock or a combination thereof, together
with accrued and unpaid dividends thereon to, but excluding, the Mandatory
Redemption Date, without interest. For purposes of determining the number of
shares of the Common Stock to be issued pursuant to this paragraph (6)(c), the
price per share of Common Stock shall be the 25-Day Average Market Price. For
purposes of the 5% Preferred Stock, Series B, "All But One Outstanding Share"
means all but one share of 5% Preferred Stock, Series B outstanding at the
relevant time. For the avoidance of doubt, so long as the Qualified Holding
Condition is satisfied, at least one share of 5% Preferred Stock, Series B shall
remain outstanding in perpetuity. As soon as (i) the Qualified Holding Condition
is no longer satisfied and (ii) there is only one share of 5% Preferred Stock,
Series B that has not been redeemed pursuant to this paragraph (6) or converted
pursuant to paragraph (8), that one outstanding share of 5% Preferred
15
<PAGE>
Stock, Series B shall be redeemed, payable, at the option of the holder, in cash
or in Common Stock.
(d) If the Corporation is unable or shall fail to discharge
its obligation to redeem all outstanding shares or All But One Outstanding Share
of 5% Preferred Stock, Series B pursuant to paragraphs 6(b) or 6(c) (each, a
"Mandatory Redemption Obligation"), the Mandatory Redemption Obligation shall be
discharged as soon as the Corporation is able to discharge such Mandatory
Redemption Obligation. If and so long as any Mandatory Redemption Obligation
with respect to the 5% Preferred Stock, Series B shall not be fully discharged,
the Corporation shall not (i) directly or indirectly, redeem, purchase, or
otherwise acquire any Parity Security or discharge any mandatory or optional
redemption, sinking fund or other similar obligation in respect of any Parity
Securities (except in connection with a redemption, sinking fund or other
similar obligation to be satisfied pro rata with the 5% Preferred Stock, Series
B) or (ii) declare or make any Junior Securities Distribution (other than
dividends or distributions paid in shares of, or options, warrants or rights to
subscribe for or purchase shares of, Junior Securities), or, directly or
indirectly, discharge any mandatory or optional redemption, sinking fund or
other similar obligation in respect of the Junior Securities.
(e) Upon any redemption of 5% Preferred Stock, Series B, the
Corporation shall pay the redemption price and any accrued and unpaid dividends
in arrears to, but excluding, the applicable redemption date.
(f) For purposes of paragraph (6)(a) only, unless full
cumulative dividends (whether or not declared) on all outstanding shares of 5%
Preferred Stock, Series B and any Parity Securities shall have been paid or
contemporaneously are declared and paid or set apart for payment for all
Dividend Periods terminating on or prior to the applicable redemption date and
notice has been given in accordance with paragraph (7), none of the shares of 5%
Preferred Stock, Series B shall be redeemed, and no sum shall be set aside for
such redemption, unless shares of 5% Preferred Stock, Series B are redeemed pro
rata and notice has previously been given in accordance with paragraph (7).
(7) Procedure for Redemption. (a) If the Corporation shall
redeem shares of 5% Preferred Stock, Series B pursuant to paragraph 6(a), notice
of such redemption shall be given by certified mail, return receipt requested,
postage prepaid, mailed not less than 30 days nor more than 60 days prior to the
redemption date, to each holder of record of the shares to be redeemed at such
holder's address as the same appears on the stock register of the Corporation
and confirmed by facsimile transmission to each holder of record if the
Corporation has been furnished with such facsimile address by the holder(s);
provided, however, that neither the failure to give such notice nor confirmation
nor any defect therein or in the mailing thereof, to any particular holder,
shall affect the sufficiency of the notice or the validity of the proceedings
for redemption with respect to the other holders. Any notice that was mailed in
the manner herein provided shall be conclusively presumed to have been duly
given on the date mailed whether or not the holder receives the notice. Each
such notice shall state: (i) the redemption date; (ii) the
16
<PAGE>
number of shares of 5% Preferred Stock, Series B to be redeemed and, if fewer
than all the shares held by such holder are to be redeemed, the number of shares
to be redeemed from such holder; (iii) the amount payable, whether such amount
shall be paid in Common Stock or in cash, and, if the payment is in Common
Stock, an explanation of the determination of the amount to be paid; (iv) the
place or places where certificates for such shares are to be surrendered or
where the notice under paragraph (11)(d) should be sent for payment of the
redemption price; and (v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date, except as otherwise provided herein.
(b) If notice has been mailed as aforesaid, from and after
the redemption date (unless default shall be made by the Corporation in
providing for the payment of the redemption price of the shares called for
redemption and dividends accrued and unpaid thereon, if any), (i) except as
otherwise provided herein, dividends on the shares of 5% Preferred Stock, Series
B so called for redemption shall cease to accrue, (ii) said shares shall no
longer be deemed to be outstanding, and (iii) all rights of the holders thereof
as holders of the 5% Preferred Stock, Series B shall cease (except the right to
receive from the Corporation the redemption price without interest thereon, upon
surrender and endorsement (or a constructive surrender under paragraph (11)(d))
of their certificates if so required, and to receive any dividends payable
thereon).
(c) Upon surrender (including a constructive surrender under
paragraph (11)(d)) in accordance with notice given pursuant to this paragraph
(7) of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be redeemed by the
Corporation at the redemption price aforesaid, plus any dividends payable
thereon. If fewer than all the outstanding shares of 5% Preferred Stock, Series
B are to be redeemed, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be selected pro rata
(with any fractional shares being rounded to the nearest whole share). In case
fewer than all the shares represented by any such certificate are redeemed, a
new certificate shall be issued, subject to a holder's election under paragraph
(11)(d), representing the surrendered shares without cost to the holder thereof.
(8) Conversion. (a) Subject to and upon compliance with the
provisions of this paragraph (8), a holder of shares of 5% Preferred Stock,
Series B shall have the right, at any time and from time to time, at such
holder's option, to convert any or All But One Outstanding Share or, if the
Qualified Holding Condition is not satisfied, all outstanding shares, of 5%
Preferred Stock, Series B held by such holder, but not fractions of shares, into
fully paid and non-assessable shares of Common Stock by surrendering such shares
to be converted, such surrender to be made in the manner provided in paragraph
(8)(b) hereof. The number of shares of Common Stock deliverable upon conversion
of each share of 5% Preferred Stock, Series B shall be equal to $1,000.00
divided by 125.00 (such quotient, as adjusted as provided herein, the
"Conversion Rate"). The Conversion Rate is subject to adjustment from time to
time pursuant to paragraph (8)(d) hereof. The right to convert shares called for
redemption pursuant to
17
<PAGE>
paragraph 6(a) shall terminate at the close of business on the date immediately
preceding the date fixed for such redemption unless the Corporation shall
default in making payment of the amount payable upon such redemption, in which
case such right of conversion shall be reinstated. Upon conversion, any accrued
and unpaid dividends on the 5% Preferred Stock, Series B at the date of
conversion shall be paid to the holder thereof in accordance with the provisions
of paragraph (4), except that, upon conversion of All But One Outstanding Share
or, if the Qualified Holding Condition is not satisfied, all outstanding shares,
of 5% Preferred Stock, Series B held by such holder, all such accrued and unpaid
dividends at the date of conversion shall be paid in Common Stock at the
applicable Conversion Rate.
(b) (i) In order to exercise the conversion privilege, the
holder of each share of 5% Preferred Stock, Series B to be converted shall
surrender (or constructively surrender in accordance with paragraph (11)(d)) the
certificate representing such share, duly endorsed or assigned to the
Corporation or in blank, at the office of the Corporation, or to any transfer
agent of the Corporation previously designated by the Corporation to the holders
of the 5% Preferred Stock, Series B for such purposes, with a written notice of
election to convert completed and signed, specifying the number of shares to be
converted. Such notice shall state that the holder has satisfied any legal or
regulatory requirement for conversion, including compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976; provided, however, that
the Corporation shall use its best efforts in cooperating with such holder to
obtain such legal or regulatory approvals to the extent its cooperation is
necessary. Such notice shall also state the name or names (with address and
social security or other taxpayer identification number, if applicable) in which
the certificate or certificates for Common Stock are to be issued. Unless the
shares issuable on conversion are to be issued in the same name as the name in
which such share of 5% Preferred Stock, Series B is registered, each share
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder or the
holder's duly authorized attorney and an amount sufficient to pay any transfer
or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid). All certificates representing
shares of 5% Preferred Stock, Series B surrendered for conversion shall be
canceled by the Corporation or the transfer agent.
(ii) Subject to the last sentence of paragraph (8)(a),
holders of shares of 5% Preferred Stock, Series B at the close of business on a
dividend payment record date shall not be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date if such holder
shall have surrendered (or made a constructive surrender under paragraph
(11)(d)) for conversion such shares at any time following the preceding Dividend
Payment Date and prior to such Dividend Payment Date.
(iii) Subject to a holder's election under paragraph (11)(d),
as promptly as practicable after the surrender (including a constructive
surrender under paragraph (11)(d)) by a holder of the certificates for shares of
5% Preferred Stock, Series B as aforesaid, the Corporation shall issue and shall
deliver to such holder, or on the holder's written order, a certificate or
certificates (which certificate or certificates shall have the legend set forth
in paragraph (11)(c))
18
<PAGE>
for the whole number of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock issuable upon the conversion of such
shares in accordance with the provisions of this paragraph (8), and any
fractional interest in respect of a share of Common Stock arising on such
conversion shall be settled as provided in paragraph (8)(c). Upon conversion of
only a portion of the shares of 5% Preferred Stock, Series B represented by any
certificate, a new certificate shall be issued representing the unconverted
portion of the certificate so surrendered without cost to the holder thereof.
Subject to a holder's election under paragraph (11)(d), upon the surrender
(including a constructive surrender under paragraph (11)(d)) of certificates
representing shares of 5% Preferred Stock, Series B to be converted, such shares
shall no longer be deemed to be outstanding and all rights of a holder with
respect to such shares so surrendered shall immediately terminate except the
right to receive the Common Stock and other amounts payable pursuant to this
paragraph (8).
(iv) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the certificates
for shares of 5% Preferred Stock, Series B shall have been surrendered (or
deemed surrendered pursuant to an election under paragraph (11)(d)) and such
notice received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall shall be deemed to have become the
holder or holders of record of the shares of Common Stock represented thereby at
such time on such date and such conversion shall be into a number of shares of
Common Stock equal to the product of the number of shares of 5% Preferred Stock,
Series B surrendered times the Conversion Rate in effect at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such Person or Persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open, but such conversion shall be based
upon the Conversion Rate in effect on the date upon which such shares shall have
been surrendered and such notice received by the Corporation.
(c) (i) No fractional shares or scrip representing fractions
of shares of Common Stock shall be issued upon conversion of the 5% Preferred
Stock, Series B. Instead of any fractional interest in a share of Common Stock
that would otherwise be deliverable upon the conversion of a share of 5%
Preferred Stock, Series B, the Corporation shall pay to the holder of such share
an amount in cash based upon the Current Market Price of Common Stock on the
Trading Day immediately preceding the date of conversion. If more than one share
shall be surrendered for conversion (or deemed surrendered under paragraph
(10)(d)) at one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of 5% Preferred Stock, Series B surrendered (or
deemed surrendered under paragraph (10)(d)) for conversion by such holder.
(ii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the certificates
for shares of 5% Preferred Stock, Series B shall have been surrendered (or
deemed surrendered under paragraph (10)(d)) and such notice received by the
Corporation as aforesaid, and the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of
19
<PAGE>
Common Stock represented thereby at such time on such date and such conversion
shall be into a number of shares of Common Stock equal to the product of the
number of shares of 5% Preferred Stock, Series B surrendered times the
Conversion Rate in effect at such time on such date, unless the stock transfer
books of the Corporation shall be closed on that date, in which event such
Person or Persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such stock
transfer books are open, but such conversion shall be based upon the Conversion
Rate in effect on the date upon which such shares shall have been surrendered
(or deemed surrendered under paragraph (10)(d)) and such notice received by the
Corporation.
(d) The Conversion Rate shall be adjusted from time to time
as follows:
(i) If the Corporation shall after the Issue Date (A) declare
a dividend or make a distribution on its Common Stock in shares of its Common
Stock, (B) subdivide its outstanding Common Stock into a greater number of
shares, (C) combine its outstanding Common Stock into a smaller number of
shares, or (D) effect any reclassification of its outstanding Common Stock, the
Conversion Rate in effect on the record date for such dividend or distribution,
or the effective date of such subdivision, combination or reclassification, as
the case may be, shall be proportionately adjusted so that the holder of any
share of 5% Preferred Stock, Series B thereafter surrendered for conversion
shall be entitled to receive the number and kind of shares of Common Stock that
such holder would have owned or have been entitled to receive after the
happening of any of the events described above had such share been converted
immediately prior to the record date in the case of a dividend or distribution
or the effective date in the case of a subdivision, combination or
reclassification. An adjustment made pursuant to this subparagraph (i) shall
become effective immediately after the opening of business on the Business Day
next following the record date (except as provided in paragraph (8)(h)) in the
case of a dividend or distribution and shall become effective immediately after
the opening of business on the Business Day next following the effective date in
the case of a subdivision, combination or reclassification. Adjustments in
accordance with this paragraph (8)(d)(i) shall be made whenever any event listed
above shall occur.
(ii) If the Corporation shall after the Issue Date fix a
record date for the issuance of rights or warrants (in each case, other than any
rights issued pursuant to a shareholder rights plan) to all holders of Common
Stock entitling them (for a period expiring within 45 days after such record
date) to subscribe for or purchase Common Stock (or securities convertible into
Common Stock) at a price per share (or, in the case of a right or warrant to
purchase securities convertible into Common Stock, having an effective exercise
price per share of Common Stock, computed on the basis of the maximum number of
shares of Common Stock issuable upon conversion of such convertible securities,
plus the amount of additional consideration payable, if any, to receive one
share of Common Stock upon conversion of such securities) less than the 25-Day
Average Market Price on the date on which such issuance was declared or
otherwise announced by the Corporation (the "Determination Date"), then the
Conversion Rate in effect at the opening of business on the Business Day next
following such record date shall be adjusted so
20
<PAGE>
that the holder of each share of 5% Preferred Stock, Series B shall be entitled
to receive, upon the conversion thereof, the number of shares of Common Stock
determined by multiplying (I) the Conversion Rate in effect immediately prior to
such record date by (II) a fraction, the numerator of which shall be the sum of
(A) the number of shares of Common Stock outstanding on the close of business on
the Determination Date and (B) the number of additional shares of Common Stock
offered for subscription or purchase pursuant to such rights or warrants (or in
the case of a right or warrant to purchase securities convertible into Common
Stock, the aggregate number of additional shares of Common Stock into which the
convertible securities so offered are initially convertible), and the
denominator of which shall be the sum of (A) the number of shares of Common
Stock outstanding on the close of business on the Determination Date and (B) the
number of shares that the aggregate proceeds to the Corporation from the
exercise of such rights or warrants for Common Stock would purchase at such
25-Day Average Market Price on such date (or, in the case of a right of warrant
to purchase securities convertible into Common Stock, the number of shares of
Common Stock obtained by dividing the aggregate exercise price of such rights or
warrants for the maximum number of shares of Common Stock issuable upon
conversion of such convertible securities, plus the aggregate amount of
additional consideration payable, if any, to convert such securities into Common
Stock, by such 25-Day Average Market Price). Such adjustment shall become
effective immediately after the opening of business on the Business Day next
following such record date (except as provided in paragraph (8)(h)). Such
adjustment shall be made successively whenever such a record date is fixed. In
the event that after fixing a record date such rights or warrants are not so
issued, the Conversion Rate shall be readjusted to the Conversion Rate which
would then be in effect if such record date had not been fixed. In determining
whether any rights or warrants entitle the holders of Common Stock to subscribe
for or purchase shares of Common Stock at less than such 25-Day Average Market
Price, there shall be taken into account any consideration received by the
Corporation upon issuance and upon exercise of such rights or warrants, the
value of such consideration, if other than cash, to be determined by the Board
of Directors in good faith. In case any rights or warrants referred to in this
subparagraph (ii) shall expire unexercised after the same have been distributed
or issued by the Corporation (or, in the case of rights or warrants to purchase
securities convertible into Common Stock once exercised, the conversion right of
such securities shall expire), the Conversion Rate shall be readjusted at the
time of such expiration to the Conversion Rate that would have been in effect if
no adjustment had been made on account of the distribution or issuance of such
expired rights or warrants.
(iii) If the Corporation shall fix a record date for the
making of a distribution to all holders of its Common Stock of evidences of its
indebtedness, shares of its capital stock or assets (excluding regular cash
dividends or distributions declared in the ordinary course by the Board of
Directors and dividends payable in Common Stock for which an adjustment is made
pursuant to paragraph (8)(d)(i)) or rights or warrants (in each case, other than
any rights issued pursuant to a shareholder rights plan) to subscribe for or
purchase any of its securities (excluding those rights and warrants issued to
all holders of Common Stock entitling them (for a period expiring within 45 days
after such record date) to subscribe for or purchase Common Stock or securities
convertible into shares of Common Stock, which rights and warrants are referred
to in
21
<PAGE>
and treated under subparagraph (ii) above) (any of the foregoing being
hereinafter in this subparagraph (iii) called the "Securities"), then in each
such case the Conversion Rate shall be adjusted so that the holder of each share
of 5% Preferred Stock, Series B shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock determined by
multiplying (I) the Conversion Rate in effect immediately prior to the close of
business on such record date by (II) a fraction, the numerator of which shall be
the 25-Day Average Market Price per share of the Common Stock on such record
date, and the denominator of which shall be the 25-Day Average Market Price per
share of the Common Stock on such record date less the then- fair market value
(as determined by the Board of Directors in good faith, whose determinations
shall be conclusive) of the portion of the assets, shares of its capital stock
or evidences of indebtedness so distributed or of such rights or warrants
applicable to one share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that after
fixing a record date such distribution is not so made, the Conversion Rate shall
be readjusted to the Conversion Rate which would then be in effect if such
record date had not been fixed. Such adjustment shall become effective
immediately at the opening of business on the Business Day next following
(except as provided in paragraph (8)(h)) the record date for the determination
of shareholders entitled to receive such distribution. For the purposes of this
subparagraph (iii), the distribution of a Security, which is distributed not
only to the holders of the Common Stock on the date fixed for the determination
of shareholders entitled to such distribution of such Security, but also is
distributed with each share of Common Stock delivered to a Person converting a
share of 5% Preferred Stock, Series B after such determination date, shall not
require an adjustment of the Conversion Rate pursuant to this subparagraph
(iii); provided, however, that on the date, if any, on which a Person converting
a share of 5% Preferred Stock, Series B would no longer be entitled to receive
such Security with a share of Common Stock (other than as a result of the
termination of all such Securities), a distribution of such Securities shall be
deemed to have occurred and the Conversion Rate shall be adjusted as provided in
this subparagraph (iii) (and such day shall be deemed to be "the date fixed for
the determination of shareholders entitled to receive such distribution" and
"the record date" within the meaning of the three preceding sentences). If any
rights or warrants referred to in this subparagraph (iii) shall expire
unexercised after the same shall have been distributed or issued by the
Corporation, the Conversion Rate shall be readjusted at the time of such
expiration to the Conversion Rate that would have been in effect if no
adjustment had been made on account of the distribution or issuance of such
expired rights or warrants.
(iv) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash in the amount per share that,
together with the aggregate of the per share amounts of any other cash
distributions to all holders of its Common Stock made within the 12 months
preceding the date of payment of such distribution and in respect of which no
adjustment pursuant to this paragraph (iv) has been made exceeds 5.0% of the
25-Day Average Market Price immediately prior to the date of declaration of such
dividend or distribution (excluding any dividend or distribution in connection
with the liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, and any cash that is distributed upon a merger,
consolidation or other transaction for which an adjustment pursuant to
22
<PAGE>
paragraph 8(e) is made), then, in such case, the Conversion Rate shall be
adjusted so that the same shall equal the rate determined by multiplying the
Conversion Rate in effect immediately prior to the close of business on the
Record Date for the cash dividend or distribution by a fraction the numerator of
which shall be the Current Market Price of a share of the Common Stock on the
Record Date and the denominator shall be such Current Market Price less the per
share amount of cash so distributed during the 12-month period applicable to one
share of Common Stock, such adjustment to be effective immediately prior to the
opening of business on the Business Day following the Record Date; provided,
however, that in the event the denominator of the foregoing fraction is zero or
negative, in lieu of the foregoing adjustment, adequate provision shall be made
so that each holder of 5% Preferred Stock, Series B shall have the right to
receive upon conversion, in addition to the shares of Common Stock to which the
holder is entitled, the amount of cash such holder would have received had such
holder converted each share of 5% Preferred Stock, Series B at the beginning of
the 12-month period. In the event that such dividend or distribution is not so
paid or made, the Conversion Rate shall again be adjusted to be the Conversion
Rate which would then be in effect if such dividend or distribution had not been
declared. Notwithstanding the foregoing, if any adjustment is required to be
made as set forth in this paragraph (8)(d)(iv), the calculation of any such
adjustment shall include the amount of the quarterly cash dividends paid during
the 12-month reference period only to the extent such dividends exceed the
regular quarterly cash dividends paid during the 12 months preceding the
12-month reference period. For purposes of this paragraph (8)(d)(iv), "Record
Date" shall mean, with respect to any dividend or distribution in which the
holders of Common Stock have the right to receive cash, the date fixed for
determination of shareholders entitled to receive such cash.
In the event that at any time cash distributions to holders
of Common Stock are not paid equally on all series of Common Stock, the
provisions of this paragraph 8(d)(iv) will apply to any cash dividend or cash
distribution on any series of Common Stock otherwise meeting the requirements of
this paragraph, and shall be deemed amended to the extent necessary so that any
adjustment required will be made on the basis of the cash dividend or cash
distribution made on any such series.
(v) In case of the consummation of a tender or exchange offer
(other than an odd-lot tender offer) made by the Corporation or any subsidiary
of the Corporation for all or any portion of the outstanding shares of Common
Stock to the extent that the cash and fair market value (as determined in good
faith by the Board of Directors of the Corporation, whose determination shall be
conclusive and shall be described in a resolution of such Board) of any other
consideration included in such payment per share of Common Stock at the last
time (the "Expiration Time") tenders or exchanges may be made pursuant to such
tender or exchange offer (as amended) exceed by more than 5.0%, with any smaller
excess being disregarded in computing the adjustment to the Conversion Rate
provided in this paragraph (8)(d)(v), the first reported sale price per share of
the Common Stock on the Trading Day next succeeding the Expiration Time, then
the Conversion Rate shall be adjusted so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to the
Expiration
23
<PAGE>
Time by a fraction the numerator of which shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration payable to
shareholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged and
not withdrawn as of the Expiration Time (the shares deemed so accepted, up to
any such maximum, being referred to as the "Purchase Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any Purchase
Shares) on the Expiration Time and the first reported sale price of the Common
Stock on the Trading Day next succeeding the Expiration Time, and the
denominator of which shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the Expiration Time multiplied
by the first reported sale price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such adjustment to become effective immediately
prior to the opening of business on the day following the Expiration Time.
(vi) No adjustment in the Conversion Rate shall be required
unless such adjustment would require a cumulative increase or decrease of at
least 1% in the Conversion Rate; provided, however, that any adjustments that by
reason of this subparagraph (vi) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment until made, and
provided further that any adjustment shall be required and made in accordance
with the provisions of this paragraph (8) (other than this subparagraph (vi))
not later than such time as may be required in order to preserve the tax-free
nature of a distribution for United States income tax purposes to the holders of
shares of 5% Preferred Stock, Series B or Common Stock. Notwithstanding any
other provisions of this paragraph (8), the Corporation shall not be required to
make any adjustment of the Conversion Rate for the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Corporation and the investment of
additional optional amounts in shares of Common Stock under such plan. All
calculations under this paragraph (8) shall be made to the nearest dollar or to
the nearest 1/1,000 of a share, as the case may be. Anything in this paragraph
(8)(d) to the contrary notwithstanding, the Corporation shall be entitled, to
the extent permitted by law, to make such adjustments in the Conversion Rate, in
addition to those required by this paragraph (8)(d), as it in its discretion
shall determine to be advisable in order that any stock dividends subdivision of
shares, reclassification or combination of shares, distribution or rights or
warrants to purchase stock or securities, or a distribution of other assets
(other than cash dividends) hereafter made by the Corporation to its
shareholders shall not be taxable.
(vii) In the event that, at any time as a result of shares of
any other class of capital stock becoming issuable in exchange or substitution
for or in lieu of shares of Common Stock or as a result of an adjustment made
pursuant to the provisions of this paragraph (8)(d), the holder of 5% Preferred
Stock, Series B upon subsequent conversion shall become entitled to receive any
shares of capital stock of the Corporation other than Common Stock, the number
of such other shares so receivable upon conversion of any shares of 5% Preferred
Stock, Series B shall thereafter be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
contained herein.
24
<PAGE>
(e) (i) If the Corporation shall be a party to any
transaction (including without limitation, a merger, consolidation, sale of all
or substantially all of the Corporation's assets or recapitalization of the
Common Stock and excluding any transaction as to which paragraph (8)(d)(i)
applies) (each of the foregoing being referred to herein as a "Transaction"), in
each case as a result of which shares of Common Stock shall be converted into
the right to receive stock, securities or other property (including cash or any
combination thereof), there shall be no adjustment to the Conversion Rate but
each share of 5% Preferred Stock, Series B which is not converted into the right
to receive stock, securities or other property in connection with such
Transaction shall thereafter be convertible into the kind and amount of shares
of stock, securities and other property (including cash or any combination
thereof) receivable upon the consummation of such Transaction by a holder of
that number of shares or fraction thereof of Common Stock into which one share
of 5% Preferred Stock, Series B was convertible immediately prior to such
Transaction, assuming such holder of Common Stock (i) is not a Person with which
the Corporation consolidated or into which the Corporation merged or which
merged into the Corporation or to which such sale or transfer was made, as the
case may be ("Constituent Person"), or an affiliate of a Constituent Person and
(ii) failed to exercise his rights of election, if any, as to the kind or amount
of stock securities and other property (including cash) receivable upon such
Transaction (provided that if the kind or amount of stock, securities and other
property (including cash) receivable upon such Transaction is not the same for
each share of Common Stock of the Corporation held immediately prior to such
Transaction by other than a Constituent Person or an affiliate thereof and in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this paragraph (8)(e) the kind
and amount of stock, securities and other property (including cash) receivable
upon such Transaction by each non-electing share shall be deemed to be the kind
and amount so receivable per share by a plurality of the non-electing shares).
The provisions of this paragraph (8)(e)(i) shall similarly apply to successive
Transactions.
(ii) Notwithstanding anything herein to the contrary, if the
Corporation is reorganized such that the Common Stock is exchanged for the
common stock of a new entity ("Holdco") whose common stock is traded on the
Nasdaq National Market or another recognized securities exchange or automated
quotation system, then the Corporation, by notice to and consultation with the
holders of the 5% Preferred Stock, Series B, may cause the exchange of this 5%
Preferred Stock, Series B for preferred stock of Holdco having the same terms
and conditions as set forth herein; provided that the rights attaching to the
preferred stock of Holdco shall be adjusted so as to comply with the local law
of the country of incorporation of Holdco or the new share structure of Holdco
subject to such rights effectively giving the same economic rights as the 5%
Preferred Stock, Series B (including for these purposes any resultant change in
the tax treatment for the holders of such stock).
(f) If:
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock; or
25
<PAGE>
(ii) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or any other rights or warrants; or
(iii) there shall be any subdivision, combination or
reclassification of the Common Stock or any consolidation or merger to
which the Corporation is a party and for which approval of any
shareholders of the Corporation is required, or the sale or transfer
of all or substantially all of the assets of the Corporation as an
entirety; or
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
then the Corporation shall cause to be filed with any transfer agent designated
by the Corporation pursuant to paragraph (8)(b) and shall cause to be mailed to
the holders of shares of the 5% Preferred Stock, Series B at their addresses as
shown on the stock records of the Corporation, as promptly as possible, but at
least ten days prior to the applicable date hereinafter specified, a notice
stating (A) the date on which a record is to be taken for the purpose of such
dividend (or such other distribution) or rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution or rights or warrants are to be
determined or (B) the date on which such subdivision, combination,
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up or other action is expected to become effective, and
the date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such subdivision, combination,
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up. Failure to give or receive such notice or any defect
therein shall not affect the legality or validity of any distribution, right,
warrant subdivision, combination, reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, winding up or other action, or the vote upon
any of the foregoing.
(g) Whenever the Conversion Rate is adjusted as herein
provided, the Corporation shall prepare an officer's certificate with respect to
such adjustment of the Conversion Rate setting forth the adjusted Conversion
Rate and the effective date of such adjustment and shall mail a copy of such
officer's certificate to the holder of each share of 5% Preferred Stock, Series
B at such holder's last address as shown on the stock records of the
Corporation. If the Corporation shall have designated a transfer agent pursuant
to paragraph (8)(b), it shall also promptly file with such transfer agent an
officer's certificate setting forth the Conversion Rate after such adjustment
and setting forth a brief statement of the facts requiring such adjustment which
certificate shall be conclusive evidence of the correctness of such adjustment.
(h) In any case in which paragraph (8)(d) provides that an
adjustment shall become effective on the day next following a record date for an
event, the Corporation may defer
26
<PAGE>
until the occurrence of such event (i) issuing to the holder of any share of 5%
Preferred Stock, Series B converted after such record date and before the
occurrence of such event the additional shares of Common Stock issuable upon
such conversion by reason of the adjustment required by such event over and
above the Common Stock issuable upon such conversion before giving effect to
such adjustment and (ii) paying to such holder any amount in cash in lieu of any
fraction pursuant to paragraph (8)(c).
(i) For purposes of this paragraph (8), the number of shares
of Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Corporation. The
Corporation shall not pay a dividend or make any distribution on shares of
Common Stock held in the treasury of the Corporation.
(j) There shall be no adjustment of the Conversion Rate in
case of the issuance of any stock of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set forth in
this paragraph (8). If any single action would require adjustment of the
Conversion Rate pursuant to more than one subparagraph of this paragraph (8),
only one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value.
(k) If the Corporation shall take any action affecting the
Common Stock, other than action described in this paragraph (8), that in the
opinion of the Board of Directors materially adversely affects the conversion
rights of the holders of the shares of 5% Preferred Stock, Series B, the
Conversion Rate may be adjusted, to the extent permitted by law, in such manner,
if any, and at such time, as the Board of Directors may determine to be
equitable in the circumstances; provided that the provisions of this paragraph
(8)(k) shall not affect any rights the holders of 5% Preferred Stock, Series B
may have at law or in equity.
(l) (i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued shares of Common Stock or its issued shares of
Common Stock held in its treasury, or both, for the purpose of effecting
conversion of the 5% Preferred Stock, Series B, the full number of shares of
Common Stock deliverable upon the conversion of all outstanding shares of 5%
Preferred Stock, Series B not theretofore converted. For purposes of this
paragraph (8)(l) the number of shares of Common Stock that shall be deliverable
upon the conversion of all outstanding shares of 5% Preferred Stock, Series B
shall be computed as if at the time of computation all such outstanding shares
were held by a single holder.
(ii) The Corporation covenants that any shares of Common
Stock issued upon conversion of the 5% Preferred Stock, Series B shall be duly
authorized, validly issued, fully paid and non-assessable. Before taking any
action that would cause an adjustment increasing the Conversion Rate such that
the quotient of $1,000.00 and the Conversion Rate (which quotient initially
shall be $125.00) would be reduced below the then-par value of the shares of
Common Stock deliverable upon conversion of the 5% Preferred Stock, Series B,
the Corporation will take
27
<PAGE>
any corporate action that, in the opinion of its counsel, may be necessary in
order that the Corporation may validly and legally issue fully paid and
non-assessable shares of Common Stock based upon such adjusted Conversion Rate.
(iii) Prior to the delivery of any securities that the
Corporation shall be obligated to deliver upon conversion of the 5% Preferred
Stock, Series B, the Corporation shall comply with all applicable federal and
state laws and regulations which require action to be taken by the Corporation.
(m) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock or other securities or property on conversion of the 5%
Preferred Stock, Series B pursuant hereto; provided, however, that the
Corporation shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issue or delivery of shares of Common Stock or
other securities or property in a name other than that of the holder of the 5%
Preferred Stock, Series B to be converted and no such issue or delivery shall be
made unless and until the Person requesting such issue or delivery has paid to
the Corporation the amount of any such tax or established, to the satisfaction
of the Corporation, that such tax has been paid.
(n) No adjustment in the Conversion Rate need be made for a
transaction referred to in paragraph (8)(d)(i) through (v) above to the extent
that all holders of 5% Preferred Stock, Series B are entitled to participate in
such transaction pursuant to paragraph 4(b).
(9) Governance. (a) The holders of record of shares of 5%
Preferred Stock, Series B shall not be entitled to any voting rights except as
hereinafter provided in this paragraph (9) or as otherwise provided by law.
(b) If and whenever either (i) six quarterly dividends
(whether or not consecutive) payable on the 5% Preferred Stock, Series B have
not been paid in full, (ii) the Corporation shall have failed to discharge its
Mandatory Redemption Obligation, or (iii) there occurs a Bankruptcy Event (any
such event described in the preceding subparagraphs (i) through (iii) being
hereinafter referred to as a "Trigger Event"), a vote of the holders of shares
of 5% Preferred Stock, Series B, voting as a single class, will be required on
all matters brought to shareholders of the Corporation. Whenever all arrears in
dividends on the 5% Preferred Stock, Series B then outstanding shall have been
paid and dividends thereon for the current quarterly dividend period shall have
been paid or declared and set apart for payment, the Corporation shall have
fulfilled its Mandatory Redemption Obligation, and all Bankruptcy Events shall
have been cured (the "Trigger Event Cure"), then the right of the holders of the
5% Preferred Stock, Series B to vote as described in the this paragraph 9(b)
shall cease (but subject always to the same provisions for the vesting of such
voting rights if any Trigger Event occurs).
(c) In addition to the power to elect directors in accordance
with paragraph (9)(d), upon the occurrence of any Trigger Event, the number of
directors then
28
<PAGE>
constituting the Board of Directors shall be increased by two and the holders of
shares of 5% Preferred Stock, Series B, together with the holders of 5%
Preferred Stock, Series A and shares of every other series of preferred stock
(including, without limitation, Additional Preferred) upon which like rights to
vote for the election of two additional directors have been conferred and are
exercisable (resulting from either the failure to pay dividends or the failure
to redeem) (any such other series is referred to as the "Preferred Shares"),
voting as a single class regardless of series, shall be entitled to elect the
two additional directors to serve on the Board of Directors at any annual
meeting of stockholders or special meeting held in place thereof, or at a
special meeting of the holders of 5% Preferred Stock, Series B and the Preferred
Shares, called as hereinafter provided. Whenever all arrears in dividends on the
Preferred Shares then outstanding shall have been paid and dividends thereon for
the current quarterly dividend period shall have been paid or declared and set
apart for payment, the Corporation shall have fulfilled any redemption
obligation in respect of the Preferred Shares, and the Trigger Event Cure has
occurred, then the right of the holders of the 5% Preferred Stock, Series B and
the Preferred Shares to elect such additional two directors shall cease (but
subject always to the same provisions for the vesting of such voting rights if
any Trigger Event occurs), and the terms of office of all persons elected as
directors by the holders of 5% Preferred Stock, Series B and the Preferred
Shares shall forthwith terminate and the number of members of the Board of
Directors shall be reduced accordingly. At any time after such voting power
shall have been so vested in holders of shares of 5% Preferred Stock, Series B
and the Preferred Shares, the Secretary of the Corporation may, and upon the
written request of any holder of 5% Preferred Stock, Series B (addressed to the
secretary at the principal office of the Corporation) shall, call a special
meeting of the holders of the 5% Preferred Stock, Series B and of the Preferred
Shares for the election of the two directors to be elected by them as herein
provided, such call to be made by notice similar to that provided in the By-laws
of the Corporation for a special meeting of the stockholders or as required by
law. If any such special meeting required to be called as above provided shall
not be called by the Secretary of the Corporation within 20 days after receipt
of any such request, then any holder of shares of 5% Preferred Stock, Series B
may call such meeting, upon the notice above provided, and for that purpose
shall have access to the stock books of the Corporation. The directors elected
at any such special meeting shall hold office until the next annual meeting of
the stockholders or special meeting held in lieu thereof if such office shall
not have previously terminated as above provided. If any vacancy shall occur
among the directors elected by the holders of the 5% Preferred Stock, Series B
and the Preferred Shares, a successor shall be elected by the Board of
Directors, upon the nomination of the then-remaining director elected by the
holders of the 5% Preferred Stock, Series B and the Preferred Shares or the
successor of such remaining director, to serve until the next annual meeting of
the stockholders or special meeting held in place thereof if such office shall
not have previously terminated as provided above.
(d) (i) (A) In addition to any other rights granted in this
paragraph (9) to elect directors or to vote on any matter submitted to
stockholders, all holders of shares of 5% Preferred Stock, Series B, voting
separately as a class, shall have the right to elect directors to serve on the
Board of Directors in accordance with the provisions of this paragraph (9)(d),
so long as the Qualified Holding Condition is satisfied.
29
<PAGE>
(B) If there are twelve or fewer members of the Board of
Directors, the Qualified Holder shall be entitled to elect three directors. If
there are fourteen or more members of the Board of Directors, the Qualified
Holder shall be entitled to elect four directors. In either case, any director
that is appointed by a holder of shares of 5% Preferred Stock, Series A,
pursuant to paragraph (9)(d) of the Series A Certificate, shall be counted
toward the three or four directors, as the case may be, that a Qualified Holder
is entitled to appoint pursuant to this paragraph (9)(d).
(C) Immediately upon failure of the Qualified Holding
Condition, this paragraph (9)(d), paragraphs (9)(h), (9)(i) and (9)(j) shall be
of no effect and the rights granted in such paragraphs to the holders of the 5%
Preferred Stock, Series B shall cease to apply.
(ii) The voting rights granted to the Qualified Holder
pursuant to this paragraph 9(d) may be exercised initially at a special meeting
called pursuant to subparagraph (iii) of this paragraph (9)(d) or at any annual
meeting of stockholders, and thereafter at annual meetings of stockholders,
provided that such voting rights may not be exercised at any meeting unless an
Authorized Officer of the Qualified Holder shall be present at such meeting in
person or by proxy. The absence of a quorum of the holders of Common Stock shall
not affect the exercise by the holders of shares of 5% Preferred Stock, Series B
of such rights. At any meeting at which the holders of shares of 5% Preferred
Stock, Series B shall exercise such voting rights initially, they shall have the
right, voting separately as a class, to elect the number of directors provided
under paragraph (9)(d)(i)(B) to fill vacancies in the Board of Directors, to the
extent that such number of vacancies then exist, or, if such right is exercised
at an annual meeting, to elect such number of directors. If necessary, the
holders of the shares of 5% Preferred Stock, Series B shall have the right to
make such increase in the number of members of the Board of Directors as shall
be necessary to permit them to so elect such number of directors.
(iii) Unless the holders of shares of 5% Preferred Stock,
Series B shall have previously exercised their right to elect the number of
directors provided under paragraph (9)(d)(i)(B), the Board of Directors shall
order, and any stockholder or stockholders owning in the aggregate not less than
25% of the total number of the shares of 5% Preferred Stock, Series B
outstanding may request, the calling of a special meeting of the holders of
shares of 5% Preferred Stock, Series B, which meeting shall thereupon promptly
be called by the Secretary of the Corporation. Notice of such meeting and of any
annual meeting at which holders of shares of 5% Preferred Stock, Series B are
entitled to vote pursuant to this paragraph (9)(d) shall be given to each holder
of record of shares of 5% Preferred Stock, Series B by mailing a copy of such
notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 20 days
and not later then 60 days after such order or request or in default of the
calling of such meeting within 60 days after such order or request, such meeting
may be called on similar notice by any stockholder or stockholders owning in the
aggregate not less than 25% of the total number of outstanding shares of 5%
Preferred Stock, Series B.
30
<PAGE>
(iv) The holders of shares of Common Stock and shares of 5%
Preferred Stock, Series B, and other classes or series of stock of the
Corporation, if applicable, shall continue to be entitled to elect all the
directors until holders of the shares of 5% Preferred Stock, Series B shall have
exercised their right to elect the number of directors provided under paragraph
(9)(d)(i)(B), voting as a separate class, after the exercise of which right (x)
the directors so elected by the holders of shares of 5% Preferred Stock, Series
B shall continue in office until their successors shall have been elected by
such holders, and (y) any vacancy in the Board of Directors may (except as
provided in paragraph (9)(d)(ii)) be filled by vote of a majority of the
remaining directors theretofore elected by the holders of the class of capital
stock which elected the directors whose offices shall have become vacant.
References in this paragraph (9)(d)(iv) to directors elected by the holders of a
particular class of capital stock shall include directors elected by such
directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(e) Without the written consent of the holders of at least
66 2/3% in liquidation preference of the outstanding shares of 5% Preferred
Stock, Series B or the vote of holders of at least 66 2/3% in liquidation
preference of the outstanding shares of 5% Preferred Stock, Series B at a
meeting of the holders of 5% Preferred Stock, Series B called for such purpose,
the Corporation will not amend, alter or repeal any provision of the Certificate
of Incorporation (by merger or otherwise) so as to adversely affect the
preferences, rights or powers of the 5% Preferred Stock, Series B; provided that
any such amendment that changes the dividend payable on, the Conversion Rate
with respect to, or the liquidation preference of, the 5% Preferred Stock,
Series B shall require the affirmative vote at a meeting of holders of 5%
Preferred Stock, Series B called for such purpose or written consent of the
holder of each share of 5% Preferred Stock, Series B.
(f) Without the written consent of the holders of at least
66 2/3% in liquidation preference of the outstanding shares of 5% Preferred
Stock, Series B or the vote of holders of at least 66 2/3% in liquidation
preference of the outstanding shares of 5% Preferred Stock, Series B at a
meeting of such holders called for such purpose, the Corporation will not issue
any additional 5% Preferred Stock, Series B or create, authorize or issue any
Parity Securities or Senior Securities or increase the authorized amount of any
such other class or series; provided that this paragraph 9(f) shall not limit
the right of the Corporation to (i) issue Additional Preferred as dividends
pursuant to paragraph 4 or (ii) issue Parity Securities or Senior Securities in
order to refinance, redeem or refund the 13% Preferred, the 5 1/4% Preferred, or
the 5% Preferred Stock, Series A, provided that the maximum value of such Parity
Securities or Senior Securities issued by the Corporation in such refinancing as
shall be reflected on the Corporation's consolidated balance sheet prepared in
accordance with GAAP applied on a basis consistent with the Corporation's prior
practice, shall not exceed in the aggregate the aggregate value of the 13%
Preferred, the 5 1/4% Preferred, or the 5% Preferred Stock, Series A,
respectively, as reflected on the Corporation's consolidated balance sheet as
contained in the report filed by the Corporation with the United States
Securities and Exchange Commission pursuant to the Exchange Act that is most
recent prior to such refinancing.
31
<PAGE>
(g) In exercising the voting rights set forth in this
paragraph (9), each share of 5% Preferred Stock, Series B shall have one vote
per share, except that when any other series of preferred stock shall have the
right to vote with the 5% Preferred Stock, Series B as a single class on any
matter, then the 5% Preferred Stock, Series B and other series shall have with
respect to such matters one vote per $1,000 of stated liquidation preference.
Except as otherwise required by applicable law or as set forth herein, the
shares of 5% Preferred Stock, Series B shall not have any relative,
participating, optional or other special voting rights and powers and the
consent of the holders thereof shall not be required for the taking of any
corporate action.
(h) So long as the Qualified Holding Condition is met:
(i) there shall be no more than sixteen members of the Board
of Directors;
(ii) at least one director appointed by the Qualified Holder
shall be a member of each committee of the Board of Directors, other
than a committee formed to evaluate transactions with that holder;
(iii) the directors elected by the Qualified Holder to the
Board of Directors pursuant to paragraph (9)(d) shall be elected as
members of the boards of directors of the Corporation Subsidiaries, if
such boards of directors include substantially all of the other
members of the Board of Directors;
(iv) the By-laws shall contain provisions (A) requiring
notices to be given to directors in a reasonable and customary form
and allowing directors enough time to take any action that directors
may deem necessary with respect to such notice and (B) allowing
participation of directors in any meeting of the Board of Directors
and any committee thereof by means of telephonic conference;
(v) the Corporation shall not offer, issue, sell or transfer
any securities to any Person or amend or waive the Rights Agreement to
permit a transaction by any Person, if as a result of such offer,
issuance, sale or transfer, such Person will beneficially own 15.0% or
more of the Diluted Shares; provided, however, that this paragraph
(9)(h)(v) shall not apply to a transaction or series of related
transactions involving a contractual sale or other acquisition of 100%
of the capital stock of the Corporation, so long as (a) such
transaction is definitive or provides for a make-whole premium or
similar significant penalty payable to shareholders other than the
potential acquirer if the potential acquirer does not complete such a
transaction, and (b) the transactions contemplated by such agreement
are approved by the Board of Directors and are either (A) submitted
for approval by the holders of Common Stock or (B) subject to the
tender offer rules under the Exchange Act;
(vi) if the Corporation offers, issues, sells or transfers
any securities to any Person that would result in such Person owning
less than 15.0% of the Diluted Shares, the
32
<PAGE>
Corporation shall comply with the provisions of paragraph (10) and
shall not (A) grant to such Person a right to elect more than one
director to the Board of Directors or (B) agree to standstill or
transfer restrictions more favorable than those granted to the
Qualified Holder under the Investment Agreement and shall not grant
any rights to such Person that the Qualified Holder does not have
herein or under the Investment Agreement;
(vii) the Corporation shall not consummate, without the
approval of a majority of holders of the Common Stock or the unanimous
approval by the Board of Directors or a committee thereof (if such
committee includes a director appointed by the Qualified Holder), any
transaction or a series of transactions involving (A) an acquisition
(either in an asset or stock purchase transaction) or (B) a sale or
transfer (either in an asset or stock purchase transaction) (other
than a spin-off (to the Corporation's stockholders) of the
Corporation's and the Corporation Subsidiaries' broadcast assets or
assets located outside of the United Kingdom, it being understood that
the Purchaser shall have the corporate governance and other rights
with respect to such spun-off entity, as provided pursuant to the
Investment Agreement) of Core Business Assets, if the fair market
value of the Core Business Assets to be so acquired, sold or
transferred exceeds, in the aggregate, 10% of the Market Value;
(viii) the acquisition of any assets or stock of a business
that does not constitute Core Business Assets, in any transaction or
series of related transactions that represents, individually or when
aggregated with all such transactions completed during the immediately
preceding 24 months, 10% or more of the Market Value at the time of
the proposed new acquisition, will require the approval of at least
66 2/3% of the holders of the then-outstanding Common Stock, unless
the Board of Directors or a committee thereof (if such committee
includes a director appointed by the Qualified Holder) approves such
transaction unanimously, and a transaction shall be considered to be
completed in the preceding 24-month period if it shall have been
either completed (in which case the fair market value of the acquired
assets shall be determined at the time of completion) or announced
pursuant to a definitive agreement (in which case the fair market
value of the acquired assets shall be determined at the time of such
announcement);
(ix) the Corporation shall not, without the unanimous
approval by the Board of Directors or a committee thereof (if such
committee includes a director appointed by the Qualified Holder),
incur any Indebtedness (other than any refinancing of any existing
Indebtedness that would not result in a material increase of the
principal amount of such existing Indebtedness) after the date on
which the Corporation receives its first credit rating from a rating
agency of national reputation giving effect to the Strategic
Acquisition (the "Pro Forma Rating"), if the Board of Directors has
reason to believe (after reasonable inquiry of an internationally
recognized rating agency or a major investment bank having expertise
in credit rating advisory work) that the effect of incurring such
Indebtedness would reduce the credit rating of NTL Communications
Corp. below (i) the lower of (x) the equivalent of Standard & Poor's
rating of BB- or (y)
33
<PAGE>
the Pro Forma Rating, if such Indebtedness is incurred prior to
January 1, 2001 or (ii) the equivalent of Standard & Poor's rating of
BB, if the Indebtedness is incurred on or after January 1, 2001; and
(x) the Corporation shall maintain the total number of
directors at a level that enables the Qualified Holder to elect at
least ten percent of the members of the Board of Directors.
(i) So long as the Qualified Holding Condition is met, none of the
following shall be permitted without the prior written approval of one of the
Authorized Officers:
(I) a reclassification, combination, stock dividend or any similar
transaction that may adversely affect the rights of the holders of the 5%
Preferred Stock, Series B;
(II) an amendment to the Certificate of Incorporation or By-laws that
may adversely affect the rights of the holders of the 5% Preferred Stock,
Series B;
(III)commencement or institution of a Bankruptcy Event;
(IV) issuance by the Corporation of any security that would adversely
affect the rights of holders of the 5% Preferred Stock, Series A, or the 5%
Preferred Stock, Series B; or
(V) any agreement by the Corporation or any of its Affiliates to enter
into a Conflicting Investment.
(j) Before entering into any Alliance to provide telecommunications
services in any country in the European Union, the Corporation shall consult
with the Qualified Holder with a view to mutually cooperating in such venture.
(k) Nothing in this paragraph (9) shall be in derogation of any rights
that a holder of shares of 5% Preferred Stock, Series B may have in its capacity
as a holder of shares of Common Stock.
(10) Preemptive Rights. The Corporation shall not issue, sell,
transfer to any Person or grant to any Person a right to acquire any shares of
capital stock or options, warrants or similar instruments or any other security
convertible or exchangeable for shares of capital stock of the Corporation
(other than (i) through exercise of any options, warrants, Convertible
Debentures, the 13% Preferred, the 5 1/4% Preferred, the 9.9% Series A Preferred
or the 9.9% Series B Preferred, in each case, that is outstanding on the Issue
Date or the issuance of options to the employees of the Corporation and the
Corporation Subsidiaries pursuant to Benefit Plans existing on the Issue Date,
as such Benefit Plans may be amended or replaced (provided that such amended or
replaced Benefit Plans shall have terms similar to and consistent with the terms
of
34
<PAGE>
Existing Benefit Plans), and the exercise of such options, (ii) as consent
payments contemplated by and in accordance with Section 5.01(d)(iv) of the
Investment Agreement, (iii) as contemplated by the Transaction Agreement, or
(iv) as dividends on or conversion or in redemption of shares of preferred stock
contemplated by and in accordance with Section 5.01(d)(iii) of the Investment
Agreement (the "Equity Securities")), unless the Qualified Holder is notified in
writing of any such issuance, sale or transfer and is offered the right to
purchase at the sale price and on the terms and conditions of the sale such
quantity of Equity Securities as would be necessary for the Purchaser to
maintain its then current beneficial ownership level of the Diluted Shares. The
preemptive rights of the Qualified Holder pursuant to this paragraph (10) shall
be exercised in a manner and based on a timetable that will not restrict or
adversely affect the Corporation's ability to raise equity capital in a flexible
and cost-effective manner.
(11) General Provisions. (a) The headings of the paragraphs,
subparagraphs, clauses and subclauses of this Certificate of Designation are for
convenience of reference only and shall not define, limit or affect any of the
provisions hereof.
(b) If the Corporation shall have failed to declare or pay dividends
as required pursuant to paragraph (4) hereof or shall have failed to discharge
any obligation to redeem shares of 5% Preferred Stock, Series B pursuant to
paragraph (6) hereof, the holders of shares of 5% Preferred Stock, Series B
shall be entitled to receive, in addition to all other amounts required to be
paid hereunder, when, as and if declared by the Board of Directors, out of funds
legally available for the payment of dividends, cash dividends on the aggregate
dividends which the Corporation shall have failed to declare or pay or the
redemption price, together with accrued and unpaid dividends thereon, as the
case may be, at a rate of 2% per quarter, compounded quarterly, for the period
during which the failure to pay dividends or failure to discharge an obligation
to redeem shares of 5% Preferred Stock, Series B shall continue.
(c) The shares of 5% Preferred Stock, Series B shall bear the
following legend:
THE SHARES OF PREFERRED STOCK, PAR VALUE $.01, OF THE COMPANY (THE
"PREFERRED STOCK") (AND THE SHARES OF COMMON STOCK, PAR VALUE $.01, OF
THE COMPANY (THE "COMMON STOCK") INTO WHICH THE PREFERRED STOCK MAY BE
CONVERTED) REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD
IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS
OR AN APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS. THE
TRANSFER OF THE PREFERRED STOCK (OR COMMON STOCK, IF THE PREFERRED
STOCK HAS BEEN CONVERTED) EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO
THE RESTRICTIONS ON TRANSFER PROVIDED FOR IN THE PURCHASE AGREEMENT,
DATED _______ ___, 1999, AS MAY BE
35
<PAGE>
AMENDED, AMONG THE CORPORATION AND FRANCE TELECOM, A COPY OF WHICH IS
ON FILE AT THE EXECUTIVE OFFICES OF THE CORPORATION AND WILL BE
FURNISHED WITHOUT CHARGE TO THE HOLDER OF SUCH PREFERRED STOCK UPON
WRITTEN REQUEST TO THE CORPORATION.
THE SHARES OF PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE
CONVERTED INTO COMMON STOCK, PAR VALUE $.01, OF THE COMPANY (THE
"COMMON STOCK") OR REDEEMED IN EXCHANGE FOR COMMON STOCK WITHOUT THE
SURRENDER AND EXCHANGE OF THIS CERTIFICATE FOR CERTIFICATES
REPRESENTING SUCH COMMON STOCK. A NOTICE OF SUCH CONVERSION EVENT, IF
ANY, IS ON FILE AT THE EXECUTIVE OFFICES OF THE CORPORATION AND WILL
BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF THIS CERTIFICATE UPON
WRITTEN REQUEST TO THE CORPORATION.
The shares of Common Stock issuable upon conversion of the 5%
Preferred Stock, Series B shall bear the following legend:
THE SHARES OF COMMON STOCK, PAR VALUE $.01, OF THE COMPANY (THE
"COMMON STOCK") REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR
SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS. THE
TRANSFER OF THE COMMON STOCK EVIDENCED BY THIS CERTIFICATE IS SUBJECT
TO THE RESTRICTIONS ON TRANSFER PROVIDED FOR IN THE PURCHASE
AGREEMENT, DATED _______ ___, 1999, AS MAY BE AMENDED, AMONG THE
CORPORATION AND FRANCE TELECOM, A COPY OF WHICH IS ON FILE AT THE
EXECUTIVE OFFICES OF THE CORPORATION AND WILL BE FURNISHED WITHOUT
CHARGE TO THE HOLDER OF SUCH COMMON STOCK UPON WRITTEN REQUEST TO THE
CORPORATION.
(d) (i) Whenever in connection with any conversion or redemption of
the 5% Preferred Stock, Series B in exchange for Common Stock the holder is
required to surrender certificates representing such shares of 5% Preferred
Stock, Series B, such holder may, by written notice to the Corporation and its
transfer agent, elect to retain such certificates. In such case, the
certificates so retained by the holder thereof shall be deemed to represent, at
and from the date of such conversion or redemption, the number of shares of
Common Stock issuable upon such
36
<PAGE>
conversion or redemption (subject to paragraph (8)(c), if applicable), and shall
be so reflected upon the books of the Corporation and its transfer agent.
(ii) (A) A holder who has previously elected to retain certificates
representing the 5% Preferred Stock, Series B in accordance with paragraph
(11)(d)(i) upon conversion or redemption may subsequently elect to receive
certificates representing the shares of Common Stock issued upon such conversion
or redemption. To receive certificates representing such shares of Common Stock,
the holder of such certificate shall surrender it, duly endorsed or assigned to
the Corporation or in blank, at the office of the Corporation, or to any
transfer agent of the Corporation previously designated by the Corporation for
such purposes, with a written notice of that election.
(B) Unless the certificates to be issued shall be registered in the
same name as the name in which such surrendered certificates are registered,
each certificate so surrendered shall be accompanied by instruments of transfer,
in form satisfactory to the Corporation, duly executed by the holder or the
holder's duly authorized attorney and an amount sufficient to pay any transfer
or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid). All certificates so surrendered
shall be canceled by the Corporation or the transfer agent.
(C) As promptly as practicable after the surrender by a holder of such
certificates, the Corporation shall issue and shall deliver to such holder, or
on the holder's written order, a certificate or certificates (which certificate
or certificates shall have the legend set forth in paragraph 11(c)) for the
number of duly authorized, validly issued, fully paid and non-assessable shares
of Common Stock represented by the certificates so surrendered.
(12) Shareholder Rights Plan. The shares of 5% Preferred Stock, Series
B shall be entitled to the benefits of a number of rights ("Rights") issuable
under the Shareholder Rights Agreement, dated as of October 1, 1993, as amended,
between the Company and Continental Stock Transfer & Trust Company or any
successor plan of similar purpose and effect (the "Rights Agreement") equal to
the number of shares of Common Stock then issuable upon conversion of the 5%
Preferred Stock, Series B at the prevailing Conversion Rate. Any shares of
Common Stock deliverable upon conversion of a share of 5% Preferred Stock,
Series B or upon payment of a dividend shall be accomplished by a Right.
37
