<PAGE>
As Filed With the Securities and Exchange Commission on February 4, 1999
Registration No. 333-67895
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Amendment No. 6
to
FORM S-1
REGISTRATION STATEMENT
Under The Securities Act of 1933
----------------
United Pan-Europe Communications N.V.
(Exact name of registrant as specified in its charter)
The Netherlands 4841 98-0191997
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
Fred. Roeskestraat 123
P.O. Box 74763
1070 BT Amsterdam, The Netherlands
(31) 20-7789840
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------
Michael T. Fries, Supervisory Board Member
United International Holdings, Inc.
4643 South Ulster Street, Suite 1300
Denver, Colorado 80237
(303) 770-4001
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
Garth B. Jensen, Esq. Katherine Ashton, Esq.
Holme Roberts & Owen LLP Debevoise & Plimpton
1700 Lincoln, Suite 4100 25 Old Broad Street
Denver, Colorado 80203 London EC2N 1HQ England
(303) 861-7000 (44) 171-786-9000
----------------
Approximate Date of Commencement of Proposed Sale to the Public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell these securities nor does it +
+seek an offer to buy these securities in any jurisdiction where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated February 4, 1999.
[LOGO OF UNITED PAN-EUROPE COMMUNICATIONS N.V. APPEARS HERE]
United Pan-Europe Communications N.V.
40,000,000 Ordinary Shares
in the form of American Depositary Shares or Ordinary Shares
----------
This is an initial public offering of ordinary shares of United Pan-Europe
Communications N.V. UPC is also offering the ordinary shares in the form of
American Depositary Shares. Each ADS represents one ordinary share. This
prospectus relates to an offering of 17,600,000 ordinary shares, in the form of
ordinary shares or ADSs, in the United States. In addition, 22,400,000 ordinary
shares, in the form of ordinary shares or ADSs, are being offered outside the
United States.
At UPC's request, the underwriters have reserved, out of the shares being
offered in the United States, $300 million worth of ordinary shares at the
initial public offering price for sale to Microsoft Corporation. This would
represent 10,157,750 ordinary shares at the midpoint of the offering price
range. If Microsoft purchases all of these shares, it will own about 8.1%, and
United International Holdings, Inc. will own about 62%, of UPC immediately
after this offering.
UPC and the underwriters currently estimate that the initial public offering
price will be between (Euro)24.00 (NLG52.89) and (Euro)27.00 (NLG59.50) per
ordinary share. This is equivalent to a price range of $27.80 to $31.27 per ADS
at an exchange rate of (Euro)0.86341 per $1.00. UPC intends to list the
ordinary shares in bearer form on the Official Market of the Amsterdam Stock
Exchange under the symbol "UPC". UPC also intends to have the ADSs quoted on
the Nasdaq National Market System under the symbol "UPCOY".
----------
See "Risk Factors" beginning on page 10 to read about certain factors you
should consider before buying ordinary shares or ADSs.
----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
----------
<TABLE>
<CAPTION>
Per ADS Per Ordinary Share Total, at ADS price
------- ------------------ -------------------
<S> <C> <C> <C>
Initial public offering price.. $ (Euro) $
Underwriting discount.......... $ (Euro) $
Proceeds, before expenses, to
UPC........................... $ (Euro) $
</TABLE>
The U.S. underwriters may, under certain circumstances, purchase up to an
additional 1,150,000 ordinary shares, in the form of ordinary shares or ADSs,
from UPC at the initial public offering price less the underwriting discount.
The international underwriters may similarly purchase up to an additional
3,450,000 ordinary shares, in the form of ordinary shares or ADSs.
----------
Joint Global Coordinators
Goldman Sachs International Morgan Stanley Dean Witter
----------
Goldman, Sachs & Co.
Morgan Stanley Dean Witter
Donaldson, Lufkin & Jenrette
----------
Prospectus dated February , 1999.
<PAGE>
VIDEO, VOICE & DATA COMMUNICATIONS [Company Logo]
[MAP OF EUROPE AND ISRAEL IDENTIFYING LOCATION OF UPC'S OPERATING SYSTEMS]
Countries in which our systems
are located
Video
We offer subscribers some of the best traditional video services
available today, as well as a large choice of FM radio programs.
Approximately 3.4 million homes subscribe to our basic video
services. This is an average of 70% of the homes capable of being
connected to our network and receiving our services. We are upgrading
our systems so that they can send signals both to and from the
customer's home. This allows us to offer additional revenue-
generating services.
Voice
Our upgraded cable network and current subscriber relationships
provide ready access to potential residential telephone customers. We
plan to offer local telephone services to our customers in Austria,
The Netherlands, France and Norway under the Priority Telecom name.
We use the name Nedpoint for this in the A2000 system in Amsterdam
and surrounding areas. Our state-of-the-art networks also create the
opportunity to reach potential business telephone customers on a
cost-effective pan-European basis.
Data
Our chello broadband subsidiary is launching a European Internet
access service with specially created content. chello broadband plans
to serve our operating companies, as well as third-party cable
operators across Europe. We have already launched a service giving
high-speed access to the Internet through cable modems in many of our
European markets.
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS: BUILDING A PAN-EUROPEAN NETWORK TO BRING
VIDEO, VOICE AND DATA COMMUNICATIONS TO HOMES AND BUSINESSES
[PHOTOS OF OUR OPERATIONS]
<PAGE>
[PHOTOS OF OUR OPERATIONS]
<PAGE>
PROSPECTUS SUMMARY
This summary highlights more detailed information and financial statements
contained later in this prospectus. This summary does not contain all of the
information that you should consider before investing in the shares. You should
read the entire prospectus carefully, especially the risks of investing in the
shares discussed under "Risk Factors".
General Information About Us and Our Business
Overview
United Pan-Europe Communications N.V. owns and operates cable-based
communications networks in ten countries in Europe and in Israel. We provide
cable television services. Some of our systems also provide telephone and
Internet access services. Our systems together have the largest number of
subscribers of any group of broadband communications networks operated across
Europe. We have systems in Austria, The Netherlands, Belgium, Norway and
France. These systems are strategically located in the capital cities of
Vienna, Amsterdam, Brussels, Oslo and suburban Paris. We also have systems in
Israel, Malta and Eastern Europe. We are a subsidiary of United International
Holdings, Inc., a leading international provider of video, telephone and data
services.
Our systems had about 5.9 million homes in their license areas at September
30, 1998. Of these, about 4.9 million homes were passed by the cable in our
network and thus capable of receiving our services. About 3.4 million of these
homes, or 70%, subscribed to our basic video services. We have majority
ownership of all of our Western European systems except the A2000 system in
Amsterdam and surrounding areas. We also have majority ownership of most of our
systems outside Western Europe. Measured by our ownership percentage of
individual systems, we have an equity interest in about 3.0 million homes
passed by, and 2.0 million subscribers served by, our cable systems.
In our Western European markets, we are upgrading our existing network to
two-way transmission capability. This enables us to provide digital video,
telephone and Internet/data services. At September 30, 1998, our systems had
about 13,850 cable telephone and about 12,725 Internet access subscribers.
We are investing significant amounts in our network. As a result, we are
incurring substantial depreciation, amortization and other expenses. We have
made net losses every year since we started business.
Relationship with Microsoft
We plan to establish a relationship with Microsoft Corporation to work
jointly on Internet, telephone and video projects. See "Relationship with
Microsoft" and "Risk Factors -- Our Relationship with Microsoft May Not Work
Out".
New Business Lines
We believe the European telecommunications market offers significant growth
opportunities. Most European Union member countries and Norway had opened their
telephone industries to competition by January 1, 1998. This liberalization
means that new providers can offer telephone and other telecommunications
services. Due to this change in regulation and technological advances, a single
cable link to the home can deliver video, telephone and Internet/data services.
We can now offer all three services as an integrated package in the markets
where we have upgraded our network. We have already begun to do so in some
markets.
We plan to offer local telephone services, called Priority Telecom in our
Austrian, Dutch, French and Norwegian systems. We use the name Nedpoint for
these services in A2000, the Amsterdam system. A2000 has offered cable
telephone services since July 1997. By September 30, 1998, A2000 served
approximately 16,000 lines covering 13,850 cable telephone subscribers. In
November 1998, we launched cable telephone service on a trial basis in Vienna.
We have launched in Austria, Belgium, The Netherlands and Norway a service
giving high-speed access to the Internet through cable modems. Cable modem
technology can provide Internet access at speeds up to 100 times faster than
traditional modems using telephone lines.
3
<PAGE>
By September 30, 1998, we had more than 12,125 residential and 600 business
Internet access subscribers. We will begin offering new Internet access and
content services, which we call chello broadband, in our upgraded Western
European networks during the first quarter of 1999.
Network Upgrade
Since 1994, we have been upgrading our Western European cable television
infrastructure. When we upgrade, we replace parts of the coaxial cable with
fiber optic lines and upgrade the remaining coaxial cable so that it can send
signals both to and from the customer's home. By September 30, 1998, the
upgraded parts of our networks in Austria, Belgium, The Netherlands and France
passed about 54% of the 2.6 million homes passed by those networks. We plan to
reach about 87% by the end of 1999.
By September 30, 1998, our systems had about 4,375 kilometers of high-
capacity active fiber optic infrastructure. We also had more than 35,340
kilometers of coaxial distribution cable. About 25,200 kilometers of this
coaxial cable can send signals both to and from the customer's home.
Our Growth Strategy
We believe our leading position in providing video services across Europe
will help us to expand our three lines of business. Our strategy is to become a
leading provider of video distribution and programming services, telephone
services and Internet/data services.
The key elements of our strategy are to:
. keep increasing our average revenue per subscriber by developing our
expanded basic tier service, pay-per-view and audio-only program offerings,
. take advantage of our upgraded cable television infrastructure to offer
telephone and Internet/data services, and
. keep acquiring systems near our current systems and increase the percentage
we own in some systems.
Historical Growth
Most of our operating systems have provided video services for a long time.
These systems have grown significantly over the past few years, measured by the
number of subscribers and by revenues. We have grown by strategically acquiring
cable television systems and developing our existing systems. The operating and
financial information in the tables below show this growth.
We do not own 100% of all of our operating companies. The second table
measures the operating data by the percentage we own of our operating
companies. The third table presents consolidated financial information,
starting from when we began as a joint venture in July 1995.
<TABLE>
<CAPTION>
At December 31,
----------------------------- At September 30,
Operating Data 1995 1996 1997 1998
- -------------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Homes in our service areas...... 4,332,400 4,007,760 4,134,656 5,867,686
Homes passed by cable in our
networks....................... 3,457,232 3,254,865 3,553,756 4,900,030
Homes passed by two-way cable... -- -- 674,457 1,396,651
Basic video subscribers......... 2,153,422 2,061,197 2,311,708 3,430,903
Internet/data subscribers....... -- -- 1,907 12,736
Telephone subscribers........... -- -- 3,255 13,849
<CAPTION>
At December 31,
----------------------------- At September 30,
Proportionate Operating Data 1995 1996 1997 1998
- ---------------------------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Homes in our service areas...... 2,055,000 2,650,156 2,870,982 3,821,549
Homes passed by cable in our
networks....................... 1,635,938 2,088,108 2,351,539 3,008,195
Homes passed by two-way cable... -- -- 541,082 919,653
Basic video subscribers......... 1,011,004 1,321,004 1,514,606 2,035,753
Internet/data subscribers....... -- -- 1,622 8,272
Telephone subscribers........... -- -- 1,627 3,531
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Years Ended
Six Months Ended December 31, For the Nine
December 31, ------------------ Months Ended
Consolidated Financial Information 1995(3) 1996 1997 September 30, 1998
- ---------------------------------- ---------------- -------- -------- ------------------
(Dutch guilders, in thousands)
<S> <C> <C> <C> <C>
Revenues................ 100,179 245,179 337,155 305,237
Adjusted EBITDA......... 33,756 85,877 116,030 107,792
Adjusted EBITDA Margin
(Adjusted
EBITDA/Revenues)....... 33.7% 35.0% 34.4% 35.3%
Net operating (loss)
income................. (218) 6,045 (23,751) (61,932)
Net Loss................ (39,279) (71,336) (161,713) (171,852)
Cash flows from
operating activities.... 38,493 41,542 132,584 52,071
Cash flows from
investing activities.... (500,106) (6,394) (402,340) (381,253)
Cash flows from
financing activities.... 465,508 (116,756) 326,482 275,910
</TABLE>
We have presented "Adjusted EBITDA" statistics in the table above and
elsewhere in this prospectus. The term "Adjusted EBITDA" represents earnings
before:
.net interest expense,
.income tax expense,
.depreciation,
.amortization,
.stock-based compensation charges,
.minority interest,
.share in results of affiliated companies (net),
.currency exchange gains (losses), and
.other non-operating income (expense) items.
Industry analysts generally consider Adjusted EBITDA to be a helpful way to
measure the performance of cable television operations and communications
companies such as us. We believe Adjusted EBITDA helps investors to assess the
cash flow from our operations from period to period and, thus to value our
business. Adjusted EBITDA should not, however, be considered a replacement for
net income, cash flows or for any other measure of performance or liquidity
under generally accepted accounting principles or as an indicator of a
company's operating performance. We are not entirely free to use the cash
represented by our Adjusted EBITDA as we please. Several of our consolidated
operating companies are restricted by the terms of their debt arrangements.
Each company has its own operating expenses and capital expenditure
requirements, which can limit our use of cash. Our presentation of Adjusted
EBITDA may not be comparable to statistics with a similar name reported by
other companies. Not all companies and analysts calculate EBITDA in the same
manner. We have calculated Adjusted EBITDA as follows:
<TABLE>
<CAPTION>
Nine Months
Six Months Years Ended Ended
Ended December 31, September 30,
December 31, -------------- -------------
1995 1996 1997 1998
------------ ------ ------- -------------
(Dutch guilders, in thousands)
<S> <C> <C> <C> <C>
Net Operating income/(loss)..... (218) 6,045 (23,751) (61,932)
Add Back:
Depreciation and Amortisation... 33,974 79,832 134,963 137,231
Compensation Expense Related to
Stock Options.................. -- -- 4,818 32,493
------ ------ ------- -------
Adjusted EBITDA................. 33,756 85,877 116,030 107,792
====== ====== ======= =======
</TABLE>
Relationship with UIH
United International Holdings, Inc. will own about 62% of our ordinary
shares and all of our priority shares immediately after this offering. This
means UIH will continue to control us for the foreseeable future. The rules of
the Amsterdam Stock Exchange restrict the number of ordinary shares UIH may
sell for the next three years unless the ordinary shares are sold in a public
offering. UIH is a leading provider of video, voice and data services in
Europe, the Asia/Pacific region and Latin America. At September 30, 1998, UIH's
systems passed 9.7 million homes and served 4.4 million basic video
subscribers. Measured by the percentage it holds of its operating systems,
UIH's systems passed 6.0 million homes and served 2.5 million subscribers.
UIH's Class A Common Stock trades on the Nasdaq National Market System under
the symbol "UIHIA".
5
<PAGE>
The Offering
The information throughout this prospectus assumes that the underwriters do
not exercise their option to purchase additional ordinary shares in this
offering. The following information also assumes an initial public offering
price of ^25.50, the midpoint of the offering price range.
The Offering.............
<TABLE>
<S> <C>
U.S. offering 17,600,000 ordinary shares
International
offering 22,400,000 ordinary shares
--------------------------
Total 40,000,000 ordinary shares
==========================
</TABLE>
Directed Shares.......... We have asked the underwriters to reserve, out of
the shares in the U.S. offering, $300 million
worth of ordinary shares at the initial public
offering price for sale to Microsoft Corporation.
This would represent 10,157,750 ordinary shares
at the midpoint of the offering price range.
Shares Outstanding.......
After this offering, we will have 124,815,969
ordinary shares and 100 priority shares issued
and outstanding. Priority shares have special
approval and other rights.
Use of Proceeds.......... We intend to use the net proceeds from this
offering:
. to fund costs of about NLG500 million to
NLG750 million to improve our cable network to
provide telephone and Internet/data services,
and to pay for new activities in our video
distribution and programming businesses,
. until we make these investments, to repay
NLG620 million of debt which we intend to
reborrow under the same debt facility to use
for these investments,
. to pay about NLG445 million as part of the
purchase price for the 49% we do not now own
of United Telekabel Holding, our Dutch holding
company,
. to repay other debt of about NLG270 million,
and
. for general corporate purposes and future
Listing/Trading acquisitions.
Symbols.................. ADSs on Nasdaq: "UPCOY"
Ordinary shares on the Amsterdam Stock Exchange:
Risk Factors............. "UPC"
You should review the "Risk Factors" section for
a discussion of certain factors about us, the
industries in which we operate and this offering
that you should consider before buying ordinary
shares or ADSs.
Payment and Delivery.....
The underwriters expect to deliver the ADSs
against payment in U.S. dollars through The
Depository Trust Company's book-entry facilities
and to deliver the ordinary shares against
payment in euros through the book-entry
facilities of the Dutch clearing house, which is
called NECIGEF, Euroclear and Cedel on or about
February , 1999.
6
<PAGE>
American Depositary Shares
We are selling our ordinary shares in the form of ordinary shares or ADSs.
ADSs are American depositary shares that represent our shares. Each ADS, as of
the date of issuance of the ADSs, will represent one ordinary share. Citibank
N.A. will issue the ADSs. Because ADSs usually make owning foreign shares
easier, ADSs are commonly used in offerings by foreign companies. We are using
them because we believe they will provide you with the following benefits:
. Citibank will normally convert the cash dividends and other payments made
from Dutch guilders or euros to U.S. dollars for you. Citibank will also
assist you in claiming refunds for Dutch withholding taxes if refunds are
available.
. When we invite you to vote, we expect Citibank to put in place procedures
to allow you to vote the shares, so you will not need to come to The
Netherlands or comply with Dutch law to exercise your right to vote.
. We expect to make certain information available in English. This would
include notices of meetings of shareholders, the taking of any action by
shareholders other than at a meeting, or of any action regarding
distributions on the shares. Citibank will make this information available
in the United States. We will also ask Citibank to send you or otherwise
make available to you other notices and reports made to shareholders and
our annual and semi-annual reports, which will also be in English.
. Although you must pay the fees associated with owning ADSs, you will not
need to make special custody arrangements to hold the shares in The
Netherlands.
Your specific rights in the ADSs and in our ordinary shares underlying the
ADSs are set out in an agreement among us, Citibank and you, as an ADS holder.
To understand the terms of the ADSs, you should read carefully the section in
this prospectus entitled "Description of American Depositary Shares", which
describes the agreement. We also encourage you to read the agreement, which is
an exhibit to our registration statement filed with the U.S. Securities and
Exchange Commission. See "Available Information".
7
<PAGE>
Summary Consolidated Selected Financial Data of the Company
The December 31, 1995, 1996 and 1997 and September 30, 1998 financial data
in the table below come from our audited consolidated financial statements in
this prospectus. The September 30, 1997 information comes from unaudited
financial statements in this prospectus. We applied certain accounting changes
to calculate the September 30, 1998 financial information to take into account
UIH's purchase of its partner's interest in us on December 11, 1997. For more
information about these accounting changes, see "Pro Forma Selected
Consolidated Financial Data" and note 1 to the audited consolidated financial
statements at the back of this prospectus. We calculated "Basic and diluted
loss per ordinary share" by dividing net loss available to ordinary
shareholders by the weighted-average number of ordinary shares outstanding
during each period. "Supplemental basic and diluted net loss per ordinary
share" shows the pro forma reduction of debt-related interest expense expected
after debt is repaid from proceeds of this offering. To make this calculation,
we have assumed the number of outstanding shares will increase in this offering
by enough to produce proceeds to repay the debt. Before this offering, we will
convert every two of our ordinary shares into three ordinary shares. We have
prepared all of the information in this prospectus as if this "stock split" has
already happened.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
Six Months Ended December 31, September 30,
December 31, ---------------------- ----------------------
1995 1996 1997 1997 1998
---------------- ---------- ---------- ---------- ----------
(Dutch guilders, in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Service and other
revenue................ 100,179 245,179 337,155 250,061 305,237
Operating expense....... (32,806) (80,479) (111,919) (87,206) (97,472)
Selling, general &
administrative
expense................ (33,617) (78,823) (114,024) (80,061) (132,466)
Depreciation and
amortization........... (33,974) (79,832) (134,963) (96,528) (137,231)
---------- ---------- ---------- ---------- ----------
Net operating (loss)
income................. (218) 6,045 (23,751) (13,734) (61,932)
---------- ---------- ---------- ---------- ----------
Net loss before income
taxes and other items.. (17,064) (50,808) (149,831) (109,872) (125,260)
---------- ---------- ---------- ---------- ----------
Net loss................ (39,279) (71,336) (161,713) (126,609) (171,852)
========== ========== ========== ========== ==========
Basic and diluted loss
per ordinary share..... (0.48) (0.88) (2.01) (1.56) (2.39)
========== ========== ========== ========== ==========
Supplemental basic and
diluted net loss per
ordinary share......... (1.73) (1.68)
========== ==========
Weighted-average number
of ordinary shares
outstanding............ 81,000,000 81,000,000 80,488,992 81,000,000 71,801,865
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1997 As of September 30, 1998
----------------------- ------------------------
(Dutch guilders, in thousands)
<S> <C> <C>
Balance Sheet Data:
Property, plant and
equipment................... 483,693 527,069
Intangible assets............ 725,513 678,741
Total assets................. 1,919,815 1,849,968
Short-term and long-term
debt........................ 1,261,533 1,343,201
Total liabilities............ 1,501,506 1,594,356
Total shareholders' equity... 411,530 221,347
</TABLE>
8
<PAGE>
Corporate Ownership Structure
The diagram below summarizes our operations and equity ownership percentages
in our operating systems on September 30, 1998. In November 1998, we increased
our ownership of the Israeli system to 46.6% and the Maltese system to 50%, and
sold our 20% interest in our Irish operating company. In December 1998, we
acquired from UIH 44.75% of the telephone system operating in the Monor region
of Hungary and 75% of the programming service, Tara. In February 1999, we
bought from UIH 33.5% of IPS, a group of programming companies focusing on the
Spanish- and Portuguese-speaking markets. After we sell shares in this
offering, we will buy the 49% of our Dutch holding company, United Telekabel
Holding, that we do not own.
[FLOW CHART APPEARS HERE]
United Pan-Europe Communications N.V.(1)
Operating Systems
Consolidated Systems
Austria
Telekabel Group
95%
100%
Belgium
TVD
100%
Norway
Janco Multicom
99.6%(2)
France
Mediareseaux
Eastern Europe
Hungary(3) - 79.25%
Czech Republic - 100%
Romania(3) - 51-100%
Slovak Republic(3) - 75-100%
Unconsolidated Systems
51%
The Netherlands
United Telekabel
Holding
50%
A2000
100%
CNBH
Telekabel
Beheer
Israel
Tevel
Malta
Melita Cable
Business Lines
Video Distribution and
Programming Services
Telephony Services
Priority Telecom
Internet/Data Services
chello broadband
9
<PAGE>
Summary Operating and Financial Data
In the table below, we show the percentage we own of our operating systems,
as well as operating and financial information for those systems. When we refer
to information as "proportionate", we mean that we have multiplied the
statistic for each operating system by our percentage ownership of that system.
Some of our percentage ownerships of operating systems have changed since the
date of this table. In November 1998, we doubled our ownership of our Israeli
system to 46.6% and our Maltese system to 50%. As part of that transaction, we
sold our entire interest in our Irish system. Also, at the same time as we sell
shares in this offering, we will increase our ownership of UTH to 100% and
A2000 to 50%. Finally, because we acquired Eurosat in May 1998, only four
months of its results of operations are included.
<TABLE>
<CAPTION>
At September 30, 1998
---------------------------------------------------------------
UPC Homes Two-Way Basic Basic
Ownership Under Homes Homes Video Video
Interest License Passed Passed Subscribers Penetration
--------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Western European
Systems
Austria.......... 95.0% 1,070,640 897,938 487,055 442,596 49.3%
Belgium.......... 100.0 133,000 133,000 85,939 127,574 95.9%
France........... 99.6 86,000 60,712 60,712 20,955 34.5%
The Netherlands:
A2000........... 25.5 575,000 569,459 329,101 516,729 90.7%
UTH............. 51.0 935,132 907,078 422,902 855,277 94.3%
Norway........... 100.0 529,924 461,759 10,942 319,769 69.3%
--------- --------- --------- ---------
Subtotal........ 3,329,696 3,029,946 1,396,651 2,282,900
Other Systems
Israel........... 23.3 600,000 568,999 -- 395,680 69.5%
Malta............ 25.0 179,000 161,310 -- 68,149 42.2%
Ireland.......... 20.0 380,000 377,206 -- 145,251 38.5%
--------- --------- --------- ---------
Subtotal........ 1,159,000 1,107,515 -- 609,080
Eastern Europe
Hungary.......... 79.25 901,500 490,966 -- 413,119 84.1%
Czech Republic... 100.0 229,531 148,963 -- 52,268 35.1%
Romania:
Multicanal...... 100.0 70,000 21,220 -- 7,405 34.9%
Control Cable... 100.0 80,000 48,454 -- 32,128 66.3%
Eurosat......... 51.0 30,000 26,000 -- 19,367 74.5%
Slovak Republic:
Trnavatel....... 75.0 21,839 16,782 -- 11,507 68.6%
Kabeltel........ 100.0 46,120 10,184 -- 3,129 30.7%
--------- --------- --------- ---------
Subtotal........ 1,378,990 762,569 -- 538,923
========= ========= ========= =========
Total........... 5,867,686 4,900,030 1,396,651 3,430,903
========= ========= ========= =========
Total of our
proportionate
interests...... 3,821,549 3,008,195 919,653 2,035,753
========= ========= ========= =========
<CAPTION>
For the Nine Months
Ended September 30, 1998
-------------------------------------------------
Net Total Proportionate
Income Adjusted Adjusted
Revenue (Loss) EBITDA EBITDA
---------- ----------- ------------ -------------
(Dutch guilders, in thousands)
<S> <C> <C> <C> <C>
Western European
Systems
Austria.......... 130,288 (2,921) 62,735 59,598
Belgium.......... 26,944 (13,115) 9,807 9,807
France........... 5,189 (8,318) (2,962) (2,950)
The Netherlands:
A2000........... 90,234 (46,623) 21,620 5,513
UTH............. 156,690 (47,805) 79,034 40,307
Norway........... 69,035 (47,970) 25,750 25,750
Subtotal........
Other Systems
Israel........... 222,481 15,845 121,338 28,272
Malta............ 22,226 1,922 9,357 2,339
Ireland.......... 58,342 11 22,448 4,490
Subtotal........
Eastern Europe
Hungary.......... 39,225 6,903 14,416 11,425
Czech Republic... 6,618 (5,327) (1,818) (1,818)
Romania:
Multicanal...... 405 86 163 163
Control Cable... 1,890 310 1,003 1,003
Eurosat......... 562 87 216 110
Slovak Republic:
Trnavatel....... 923 (605) 296 222
Kabeltel........ 240 (1,912) (369) (369)
Subtotal........
Total...........
Total of our
proportionate
interests......
</TABLE>
Our Address and Telephone Number
Our office address is Fred. Roeskestraat 123, 1076 EE Amsterdam, The
Netherlands. Our telephone number is +31 20 778 98 40.
9--1
<PAGE>
RISK FACTORS
You should consider carefully the following risk factors, as well as all of
the other information in this prospectus, before buying shares.
We Expect to Continue to Make Net Losses for the Next Five to Ten Years
If we never become profitable, the value of our shares may fall. We have
made net losses every year since we started business in July 1995. Through
September 30, 1998, we had recognized cumulative losses of about NLG443.9
million. We have had positive operating cash flow since we started business,
but we are now actively expanding our video services business and introducing
other new lines of business. At the moment, the new lines of business have
negative cash flow. We expect negative cash flow from the new business ventures
to increase as these operations expand. We expect to incur net losses for the
next five to ten years. Continuing to make net losses could increase our
capital needs.
Failure to Raise Necessary Capital Could Restrict the Development of Our
Network, the Introduction of New Services and the Acquisition of Cable Systems
Setting up and running cable television and telecommunications systems
requires significant capital. Lack of capital could harm our business.
Many of our operating companies are expanding and upgrading their networks
to offer new services. Technological change may make even more upgrades
necessary if our operating companies are to compete in their markets. Our
financial resources, even with the proceeds from this offering, may not be
enough for our capital needs. Also, we plan that equipment vendors will finance
a good part of the cost of the equipment for our new services. This vendor
financing is not yet in place. We may not be able to secure vendor financing on
satisfactory terms. Not upgrading our operating systems or making other planned
capital expenditures could harm our operations and competitive position. We
have budgeted NLG515.1 million for capital expenditures in 1999 for our
consolidated companies. This amount does not include NLG187.5 of UTH's
projected capital expenditures, which we will consolidate after this offering.
During 1999, we must also repay or refinance over NLG750 million of
indebtedness. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Consolidated Capital
Expenditures" and "-- Liquidity and Capital Resources -- Sources of Capital".
We continue to look for acquisition opportunities in our existing markets.
We have agreed, for example, to buy our partner's interest in United Telekabel
Holding, our Dutch holding company. We have made no other commitments for any
significant transactions. We want to acquire systems near our existing systems
that we can run efficiently and in which we can introduce our new services. If
we pursue new acquisition or development opportunities, we may need to raise
more capital. We might do so by selling assets, issuing debt or equity or
borrowing funds. We are not sure whether we will be able to raise capital
through any of these or other methods. If we cannot, then we may not be able to
grow by acquiring systems as we intend.
Our High Level of Debt and Limitations on Our Capacity to Borrow and Invest
Could Slow Down Growth in Subscribers and Revenue
Our high level of debt and limitations on our capacity to borrow and invest
reduce our financial flexibility. This could reduce the amount of money
available to develop our businesses and could result in slower growth in
subscribers and revenues than we plan. On September 30, 1998, we owed NLG303.6
million in short-term consolidated debt and NLG1,039.6 million in long-term
consolidated debt. On September 30, 1998, our total long-term debt was about
80.3% of our total capitalization. See "Capitalization". Many of our
unconsolidated subsidiaries and affiliates also have long- and short-term debt.
Some of the proceeds from this offering will be used to reduce our level of
debt. We will, however, still have a high level of debt after this offering.
Also, the terms of many of our debt facilities limit our borrowing capacity.
They also limit our ability to invest in some of our subsidiaries and certain
transactions between subsidiaries. The terms of UIH's debt securities also
restrict our ability to incur more debt.
For more detailed information about our level of debt and restrictions on
our ability to borrow, see "Management's Discussion and Analysis of
10
<PAGE>
Financial Condition and Results of Operations--Liquidity and Capital
Resources".
Our Relationship with Microsoft May Not Work Out
We and Microsoft may never reach final agreement on the terms of our
relationship. Even if we do reach agreement, the relationship may not bring the
benefits that we expect. It is also possible that regulatory concerns may
hamper the development of our relationship. Our relationship will not be
exclusive and Microsoft may enter into similar relationships with other
European companies, including any of our competitors. We have reserved an
allocation of shares for Microsoft in this offering, but Microsoft might not
buy any shares in this offering.
The Success of Our New Telephone and Internet/Data Services Depends on Whether
We Can Keep Achieving Technological Advances
Technology in the cable television and telecommunications industry is
changing very rapidly. These changes influence the demand for our products and
services. We need to be able to anticipate these changes and to develop
successful new and enhanced products quickly enough for the changing market.
This will determine whether we can continue to increase our revenues and the
number of our subscribers and be competitive.
We plan to offer new services, including:
. additional video channels and tiers,
. pay-per-view services with frequent starting times, which are known as
"impulse" pay-per-view,
. high speed data and Internet access services, and
. cable telephone services.
We cannot guarantee that we will be able to achieve the technological
advances needed for these new services to be competitive. We also cannot be
sure that demand for our services will develop or be maintained in the light of
other new technological advances. There could be delays in introducing our new
services, such as access to the Internet through cable modems and telephone
services. Our new services may also not operate as intended.
Our New Telephone and Internet/Data Services Could Run Into System, Marketing,
Competition and Timing Problems that Would Impede Our Revenue Growth
We only recently began to offer local telephone and Internet/data services.
We may not have planned for or be able to overcome all of the problems in
introducing these new services. Our new services may not meet our financial
expectations. This would impede our planned revenue growth and harm our
financial condition.
The new services involve many operating complexities. We will need to
develop and enhance new services, products and systems, as well as new
marketing plans to sell the new services. For example, we intend to introduce a
comprehensive new billing system to support our new telephone and Internet/data
businesses. Until then, however, we plan to employ enhanced versions of our
existing customer care and billing systems for these services. Problems with
the existing or new systems could delay the introduction of the new services,
increase their costs, or slow down successful marketing.
Our telephone services may not become profitable for a number of reasons.
Customer demand could be low, or we may encounter competition and pricing
pressure from incumbent and other telecommunications operators. Our network
upgrade may cost more than planned. Furthermore, our operating systems need to
interconnect their networks with those of the incumbent telecommunications
operators in order to provide telephone services. Not all of our systems have
interconnect agreements in place. We are negotiating interconnect agreements
for our planned telephone markets that do not yet have them. This may involve
time-consuming negotiations and regulatory proceedings. Incumbent
telecommunications operators may not agree to interconnect on a time scale or
on terms that will permit us to offer profitable telephone services.
Large Numbers of New Customers for Our New Telephone and Internet/Data Services
Could Harm the Quality of Service and Thus Customer Demand
We cannot be sure whether our Internet access business will be able to
handle a large number of online subscribers at high data
11
<PAGE>
transmission speeds. As the number of subscribers goes up, we may have to add
more fiber connection points in order to maintain the high speeds. This would
need more capital, which we may be unable to raise. If we cannot offer high
data transmission speeds, customer demand for our Internet/data services would
go down. This would harm our Internet/data business, our operating results and
our financial condition.
We have not yet tested the technology we plan to use for telephone services
for the numbers of subscribers we expect. It may not function successfully at
these scales. This would harm our telephone operations. We plan to use back-up
batteries for our cable phones for operation during power failures. These may
run out in prolonged power failures. This would interrupt the service and
could lead to customer dissatisfaction.
Lack of Necessary Equipment Could Delay or Impair Our Expansion
If we cannot obtain the equipment needed for our existing and planned
services, our operating results and financial condition may be harmed. For
example, a customer will need a digital set-top box to access the Internet or
receive our other enhanced services through a television set. These boxes are
being developed by several suppliers. If there are not enough affordable set-
top boxes for subscribers, however, we may have to delay our expansion plans.
Inability To Obtain the Necessary Programming Could Reduce Demand for Our
Services
Our success depends on obtaining or developing affordable and popular
programming for our subscribers. We may not be able to obtain or develop
enough competitive programming to meet our needs. This would reduce demand for
our video services, limiting their revenues. We rely on other programming
suppliers for most of our programming. In some markets, there is only a
limited amount of local language programming available. There we must
repackage other programming in the local language. We also plan to commit
substantial resources to obtaining and developing new programming. We expect
to seek partners for this. We may not, however, find the appropriate partners
or successfully implement our programming plans.
Developing Expanded Basic Tier Video Services Could Lead to Customer
Dissatisfaction
We may, where appropriate and permitted, move some of our more highly
valued channels from basic tiers, whose price is generally regulated, to
expanded basic tiers for which we charge more. In many systems, we would need
consent from the local authorities to do this. We may be unable to obtain this
consent on satisfactory terms or on the desired schedule. Subscribers to the
basic tier services accustomed to receiving certain channels may not wish to
pay additional fees to receive these channels in the expanded basic tier.
Thus, the movement of channels out of the basic tiers could lead to customer
dissatisfaction.
Increased Competition in Video Services Could Reduce Our Revenues
The cable television industry in many of our markets is competitive and
changing rapidly. Competition could result in the loss of our customers and
lower our revenues.
We expect that competition will increase with new entrants who use multi-
channel television technologies different from the technologies our cable
systems use. These technologies may include:
. services that receive satellite signals at the subscriber's home,
. private cable systems used by housing associations and multiple unit
dwellings, and
. "wireless" cable transmitted by low frequency radio.
We may also face competition from other communications and entertainment
media companies. These could include incumbent telecommunications operators.
In some franchise areas, our rights to provide video services are not
exclusive and we may have to compete with other cable operators.
The Competitiveness of the Telephone Services Industry Will Make it Difficult
for Our New Telephone Service to Enter the Market
We will face competition from incumbent telecommunications operators and
other new entrants to the European telephone market. Some of these competitors
have more experience in providing telephone services than we have. Some
12
<PAGE>
can also devote more capital to these services than we can.
Developing a profitable telephone service will depend, among other things,
on whether we can:
. attract customers,
. maintain competitive prices,
. limit loss of customers, and
. provide high quality customer care and billing services without incurring
significant additional costs.
As part of our goal to offer integrated telecommunications services, we
plan to offer local and long distance telephone services. The long distance
telephone business is extremely competitive. Prices for long distance calls
have gone down significantly in recent years and we expect them to continue to
drop. Increased competition may also push prices down for local telephone
services. Regulators may make incumbent telecommunications operators lower
their rates. Because these are our principal competitors, this could force us
to lower our rates to remain competitive.
Growing Competition in Internet/Data Services Will Make it Harder for Our
Internet/Data Service to Succeed
The Internet services business in Europe is increasingly competitive. This
will make it harder for our new Internet/data service to gain a share of the
market. At the moment, we compete with companies that provide Internet service
using telephone lines, including many incumbent telecommunications operators.
These providers usually employ traditional low-speed telephone lines. We expect
chello broadband to face growing competition from Internet service providers
that, like it, use higher-speed, higher-capacity cable modems. These include
@Home and Roadrunner as they move to the European market. In the future, we
also expect to compete with other telecommunications service providers,
including incumbent telecommunications operators, using other broadband
technologies.
Rapid Growth Would Impose Significant Challenges on Our Operations
We are pursuing a new business plan with initiatives across many new
business lines and countries. If we succeed, the number of services we provide,
the number of subscribers we serve and the operating complexities we face will
grow rapidly. We expect that this will place significant additional demands on
our management. A number of the members of our management joined us only
recently. If we achieve this growth, our continued success will depend on how
well we manage the growth. We will need to improve our information, management,
operational and financial systems. We may not be able to manage our growth
effectively, which would harm our business, operating results and financial
condition.
The Loss of Key Personnel Could Harm Our Business
There is intense competition for qualified personnel in our businesses and
technologies. Our success and growth strategy depend upon being able to attract
and hold onto key management, technological and operating personnel. These
include Mark Schneider, John Riordan, Timothy Bryan, Scott Bachman, Timothy
Morel and Joseph Webster. It is particularly difficult for us to keep a
successful management team because many of them must live and work away from
their home countries. For example, our Managing Director of Video Entertainment
recently resigned for personal reasons and we are seeking an equally qualified
replacement. It is difficult to find other experienced managers. We may not be
able to attract and hold onto key employees. This could hinder the introduction
of our new services as planned and may harm our business, operating results and
financial condition.
Adverse Regulation of Our Video Services Could Limit Our Revenues and Growth
Plans
In most of our markets, regulation of video services takes the form of
price controls and programming content restrictions. Also, in The Netherlands
and Austria, local municipalities have contractual rights that restrict our
flexibility to increase prices, change programming and introduce new services.
Such restrictions could limit our plans to increase our revenues. For example,
see "Regulation -- The Netherlands -- Video Services".
Regulation May Adversely Affect Our Plans to Introduce Our New Telephone and
Internet/Data Services or How Fast Our New Services Grow
Regulation could slow down the introduction of our new services and
increase their costs. The
13
<PAGE>
primary scope of current regulation in the telecommunications sector in our
Western European markets has been to remove the monopoly power of incumbent
telecommunications operators. While this has given us the opportunity to enter
the telephone and Internet/data markets, the regulatory regimes present some
risks. As we explained above, these markets are highly competitive, primarily
because of the current regulation. Also, our operating companies need to
obtain and retain licenses and other regulatory approvals for our new
services. They may not succeed. In order to offer our new services, our
operating companies need to connect their networks to those of the incumbent
telecommunications operators. The regulatory regimes in our Western European
markets have been designed to help us obtain fairly priced interconnect
arrangements. As we found in Austria, however, the regulatory process can be
time-consuming. This may impede our ability to obtain appropriate interconnect
arrangements on schedule. Problems such as these would delay the introduction
of the new services.
The Internet access business has not so far been materially restricted by
regulation in our markets. The legal and regulatory environment of Internet
access and commerce is uncertain, however, and may change. New laws and
regulations may be adopted for Internet service offerings. Existing laws may
be applied to the new forms of electronic commerce. Uncertainty and new
regulation could increase our costs. It could also slow the growth of
electronic commerce on the Internet significantly. This could delay growth in
demand for our Internet/data services and limit the growth of our revenues.
New and existing laws may cover issues such as:
. sales and other taxes,
. user privacy,
. pricing controls,
. characteristics and quality of products and services,
. consumer protection,
. cross-border commerce,
. libel and defamation,
. copyright and trademark infringement,
. pornography, and
. other claims based on the nature and content of Internet materials.
In Austria, the local cities have veto rights over the introduction of new
services. This would include our telephone and Internet/data services. While
the cities have not used their veto power in the past, they could use this
power to restrict the manner in which we introduce our new services.
We Will Continue to be Controlled by UIH, Whose Interests May be Different
from Those of Other Shareholders, and Restricted by the Terms of UIH's Debt
Securities
Immediately after this offering, UIH will own about 62% of our ordinary
shares and all of our priority shares. As a result, UIH will be able to
control the election of all but one of the members of our Supervisory Board.
The Supervisory Board is the Dutch equivalent of a board of directors. Philips
has had the right to appoint one member since UIH acquired 50% of us from
Philips in 1997. If our partner in our Israeli system exercises its option to
purchase our shares, it will have the right to appoint one member of our
Supervisory Board. UIH will be able to determine the outcome of almost all
corporate actions requiring the approval of our shareholders. Thus, UIH will
continue to control substantially all of our business affairs and policies.
Our Supervisory Board has the power to approve transactions in which UIH
has an interest. This power is subject to directors' fiduciary duties to our
other shareholders. Nonetheless, conflicts may arise between the interests of
UIH and our other shareholders. For example, UIH may choose to invest in other
properties or have long-term debt obligations. UIH could cause us to provide
financial resources to our shareholders. This could limit our current strategy
of investing in our new businesses.
As a subsidiary of UIH, we are restricted by the terms of UIH's debt
securities. We have agreed with UIH not to take any action that would result
in a breach of these terms. They limit our ability to incur more debt and
issue certain preferred stock. Our freedom to invest in entities that we do
not control is also limited. Even if we do not cause a breach of the terms of
UIH's debt securities, a breach that is not caused by us could still restrict
us from incurring more debt or taking other actions. Many other terms of UIH's
debt securities affect the way we operate and organize transactions.
Computer Systems May Cause Operating Problems if They Do Not Achieve Year 2000
Readiness
We rely greatly on computer systems and other technological devices. These
may not be
14
<PAGE>
capable of recognizing dates beginning on January 1, 2000. This problem could
cause any of our cable television, telephone, Internet/data or programming
operations to malfunction or fail.
UIH's Board of Directors has set up a task force to assess and try to
remedy the effect of potential Year 2000 problems on its critical operations,
including those of UPC. Some of our critical operations depend on other
companies, such as our ability to connect our telephone customers to persons
who use other telephone service providers. We cannot control how these other
companies assess and remedy their own Year 2000 problems. We are communicating
with these companies to find out more about the status of their Year 2000
compliance programs. The task force will evaluate and develop contingency plans
as needed. These may not be sufficient, however, to prevent interruptions on
our systems. If we or other companies on whom we depend fail to implement Year
2000 procedures on time, our business, operating results and financial
condition could be significantly harmed.
Foreign Currency Exchange Rate Fluctuations May Cause Losses
Changes in foreign currency exchange rates can reduce the value of our
assets and revenues and increase our liabilities and costs. In general, neither
we nor our operating companies try to reduce our exposure to these exchange
rate risks by using hedging transactions. We may therefore suffer losses solely
as a result of exchange rate fluctuations. Since we began business, we have had
cumulative foreign exchange losses of about NLG59.1 million.
In each country, our operating companies attempt to match costs, revenues,
borrowings and repayments in their local currencies. Nonetheless, they have had
to pay for a lot of equipment in currencies other than their own. They may
continue to do so. On a consolidated basis, as of September 30, 1998, about 28%
of our debt was denominated in currencies other than Dutch guilders. Some of
our operating companies also owe debt and have receivables that are denominated
in other currencies. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources". This
exposes them to risk from foreign currency exchange rate fluctuations.
At the UPC level, the value of our investment in an operating company is
affected by the exchange rate between the Dutch guilder and the local currency
of the operating company.
The Market for Our Shares May be Affected by Future Sales
The market price of our shares could drop if substantial amounts of shares
are sold in the public market or if sales of substantial amounts of shares are
expected to occur. This could also impair our ability to raise capital by
offering equity securities.
After this offering, the 40,000,000 shares sold in this offering will be
freely tradeable in the United States without restriction or further
registration under the U.S. securities laws. They will also be freely tradable
on the Amsterdam Stock Exchange. There are legal and contractual restrictions
on sales of shares after the offering by UIH, our officers and directors, and
our business partner in Israel that will receive shares at the same time as
this offering. These restrictions will expire after varying time periods. For
more information about these restrictions, see "Shares Eligible for Future
Sale".
The Net Tangible Book Value of Our Shares Issued in this Offering Will Be Less
Than the Purchase Price
Purchasers of shares in this offering will experience immediate and
substantial reduction in the net tangible book value of NLG43.28 per share,
based on an assumed initial public offering price of NLG56.20 per share, which
is the midpoint of the offering price range. In addition, we have other
securities outstanding which, upon exercise or conversion, could result in
further reduction in the net tangible book value per share.
We Do Not Intend to Pay Dividends For the Foreseeable Future
We have never paid dividends on our shares. We do not intend to pay
dividends in the foreseeable future. The terms of some of our existing debt
facilities prevent us from paying dividends. At the moment, we do not have
sufficient statutory capital under Dutch regulations to make distributions. You
should therefore not expect to receive dividends on our shares in the
foreseeable future.
15
<PAGE>
USE OF PROCEEDS
Based on the midpoint of the offering price range, the net proceeds to us
from this offering are expected to be approximately NLG2,124.7 million
((Euro)964.1 million and $1,116.7 million). We plan to use the proceeds from
this offering:
. to fund costs, which we estimate to be approximately NLG500 million to
NLG750 million in the aggregate, associated with the network upgrade (40-
60%), the build and launch of our telephone and Internet/data businesses
(20-40%), and new activities in our video distribution and programming
businesses (15-25%),
. until we make these investments, to repay NLG620 million of debt owed
under our senior revolving credit facility, which we plan to reborrow
under that facility to use for these investments,
. to pay approximately NLG445 million as the cash portion of the purchase
price for the remaining 49% of UTH we do not own, including a NLG33
million subordinated note and related interest owed by UTH to NUON,
. to repay approximately NLG156 million of indebtedness and the interest on
this amount owed to UIH,
. to repay approximately NLG114 million of indebtedness incurred under our
bridge bank facility, and
. for general corporate purposes and future acquisitions.
Until the net proceeds of this offering are used as described above, we
intend to hold them in short-term, interest-bearing, investment grade
securities, including governmental obligations and other money market
instruments.
Our senior revolving credit facility bears interest at LIBOR plus a margin
of 0.5% to 2.0% and matures in 2006. Our bridge bank facility bears interest at
LIBOR plus a margin of 4.5% to 6.0% and matures in June 1999. As of September
30, 1998, approximately NLG972 million was outstanding under our senior
revolving credit facility and NLG114 million was outstanding under our bridge
bank facility. Part of our senior revolving credit facility was used to
refinance some of our operating companies' indebtedness. Part of our senior
revolving credit facility and our entire bridge bank facility were used to fund
UIH's acquisition of its partner's interest in us.
The UIH loan bears interest at 10.75% per annum. As of September 30, 1998,
approximately NLG156 million was outstanding under this loan. The funds loaned
by UIH were used to reduce our indebtedness under the bridge bank facility and
to fund business operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources".
DIVIDEND POLICY
We have never declared or paid cash dividends on our ordinary shares. We do
not intend to pay dividends for the foreseeable future. Some of our debt
facilities currently prohibit us from paying dividends. In addition, Dutch
regulations limit our distributions from statutory capital equity. See "Risk
Factors -- We Do Not Intend to Pay Dividends for the Foreseeable Future".
16
<PAGE>
EXCHANGE RATE DATA
We report all of our historical financial results in Dutch guilders. For
your convenience, we have converted some amounts in non-Dutch currencies to
Dutch guilders. These foreign currency translations for amounts prior to
December 31, 1997 use the same exchange rates used for the 1997 financial
statements. For amounts after December 31, 1997, we have used September 30,
1998 exchange rates, except as otherwise noted. These translated amounts may
not currently equal such Dutch guilder amounts nor may they necessarily be
converted into Dutch guilders at the translation exchange rates used.
In the future, we expect to report our financial results in euros. The
fixed exchange rate is (Euro)0.45378 per NLG1.00. On January 22, 1999, the
exchange rate was (Euro)0.86341 per $1.00.
The following table sets forth, for the periods indicated, information
concerning the exchange rate at the end of the period, the average of the
exchange rates at 12:00 p.m. Eastern Standard Time on the last day of each
month during the applicable period and the high and low exchange rates for
Dutch guilders expressed in guilders per $1.00. Exchange rates have been
rounded to the nearest 1/100th of one dollar. The source of the information in
this table is U.S. Federal Reserve Statistical Release H.10(512). On January
22, 1999, the exchange rate was NLG1.9027 per $1.00.
<TABLE>
<CAPTION>
At and for the Year At and for the
Ended December 31, Nine Months
------------------------ Ended
1993 1994 1995 1996 1997 September 30, 1998
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Exchange rate at end of period.... 1.95 1.74 1.60 1.73 2.03 1.88
Average exchange rate during
period........................... 1.86 1.81 1.60 1.69 1.97 2.02
Highest exchange rate during
period........................... 1.96 1.98 1.75 1.76 2.12 2.09
Lowest exchange rate during
period........................... 1.76 1.67 1.52 1.61 1.73 1.88
</TABLE>
The following table presents the spot rates used to translate the balance
sheets and the average rates used to translate the income statements of our
operating systems into Dutch guilders presented in this prospectus. The amounts
below represent the number of Dutch guilders per unit of each functional
currency, unless otherwise indicated.
<TABLE>
<CAPTION>
Average Rate
Average Rate Twelve Average Rate
Average Rate Balance Sheet Twelve Months Balance Sheet Months Balance Sheet Nine Months
Six Months Rate at Ended Rate at Ended Rate at Ended
Dec. 31, 1995 Dec. 31, 1996 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1997 September 30, 1998 September 30, 1998
------------- ------------- ------------- ------------- ------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Austrian
Schilling...... 0.1592 0.1595 0.1593 0.1602 0.1599 0.1602 0.16019
Belgian Franc... 0.0544 0.0545 0.0544 0.0546 0.0545 0.0547 0.05463
Czech Koruna.... 0.0606 0.0637 0.0626 0.0585 0.0622 0.0624 0.06121
French Franc.... -- 0.3330 0.3295 0.3369 0.3243 0.3365 0.33627
German Mark..... -- -- -- -- -- 1.12718 1.1276
Hungarian Forint
(per 100
units)......... -- -- -- 0.99 1.05 0.86 0.947
Irish Pound..... -- -- -- 2.89 2.96 2.82 2.829
New Israeli
Shekel......... -- -- -- 0.5720 0.5522 0.4913 0.55342
Maltese Lira.... -- -- -- 5.11 4.99 5.05 5.112
Norwegian
Kroner......... -- 0.2711 0.2645 0.2745 0.2755 0.2553 0.26689
Romania Lei (per
100 units)..... -- -- -- 0.0250 0.0277 0.0204 0.0238
Slovak Koruna... -- -- -- 0.0579 0.0579 0.0542 0.05777
U.S. Dollar..... 1.61 1.74 1.69 2.02 1.95 1.890 2.024
</TABLE>
17
<PAGE>
DILUTION
Our net tangible book value as of September 30, 1998, was negative NLG547.7
million or negative NLG7.63 per ordinary share. We have purchased from UIH all
of UIH's interests in Monor, Tara and IPS in exchange for 11,285,604 of our
ordinary shares. Our partner in our Israeli system, the Discount Group, is
exercising its option to purchase $45 million (plus accrued interest) of our
ordinary shares at 90% of the per share price in this offering, Pro forma for
the issuance of these ordinary shares to UIH and the Discount Group, net
tangible book value as of September 30, 1998 would have been negative NLG447.5
million or negative NLG5.28 per share. "Net tangible book value per share" is
determined by subtracting our total liabilities and minority interests from our
total tangible assets and dividing the remainder by the number of shares
outstanding, including those issued shares held by the foundation that
administers our equity stock option plan. See "Management -- Stock Option
Plans". After giving effect to our sale of 40,000,000 ordinary shares in this
offering at an estimated initial public offering price of NLG56.20 per share,
the midpoint of the offering price range, and application of the estimated net
proceeds therefrom, our net tangible book value as of September 30, 1998, pro
forma for the issuance of ordinary shares to UIH and the Discount Group, would
have been NLG1,677.2 million or NLG13.44 per share. This represents an
immediate increase in net tangible book value of NLG18.72 per share to existing
shareholders and an immediate dilution in net tangible book value of NLG42.76
per share to new shareholders purchasing shares in this offering. "Dilution per
share" represents the difference between the price per share to be paid by new
shareholders for the shares issued in this offering and the net pro forma
tangible book value per share as of September 30, 1998. The following table
illustrates this per share dilution:
<TABLE>
<CAPTION>
Dutch
guilders
------------
<S> <C> <C>
Assumed initial offering price per ordinary share.............. 56.20
Negative net tangible book value per ordinary share
(including the pro forma adjustments described above) before
this offering............................................... (5.28)
Increase per ordinary share attributable to this offering ... 18.72
-----
Net tangible book value per ordinary share, as adjusted to
reflect this offering......................................... 13.44
-----
Dilution per ordinary share purchased by new investors......... 42.76
=====
</TABLE>
The following table sets forth as of September 30, 1998, pro forma for the
issuance of ordinary shares to UIH and the Discount Group, the number of
ordinary shares purchased from us, the total cash and other consideration paid
to us by UIH, the stock option foundation and the Discount Group.The table also
includes the purchasers of the shares in this offering, at an estimated initial
public offering price of NLG56.20 per share, the midpoint of the offering price
range. See "Certain Transactions and Relationships -- The Discount Group's
Option".
UIH's share ownership is comprised of 75,000,000 total outstanding ordinary
shares excluding the 6,000,000 shares held by the foundation, less outstanding
treasury shares of 9,198,135 plus 11,285,604 new ordinary shares issued to UIH
for its contribution to us of UIH's interest in Monor, Tara and IPS. The total
consideration amount in the table for UIH represents cash and the book value of
all property contributed by UIH to us upon our formation and afterwards,
additional consideration paid by UIH to Philips upon our formation, the amount
paid by UIH to acquire Philips' interest in us and the book value of Monor,
Tara and IPS.
The foundation holds ordinary shares to administer the stock option plan
for our employees. We have the right to repurchase some of these. These options
have exercise prices of between NLG10.49 and NLG13.57. Proceeds from the
exercise of these options remain in the foundation. When the foundation is
liquidated, any remaining assets revert to UIH. See "Management -- Stock Option
Plans".
18
<PAGE>
<TABLE>
<CAPTION>
Ordinary Shares Total Consideration
------------------- ---------------------
Number Percent Amount Percent
----------- ------- ----------- --------
(Dutch
guilders,
in
thousands)
<S> <C> <C> <C> <C>
UIH............................ 77,087,469 61.76 633,949 21.35
Foundation..................... 6,000,000 4.81 -- --
Discount Group................. 1,728,500 1.38 87,428 2.94
Investors in this offering..... 40,000,000 32.05 2,248,000 75.71
----------- ------ ----------- --------
Total........................ 124,815,969 100.00 2,969,377 100.00
=========== ====== =========== ========
</TABLE>
18--1
<PAGE>
CAPITALIZATION
The following table sets forth our non-restricted cash and cash
equivalents, short-term debt and consolidated capitalization as of September
30, 1998 and as adjusted to reflect (1) the sale of 40,000,000 ordinary shares
in this offering and the application of the net proceeds from this offering,
(2) the purchase of the remaining 49% of UTH, (3) the Discount Group's exercise
of its option to acquire 1,728,500 ordinary shares at 90% of the per share
price in this offering, based on the midpoint of the offering price range, and
(4) the issuance of 11,285,604 of our ordinary shares to UIH in connection with
UIH's contribution of its interests in Monor, Tara and IPS. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Certain Transactions and Relationships--The Discount Group's Option". The
table should be read in conjunction with our audited consolidated financial
statements and the notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in this prospectus.
<TABLE>
<CAPTION>
As of September 30, 1998
---------------------------------
Actual As Adjusted
--------------- ----------------
(Dutch guilders, in thousands)
<S> <C> <C>
Non-restricted cash and cash equivalents.. 44,340 870,466 (1)
=============== ===============
Short-term debt:
Time Warner Note........................ 34,020 34,020
UTH short-term debt..................... -- 576,400 (2)
UIH Loan................................ 156,030 -- (1)
Bridge bank facility.................... 113,519 -- (1)
--------------- ---------------
Total short-term debt................. 303,569 610,420
=============== ===============
Long-term debt:
Senior revolving credit facility........ 971,978 351,978 (1)
Mediareseaux Facility................... 20,190 20,190
UTH long-term debt...................... -- 224,092 (3)
Bank and other loans.................... 47,464 47,464
--------------- ---------------
Total long-term debt.................. 1,039,632 643,724
--------------- ---------------
Minority interest in subsidiaries......... 34,265 34,265
NUON equity obligation.................... -- 106,000 (4)
Shareholders' equity:
Ordinary shares......................... 54,000 83,211 (5)
Additional paid-in capital.............. 631,323 2,704,338 (5)
Equity warrants......................... -- 57,500 (6)
Deferred compensation................... (5,826) (5,826)
Treasury stock.......................... (122,662) --
Accumulated deficit..................... (318,089) (318,089)
Other cumulative comprehensive income
(loss) ................................ (17,399) (17,399)
--------------- ---------------
Total shareholders' equity............ 221,347 2,503,735
--------------- ---------------
Total capitalization................ 1,295,244 3,287,724
=============== ===============
</TABLE>
- --------
(1) Non-restricted cash and cash equivalents have been increased for net
proceeds of this offering, net of repayment of the UIH Loan, the bridge
bank facility, NLG620 million of the senior revolving credit facility,
which we plan to reborrow under this same facility, and funds due to NUON
for our purchase of the remaining 49% interest of UTH. See "Use of
Proceeds".
(2) Represents short-term debt to be consolidated in connection with the
purchase of UTH. In January 1999, UTH received commitments from a group of
banks to refinance this facility on a long-term basis.
(3) Represents long-term debt to be consolidated in connection with the
purchase of UTH.
(4) Represents our equity obligation to NUON due six months after the closing
of this offering.
(5) Reflects the issuance of 11,285,604 ordinary shares to UIH in connection
with UIH's contribution to us of its interests in Monor, Tara, and IPS, the
issuance of 1,728,500 ordinary shares to the Discount Group upon exercise
of its option and the sale of 40,000,000 ordinary shares in this offering,
including 9,198,135 shares held by a wholly-owned subsidiary. See "Certain
Transactions and Relationships -- Previously-Issued Shares". Due to our
stock split, the nominal value of our ordinary shares has been reduced from
NLG1.00 to NLG0.67.
(6) Represents the fair value of the initially vested portion (50%) of the
3,800,000 warrants expected to be issued to Microsoft in connection with
our technology relationship. The remaining 50% will be based on performance
criteria to be established jointly by Microsoft and us. No initial fair
value has been assigned to the performance-based portion of these warrants.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the six months ended
December 31, 1995, the years ended December 31, 1996 and 1997 and the nine
months ended September 30, 1998 have been derived from our audited consolidated
financial statements included in this prospectus. The following selected
consolidated financial data for the nine months ended September 30, 1997 has
been derived from unaudited financial statements included in this prospectus
that, in our opinion, reflect all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial data for such periods
and as of such date. The consolidated financial data for the years ended
December 31, 1993 and 1994 have been derived from the audited financial
statements of the European cable television operations of Philips Electronics
N.V. contributed to us upon our formation as a joint venture. The following
consolidated financial data for the six months ended June 30, 1995 have been
derived from unaudited financial statements that, in our opinion, reflect all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the financial data for such periods and as of such date. Due to the
relative value of the assets contributed by UIH and Philips, the cable
television properties contributed by Philips are deemed to be our predecessor.
On December 11, 1997, UIH acquired the 50% of us that it did not already own
from Philips. As a result of this acquisition and the associated push-down of
UIH's basis on December 11, 1997, the financial information for the nine months
ended September 30, 1998 is presented on a "post-acquisition" basis. The data
set forth below for us is qualified by reference to, and should be read in
conjunction with, our audited consolidated financial statements and notes
thereto and also with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in this prospectus.
<TABLE>
<CAPTION>
Predecessor in Interest UPC
---------------------------- -----------------------------------------------------------
Year Ended Six Months Six Months Year Ended Nine Months Ended
December 31, Ended Ended December 31, September 30,
---------------- June 30, December 31, ---------------------- ----------------------
1993 1994 1995 1995 1996 1997 1997 1998
------- ------- ---------- ------------ ---------- ---------- ---------- ----------
(Dutch guilders, in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Service and other
revenue............... 171,300 183,600 91,100 100,179 245,179 337,155 250,061 305,237
Operating expense...... (43,800) (44,100) (23,000) (32,806) (80,479) (111,919) (87,206) (97,472)
Selling, general &
administrative
expense............... (38,600) (44,500) (23,600) (33,617) (78,823) (114,024) (80,061) (132,466)
Depreciation and
amortization.......... (44,100) (42,200) (21,100) (33,974) (79,832) (134,963) (96,528) (137,231)
------- ------- ------- ---------- ---------- ---------- ---------- ----------
Net operating income
(loss)................ 44,800 52,800 23,400 (218) 6,045 (23,751) (13,734) (61,932)
Interest income........ -- -- -- 6,403 2,757 6,512 1,561 4,621
Interest expense....... -- -- -- (19,873) (38,475) (72,544) (45,522) (74,558)
Provision for loss on
investment related
costs................. -- -- -- -- -- (18,888) (10,000) --
Foreign exchange gain
(loss) and other
expense............... -- -- -- (3,376) (21,135) (41,160) (42,177) 6,609
------- ------- ------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
before income taxes
and other items....... 44,800 52,800 23,400 (17,064) (50,808) (149,831) (109,872) (125,260)
Shares in result of
affiliated companies,
net................... (300) (2,800) (2,300) (22,179) (17,811) (10,637) (15,807) (42,167)
Minority interests in
subsidiaries.......... (200) (200) -- (191) (2,208) (2,894) (1,339) (4,838)
Income tax benefit
(expense)............. -- -- -- 155 (509) 1,649 409 413
------- ------- ------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... 44,300 49,800 21,100 (39,279) (71,336) (161,713) (126,609) (171,852)
======= ======= ======= ========== ========== ========== ========== ==========
Basic and diluted loss
per ordinary share.... n/a n/a n/a (0.48) (0.88) (2.01) (1.56) (2.39)
========== ========== ========== ========== ==========
Supplemental basic and
diluted net loss per
ordinary share(s)..... (1.78) (1.68)
========== ==========
Weighted-average number
of ordinary shares
outstanding........... n/a n/a n/a 81,000,000 81,000,000 80,488,992 81,000,000 71,801,865
========== ========== ========== ========== ==========
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Predecessor in Interest UPC
------------------------ ----------------------------------------------
As of As of As of
December 31, As of As of December 31, September 30,
--------------- June 30, December 31, ------------------- -------------
1993 1994 1995 1995 1996 1997 1998
------- ------- -------- ------------ --------- --------- -------------
(Dutch guilders, in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Balance Sheet
Data:
Non-restricted cash and
cash equivalents....... 600 700 400 123,895 42,631 99,315 44,340
Other current assets.... 13,200 14,700 10,000 172,687 82,912 84,892 101,177
Investments in
affiliated companies... 5,200 5,900 5,200 236,262 224,157 384,940 365,724
Property, plant and
equipment.............. 193,400 197,800 192,000 277,785 414,669 483,693 527,069
Intangible assets....... -- 2,300 2,200 209,274 270,407 725,513 678,741
Total assets........... 213,000 222,000 220,400 1,020,692 1,035,930 1,919,815 1,849,968
Short-term debt......... 3,400 3,400 -- 443,401 449,892 257,515 303,569
Other current
liabilities............ 25,100 41,100 132,300 92,574 118,659 181,846 198,513
Long-term debt.......... -- -- -- 236,140 275,802 1,004,018 1,039,632
Total liabilities...... 149,000 165,100 132,300 777,506 856,060 1,501,506 1,594,356
Total shareholders'
equity................ 64,000 56,900 86,700 241,786 175,316 411,530 221,347
</TABLE>
21
<PAGE>
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
In August 1998, we and a Dutch energy company, NUON, created United
Telekabel Holding by contributing each of our interests in Dutch cable
television systems to the new company. We refer to the creation of UTH as the
"UTH Transaction". We contributed our 100% interest in CNBH and our 50%
interest in A2000. NUON contributed its 100% interest in N.V. TeleKabel Beheer
("Telekabel Beheer"). We held 51% of UTH, with NUON owning the remaining 49%.
Effective August 1998, we deconsolidated our assets contributed to UTH and
accounted for our interest in UTH under the equity method. See note 3 to the
audited consolidated financial statements included in this prospectus for more
information on this. In January 1999, we agreed to purchase NUON's 49%
ownership interest in UTH, increasing our ownership of UTH to 100% (the "NUON
Transaction"), for NLG487.6 million, plus interest at 5.5% compounded annually
from January 1, 1998. In addition, we will purchase from NUON a NLG33.0 million
subordinated loan dated December 23, 1998, and owed by UTH to NUON, plus
interest on the loan at 5.5% from December 23, 1998 until the closing date. We
refer to the purchase of NUON's 49% interest in UTH as the "NUON Transaction".
The NUON Transaction is expected to close in February 1999. Upon closing of the
NUON Transaction, we will consolidate 100% of the results of UTH. See
"Corporate Ownership Structure -- The Netherlands -- UTH".
The following unaudited pro forma consolidated condensed balance sheet
gives effect to the NUON Transaction as if it had occurred on September 30,
1998. The following
unaudited pro forma consolidated statement of operations for the year ended
December 31, 1997 gives effect to (1) UIH's acquisition of Philips' 50%
interest in us in December 1997, which we refer to as the "UPC Acquisition", as
if it had occurred as of January 1, 1997 and (2) the UTH Transaction and the
NUON Transaction, as if both had occurred as of January 1, 1997. The following
unaudited pro forma consolidated statement of operations for the nine months
ended September 30, 1998 gives effect to the UTH Transaction and the NUON
Transaction, as if both had occurred as of January 1, 1997.
The following pro forma consolidated condensed balance sheet and statements
of operations and notes thereto do not purport to represent what our results of
operations would actually have been if such transactions had in fact occurred
on such dates.
The pro forma adjustments are based upon currently available information
and upon certain assumptions that we believe are reasonable. The unaudited pro
forma consolidated condensed financial information and accompanying notes
should be read in conjunction with our audited consolidated financial
statements and the notes thereto, and other financial information, including
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", included in this prospectus.
<TABLE>
<CAPTION>
As of September 30, 1998
-------------------------------------
NUON
Historical Transaction(1) Pro Forma
Consolidated Condensed Balance Sheet: ---------- -------------- ---------
(Dutch guilders, in thousands)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents................. 44,340 2,562 46,902
Restricted cash........................... 9,265 -- 9,265
Subscriber receivables, net............... 12,369 13,810 26,179
Costs to be reimbursed by affiliated
companies, net........................... 25,369 -- 25,369
Other current assets...................... 54,174 69,527 123,701
--------- --------- ---------
Total current assets..................... 145,517 85,899 231,416
Marketable equity securities of parent, at
fair value............................... 58,025 -- 58,025
Investments in and advances to affiliated
companies, accounted for under the equity
method, net ............................. 365,724 (63,270)(2) 302,454
Property, plant and equipment, net........ 527,069 779,629 1,306,698
Goodwill and other intangible assets,
net...................................... 678,741 683,820 (3) 1,362,561
Deferred financing costs, net............. 22,142 -- 22,142
Non-current restricted cash and other
assets................................... 52,750 -- 52,750
--------- --------- ---------
Total assets............................. 1,849,968 1,486,078 3,336,046
========= ========= =========
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
As of September 30, 1998
------------------------------------
NUON
Historical Transaction(1) Pro Forma
---------- -------------- ---------
(Dutch guilders, in thousands)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued liabilities and
other current liabilities .............. 198,513 132,850 331,363
Short term debt.......................... 34,020 257,500(4) 291,520
Notes payable............................ 156,030 -- 156,030
Current portion of long term debt ....... 113,519 579,009 692,528
--------- --------- ---------
Total current liabilities............... 502,082 969,359 1,471,441
Long-term debt........................... 1,039,632 481,592(5) 1,521,224
Deferred taxes and other long-term
liabilities............................. 52,642 35,127 87,769
--------- --------- ---------
Total liabilities....................... 1,594,356 1,486,078 3,080,434
--------- --------- ---------
Minority interest in subsidiaries........ 34,265 -- 34,265
--------- --------- ---------
Shareholders' equity..................... 221,347 -- 221,347
--------- --------- ---------
Total liabilities and shareholders'
equity.................................. 1,849,968 1,486,078 3,336,046
========= ========= =========
</TABLE>
- --------
(1) The unaudited pro forma effects on the balance sheet include (1)
elimination of our equity investment in UTH, (2) the purchase of the
remaining 49% interest in UTH, including the purchase price allocation
related to the acquisition, and (3) additional debt assuming that the
acquisition of the remaining 49% ownership interest in UTH would be funded
with debt.
In accordance with the terms of the purchase agreement for the acquisition
of NUON's 49% interest in UTH and assuming offering proceeds of NLG2,248
million, the purchase price, including the NLG33 million subordinated note
and related interest, would be funded with approximately NLG445 million in
cash proceeds from this offering and the remaining amount totaling
approximately NLG106 million would be satisfied six months after closing of
the NUON Transaction by an issuance of our ordinary shares to NUON or, at
our option, in cash. If an offering is not consummated, the purchase
agreement requires settlement of the entire purchase price in cash. These
pro formas have been prepared assuming an offering is not completed and we
must settle the entire purchase price in cash.
(2) Represents the net decrease in investments in and advances to affiliated
companies as a result of the NUON Transaction:
<TABLE>
<S> <C>
De-consolidation of UPC's historical investments in and
advances to UTH........................................... NLG(248,791)
Consolidation of historical UTH investments in and advances
to affiliated companies................................... NLG 185,521
-----------
NLG (63,270)
===========
</TABLE>
(3) Represents the increase in goodwill as a result of the NUON Transaction:
<TABLE>
<S> <C>
Consolidation of historical UTH goodwill..................... NLG403,629
Additional pro forma goodwill related to the NUON
Transaction................................................. NLG280,191
----------
NLG683,820
==========
</TABLE>
(4) Represents the increase in short-term debt for the portion of the seller
financing from NUON due no later than November 30, 1999 incurred in
connection with the NUON Transaction.
(5) Represents the increase in long-term debt as a result of the NUON
Transaction:
<TABLE>
<S> <C>
Consolidation of historical UTH long-term debt................ NLG224,092
Seller financing due December 31, 2000........................ NLG257,500
----------
NLG481,592
==========
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1998
----------------------------------------------------------------
UTH NUON
Historical Transaction(1) Transaction(2) Pro Forma
-------------- --------------- --------------- --------------
(Dutch guilders, in thousands except per share data)
<S> <C> <C> <C> <C>
Consolidated Condensed
Statement of
Operations:
Service and other
revenue................ 305,237 (31,146) 154,563 428,654
Operating expense....... (97,472) 6,123 (48,708) (140,057)
Selling, general and
administrative
expense................ (132,466) 5,062 (34,898) (162,302)
Depreciation and
amortization........... (137,231) 13,794 (74,371) (197,808)
-------------- ----------- ----------- --------------
Net operating loss...... (61,932) (6,167) (3,414) (71,513)
Interest income......... 4,621 (48) 48 4,621
Interest expense........ (74,558) 5,709 (55,991) (124,840)
Provision for loss on
investment related
costs.................. -- -- -- --
Foreign exchange gain
(loss) and other
expense................ 6,609 -- -- 6,609
-------------- ----------- ----------- --------------
Net loss before income
taxes and other items.. (125,260) (506) (59,357) (185,123)
Share in results of
affiliated companies,
net.................... (42,167) 8,250 (2,741) (36,658)
Minority interests in
subsidiaries........... (4,838) -- -- (4,838)
Income tax benefit
(expense).............. 413 (1,696) 1,696 413
-------------- ----------- ----------- ==============
Net loss................ (171,852) 6,048 (60,402) (226,206)
============== =========== =========== ==============
Basic and diluted net
loss per ordinary
share(3)............... (2.39) (3.15)
============== ==============
Weighted-average number
of ordinary shares
outstanding............ 71,801,865 71,801,865
============== ==============
Supplemental basic and
diluted net loss per
ordinary share(3)...... (1.68)
==============
Supplemental weighted-
average number of
ordinary shares
outstanding............ 96,132,263
==============
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1997
--------------------------------------------------------------------
Pro Forma Adjustments
---------------------------------------------
UPC UTH NUON
Historical Acquisition(4) Transaction(1) Transaction(2) Pro Forma
---------- -------------- -------------- -------------- ----------
(Dutch guilders, in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Condensed
Statement of
Operations:
Service and other
revenue................ 337,155 -- (18,386) 155,619 474,388
Operating expense....... (111,919) -- 4,120 (47,903) (155,702)
Selling, general and
administrative
expense................ (114,024) -- 3,830 (39,512) (149,706)
Depreciation and
amortization........... (134,963) (24,204)(5) 8,136 (66,391) (217,422)
---------- ------- ------- ------- ----------
Net operating loss...... (23,751) (24,204) (2,300) 1,813 (48,442)
Interest income......... 6,512 -- (144) 144 6,512
Interest expense........ (72,544) (12,483)(6) 3,757 (58,292) (139,562)
Provision for loss on
investment related
costs.................. (18,888) -- -- -- (18,888)
Foreign exchange gain
(loss) and other
expense................ (41,160) 8,441 (7) -- -- (32,719)
---------- ------- ------- ------- ----------
Net loss before income
taxes and other items.. (149,831) (28,246) 1,313 (56,335) (233,099)
Share in results of
affiliated companies,
net.................... (10,637) (8,169)(8) 9,351 (14,082) (23,537)
Minority interests in
subsidiaries........... (2,894) -- -- 683 (2,211)
Income tax benefit
(expense).............. 1,649 -- (1,454) 4,535 4,730
---------- ------- ------- ------- ----------
Net loss................ (161,713) (36,415) 9,210 (65,199) (254,117)
========== ======= ======= ======= ==========
Basic and diluted net
loss per ordinary
share(3)............... (2.01) (3.54)
========== ==========
Weighted-average number
of ordinary shares
outstanding............ 80,488,992 71,801,865
========== ==========
Supplemental basic and
diluted net loss per
ordinary share(3)...... (1.78)
==========
Supplemental weighted-
average number of
ordinary shares
outstanding............ 96,132,263
==========
</TABLE>
- --------
(1) Represents the unaudited pro forma effects on the statement of operations
for the nine months ended September 30, 1998 and the twelve months ended
December 31, 1997 for the UTH Transaction, including (1) the
deconsolidation of the results of operations for the assets contributed to
UTH which are included in UPC's historical results of operations, (2)
UPC's 51% of the results of operations of UTH on the equity method of
accounting, and (3) additional amortization expense related to UPC's
excess basis in its equity investment in UTH.
(2) Represents the unaudited pro forma effects on the statement of operations
for the nine months ended September 30, 1998 and the twelve months ended
December 31, 1997 for the acquisition of NUON's 49% interest in UTH.
In accordance with the terms of the purchase agreement for the acquisition
of NUON's 49% interest in UTH and assuming gross offering proceeds of
NLG2,248 million, the purchase price of NLG515 million plus, the NLG33
million subordinated note and related interest, would be funded by
approximately NLG445 million in cash proceeds from this offering and the
remaining amount totaling approximately NLG106 million would be satisfied
six months after closing of the NUON Transaction by an issuance of our
ordinary shares to NUON or, at our option, cash. If an offering is not
consummated, the purchase agreement requires settlement of the entire
purchase price in cash. These pro formas have been prepared assuming an
offering is not completed and we must settle the entire purchase price in
cash. Accordingly, the pro forma consolidated condensed balance sheet
assumes acquisition debt of approximately NLG515 million and the pro forma
consolidated condensed statement of operations reflects interest expense
at an annual rate of 5.5%.
25
<PAGE>
The following pro forma consolidated condensed statements of
operations for the nine months ended September 30, 1998 the year
ended December 31, 1997 give effect to the components related to the
NUON Transaction:
<TABLE>
<CAPTION>
September 30, 1998
-------------------------------------------------------------------
Telekabel
UPC Assets Beheer UTH Pro Forma NUON
Historical(a) Historical(a) Historical(b) Adjustments Transaction
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations:
Revenue................. 31,146 86,919 36,498 -- 154,563
Operating expense....... (6,123) (29,142) (13,443) -- (48,708)
Selling, general and
administrative
expense................ (5,062) (22,099) (7,737) -- (34,898)
Depreciation and
amortization........... (13,794) (32,128) (14,730) (13,719)(c) (74,371)(g)
------- ------- ------- ------- -------
Net operating loss...... 6,167 3,550 588 (13,719) (3,414)
Interest income......... 48 -- -- -- 48
Interest expense........ (5,709) (21,227) (7,811) (21,244)(d) (55,991)
Provision for loss on
investment related
costs.................. -- -- -- -- --
Foreign exchange gain
(loss) and other
expense................ -- -- -- -- --
------- ------- ------- ------- -------
Net loss before income
taxes and other items.. 506 (17,677) (7,223) (34,963) (59,357)
Share in results of
affiliated companies,
net.................... (26,630) 6,237 (9,053) 26,705 (e) (2,741)
Minority interests in
subsidiaries........... -- -- -- -- --
Income tax benefit
(expense).............. 1,696 -- -- -- 1,696
------- ------- ------- ------- -------
Net loss................ (24,428) (11,440) (16,276) (8,258) (60,402)
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------
Telekabel
UPC Assets Beheer Pro Forma NUON
Historical(a) Historical(a) Adjustments Transaction
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Consolidated Statement
of Operations:
Revenue................. 18,386 137,233 -- 155,619
Operating expense....... (4,120) (43,783) -- (47,903)
Selling, general and
administrative
expense................ (3,830) (35,682) -- (39,512)
Depreciation and
amortization........... (8,136) (39,963) (18,292)(c) (66,391)(g)
------- ------- ------- -------
Net operating loss...... 2,300 17,805 (18,292) 1,813
Interest income......... 144 -- -- 144
Interest expense........ (3,757) (26,210) (28,325)(d) (58,292)
Provision for loss on
investment related
costs.................. -- -- -- --
Foreign exchange gain
(loss) and other
expense................ -- -- -- --
------- ------- ------- -------
Net loss before income
taxes and other items.. (1,313) (8,405) (46,617) (56,335)
Share in results of
affiliated companies,
net.................... (28,996) (4,731) 19,645 (f) (14,082)
Minority interests in
subsidiaries........... -- 683 -- 683
Income tax benefit
(expense).............. 1,454 3,081 -- 4,535
------- ------- ------- -------
Net loss................ (28,855) (9,372) (26,972) (65,199)
======= ======= ======= =======
</TABLE>
(a) Represents the historical results of operations for the net
assets contributed by UPC and NUON to UTH for the seven months
ended July 31, 1998 and the year ended December 31, 1997.
(b) Represents the historical results of operations of UTH for the
two months ended September 30, 1998.
(c) Represents additional amortization as a result of the step-up
in basis of Telekabel Beheer recorded under purchase accounting
in connection with the NUON Transaction. The excess basis will
be amortized over 15 years.
(d) Represents additional interest expense as a result of the debt
incurred by UPC for the acquisition of NUON's interest in UTH
for the nine months ended September 30, 1998 and the year ended
December 31, 1998.
25--1
<PAGE>
(e) Represents the following:
<TABLE>
<S> <C>
Elimination of pro forma share of results recorded for the UTH
Transaction representing UPC's 51% interest in UTH for the seven
months ending July 31, 1998...................................... 18,293
Elimination of pro forma amortization of basis difference in UPC's
investment in UTH recorded for the UTH Transaction............... 111
Elimination of equity pick-up recorded in UPC historical results
for its share in the results of UTH for the two months ending
September 30, 1998............................................... 8,301
------
26,705
======
</TABLE>
(f) Represents the following:
<TABLE>
<S> <C>
Elimination of pro forma share of results recorded for the UTH
Transaction representing UPC's 51% interest in UTH for the twelve
months ending December 31, 1998.................................. 19,496
Elimination of pro forma amortization of basis difference in UPC's
investment in UTH recorded for the UTH Trasnaction............... 149
------
19,645
======
</TABLE>
(g) The expected useful lives of the assets acquired by UPC in the
NUON Transaction are as follows:
<TABLE>
<S> <C>
Cable distribution networks.................................... 7-20 years
Subscriber installation costs and converters................... 5 years
Office equipment, furniture and fixtures....................... 3-8 years
Buildings and leasehold improvements........................... 20-33 years
Other.......................................................... 3-10 years
Goodwill and intangible assets................................. 15-20 years
</TABLE>
(3) "Basic and diluted loss per ordinary share" is determined by dividing net
loss available to ordinary shareholders by the weighted-average number of
ordinary shares outstanding during each period. Supplemental basic and
diluted net loss per ordinary share gives pro forma effect to a reduction
of debt related interest expense for that debt that will be paid down from
offering proceeds. In addition, the number of pro forma outstanding shares
has been increased for the proceeds necessary to reduce the debt.
(4) In connection with the UPC Acquisition, our net assets acquired by UIH
were recorded at fair market value based on the purchase price paid by
UIH. As a result of our becoming essentially wholly owned by UIH, certain
purchase accounting adjustments, along with UIH's investment in us
including existing basis differences, were pushed down to our financial
statements and a new basis of accounting was established for our net
assets. The pro forma effects on the statement of operations for the year
ended December 31, 1997 include (1) additional depreciation and
amortization related to the step-up in basis in tangible assets and the
excess of the purchase price over Philips' interest in our net assets, (2)
the increase in interest expense from the senior revolving credit and
bridge bank facility incurred to finance UIH's acquisition of Philips'
interest in us, as well as foreign exchange loss on the U.S. dollar-
denominated Tranche B Facility, (3) elimination of historical interest
expense and the related foreign exchange loss on the U.S. dollar-
denominated pay-in-kind convertible notes and (4) elimination of
historical interest expense on those existing credit facilities that were
refinanced through the proceeds from the senior revolving credit and
bridge bank facilities.
(5) Represents additional depreciation and amortization as a result of the
step-up in basis of property, plant and equipment, license costs and
goodwill as a result of the UPC Acquisition for the period from January 1,
1997 through December 11, 1997. The step-up in basis is being amortized
over 15 years. As a result of the UPC Acquisition and associated push-down
of UIH basis, the net assets of UPC were adjusted to reflect UIH's net
investment in us as of the acquisition date. The new basis will be
depreciated or amortized over the remaining useful lives of the assets.
(6) Represents the net increase in interest expense as a result of the UPC
Acquisition:
<TABLE>
<S> <C>
Elimination of historical interest expense on the pay-in-kind
convertible notes............................................ NLG28,743
Elimination of historical interest on refinanced credit
facilities................................................... NLG19,700
Additional interest expense on the senior revolving credit
facility (assuming borrowings of NLG786,000 at an interest
rate of 5.5%)................................................ NLG(40,828)
Additional interest expense on the bridge bank facility
(assuming borrowings of NLG224,000 at an interest rate of
9.5%)........................................................ NLG(20,098)
----------
NLG(12,483)
==========
</TABLE>
(7) Represents the net decrease in foreign exchange loss as a result of the
UPC Acquisition.
<TABLE>
<S> <C>
Elimination of historical foreign exchange loss of the pay-
in-kind convertible notes.................................. NLG 43,441
Pro Forma foreign exchange loss on the bridge bank
facility................................................... NLG(35,000)
==========
NLG 8,441
==========
</TABLE>
(8) Represents the net increase on share results of affiliated companies as a
result of the amortization of the step-up in basis of investments in and
advances to affiliated companies accounted for under the equity method as
a result of the UPC Acquisition. The excess basis attributable to
investments in and advances to affiliated companies is being amortized
over 15 years.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. Our actual
results may differ significantly from the results discussed in the forward-
looking statements. The following discussion and analysis of financial
condition and results of operations covers the six months from July 1, 1995,
when the joint venture between UIH and Philips commenced, to December 31, 1995,
the years ended December 31, 1996 and 1997, and the nine months ended September
30, 1997 and 1998 and should be read together with our consolidated financial
statements and related notes included in this prospectus. These consolidated
financial statements provide additional information regarding our financial
activities and condition.
Introduction
We commenced our present business in July 1995. Our systems together have
the largest number of subscribers of any group of broadband communications
networks operated across Europe. We provide cable television services. We are
further developing and upgrading our network to provide digital video, voice
and Internet/data services in our Western European markets. We and Microsoft
recently signed a letter of intent to establish a relationship to work jointly
on Internet, telephone and video projects. See "Relationship with Microsoft"
and "Risk Factors -- Our Relationship with Microsoft May Not Work Out".
As of September 30, 1998, we consolidated the results from our systems in
Austria, Belgium, Norway, France, Hungary, the Czech Republic, Romania and the
Slovak Republic. Unconsolidated systems included our interests in the Dutch,
Israeli and Maltese systems and programming interests in Hungary and the Czech
Republic. We account for these unconsolidated systems using the equity method
of accounting. During the nine-month period ended September 30, 1998, we
consolidated some of our Dutch systems for a seven-month period ended July 31,
1998. Thereafter, all of the Dutch systems were accounted for using the equity
method. After the closing of this offering, we will acquire the remaining 49%
interest in UTH, our Dutch holding company, and will begin consolidating the
results of UTH's systems other than A2000.
History of UPC
Since formation, we have developed largely through acquisitions. The most
recent acquisitions have resulted in significant growth in consolidated
revenues and expenditures.
July 1995
Formation of UPC We operated from July 1995 to December 1997 as a
50/50 joint venture between UIH and Philips. At the
formation of the joint venture in July 1995, Philips
contributed to us, among other things, its 95% interest
in cable television systems in Austria, its 100% interest
in cable television systems in Belgium, and its minority
interests in cable television systems in France, called
Citecable, Germany and The Netherlands, called KTE. UIH
contributed to us its minority interests in cable
television systems in Hungary, Ireland, Israel, Malta,
Norway, Spain and Sweden, and its majority interest in
the Czech Republic and Portugese systems, $75.0 million
in cash and accrued interest of $3.2 million. UIH also
issued to Philips $50.0 million of UIH common stock. In
addition, Philips received convertible notes of UPC
totalling $133.6 million to make up the difference in
values between the assets contributed by UIH and the
assets contributed by Philips.
July 1995 In July 1995, in connection with our formation, we
A2000 Acquisition agreed to acquire from Philips 50% of A2000, which had
recently acquired the existing cable television systems
from the City of Amsterdam and four surrounding
27
<PAGE>
municipalities. Although this transaction closed in
September 1995, A2000 was accounted for using the equity
method of accounting, effective as of July 1, 1995.
September 1995 In September 1995, we acquired the remaining 96.2% of
KTE Acquisition the Dutch KTE system and began consolidating its
results.
September 1996 In September 1996, we increased our ownership in
Norkabel and Norkabel (Norway) from 8.3% to 100%, Kabelkom (Hungary)
Kabelkom from 25.9% to effectively 50% and the Swedish system
Acquisitions from 2.1% to 25.9%. We subsequently sold our interest in
the Swedish system. Norkabel was consolidated effective
upon its acquisition. Kabelkom was accounted for using
the equity method.
January 1997 In January 1997, we acquired 70.2% of Janco, a cable
Janco Acquisition system in Oslo, Norway, from Helsinki Media. In November
1997, we merged Norkabel into Janco to form Janco
Multicom, of which we held 87.3%. In November 1998, we
acquired the remaining 12.7% of Janco Multicom for
approximately NLG37.2 million. Because of certain
contractual arrangements with Helsinki Media, we have
consolidated 100% of the operations of Janco Multicom
since formation.
December 1997 On December 11, 1997, we and UIH acquired the 50% of
UPC Acquisition our ordinary shares held by Philips for NLG450.0
million. As part of this acquisition, we purchased 3.17
million shares of Class A Common Stock of UIH held by
Philips for NLG66.8 million and we and UIH purchased all
of our convertible notes back from Philips for NLG339.8
million. The acquisition of UPC was financed with
proceeds from our senior revolving credit facility and
our bridge bank facility and cash from UIH.
Miscellaneous We sold our unconsolidated interests in our systems
System Sales in France called Citecable in 1996, Germany in 1997 and
(1996-1998) Spain in 1998 and our consolidated interest in Portugal
in 1998.
January 1998 Effective January 1, 1998, we acquired the Combivisie
Combivisie cable television systems in the region surrounding our
Acquisition and KTE system in The Netherlands for a purchase price of
CNBH Formation NLG180.8 million. Effective January 1, 1998, we combined
the Combivisie and KTE systems to form CNBH and
consolidated the results of CNBH through July 31, 1998.
June 1998 On June 29, 1998, we acquired from Time Warner
Eastern Europe Entertainment Company L.P. 50% of Kabelkom, the
Transactions Hungarian cable television system holding company,
increasing our ownership to 100%. The purchase price was
approximately $27.5 million, $9.5 million of which was
payable in cash and $18.0 million by delivery of a non-
interest bearing note. We gave Time Warner the option,
exercisable until March 26, 1999, to purchase 50% of the
Hungarian programming businesses formerly held by
Kabelkom, including HBO Hungary, and 100% of TV Max, a
Czech and Slovak Republic programming business, for
approximately $18.25 million. Effective June 30, 1998,
we combined our interests in Kabelkom with Kabeltel, a
group of Hungarian cable television systems located in
Budapest and other large Hungarian cities, forming
Telekabel Hungary. We own 79.25% of Telekabel Hungary,
Hungary's largest cable television operator and started
consolidating its results as of such date.
28
<PAGE>
August 1998 In August 1998, we and NUON combined all of our Dutch
UTH Formation broadband cable television and telecommunications
businesses to form UTH. We contributed 100% of CNBH and
50% of A2000 for our 51% interest in UTH. NUON
contributed 100% of Telekabel Beheer. We and NUON agreed
on the relative values of their respective assets and
NUON made a small balancing payment of approximately
NLG2.0 million for its 49% interest. See "Corporate
Ownership Structure -- The Netherlands -- UTH". As a
result of the creation of UTH, since August 1, 1998, we
have not consolidated the results of CNBH and account for
UTH using the equity method of accounting. As described
below, however, we have agreed to purchase the other 49%
of UTH and will consolidate the results of its systems in
the future. See "Pro Forma Selected Consolidated
Financial Data".
November 1998 We held our interest in the Israeli, Maltese and
Increase in Israeli Irish operating systems through a partnership with a
and subsidiary of Tele-Communications International, Inc. In
Maltese Systems November 1998, we acquired Tele-Communications
Ownership International's indirect 23.3% and 25.0% interests in the
Israeli and Maltese systems for approximately $88.5
million, net of closing adjustments, doubling our
respective interests in these systems to 46.6% and 50%.
We financed this acquisition through a loan from our
primary partners in the Israeli operating system. See "--
Liquidity and Capital Resources -- Current Debt
Facilities -- DIC Loan" and "Shares Eligible for Future
Sale".
November 1998 As part of the Israeli and Maltese transaction
Sale of Irish described above, in November 1998, we purchased from
System Riordan Communications Ltd., an indirect 5% interest in
an Irish multi-channel television system and 5% of Tara
Television Limited, a company providing Irish programming
to the U.K. markets. The purchase price was 384,531
shares of UIH we indirectly held. In November 1998, we
sold the newly-acquired 5% interest in the Irish multi-
channel television system, together with our previously-
held 20% interest in this system, to Tele-Communications
International. The purchase price for this transaction
was $20.5 million, offsetting part of the purchase price
payable for the Israeli and Maltese systems. See "Certain
Transactions and Relationships".
December 1998 In December 1998, UIH sold to us in exchange for
Purchase of Monor 6,330,340 of our ordinary shares UIH's:
and Tara from UIH
. 50% voting and 46.3% economic interest in Monor
Communications Group Inc., a company that operates
a traditional telephone system in the Monor region
of Hungary. See "Business -- Operating Companies --
Eastern Europe".
. 75% interest in Tara, a company with revenues of
approximately NLG1.0 million for the nine months
ended September 30, 1998. See "Relationship with
UIH and Related Transactions".
February 1999 .In February 1999, UIH sold to us, in exchange for
Purchase of IPS 4,955,264 of our ordinary shares, UIH's approximately
from UIH 33.5% interest in IPS, a group of programming entities
focusing on the Spanish- and Portuguese-speaking markets.
IPS had revenues of approximately NLG23.5 million for the
nine months ended September 30, 1998. See "Relationship
with UIH and Related Transactions".
29
<PAGE>
February 1999 In January 1999, we agreed to buy NUON's 49%
Purchase of ownership interest in UTH for NLG487.6 million plus an
UTHMinority interest payment on this amount at a rate of 5.5% from
Interest January 1, 1998 until the closing date. In addition, we
will purchase from NUON a NLG33.0 million subordinated
loan dated December 23, 1998 owed by UTH to NUON plus
interest on the loan at 5.5% from December 23, 1998 until
the closing date. This transaction will close
concurrently with the completion of this offering. Half
of the purchase price is payable in cash and, assuming
offering proceeds of more than NLG1,400 million, an
additional 20% of the offering proceeds in excess of
NLG1,400 million is also payable in cash. The remaining
amount of the purchase price is due after six months in
our ordinary shares at their market value at that time
or, at our option, in cash. If we raise gross proceeds of
NLG2,248 million in this offering, approximately NLG445
million of cash will be payable at the closing with
approximately NLG106 million due after six months in our
ordinary shares or, at our option, in cash. We will own
100% of UTH following this acquisition. We will pledge
our shares in UTH to NUON to secure our performance of
the agreement.
30
<PAGE>
Overview of Our Activities
Services
To date, our primary source of revenue has been video entertainment
services. For the year ended December 31, 1997 and the nine months ended
September 30, 1998, our video services accounted for approximately 95.1% and
92.4%, respectively, of our consolidated revenues. For the same periods, our
Internet/data service accounted for about 0.2% and 1.7%, respectively, of our
consolidated revenue and our telephone services accounted for 0% and 0.2%,
respectively.
Our operating systems generally offer a range of video service subscription
packages including a basic tier, which includes 26 to 32 channels, and an
expanded basic tier, which includes 6 to 13 additional channels. In some
systems, we also offer mini-tiers, premium programming, which typically
includes 2 channels and pay-per-view programming, which includes 5 to 10
channels.
Historically, video services revenue has increased as a result of:
. acquisitions of systems, primarily in The Netherlands and Norway,
. subscriber growth from both well established and developing systems,
primarily in our Austrian and Eastern European systems, and
. increases in revenue per subscriber from basic rate increases and the
introduction of expanded basic tiers and pay-per-view services.
For a discussion of our revenue recognition policies, see note 2 of the
Notes to Consolidated Financial Statements.
We believe that an increasing percentage of our future revenues will come
from telephone and Internet/data services. Within a decade, video services
could account for half of our total revenue, as our other services increase.
See "Risk Factors -- The Success of Our New Telephone and Internet/Data
Services Depends on Whether We Can Keep Acheiving Technological Advances",
"Business -- UPC Telephone Services: Priority Telecom" and "UPC Internet/Data
Services: High Speed Access and chello broadband". These are forward-looking
statements and will not be fulfilled unless our new services grow dramatically.
Our capital constraints, technological limitations, competition, lack of
programming, loss of personnel, adverse regulation and many other factors could
prevent our new services from growing as we expect.
Pricing
We usually charge a one-time installation fee when we connect subscribers,
a monthly subscription fee that depends on whether basic or expanded basic tier
service is offered, and incremental amounts for those subscribers purchasing
pay-per-view and premium programming, which are generally offered only to
expanded basic tier subscribers.
In our Western European markets, price controls by various local and
national governmental agencies apply to the basic tier services. Expanded basic
tier, pay-per-view and premium programming are subject to EU and national
competition laws generally but are not subject to sector-specific price
controls. See "Regulation".
Costs of Operations
Video services operating costs include the direct costs of programming,
franchise fees and operating expenses necessary to provide the service to the
subscriber. Direct costs of programming are variable, based on the number of
subscribers. The cost per subscriber is established by negotiation between us
and the program supplier or rates negotiated by cable associations. Franchise
fees, where applicable, are typically based upon a percentage of revenue and
typically range from 3% to 5% in Belgium and are approximately 13.5% in
Austria. Other direct operating expenses include operating personnel, service
vehicles, maintenance and plant electricity.
Selling, general and administrative expenses include personnel-related
costs such as stock-based compensation expenses, marketing, sales and
commissions, legal and accounting, office facilities and other overhead costs.
Stock based compensation expense results from our stock option and phantom
stock option plans, which require variable plan accounting. Increases in the
fair market value of our shares
31
<PAGE>
result in compensation charges that are expensed for vested options and
deferred and amortized over their remaining vesting period for unvested
options. Decreases in fair market value would result in compensation credits. A
compensation charge is generally a non-cash expense unless the option holder
puts the vested option to us for cash. After the offering, we have the right to
settle the option in shares upon exercise; therefore options issued pursuant to
the Stock Option Plan will no longer require variable plan accounting.
31--1
<PAGE>
Results of Operations
The following table sets forth information from, or derived from, our
Consolidated Statements of Operations for the six months ended December 31,
1995, the years ended December 31, 1996 and 1997, and the nine months ended
September 30, 1997 and 1998. As a result of UIH's acquisition of UPC and the
associated push-down of UIH's basis on December 11, 1997, this information is
presented on a "post-acquisition" basis. For additional information regarding
the operating results of our consolidated and unconsolidated operating
companies, see "Business -- Operating Companies".
<TABLE>
<CAPTION>
For the
Six Months For the Years Nine Months
Ended Ended Ended
December 31, December 31, September 30,
------------ ----------------- ------------------
1995 1996 1997 1997 1998
------------ ------- -------- -------- --------
(Dutch guilders, in thousands)
<S> <C> <C> <C> <C> <C>
Service and other
revenue.................. 100,179 245,179 337,155 250,061 305,237
Operating expense......... (32,806) (80,479) (111,919) (87,206) (97,472)
Selling, general and
administrative expense
("SG&A")................. (33,617) (78,823) (114,024) (80,061) (132,466)
Depreciation and
amortization............. (33,974) (79,832) (134,963) (96,528) (137,231)
------- ------- -------- -------- --------
Net operating income
(loss).................. (218) 6,045 (23,751) (13,734) (61,932)
Interest income........... 6,403 2,757 6,512 1,561 4,621
Interest expense.......... (19,873) (38,475) (72,544) (45,522) (74,558)
Provision for loss on
investment related
costs.................... -- -- (18,888) (10,000) --
Foreign exchange gain
(loss) and other
expense.................. (3,376) (21,135) (41,160) (42,177) 6,609
------- ------- -------- -------- --------
Net loss before income
taxes and other items... (17,064) (50,808) (149,831) (109,872) (125,260)
Share in results of
affiliated companies,
net...................... (22,179) (17,811) (10,637) (15,807) (42,167)
Minority interests in
subsidiaries............. (191) (2,208) (2,894) (1,339) (4,838)
Income tax benefit
(expense)................ 155 (509) 1,649 409 413
------- ------- -------- -------- --------
Net loss.................. (39,279) (71,336) (161,713) (126,609) (171,852)
======= ======= ======== ======== ========
Other information:
Consolidated Adjusted
EBITDA................... 33,756 85,877 116,030 82,794 107,792
As a Percentage of
Revenue:
Operating expense......... 32.7% 32.8% 33.2% 34.9% 31.9%
Selling, general and
administrative expense... 33.6 32.1 33.8 32.0 43.4
Adjusted EBITDA........... 33.7 35.0 34.4 33.1 35.3
Depreciation and
amortization............. 33.9 32.6 40.0 38.6 45.0
Net operating (loss)
income................... (0.2) 2.5 (7.0) (5.5) (20.3)
Net loss.................. (39.2) (29.1) (48.0) (50.6) (56.3)
</TABLE>
Revenue
During the nine months ended September 30, 1998, our revenue increased
NLG55.2 million to NLG305.2 million from NLG250.0 million for the nine months
ended September 30, 1997, a 22.1% increase. Approximately one-third of this
increase was attributable to the acquisition of Combivisie in January 1998 and
was consolidated through July 31, 1998. The balance of this increase came from
subscriber growth and in revenue per subscriber in Austria, and increased
revenue from subscriber growth in the systems we are developing in France and
Eastern Europe. In addition, effective July 1, 1998, we began consolidating
Telekabel Hungary, which increased revenues during the period by NLG13.8
million.
During the year ended December 31, 1997, our revenue increased NLG92.0
million to NLG337.2 million from NLG245.2 million for the year ended December
31, 1996, a 37.5% increase. A substantial portion of this increase was
attributable to the acquisition of Norkabel in October 1996 and the acquisition
of Janco in January 1997, which together amounted to NLG77.0 million. The
remaining increase in revenue was attributable to subscriber growth in the
Austrian systems and increases in subscription
32
<PAGE>
fees in some systems. In addition, revenue for the year ended December 31, 1997
included revenues from developing systems in France, Romania and the Slovak
Republic, which were not included in the 1996 operating results.
Revenues for the year ended December 31, 1996 were 22.4% greater than
annualized revenues for the six months ended December 31, 1995, primarily due
to the consolidation of the KTE system for the entire 1996 reporting period and
of Norkabel following its acquisition in October 1996. The remaining increase
in revenue comprised subscriber growth in Austria and the Czech Republic and
increased revenue from other developing systems in Eastern Europe.
Because of various acquisitions and dispositions and changes in ownership
percentages of operating systems throughout the period, we do not calculate
revenue per subscriber on a consolidated basis. You can see the historical
revenue per subscriber information in each operating company subsection in
"Business-- Operating Companies".
Operating Expense
During the nine months ended September 30, 1998, our operating expense
increased NLG10.3 million to NLG97.5 million from NLG87.2 million for the nine
months ended September 30, 1997, an 11.8% increase. Approximately one-third of
this increase was attributable to the acquisition of Combivisie. Effective July
1, 1998, our operations include the results of Telekabel Hungary, which
increased operating expenses during the period by NLG4.9 million. The remaining
increase comprised direct costs related to subscriber growth and increased
operating costs related to the introduction of our Internet/data services. As a
percentage of revenues, operating expense declined from 34.9% for the
comparable nine-month period in 1997 to 31.9%. This was due primarily to the
lower operating costs in the Combivisie system. We expect operating expense as
a percentage of revenue to increase as new video, telephone and Internet/data
services are introduced.
During the year ended December 31, 1997, our operating expense increased
NLG31.4 million to NLG111.9 million from NLG80.5 million the previous year, a
39.0% increase. Most of this increase was attributable to the acquisition of
Norkabel in October 1996 and of Janco in January 1997, which together amounted
to NLG27.5 million, as well as the inclusion of operating expenses related to
developing systems in France, Romania and the Slovak Republic that were not
included in the 1996 operating results. In addition, operating expenses during
1997 included expenses related to the introduction of expanded basic tier
programming in Austria, Belgium and The Netherlands and Internet/data services
in Austria and Belgium.
Operating expenses for the year ended December 31, 1996 were 22.7% greater
than annualized operating expenses for the six months ended December 31, 1995.
This was due primarily to the consolidation of the KTE system.
Selling, General and Administrative Expense
During the nine months ended September 30, 1998, our SG&A expense increased
NLG52.5 million to NLG132.5 million from NLG80.0 million for the nine months
ended September 30, 1997, a 65.6% increase. A substantial portion of this
increase and the increase as a percentage of net revenue resulted from a stock-
based compensation charge of NLG32.5 million attributable to our stock option
plans for the nine months ended September 30, 1998. A portion of this increase
was also attributable to the acquisition of Combivisie and the acquisition of
Telekabel Hungary, with the remaining increase comprising additional SG&A
expenses related to the development of new businesses, including further
development of Internet/data services and preparation for the launch of
telephone services in Austria, The Netherlands, Norway and France. We expect
SG&A expense as a percentage of revenue to continue to increase as new video,
telephone and Internet/data services are introduced and due to increased stock-
based compensation expense. We anticipate incurring stock-based compensation
expense of approximately NLG240 million under our stock option plan and phantom
stock option plan for the three months ended December 31, 1998. This amount is
based on an initial public offering price
33
<PAGE>
of NLG56.20 per share, which is the midpoint of the offering price range.
During the year ended December 31, 1997, our SG&A expense increased NLG35.2
million to NLG114.0 million from NLG78.8 million for the prior year, a 44.7%
increase. A substantial portion of this increase was attributable to the
acquisition of Norkabel in October 1996 and of Janco in January 1997, which
together amounted to NLG19.1 million, as well as the inclusion of expenses
related to developing systems in France, Romania and the Slovak Republic that
were not included in 1996. SG&A expense during the year ended December 31,
1997, which also included expenses related to the introduction of expanded
basic tier programming in Austria, Belgium and The Netherlands and
Internet/data services in Austria and Belgium, as well as a stock-based
compensation charge of NLG4.8 million.
SG&A expense for the year ended December 31, 1996 was 17.2% greater than
annualized SG&A expense for the six months ended December 31, 1995, primarily
due to the consolidation of the KTE system for the entire reporting period and
of Norkabel following the acquisition of Norkabel in October 1996.
Our allowance for doubtful accounts as a percentage of trade receivables
for the years ended December 31, 1996 and 1997 and the nine month period ended
September 30, 1998 was 37.9%, 40.6% and 39.0%, respectively. This high
allowance as a percentage of trade receivables results primarily from our
billing process, whereby subscribers receive and generally pay their invoice
before the service period begins. Therefore, most of our outstanding
receivables generally represent overdue accounts requiring consideration for an
allowance. As a percentage of revenue, our receivable balance is less than one
half of a month of revenue.
Depreciation and Amortization
During the nine months ended September 30, 1998, our depreciation and
amortization expense increased NLG40.7 million to NLG137.2 million from NLG96.5
million for the nine months ended September 30, 1997, a 42.2% increase. NLG25.5
million of this increase and much of the increase as a percentage of our net
revenue was attributable to the application of push down accounting, including
goodwill created in connection with the acquisition of UPC. The remaining
increase comprised additional depreciation related to the acquisition of
Combivisie and acquisition of Telekabel Hungary, additional capital
expenditures to upgrade the network in our Western European systems and new-
build for developing systems.
During the year ended December 31, 1997, our depreciation and amortization
expense increased NLG55.2 million to NLG135.0 million from NLG79.8 million in
1996, a 69.2% increase. The majority of the increase was directly attributable
to the acquisition of Norkabel in October 1996 and of Janco in January 1997,
which together amounted to NLG47.5 million). The remaining increase comprised
additional depreciation from capital expenditures to upgrade the network in our
primary systems and new-build for developing systems.
Depreciation and amortization for the year ended December 31, 1996 was
17.5% greater than annualized depreciation and amortization expense for the six
months ended December 31, 1995, primarily due to the consolidation of the KTE
system for the entire reporting period and of Norkabel following its
acquisition in October 1996.
In connection with the letter of intent entered into with Microsoft
Corporation providing for the establishment of a technical services
relationship, we have agreed to grant Microsoft warrants to purchase up to
3,800,000 ADSs or ordinary shares, at Microsoft's option, at an exercise price
of the lesser of $28.00 and the per share price in this offering. Half of these
warrants will be exercisable after one year for a period of three years and the
other half will vest based on performance criteria to be established in the
definitive agreements, although they also will not be exercisable until at
least one year after the date of the closing of this offering. We expect to
record as contract acquisition rights approximately NLG57.5 million associated
with these warrants. Such costs are expected to be amortized on a straight-line
basis over the expected contract life, which is yet to be determined.
Operating Income (Loss); Adjusted EBITDA
During the nine month period ended September 30, 1998, operating loss
increased NLG48.2 million to NLG61.9 million from NLG13.7 million, a 350.9%
increase. Most of the increase
34
<PAGE>
resulted from the stock-based compensation charge of NLG32.5 million related to
our stock option plans as well as new depreciation and amortization expense
from the acquisition of UPC, the acquisition of Combivisie and the acquisition
of Telekabel Hungary. The cable television industry generally measures the
performance of a cable television company in terms of operating income before
depreciation, amortization and other non-cash charges, which we refer to as
"Adjusted EBITDA". Adjusted EBITDA increased NLG25.0 million to NLG107.8
million from NLG82.8 million, a 30.2% increase.
During the year ended December 31, 1997, operating loss increased to
NLG23.8 million from operating income of NLG6.0 million for the year ended
December 31, 1996. This increase was primarily related to depreciation and
amortization expense. Adjusted EBITDA increased NLG30.1 million to NLG116.0
million from NLG85.9 million, a 35.0% increase. During the year ended December
31, 1997, Adjusted EBITDA as a percentage of revenue dropped from 35.0% in 1996
to 34.4%, a decrease of about 1.7%. This decrease was primarily related to
negative Adjusted EBITDA from developing systems in France and the Slovak
Republic.
During the year ended December 31, 1996, we generated operating income of
NLG6.0 million as compared to an annualized operating loss of
NLG0.4 million for the six months ended December 31, 1995. This increase was
primarily related to depreciation and amortization expense. Adjusted EBITDA
increased NLG18.4 million to NLG85.9 million as compared to annualized Adjusted
EBITDA of NLG67.5 million for the six months ended December 31, 1995, a 27.3%
increase.
We believe the introduction of telephone services and Internet/data
services will have a negative impact on operating income and Adjusted EBITDA
during the remainder of 1998 and a significant negative impact on operating
income and Adjusted EBITDA during 1999. Thereafter, this negative impact is
expected to decline. We intend for our new businesses to have positive cash
flow after the first several years following introduction of service, but there
can be no assurance that this will occur. The financial effect of the
development of our video programming businesses and the construction of our
digital distribution platform will depend upon our ability to find joint
venture partners for these new investments. If we are unable to find joint
venture partners for these new investments, we will be required to consolidate
all of the losses of these new investments. See "Risk Factors -- Failure to
Raise Necessary Capital Could Restrict the Development of our Network, the
Introduction of New Services and the Acquisition of Cable Systems".
Interest Expense
During the nine months ended September 30, 1998, interest expense increased
NLG29.1 million to NLG74.6 million from NLG45.5 million during the same period
in 1997, a 64.0% increase. This increase was due primarily to increases in
indebtedness related to the UPC Acquisition in December 1997, the acquisition
of Combivisie in January 1998 and the acquisition of Telekabel Hungary in June
1998. See "-- Liquidity and Capital Resources".
During the year ended December 31, 1997, interest expense increased NLG34.0
million to NLG72.5 million from NLG38.5 million during the same period in 1996,
an 88.3% increase. This increase was due primarily to additional indebtedness
incurred for the acquisition of Norkabel in October 1996 and, to a lesser
extent, indebtedness incurred to fund developing systems, corporate overhead
and the acquisition of UPC. See "-- Liquidity and Capital Resources".
Interest expense for the year ended December 31, 1996 was 3.2% less than
annualized interest expense for the six-month period ended December 31, 1995.
Provision for Loss on Investment Related Costs
The provision for loss on investment-related costs totaled NLG18.9 million
for the year ended December 31, 1997. During 1997, we made a strategic decision
to sell our interest in our Portuguese system due to competitive pressures
beyond our control. After receiving several offers for the sale of our
Portuguese system substantially less than the carrying value of our investment,
we recorded a permanent impairment on the investment. The system was
subsequently sold in January 1998.
35
<PAGE>
Foreign Exchange Gain (Loss) and Other Expense
Foreign exchange gain (loss) and other expense reflected a gain of NLG6.6
million for the nine months ended September 30, 1998 as compared to a loss of
NLG42.2 million for the same period in 1997. The foreign exchange gain during
1998 was due primarily to a more stable Dutch guilder in relation to the U.S.
dollar during the first nine months of 1998 as compared to the same period in
1997. We intend to repay part of our remaining U.S. dollar-denominated
indebtedness with proceeds from this offering. See "Use of Proceeds".
Foreign exchange loss and other expense increased NLG20.1 million to a loss
of NLG41.2
35--1
<PAGE>
million for the year ended December 31, 1997 from a loss of NLG21.1 million for
the previous year. This increase in foreign exchange loss was due primarily to
the weakening of the Dutch guilder in relation to the U.S. dollar and its
related impact on our U.S. dollar-denominated indebtedness, primarily the pay-
in-kind convertible notes.
Foreign exchange loss and other expense increased NLG14.3 million to a loss
of NLG21.1 million for the year ended December 31, 1996 from a loss of NLG6.8
million for the annualized six-month period ended December 31, 1995. This
increase was due primarily to the weakening of the Dutch guilder in relation to
the U.S. dollar and its related impact on our U.S. dollar-denominated
indebtedness, primarily the pay-in-kind convertible notes. See "Risk Factors --
Foreign Currency Exchange Rate Fluctuations May Cause Losses".
Share in Results of Affiliated Companies, Net
The table below sets forth our share in results of affiliated companies for
the applicable periods. It shows the consolidation, following our July 1, 1998
acquisition, of our Hungarian cable television holding company, although our
Hungarian programming business continues to be accounted for using the equity
method.
<TABLE>
<CAPTION>
For the
For the Years Nine Months
July 1, 1995 to Ended Ended
December 31, December 31, September 30,
--------------- ---------------- ----------------
1995 1996 1997 1997 1998
--------------- ------- ------- ------- -------
(Dutch guilders, in thousands)
<S> <C> <C> <C> <C> <C>
A2000..................... (6,500) (19,965) (25,458) (20,051) (26,631)
UTH....................... -- -- -- -- (8,325)
Hungary (Kabelkom,
programming and cable
television).............. -- (262) 4,431 2,179 (6,974)
UII Partnership (Israel,
Ireland and Malta)....... (1,409) 1,896 10,589 3,291 3,414
Other(1).................. (14,270) 520 (199) (1,226) (3,651)
------- ------- ------- ------- -------
Total................... (22,179) (17,811) (10,637) (15,807) (42,167)
======= ======= ======= ======= =======
</TABLE>
- --------
(1) "Other" shows in 1995 our share in results from our investments in Spain,
Germany, KTE in The Netherlands and France, in 1996, our share in results
from Spain, France and Germany and, in 1997 and 1998, our share in results
from TV Max, a Czech and Slovak Republic programming business.
For the nine months ended September 30, 1998, our share in net losses of
affiliated companies increased to NLG42.2 million from NLG15.8 million for the
nine months ended September 30, 1997, a 167.1% increase, for the comparable
period in 1997. A substantial portion of the increase in share in net losses
was attributable to additional amortization of goodwill of A2000, Kabelkom, our
Hungarian cable television holding company, and the partnership through which
we held our interests in the Israel, Ireland and Malta operating companies, in
each case related to the new basis of accounting established in the step
acquisition of us by UIH. A2000 also had increased losses as it began to
introduce telephone services during this period. The share in net losses of
Kabelkom for the nine months ended September 30, 1998 as compared to the net
income over the comparable period in 1997 was related to the introduction of a
new programming channel, increased programming fees, a loss of HBO subscribers
due to the introduction of two additional commercial channels by competitors,
and additional overhead costs. Effective July 1, 1998, we consolidated results
from our Hungarian cable television businesses and no longer accounted for them
in share of results of affiliated companies.
For the year ended December 31, 1997, our share in net losses of affiliated
companies decreased to NLG10.6 million from NLG17.8 million for the previous
year, a 40.4% decrease, primarily as a result of improved earnings from the
partnership holding the Israeli, Irish and Maltese systems.
For the year ended December 31, 1996, our share in net losses of affiliated
companies decreased to NLG17.8 million from NLG44.4 million for the annualized
six-month period ended December 31, 1995, a 60.0% decrease, primarily as a
result of our 1995 write-down to net realizable value of other investments
36
<PAGE>
in Spain, France and Germany. After the formation of UPC, we made the decision
to liquidate those investments because we could not obtain management control.
36--1
<PAGE>
Statements of Cash Flows
We had cash and cash equivalents of NLG44.3 million as of September 30,
1998, a decrease of NLG55.0 million from NLG99.3 million as of December 31,
1997. Cash and cash equivalents as of December 31, 1997 represented an increase
of NLG56.7 million from NLG42.6 million as of December 31, 1996. Cash and cash
equivalents increased NLG123.9 million during the six months ended December 31,
1995. Details of the change in cash and cash equivalents are set forth in the
table below.
<TABLE>
<CAPTION>
Nine Months
Six Months Years Ended Ended
Ended December 31, September 30,
December 31, ------------------ ------------------
1995 1996 1997 1997 1998
------------ -------- -------- -------- --------
(Dutch guilders, in thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities.............. 38,493 41,542 132,584 75,894 52,071
Cash flows from investing
activities.............. (500,106) (6,394) (402,340) (246,937) (381,253)
Cash flows from financing
activities.............. 465,508 (116,756) 326,482 196,913 275,910
Effect of exchange rates
on cash................. 1,950 344 (42) 334 (1,703)
-------- -------- -------- -------- --------
Net increase (decrease)
in cash and cash
equivalents............. 5,845 (81,264) 56,684 26,204 (54,975)
Cash and cash equivalents
at beginning of period.. 118,050 123,895 42,631 42,631 99,315
-------- -------- -------- -------- --------
Cash and cash equivalents
at end of period........ 123,895 42,631 99,315 68,835 44,340
======== ======== ======== ======== ========
</TABLE>
Cash Flows from Operating Activities
During the nine-month period ended September 30, 1998, net cash flow from
operating activities decreased NLG23.8 million to NLG52.1 million from NLG75.9
million for the comparable period in 1997, a 31.4% decrease. This decrease was
primarily related to increased cash needs for working capital.
Net cash flow from operating activities totaled NLG132.6 million for the
year ended December 31, 1997, as compared to NLG41.5 million for the year ended
December 31, 1996, an increase of NLG91.1 million. This increase was primarily
related to cash generated from working capital including increased current
liabilities and a reduction of accounts receivable.
Net cash flow from operating activities totaled NLG38.5 million for the
period ended December 31, 1995.
Cash Flows from Investing Activities
We used approximately NLG381.3 million of cash in investing activities
during the nine months ended September 30, 1998, compared to NLG246.9 million
for the nine months ended September 30, 1997. During the nine months ended
September 30, 1998 cash was used principally for new acquisitions including the
acquisitions of Combivisie and Kabelkom, which together represented NLG200.2
million, including goodwill related to the acquisitions, and for capital
expenditures for property, plant and equipment, including other tangible assets
such as system upgrade and new-build activities, which represented NLG170.2
million. During the nine months ended September 30, 1997 cash was used for new
acquisitions, primarily Janco for NLG85.1 million, an additional cash-funded
letter of credit of NLG47.0 million to acquire the remaining interest in Janco,
and capital expenditures including upgrade and new-build activities totaling
NLG92.7 million.
We used approximately NLG402.3 million of cash in investing activities
during the year ended December 31, 1997, compared to NLG6.4 million for the
year ended December 31, 1996. During the year ended December 31, 1997, cash was
used principally for (1) the acquisition of Janco and other acquisitions, which
represented NLG127.9 million including goodwill related to the acquisitions,
(2) a cash-funded letter of credit to purchase the remaining interest in Janco
Multicom, which represented NLG47.0 million, (3) the continuation of our
upgrade and new-build construction program, which represented NLG145.6 million
of capital expenditures and also including goodwill and other tangible assets,
and (4) the purchase of UIH stock, which represented NLG66.8 million. In
contrast, during the year ended December 31, 1996 cash was used principally for
purchases of property, plant and equipment and goodwill and other intangible
assets, which represented NLG106.6 million, for the continuation of our upgrade
and new-build construction and for
37
<PAGE>
acquisitions, which represented NLG46.5 million and was primarily as a result
of our acquisition of our partner's interest in the partnership that held the
Norwegian, Swedish and Hungarian cable television systems. These investing
activities were offset by repayments from A2000 and its subsidiaries of
NLG146.7 million after these companies obtained long-term financing.
We used NLG500.1 million in investing activities during the six months
ended December 31, 1995, principally for capital expenditures, which
represented NLG132.2 million, investments in and advances to our affiliates,
primarily A2000, which represented NLG339.7 million, and acquisitions, which
represented NLG28.1 million, mainly in The Netherlands.
Cash Flows from Financing Activities
We had NLG275.9 million of cash flows from financing activities during the
nine months ended September 30, 1998, as compared to NLG196.9 million for the
nine months ended September 30, 1997. Principal sources of cash during that
period included gross proceeds from long-term debt, which represented NLG338.0
million, including additional borrowings from our senior revolving credit
facility and CNBH's major facility and borrowings from UIH, which represented
NLG161.9 million. We repaid short-term borrowings of approximately NLG215.4
million during the same period, including NLG131.1 million of our bridge bank
facility and NLG65.0 million under a KTE bank facility.
Cash flows from financing activities during the year ended December 31,
1997 were NLG326.5 million, as compared to negative cash flow from financing
activities of NLG116.8 million for the year ended December 31, 1996. Principal
sources of cash from financing activities during that period included gross
proceeds of NLG1,402.1 million from short-term and long-term debt including
NLG883.9 million under our senior revolving credit facility, NLG252.5 million
under our bridge bank facility, bank loans and other obligations of NLG65.0
million in The Netherlands and other obligations primarily related to the
acquisition of Janco and the refinancing of Norkabel, which represented
NLG200.7 million. During the same period, we repaid approximately NLG587.9
million of short-term borrowings, including Dutch credit facilities of NLG384.7
million, short-term debt assumed in the acquisition of Norkabel of NLG138.4
million, other short-term credit arrangements of NLG22.1 million and other
long-term debt of NLG24.8 million. In December 1997, we also repaid NLG170.4
million of the pay-in-kind convertible notes and purchased NLG292.6 million of
ordinary shares from Philips as part of the acquisition of UPC.
Cash flows from financing activities during the year ended December 31,
1996 were negative NLG116.8 million. Financing activities during the year ended
December 31, 1996 included raising gross proceeds of NLG326.1 million from
short-term and long-term loans and repayment of long-and short-term facilities
of NLG440.4 million.
During the six months ended December 31, 1995, our cash flows from
financing activities were NLG465.5 million. Financing activities during the six
months ended December 31, 1995 included debt assumed in the acquisition of KTE
and funding of development projects in Eastern Europe.
38
<PAGE>
Consolidated Capital Expenditures
The table below sets forth our consolidated capital expenditures for the
last two fiscal years and the nine months ended September 30, 1998 and
projected capital expenditures for the three months ended December 31, 1998 and
year ended December 31, 1999. The information below does not reflect capital
expenditures by A2000, UTH, Tevel or other unconsolidated systems. CNBH has
been deconsolidated as of August 1, 1998; its capital expenditures amounting to
NLG18.6 million for the first seven months of 1998, are included for the nine
months ended September 30, 1998. UTH's projected capital expenditures are not
included in the table below but will become our full responsibility upon the
completion of our purchase of the remaining 49% of UTH. Total 1999 capital
expenditures for UTH are expected to be NLG187.5 million, including NLG81.4
million of cable network, NLG43.1 million of customer premise equipment and
NLG63.0 million of master telecom center and support systems and equipment. See
the "Budgeted Capital Expenditures and Capital Resources" section of the
respective operating systems in "Business --Operating Companies". Our actual
capital expenditures for the remainder of 1998 and for the year ended 1999 may
differ significantly from the projected amounts included below. See "Risk
Factors -- Failure to Raise Necessary Capital Could Restrict the Development of
Our Network, the Introduction of New Services and the Acquisition of Cable
Systems".
<TABLE>
<CAPTION>
Historical Projected
--------------------------------------- -------------------------
Nine Months Three Months
Year Ended Year Ended Ended Ended Year Ended
December 31, December 31, September 30, December 31, December 31,
1996 1997 1998 1998 1999
------------ ------------ ------------- ------------ ------------
(Dutch guilders, in thousands)
<S> <C> <C> <C> <C> <C>
Cable Network:
Upgrade................ 61,345 48,484 66,744 20,000 196,600
New build.............. 12,581 55,042 38,096 33,500 99,600
------- ------- ------- ------- -------
Total Cable Network.... 73,926 103,526 104,840 53,500 296,200
Master Telecom Center:
Video services......... 8,713 4,734 3,343 1,800 15,500
Cable telephone
(Priority Telecom).... -- -- 4,444 15,700 27,900
Internet/data
services.............. 349 4,480 357 4,000 7,200
------- ------- ------- ------- -------
Total Master Telecom
Center.............. 9,062 9,214 8,144 21,500 50,600
Customer Premise
Equipment (CPE):
Video services......... 4,179 5,833 9,614 5,400 13,500
Cable telephone
(Priority Telecom).... -- -- 4 -- 52,500
Internet/data
services.............. 430 3,890 8,283 6,900 20,300
------- ------- ------- ------- -------
Total CPE............ 4,609 9,723 17,901 12,300 86,300
Support Systems and
Equipment (SSE)........ 8,098 9,221 11,521 19,700 15,500
Other................... 4,347 5,629 11,742 4,800 2,900
------- ------- ------- ------- -------
Total SSE and Other.. 12,445 14,850 23,263 24,500 18,400
New Businesses:
chello broadband....... -- -- 1,340 16,200 31,000
Digital Distribution
Platform.............. -- -- -- -- 32,600
------- ------- ------- ------- -------
Total New
Businesses.......... -- -- 1,340 16,200 63,600
Intangibles and Other... 6,605 8,317 14,682 -- --
------- ------- ------- ------- -------
Total Capital
Expenditures........ 106,647 145,630 170,170 128,000 515,100
======= ======= ======= ======= =======
</TABLE>
39
<PAGE>
Cable Network
Since our formation as a joint venture, we have been aggressively upgrading
our existing cable television system infrastructure and constructing our new-
build infrastructure with two-way high capacity technology to support digital
video, telephone and Internet/data services. Capital expenditures for the
upgrade and new-build construction can be reduced at our discretion, although
such reductions require lead-time in order to complete work in progress and can
result in higher total costs of construction.
We expect that the upgrade of the cable network and related equipment will
cause us to write off some of our existing cable network and equipment. We do
not expect the write off to be significant, except in certain limited
circumstances where it will be necessary to rebuild the network. While there
are some exceptions, most of the existing cable plant and related equipment has
been in service for over ten years and the remaining book value is very low.
While we believe the upgrade will extend the life of our existing plant, we do
not anticipate extending the useful life of our existing coaxial cable and
equipment for financial reporting purposes.
During the nine months ended September 30, 1998, we spent approximately
NLG104.8 million in cable network capital expenditures. We currently anticipate
cable network capital expenditures of approximately NLG53.5 million during the
last three months of 1998. For 1999, we have budgeted cable network capital
expenditures of approximately NLG296.2 million.
Master Telecom Center
The master telecom center includes the headend and all central network
equipment needed for services provided through the operating system. For cable
television, this includes satellite antennas, encryption devices and original
transmission facilities. For telephone service, this includes the central
office switch and synchronous digital hierarchy and other telephone-related
equipment. For Internet/data service, this includes servers and equipment for
connection to the Internet. See "Technology".
During the nine months ended September 30, 1998, we spent approximately
NLG8.1 million for master telecom center equipment. For the last three months
of 1998, we currently anticipate spending approximately NLG21.5 million. For
1999, we have budgeted capital expenditures for master telecom center equipment
of approximately NLG50.6 million.
Customer Premise Equipment
Customer premise equipment includes television set-top converters for video
services, cable phone equipment for telephone and cable modems and network
interface cards for Internet/data services. Customer premise equipment is a
variable capital expenditure, except for inventory on hand, and generally will
not be incurred unless we need the equipment for a subscriber.
During the nine months ended September 30, 1998, we spent approximately
NLG17.9 million on customer premise equipment. During the last three months of
1998, we anticipate spending approximately NLG12.3 million.
For 1999, we have budgeted capital expenditures for customer premise
equipment of approximately NLG86.3 million. We are negotiating supply
arrangements for the development and purchase of an integrated digital set-top
box for video and Internet/data services, as well as for Internet-based
telephone. We expect these negotiations to be completed shortly for equipment
delivery in late 1999.
Support Systems and Equipment
Support systems and equipment includes ancillary systems such as
operational and business support systems, including network management,
customer care, inventory and billing. During the nine months ended September
30, 1998, we spent NLG23.3 million in total support systems and equipment. We
anticipate we will spend NLG24.5 million through the last three months of 1998.
For 1999, we have budgeted NLG18.4 million for support systems and equipment.
See "Risk Factors -- Our New Telephone and Internet/Data Services Could Run
Into System, Marketing, Competition and Timing Problems that Would Impede Our
Revenue Growth".
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New Businesses
In addition to the network infrastructure and related equipment and capital
resources described above, development of our newer businesses, chello
broadband and our digital distribution platform, require capital expenditures
for construction and development of our pan-European distribution and
programming facilities, including our origination facility, network operating
center, near video on demand server complex and related support systems and
equipment. For the nine months ended September 30, 1998, we incurred capital
expenditures of approximately NLG1.3 million for chello broadband. We plan to
spend approximately NLG16.2 million for capital expenditures for chello
broadband for the last three months of 1998. We have budgeted for 1999
approximately NLG31.0 million and NLG32.6 million, respectively, for capital
expenditures for chello broadband and our digital distribution platform.
Liquidity and Capital Resources
We have financed our operations and acquisitions primarily from:
.cash contributed by UIH upon our formation,
.debt financed at the UPC corporate level and project debt financed at the
operating company level, and
.operating cash flow.
We have both well-established and developing systems. In general, we have
used the cash contributed by UIH upon formation and debt financed at the UPC
corporate level to fund acquisitions, developing systems and corporate
overhead. We have financed our well-established systems and, when possible, our
developing systems, with project debt and operating cash flow. Also, well-
established systems generally have stable positive cash flows that, to the
extent permitted by applicable credit facilities, may be used to fund other
operations. Developing systems are at various stages of construction and
development and generally depend on us for some of the funding for their
operating needs until project financing can be secured.
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Current Debt Facilities
We, our consolidated subsidiaries and our unconsolidated affiliates had the
following long-term and short-term debt outstanding as of September 30, 1998.
Debt denominated in currencies other than Dutch guilders has been translated to
Dutch guilders for the last column.
<TABLE>
<CAPTION>
Outstanding
At
Final September 30,
Description (Borrower) Use of Funds Maturity Interest Rate Facility Size 1998
---------------------- ------------ -------- ------------- ------------- -------------
(in millions)
<C> <S> <C> <C> <C> <C>
UPC and Consolidated Subsidiaries:
Long-Term Debt
Senior Revolving Credit Facility UIH/Philips transaction; 2006 LIBOR + 0.5% to NLG1,100.0 NLG972.0
(UPC, Janco Multicom, Refinancing; Acquisitions; 2.0% per annum
Telekabel Wien) Capital expenditures;
Working Capital
Mediareseaux Facility Capital expenditures; 2002 FRF LIBOR + 0.75% FRF680.0 NLG20.2
(Mediareseaux) Acquisitions; Working to 2.0%
Capital
DIC Loan (UPC) To increase interests in 2000 8.0% per annum $90.0 -- (1)
Israeli and Maltese + 6.0% of principal
operating systems amount at maturity
UIH Loan (UPC) To repay indebtedness and Mar. 2001 10.75% per annum $120.0 NLG156.0
fund new business
Janco Letter of Credit (UPC) To acquire minority share 2001 5% per annum n/a NLG37.6(2)
of Janco Multicom
Short-Term Debt
Time Warner Note Acquisition of Kabelkom June 1999 Non-interest bearing $18.0 NLG34.0
(UPC) distribution assets
Bridge Bank Facility (UPC) UPC Acquisition June 1999 LIBOR + 4.5% $125.0 NLG113.5
to 6.0%
Telekabel Hungary Capital Expenditures, April 1999 BUBOR + 2.5% DM65.6 -- (3)
Facility (Telekabel Hungary) Acquisitions; Working
Capital
Unconsolidated Affiliates:
UTH Facility Acquisitions; Capital Mar. 1999 Fixed rate of 8.15% NLG690 NLG576.4
(Telekabel Beheer) expenditures; Working
capital
A2000 Group Facilities Acquisition of 2005-2006 AIBOR + 0.7/0.75% or NLG510.0 NLG492.5
(A2000 and subsidiaries) KT Amsterdam and a fixed rate advance
KT Hilversum; Capital + 0.7/0.75%
Expenditures; Working
Capital
CNBH Facility (CNBH) Acquisition of Combivisie; 2008 AIBOR + 0.60% to NLG266.0 NLG209.3
Capital expenditures 1.6% per annum
Other (CNBH)(6) Various Various Various Various NLG17.4
Tevel Facilities (Tevel) Acquisition of Gvanim; 2007-2010 Fixed rate ranging NIS928.3 NLG513.7
Working Capital from 5.5%-6.0%
Melita Facility (Melita) Capital Expenditures; 2004 Cost of funding Lm9.0 NLG40.9
Refinancing + 1.0% to 2.5%
Monor Facility (Monor) To repay indebtedness and 2006 LIBOR + 1.5% $50.0 $46.0
finance capital
expenditures
</TABLE>
- --------
(1) One of our subsidiaries drew down the full amount of this loan in November
1998.
(2) We paid NLG37.2 million from available restricted cash to acquire 12.7% of
Janco Multicom in November 1998, and the letter of credit was subsequently
cancelled.
(3) This facility was entered into after September 30, 1998. Telekabel Hungary
drew DM26.0 million under this facility in November 1998.
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Senior Revolving Credit Facility. In October 1997, we and Norkabel as
borrowers entered into a NLG1.1 billion multi-currency revolving credit
facility with a syndicate of banks led by The Toronto-Dominion Bank. Norkabel
was succeeded as a borrower by Janco Multicom after the merger of Janco and
Norkabel. In December 1997, Telekabel Wien and the other members of the
Telekabel Group also became borrowers under this facility. Although currently
not a borrower, TVD is a guarantor under this facility. As of September 30,
1998, the amount outstanding under this facility owed by us, Telekabel Wien and
Janco Multicom was NLG620.0 million, NLG213.4 million and NLG138.5 million,
respectively. This facility is secured by a pledge of the stock and assets of
TVD, Janco Multicom and Telekabel Wien.
Our borrowings and those of our subsidiaries in Austria, Belgium and Norway
are limited by financial covenants under this facility. The principal amount of
all our borrowings and those of our subsidiaries may not exceed certain
multiples of total annualized net operating cash flow for us and our
subsidiaries. In addition, the principal amount of all our borrowings and those
of our subsidiaries may not exceed certain multiples of our cable television
net operating cash flow. This facility generally prohibits dividends and other
distributions to our shareholders unless, among other things, we achieve
certain financial ratios for at least two consecutive quarters. This facility
also includes financial covenants relating to interest and debt service
coverage and application of proceeds from asset sales and debt or equity
offerings.
We have agreed with our lenders under this facility to reduce this facility
amount from NLG1.1 billion to NLG1.0 billion. This amount will be further
reduced by 5% each quarter beginning December 31, 2001 until final maturity. We
intend to repay up to NLG620 million of the amount outstanding by us under this
facility with the proceeds of the offering, which we plan subsequently to
reborrow under this facility. See "Use of Proceeds".
Mediareseaux Facility. In July 1998, Mediareseaux entered into an FRF680.0
million (NLG228.8 million) term facility with Paribas to finance capital
expenditures, working capital and acquisitions. This facility is secured by the
assets of Mediareseaux and a pledge of our stock of Mediareseaux. The
availability of this facility depends on revenue generated and its debt to
equity ratios. Drawings under this facility may be made until December 31,
2002. The repayment period runs from January 1, 2003 to final maturity in 2007.
Mediareseaux may not draw more than FRF120 million (NLG40.4 million) of this
facility for acquisitions. During the repayment period, Mediareseaux must apply
50% of its excess cash flow in prepaying the facility. This facility generally
restricts the payment of dividends and distributions. This facility also
restricts Mediareseaux from incurring additional indebtedness, subject to
certain exceptions. In July 1998, Mediareseaux also secured a 9.5 year FRF20
million (NLG6.7 million) overdraft facility, subject to the same terms and
conditions as this facility except for the availability tests which are not
applicable. Until certain financial covenants are met, we must own more than
51% of Mediareseaux. Generally, investments by Mediareseaux and its
subsidiaries require approval of the facility agent except for investments in
cash and certain marketable securities that are pledged to support the
facility. This facility also restricts the amount of management fees that
Mediareseaux may pay to us.
DIC Loan. In November 1998, a subsidiary of DIC loaned us $90.0 million.
The loan from DIC was subsequently assigned to an Israeli bank. We used the
proceeds to acquire interests in the Israeli and Maltese systems. The loan from
DIC matures in November 2000 and is secured by our pledge of our ownership
interest in the Israeli system. The loan from DIC bears interest at the nominal
rate of 8% per annum. This interest is payable, together with an additional 6%
of the principal amount, on maturity. The loan from DIC may be repaid on
quarterly prepayment dates with three months' prior notice by us. In connection
with the loan from DIC, we granted the Discount Group, our partner in the
Israeli system, an option to acquire approximately $45.0 million of ordinary
shares at a price equal to 90% of the initial public offering price. The
Discount Group has exercised the option and we intend to issue ordinary shares
to them at the same time as the closing of this
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<PAGE>
offering. The exercise price of this option is payable in cash or delivery of a
$45.0 million promissory note under the loan. If we elect to receive payment in
the form of the promissory note, the outstanding amount under the loan from DIC
will be reduced accordingly. If we elect to receive payment in cash, we intend
to use the cash to repay half of the loan from DIC. See "Dilution" and "Shares
Eligible for Future Sale". We have granted the Discount Group a further option
to purchase another $45 million of our ordinary shares, exercisable before
September 30, 2000 and payable in delivery of the promissory note for the
outstanding amount under the loan from DIC.
UIH Loan. We have entered into two promissory notes with UIH of $100.0
million, in March 1998, and $20.0 million, in July 1998. We have borrowed a
total of $79.0 million, excluding accrued interest, under these two notes.
These notes bear interest at 10.75% per annum and are payable on March 31,
2001. The $100.0 million note is convertible at UIH's option into ordinary
shares and the $20.0 million note may be repaid in our ordinary shares. Any
conversion into or payment in ordinary shares will be at the initial public
offering price. We plan to repay these notes with proceeds from the offering.
See "Use of Proceeds".
Time Warner Note. In connection with the Kabelkom transaction, we entered
into an $18.0 million (NLG34.0 million) promissory note with Time Warner. The
Time Warner note matures on the earlier of June 30, 1999 or 90 days after
written notice from Time Warner. We may, however, prepay the Time Warner note
in certain instances. We expect that the Time Warner note will be cancelled if
Time Warner exercises its option to acquire our 50% interest in HBO Hungary and
100% interest in TV Max.
Bridge Bank Facility. In connection with the UPC Acquisition, we entered
into a $125.0 million term bridge bank facility with a syndicate of banks led
by The Toronto-Dominion Bank. In March 1998, we repaid $63.0 million of the
bridge bank facility with proceeds borrowed from UIH. The bridge bank facility
is due on June 5, 1999 or the earlier closing of this offering. The bridge bank
facility is secured by certain of our assets, including a pledge of our shares
in UIH.
We intend to repay our bridge bank facility with proceeds from the
offering. See "Use of Proceeds".
Telekabel Hungary Facility. In October 1998, Telekabel Hungary entered into
a DM65.6 million (NLG74.0 million) six-month secured bridge facility.
Availability under this facility depends on certain financial covenants. The
DM49.2 million (NLG55.5 million) international tranche of the facility and half
of the DM16.4 million (NLG18.5 million) local tranche bear interest at LIBOR
plus 2.5% per annum plus an additional cost of funding calculation. The
remaining half of the local tranche must be drawn in Hungarian forints and
bears interest at Budapest interbank offered rates for Hungarian forints, plus
2.5% per annum plus an additional cost of funding calculation. Telekabel
Hungary is using the facility, among other things, to finance capital
expenditures and to acquire minority shares in our Kabelkom systems. We have
pledged our indirect 79.25% interest in Telekabel Hungary to secure the
facility. The facility also is secured by a pledge over certain assets of the
Telekabel Hungary group and a negative pledge. Telekabel Hungary is currently
negotiating a long-term facility with the lenders to replace this bridge
facility.
UTH Facility. NUON has entered into a short-term financing arrangement with
Telekabel Beheer, with a maximum availability of NLG690 million. This facility
bears interest at 8.15% per annum and is payable in March 1999. This facility
is secured by a pledge of shares in Telekabel Beheer and all of its direct and
indirect subsidiaries.
UTH intends to replace this facility with a senior facility and a junior
facility and has received commitments, subject to due diligence and
documentation, from a number of lenders for such refinancing.
Bank of America, Citibank, Deutsche Bank, MeesPierson and Paribas issued a
commitment for a (Euro)295 million (NLG650 million) revolving facility to a
subsidiary of UTH that will convert to a term facility on December 31, 2001. A
small portion of this facility will be in the form of an overdraft facility
that will be available until December 31, 2007. This existing facility will be
used to repay a portion of the UTH facility and for capital expenditures. The
new UTH facility will bear interest at the Euro Interbank Offered Rate
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<PAGE>
plus a margin between 0.75% and 2.25% based on leverage multiples tied to UTH's
net operating income. The new UTH facility will be secured by, among other
thing, a pledge over shares held by the borrower and debt of Telekabel Beheer
and will restrict Telekabel Beheer's ability to incur additional debt.
Goldman Sachs Credit Partners, MeesPierson and Paribas issued a commitment
to UTH for a NLG217.5 million secured debt facility that will be due March 31,
2001. This junior facility will bear interest at LIBOR plus a margin ranging
from 4.75% to 8.5%. If the junior facility is not paid in full on its maturity
date, it will automatically convert to a term loan that will be due March 31,
2006, and UTH will be required to issue warrants to the lenders to purchase up
to 5% of its fully-diluted capital stock. This junior facility will be used to
repay the existing UTH facility and will be secured by, among other things,
pledges of UTH's stock in its subsidiaries and negative covenants. This
facility will restrict UTH's ability to incur additional debt.
Other than Bank of America, all of the lenders under these two facilities
are underwriters or affiliates of underwriters in this offering. See
"Underwriting".
A2000 Facilities. In January 1996, A2000 and its wholly owned subsidiary KT
Amsterdam entered into bank facilities of NLG90.0 million and NLG375.0 million,
respectively. In October 1996, KT Hilversum, a wholly-owned subsidiary of
A2000, entered into a bank facility of NLG45.0 million. These facilities have
between nine- and ten-year terms and interest rates of AIBOR + 0.75% or AIBOR +
0.7% or a fixed-rate +0.7% or 0.75% per annum and restrict the borrowers from
incurring additional indebtedness, subject to certain exceptions. The A2000
facilities are secured by a pledge of the KT Amsterdam shares and its assets.
CNBH Facility. In February 1998, CNBH entered into a secured NLG250.0
million ten-year term facility with a syndicate of banks led by Rabobank. In
August 1998, this facility was increased to NLG266.0 million. Most of the
proceeds were used to repay in full a Combivisie bridge facility entered into
in connection with the acquisition of Combivisie (NLG122.0 million) and a KTE
bank facility (NLG65.0 million). The remaining amount under this facility is
available to finance certain capital expenditures. Beginning in 2001, CNBH will
be required to apply 50% of its excess cash flow to prepayment of its facility.
The facility restricts the payment of dividends and distributions and limits
the amount of payments to us under our general services agreement. In
connection with this facility, we entered into a project support agreement
providing, among other things, for us to retain majority ownership of CNBH. In
connection with this facility, CNBH also entered into a NLG5.0 million ten-year
term working capital facility with Rabobank.
Tevel Facilities. In August 1998, Tevel entered into three secured loan
agreements totalling NIS928.3 million (NLG456.1 million) to finance the
acquisition of Gvanim and working capital. These facilities bear interest at a
fixed margin of 5.5% to 6.0% over the Israeli consumer price index. The loans
mature in the years 2007 to 2010 and the repayment periods of the principal
amounts commence in the year 2000. These facilities are secured by Tevel's
pledge of its ownership interest in Gvanim and limit Tevel's ability to pay
dividends, encumber its assets and incur indebtedness.
Melita Facility. In October 1996, Melita, which operates the Maltese
systems, entered into a secured term bond facility of Lm9.0 million (NLG45.5
million) to refinance a then-outstanding term facility and to finance capital
expenditures and working capital. Availability under this facility depends on
satisfaction of various covenants. The loan matures October 2004 and the
repayment period commences in 1999. Melita is currently exploring a refinancing
of this facility that would expand its borrowing capacity.
Monor Facility. In September 1997, Monor entered into a $50 million term
loan facility with a syndicate of banks led by Credit Lyonnais. The proceeds of
Monor's facility were used to repay indebtedness and for capital expenditures
in the build-out of Monor's network. Monor's facility matures on December 31,
2006 and bears interest at LIBOR plus 1.5%. Monor's facility is secured by a
pledge over our and PenneCom's shares in Monor and its assets.
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Restrictions Under UIH Indenture
As a subsidiary of UIH, our activities are restricted by the covenants in
UIH's indenture dated February 5, 1998. The UIH indenture generally limits the
additional amount of debt that we or our subsidiaries or controlled affiliates
may borrow, or preferred shares that we or they may issue. Generally,
additional borrowings, when added to existing indebtedness, must satisfy, among
other conditions, at least one of the following tests:
. not exceed 7.0 times the borrower's consolidated operating cash flow,
. operating cash flow must exceed 1.75 times its consolidated interest
expense, or
. not exceed 225% of the borrower's consolidated invested equity capital.
In addition, there must be no existing default under the UIH indenture at
the time of the borrowing. The UIH indenture also restricts our ability to make
certain asset sales and certain payments. In connection with this offering, we
have agreed with UIH that we will not take any action during the term of the
UIH indenture that would result in a breach of the UIH indenture covenants. The
maturity date of the UIH indenture is February 2008 and interest becomes
payable in cash in February 2003. See "Risk Factors -- We Will Continue to be
Controlled by UIH and Governed by the Terms of its Debt Securities" and
"Relationship With UIH and Related Transactions -- UIH Indenture".
Sources of Capital
We had approximately NLG44.3 million of unrestricted cash and cash
equivalents on hand as of September 30, 1998. We intend to reborrow under our
senior revolving credit facility the amount repaid with proceeds of this
offering. In addition, we have additional borrowing capacity at the corporate
and project debt level including CNBH, Mediareseaux and Telekabel Hungary
facilities. We also have NLG12.3 million available from excess cash released
after we exercised our option to acquire the remaining interest in Janco, as
well as $22.0 million of proceeds from the sale of our Irish operating system,
Princes Holdings.
We are obligated to satisfy significant payment and purchase obligations in
the near term, including the repayment of:
. the Time Warner note, payable on the earlier of 90 days after notice by
Time Warner or June 30, 1999,
. our bridge bank facility, which has been extended to the earlier of the
closing of the offering or June 1999,
. the UTH existing term facility, payable in March 1999, for which UTH has
received replacement commitments from its banks, and
. Telekabel Hungary's facility, payable in April 1999.
We believe that our existing capital resources combined with the
anticipated refinancing or extensions of some short-term facilities will enable
us to satisfy our requirements for the coming 12 months. Without such
refinancings and extensions, we may need to sell assets or obtain additional
equity or debt financing. See "Risk Factors -- Our High Level of Debt and
Limitations on Our Capacity to Borrow and Invest Could Slow Down Growth in
Subscribers and Revenue".
The proceeds from this offering are expected to be used primarily for
capital expenditures and to fund other costs associated with our network
upgrade, the build and launch of our telephone and Internet/data services new
businesses as well as our video distribution and programming businesses. We
will repay a portion of our senior revolving credit facility with the proceeds
from this offering, but we then plan to reborrow the amount so repaid for such
uses. A portion of the proceeds from this offering will also be used to pay
part of the purchase price for the remaining 49% of UTH we are acquiring and to
repay our bridge bank facility and our notes held by UIH. See "Use of
Proceeds".
We may need to raise additional capital in the future to the extent we
pursue new acquisition or development opportunities or if cash flow from
operations is insufficient to satisfy our liquidity requirements. See "Risk
Factors -- Failure to Raise Necessary Capital Could Restrict the Development of
Our Network, the Introduction of New Services and the Acquisition of Cable
Systems".
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Certain Dutch Property Tax Issues
One of our Dutch systems was recently assessed for a transfer tax on
immovable property in the amount of NLG1.8 million for the purchase of a cable
network. We have always regarded our cable networks as movable property and not
subject to such transfer tax. We are appealing this tax assessment. Should we
be unsuccessful, our Dutch systems may be assessed for taxes on similar
transactions. We cannot predict the extent to which the taxes could be assessed
retroactively or the amount of tax that our systems may be assessed for,
although it may be substantial. Because we will own 100% of UTH after the
closing of this offering, any tax liabilities assessed against our Dutch
systems, other than the A2000 systems, will be consolidated with our results.
We believe that, if our appeal is unsuccessful, most cable television companies
and other utilities in The Netherlands would become subject to similar tax
liabilities. If this happens, we expect these entities would lobby with us the
Dutch tax authorities against such tax assessments.
Inflation and Foreign CurrencyExchange Rate Losses
To date, we have not been impacted materially by inflation.
The value of our monetary assets and liabilities is affected by
fluctuations in foreign currency exchange rates as accounts payable for certain
equipment purchases and certain operating expenses, such as programming
expenses, are denominated in currencies other than the functional currency of
the entity making such payments. We and some of our operating companies have
notes payable and notes receivable that are denominated in, and loans payable
that are linked to, a currency other than their own functional currency,
exposing us to foreign currency exchange risks on these monetary assets and
liabilities. In general, we and our operating companies do not execute hedge
transactions to reduce our exposure to foreign currency exchange rate risks.
Accordingly, we may experience economic loss and a negative impact on earnings
and equity with respect to our holdings solely as a result of foreign currency
exchange rate fluctuations. See "Risk Factors --Foreign Currency Exchange Rate
Fluctuations May Cause Losses".
The functional currency for our operations generally is the applicable
local currency for each
operating company. Assets and liabilities of foreign subsidiaries are
translated at the exchange rates in effect at year-end, and the statements of
operations are translated at the average exchange rates during the period.
Exchange rate fluctuations on translating foreign currency financial statements
into Dutch guilders result in unrealized gains or losses referred to as
translation adjustments. Cumulative translation adjustments are recorded as a
separate component of shareholders' equity. Transactions denominated in
currencies other than the local currency are recorded based on exchange rates
at the time such transactions arise. Subsequent changes in exchange rates
result in transaction gains and losses which are reflected in income as
unrealized, based on period-end translations, or realized upon settlement of
the transactions.
Cash flows from our operations in foreign countries are translated based on
their reporting currencies. As a result, amounts related to assets and
liabilities reported on the consolidated statements of cash flows will not
agree to changes in the corresponding balances on the consolidated balance
sheets. The effects of exchange rate changes on cash balances held in foreign
currencies are reported as a separate line below cash flows from financing
activities. See "Exchange Rate Data".
New Accounting Principles
The U.S. Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which requires that a public business
enterprise report certain financial and descriptive information about its
reportable segments. We intend to adopt this statement for the year ended
December 31, 1998.
The American Institute of Certified Public Accountants recently issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities",
which is required to be adopted by affected companies for fiscal years
beginning after December 15, 1998. This statement defines start-up and
organization costs, which must be expensed as incurred. In addition, all
deferred
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start-up and organization costs existing as of January 1, 1999 must be written-
off and accounted for as a cumulative effect of an accounting change. As of
September 30, 1998, our deferred start-up and organization costs were
insignificant. We intend to adopt this statement for fiscal year 1999.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which requires that companies recognize all
derivatives as either assets or liabilities in the balance sheet at fair value.
Under this statement, accounting for changes in fair value of a derivative
depends on its intended use and designation. This statement is effective for
fiscal years beginning after June 15, 1999. We currently are assessing the
effect of this new standard.
Year 2000 Conversion
Our cable television, programming, telephone and Internet/data operations
are heavily dependent upon computer systems and other technological devices
with imbedded chips. Such computer systems and other technological devices may
not be capable of accurately recognizing dates beginning on January 1, 2000.
The Year 2000 problem could cause miscalculations, resulting in our cable
television and telephone systems or programming services malfunctioning or
failing to operate.
Year 2000 Compliance Program
In response to possible Year 2000 problems, the Board of Directors of UIH
established a task force to assess the impact that potential Year 2000 problems
may have on company-wide operations, including us and our operating companies,
and to implement necessary changes to address such problems. The task force
includes our staff and staff from UIH, and subcommittees at the operating
company levels and reports directly to the UIH Board. We will continue to be a
part of the task force following the offering. In creating a program to
minimize Year 2000 problems, the task force identified certain critical
operations of our business. These critical operations are service delivery
systems, field and headend devices, customer service and billing systems, and
corporate management and administrative operations such as
cash flow, accounts payable and accounts receivable, operations.
The task force has established a three phase program to address potential
Year 2000 problems:
. Identification phase: identify and evaluate computer systems and other
devices (e.g. headend devices, switches and set top boxes) on a system by
system basis for Year 2000 compliance.
. Implementation phase: establish a database and evaluate the information
obtained in the identification phase, determine priorities, implement
corrective procedures, define costs and ensure adequate funding.
. Testing phase: test the corrective procedures to verify that all material
compliance problems will operate on and after January 1, 2000, and
develop, as necessary, contingency plans for material operations.
About 85% of our operating systems have completed the identification phase
and the task force is working on the implementation phase for these systems.
The remaining operating systems are expected to complete the identification
phase by March 1999. The task force has researched almost half of the items
identified during the identification phase as to Year 2000 compliance. Of the
items researched, approximately 83% are either compliant or can be easily
remediated without significant cost to us. Currently, the task force expects to
complete its research on substantially all of the items identified during first
quarter 1999. The identification phase for our corporate, management and
administrative operations has been completed, and the task force is currently
evaluating the results of that phase in order to implement any necessary
corrective procedures. Based on current data, we expect the computer systems
for all corporate operations to comply with Year 2000 by mid-1999 without
needing material remediation or replacement.
The task force has targeted mid-1999 for commencement of the testing phase.
At this time, we anticipate that all material aspects of the program will be
completed before January 1, 2000. Currently, UIH is managing the program with
its internal task force. During the
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implementation phase, the task force will also be evaluating the need for
external resources to complete the implementation phase and implement the
testing phase.
In addition to its program, UIH is a member of a Year 2000 working group,
which has 12 cable television companies and meets under the auspices of Cable
Labs. The dialogue with the other cable operators has assisted UIH in
developing its Year 2000 program. Part of the agenda of the working group is to
develop test procedures and contingency plans for critical components of
operating systems for the benefit of all its members. The test procedures are
expected to be available to members, including UIH, during the first quarter of
1999. Until the test procedures are completed, the working group will not
develop any contingency plans.
Third-Party Dependence
We believe that our largest Year 2000 risk is our dependence upon third-
party products. Two significant areas in which our systems depend upon third-
party products are programming and telephone interconnects. We do not have the
ability to control such parties in their assessment and remediation procedures
for potential Year 2000 problems. Should these parties not be prepared for Year
2000, their systems may fail and we would not be able to provide our services
to our customers. We are in the process of communicating with these parties on
the status of their Year 2000 compliance programs in an effort to prevent any
possible interruptions or failures. To date, responses to such communications
have been limited and the responses received state only that the party is
working on Year 2000 issues and does not have a definitive position at this
time. We expect, however, based on discussions with such parties, that more of
them will disclose the extent of their Year 2000 compliance programs during the
first half of 1999 as they focus more resources on their approaching Year 2000
issues. In addition, the task force has been monitoring the web sites of these
third parties for information regarding their Year 2000 compliance programs and
our and UIH's purchasing department has begun to exert pressure on third party
vendors for Year 2000 compliance information. Nonetheless, we are unable to
assess fully the risk posed by its dependence upon such third parties' systems.
The task force is considering certain limited contingency plans, including
preparing back-up programming and stand-by power generators. Such contingency
plans may not, however, resolve the problem in a satisfactory manner.
With respect to other third-party systems, each of our operating systems is
responsible for inquiring of its vendors and other entities with which it does
business (e.g., utility companies, financial institutions and facility owners)
as to such entities' Year 2000 compliance programs. Each of our operating
companies has begun this process and to assist our operating companies in this
process, we have hired two Year 2000 consultants, one for Eastern Europe and
one for Western Europe, who will visit each operating company and work with
them to identify and report to us any potential Year 2000 compliance problems.
These consultants will also contact third party vendors regarding their Year
2000 compliance measures. To date, these consultants have not identified any
new third party Year 2000 compliance problems.
The task force is working closely with the manufacturers of its headend
devices to remedy any Year 2000 problems assessed in the headend equipment.
Recent information from the two primary manufacturers of such equipment
indicate that most of the equipment used in our operating systems are not date-
sensitive. Where such equipment needs to be upgraded for Year 2000 issues, such
vendors are upgrading without charge. These upgrades are expected to be
completed before year-end 1999, but this process is not entirely within our
control. With respect to billing and customer care systems, we use standard
billing and customer care programs from several vendors. A few of our operating
systems, including two in The Netherlands, one in Romania and one in Hungary
are using Custom Fox-Pro Billing and Customer Care Systems, which have been
examined for Year 2000 compliance. We are generally upgrading our billing and
customer care systems for other reasons and do not expect the Year 2000 aspect
of this cost to be significant. The task force is working with such vendors to
achieve Year 2000 compliance for all of our systems.
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Minority-Held Systems
We also have non-controlling interests in cable television and telephone
operations, including A2000. MediaOne International, our partner in A2000, is
undertaking and implementing a program to ensure that the operations of A2000
will be Year 2000 compliant. The task force is including other minority
investments in its program. Of these investments, about 75% have completed
their identification phase of the program and the task force is in the process
of making recommendations to these entities as to Year 2000 compliance matters.
Our remaining investments are expected to complete the identification phase by
March 1999. No assurance can be given, however, that these entities will
implement the recommendations or otherwise be Year 2000 compliant. Overall, the
task force will continue to analyze the Year 2000 program and will revise the
program as necessary throughout the remainder of 1999, including procedures to
ensure third parties' Year 2000 compliance.
Cost of Compliance
The task force has not yet determined the full cost of its Year 2000
program and its related impact on our financial condition. In the course of our
business, we have made substantial capital investments over the past few years
in improving our systems, primarily for reasons other than to anticipate Year
2000 problems. Because the systems' upgrades also result in Year 2000
compliance, however, we have not had to devote a large amount of investment
specifically to the Year 2000 issue. The task force has identified certain
replacement and remediation costs and, based on the task force review to date,
we currently estimate that these costs will not exceed NLG4.0 million,
excluding any costs associated with our interest in A2000. Although no
assurance can be made, we believe that the known Year 2000 compliance issues
can be remedied without a material financial impact on us. No assurance can be
made, however, as to the total cost for the Year 2000 program until all of the
data has been gathered. In addition, we cannot predict the financial impact we
will experience if Year 2000 problems are caused by third parties upon which
our systems are dependent or experienced by entities in which we hold
investments. The failure of any one of these parties to implement Year 2000
procedures could have a material adverse impact on our operations and financial
condition.
European Economic and Monetary Union
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and the euro. The participating countries adopted the euro as their
common legal currency on that day. The euro trades on currency exchanges and is
available for non-cash transactions during the transition period between
January 1, 1999 and January 1, 2002. During this transition period, the
existing currencies are scheduled to remain legal tender in the participating
countries as denominations of the euro and public and private parties may pay
for goods and services using either the euro or the participating countries'
existing currencies.
During the transition period, all operating companies' billing systems will
include amounts in euro as well as the respective country's existing currency.
All of our accounting and management reporting systems currently are multi-
currency.
We intend to use the euro as our reporting currency by the end of 2000. We
do not expect the introduction of the euro to affect materially our cable
television and other operations. We have not yet taken steps to confirm that
the financial institutions and other third parties with whom we have financial
relationships are prepared for the use of the euro. Thus far, we have not
experienced any material problem with third parties as a result of the
introduction of the euro. We believe the introduction of the euro will not
require us to amend any of our financial instruments or loan facilities, other
than amendments that will be made automatically by operation of law. These will
include automatic replacement of the currencies of participating countries with
the euro. They will also include automatic replacement of interest rates of
participating countries with European interest rates. We believe the
introduction of the euro will reduce our exposure to risk from foreign currency
and interest rate fluctuations.
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BUSINESS
Overview
We own and operate cable-based communications networks in ten countries in
Europe and in Israel. We provide cable television services. Some of our systems
also provide telephone and Internet access services. Today, our systems, taken
together, have the largest number of subscribers of any group of broadband
communications networks operated across Europe.
Company Growth Strategy
Our goal is to become a leading pan-European provider of integrated video,
telephone and Internet/data services. Key elements of our strategy to achieve
this goal are:
Continue to Increase Video Service Revenue Per Subscriber
We plan to continue increasing our average revenue per subscriber by
expanding our video services program offerings in the expanded basic tier
service, pay-per-view and digital audio areas. We plan to continue improving
our expanded basic tier offerings by adding new channels. Generally, basic tier
pricing is regulated while the expanded basic tier is not price regulated.
Increased programming offerings will also help increase the average revenue per
subscriber by making our expanded basic tier more attractive to subscribers. We
are involved in several country-specific programming ventures that develop
local language programming for various markets. We are also developing,
together with partners, eight new pan-European channels for the cable
television market and have already secured a portion of the content required
for these channels.
We are seeking partners to construct a pan-European digital distribution
platform, UPC's EuroHits, that will enable digital distribution of our new
channels. Full digitalization, to be made possible by our network upgrade to
full two-way capability, will provide our Western European systems with
substantially more channel capacity. This increased channel capacity would
enable subscribers to customize their subscriptions for our products and
services to suit their lifestyles and personal interests. See "-- UPC Video
Services: Video Distribution and Programming -- Digital Distribution Platform".
Capitalize on the Unique Infrastructure and Economic Advantages of Our
Telephone Market Opportunity
We believe that the ability to leverage our existing subscriber base and
upgraded network will provide us with an advantage over other new entrants in
the telephone services market. In particular, we believe that our networks and
facilities provide the opportunity for cost-effective access to both
residential and business customers. Because of the relatively high European
local tariff rates, we believe potential customers will be receptive to our
telephone services, which we intend to price at a discount to services offered
by incumbent telecommunications operators. We recently began marketing our pan-
European telephone business as Priority Telecom, except in the A2000 systems,
where we call it Nedpoint. We plan to offer these services in our Austrian,
Dutch, Norwegian and French systems.
Capitalize on Internet/Data Service Opportunity
We have launched residential and business cable-modem based high speed
Internet access services in Austria, Belgium, The Netherlands and Norway and
plan to launch our Internet portal and content business, branded as chello
broadband, in our upgraded Western European markets beginning in early 1999. We
believe that our chello broadband service will benefit from the rapid growth of
the Internet and will enable us to gain more customers in the business and
residential Internet market by capitalizing on our existing network
capabilities, continuing network upgrade and broad customer base in certain
markets with high personal computer penetration. In marketing chello broadband,
we intend to emphasize the speed, price advantages and compelling multi-media
portal and content of our cable modem-based Internet service. An integral part
of our strategy is to market chello broadband's services for sale to other
cable television systems.
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Consolidation and Acquisitions
We have realized significant gains in our businesses by selectively
acquiring cable television and telecommunications systems near our current
operating areas and increasing our ownership percentage in some systems. We may
also look for acquisition and development opportunities in Germany,
Switzerland, Scandanavia, Spain and Ireland. Our strategy also has been to
dispose of some minority ownership interests where control could not be
obtained and commence new greenfield projects where we believed we could create
significant value. We intend to continue this asset rationalization program of
selective acquisitions and dispositions.
Implementation of New Services
The following table shows the status of the implementation of the new
services that we are adding in addition to our existing basic video services.
<TABLE>
<CAPTION>
Services Launched or Currently Planned For Launch
-------------------------------------------------------------
Expanded Premium Impulse Pay- Internet/Data Cable
System Basic Tier Channels Per-View Services Telephone
- ------ ---------- ---------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Austria.......... May 1997 -- May 1997 Sept. 1997 Nov. 1998
Belgium.......... Oct. 1996 Planned Planned Sept. 1997 --
The Netherlands.. Oct. 1996 Planned Apr. 1997 Oct. 1997 July 1997
Norway........... 1989 1990 Planned Mar. 1998 Planned 1999
France........... Oct. 1996 Oct. 1996 Apr. 1998 Planned 1999 Planned 1999
Israel........... 1990 -- 1994 -- --
Hungary.......... 1991 1991 -- Planned --
Czech Republic... 1994 1994 -- -- --
Romania.......... Apr. 1998 Feb. 1998 -- -- --
Slovakia......... 1995 April 1997 -- Planned --
Malta............ 1994 1994 Planned Planned --
</TABLE>
UPC Video Services: Video Distribution and Programming
Video Distribution Overview
We own and operate established cable television systems and are
constructing new systems. At September 30, 1998, our operating systems had
approximately 3.4 million subscribers to their basic tier video services. Video
distribution services accounted for approximately 92.4% of our consolidated
revenue in the first nine months of 1998. An average of 70% of the homes passed
by our systems subscribe to our basic tier video services. We offer our
subscribers some of the most advanced analog video services available today and
a large choice of FM radio programs. In addition, because many of our
operations are two-way capable, we have been able to add more services. In many
systems, for example, we have introduced impulse pay-per-view services, which
enable subscribers to our expanded basic tier to select and purchase
programming services, such as movies and special events, directly by remote
control.
To increase our average revenue per subscriber, we are focusing on enhanced
and expanded video service offerings. These offerings include:
. thematic groupings of tiered video services in key genres,
. enhanced pay-per-view services, and
. premium movie channels.
Our management team has substantial experience in the European cable
television industry and has demonstrated the potential to increase revenue per
basic cable television subscriber by offering additional services that appeal
to our subscribers. We believe that we have the opportunity to apply these
principles to
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our more recently acquired systems, which currently have much lower revenues
per subscriber, while adding major innovations in pan-European programming and
distribution to increase further our average revenue per subscriber in all
systems.
Growth Strategy
We are focusing on a multi-part growth strategy:
.create and/or acquire additional channels and programming for pay-per-view
services,
.increase sales by integrating our video services with telephone and
Internet/data services,
.selectively upgrade our networks to offer increased programming through
digitalization, and
.where appropriate and permitted, migrate high-value channels from the basic
tier to the expanded basic tier.
We have demonstrated that we can achieve higher average revenue per
subscriber in our Norkabel system in Norway and our Israeli and Maltese
systems, which were constructed and operated initially by UIH, as compared to
average revenue per subscriber in the former Philips systems in Austria,
Belgium and KTE in The Netherlands.
We have increased our average revenue per subscriber by offering enhanced
services. For example, we have offered impulse pay-per-view services in some of
our markets for several years. In Israel, Tevel's 250,000 subscribers with two-
way capabilities buy an aggregate of more than 100,000 pay-per-view programs
per month, for an average monthly buy rate of 0.4 per subscriber. In our
Austrian and the A2000 systems, during the first nine months of 1998, the
average impulse pay-per-view monthly buy rate was over 1.7 and 1.0 per expanded
basic tier subscriber, respectively.
The chart below sets forth the average monthly revenue per subscriber for
certain of our systems, as well as in the United Kingdom and the United States,
countries of comparable per capita income where these types of enhanced
services have been offered for longer periods. Although we do not expect that
we will achieve the average monthly revenue per subscriber in our systems that
is realized in the United Kingdom and the United States, these figures
illustrate the potential to increase our average monthly revenue per subscriber
through the introduction of enhanced service offerings. Information for the
U.K. comes from Kagan World Media, Ltd. and is for the three months ended
September 30, 1998. Information for the U.S. comes from Paul Kagan Associates,
Inc., Cable Television Investor.
[CHART APPEARS HERE]
Average monthly revenue per video subscriber for selected UPC systems
and for the U.K. and the U.S. for the nine months ended
September 30, 1998 (in Dutch guilders)
Hungary 11.06
A2000 14.25
UTH 17.95
Belgium 19.76
Austria 29.01
Janco 13.05
Norkabel 29.37
France 26.26
Malta 36.91
Israel 67.68
U.K.(1) 75.72
U.S.(2) 74.82
The Netherlands Norway
- --------------
(1) Kagan World Media, Ltd. Data is for the three months ended September 30,
1998.
(2) Paul Kagan Associates, Inc., Cable Television Investor
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The higher average revenue per subscriber in our Israeli, Norwegian and
Maltese systems is attributable to offering enhanced video services. Depending
on the system, this was done through introducing new channels, including
country-specific program channels, and stand-alone pay-per-view and through
migrating channels from rate-regulated basic service to unregulated tiers. Our
systems in Austria, Belgium and The Netherlands have high penetration rates but
generally lower revenues per subscriber than our systems that were developed by
UIH.
The digital pan-European distribution platform, if completed as planned,
would make it possible for our improved programming offerings to have a more
robust impact. We expect that a digital distribution platform will be in place
in our upgraded markets by the end of 1999. See "-- Digital Distribution
Platform".
Video Programming Overview/Growth Strategy
Popular programming is another key factor for increasing our video services
revenue. We believe it will also be a potential source of additional revenue
from sales to other cable television operators and satellite companies in
Europe. We have enhanced our existing, and are continuing to develop and
acquire new ownership interests in, programming services. The core of our
programming strategy is to create high-quality, local-language channels either
through joint ventures with content providers or other partners or by direct
licensing agreements. We intend to establish and manage these joint ventures
and also secure and distribute third-party channels and near video on demand
programming on a pan-European basis. We expect that these new channels will be
added to the expanded basic tier in a number of our operating systems,
furthering our strategy of increasing average revenue per subscriber.
Current Programming Activities
We are involved in several country-specific programming ventures including
creating channels for the Czech Republic, Hungary, Israel and Malta. Together,
these programming ventures have developed channels in key genres including
sports, children, documentary and movies, which are subtitled or dubbed in the
local language. We believe that our current programming ventures add value to
our cable television networks by providing compelling content to our
subscribers. In connection with our acquisition of Time Warner's interest in
the Hungary cable television systems, we have granted Time Warner an option to
purchase our interests in the Czech and Hungarian programming services.
We recently acquired UIH's 75% interest in Tara and its 33.5% interest in
IPS. Tara provides Irish general entertainment programming to the U.K. markets.
IPS produces a movie channel, a documentary channel, a children's channel and a
music channel for the Spanish and Portuguese markets. As of September 30, 1998,
Tara and IPS sold programming content to non-UPC cable operators serving an
aggregate of approximately 1.0 million subscribers.
Planned Programming Activities
We believe that we have a strong competitive opportunity to become a
provider of new channels due to our ready access to our customer base and our
ability to adapt our channels affordably for distribution to multiple European
markets and languages. We plan to:
.launch five new 24-hour channels by the end of 1999 and three channels
thereafter,
. acquire rights to up to 30 channels created by third parties over the
next few years, and
.acquire rights to and distribute up to 75 near video on demand channels
over the next few years.
The initial five planned channels are:
.UPC QuesTV: an action/adventure channel that we will adapt for European
markets pursuant to licensing and revenue sharing arrangement from QuesTV,
.Club: a women's interest channel created by licensing content from E!,
Carlton Food Network, and others,
.UPC Sport One: a sports channel created by licensing content from ESPN,
.EX-Extreme Sports: an extreme sports channel created by licensing content
from X-Dream, and
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.Wingspan: an Air and Space Channel: a topical channel adapted for European
markets pursuant to a licensing and revenue sharing arrangement with Wingspan
International.
Because QuesTV and Wingspan already exist in other markets, our role will
be limited to subtitling and dubbing, and therefore, our costs will be lower
than for new channels. In the case of new channels, such as Club, UPC Sport One
and EX-Extreme Sports, our role will also include content aggregation, channel
design and transmitting the channels to satellites for distribution. In
addition to developing our eight pan-European channels, we are negotiating for
additional channels and NVOD programming on a pan-European basis.
Digital Distribution Platform
We are seeking partners to construct a satellite-based pan-European digital
distribution platform, UPC's EuroHits, that will enable digital distribution of
our new channels and other television signals to our upgraded networks. If this
planned digital distribution platform is constructed, we would convert our
impulse pay-per-view services into a near video on demand service that would be
able to provide up to 75 channels of programming. We are negotiating to acquire
rights to broadcast first run hit movies, adult programming and special events
over this planned digital distribution platform. Upon obtaining appropriate
rights, the near video on demand service would likely include between 12 and 16
new movie titles per month that will be broadcast as frequently as every 15
minutes, thus enabling subscribers to choose a movie at a convenient start
time. Although near video on demand channels cannot be offered simultaneously
on a pan-European basis due to licensing restrictions, we intend to use remote
content servers located in the cable operator's headend to store the library
for playout at the appropriate time. We also have acquired the rights to and
would launch a low-cost digital audio service on this digital distribution
platform that could provide 20 channels of CD-quality music in the expanded
basic tier and 70 additional channels as a premium service.
Full digitalization of our television signals, to be made possible by our
network upgrade to full two-way capability, will provide our Western European
systems with substantially more channel capacity. This increased channel
capacity would enable subscribers to customize their subscriptions for our
products and services to suit their lifestyles and personal interests. If the
planned digital distribution platform is completed, we also intend to provide
our subscribers with customizable programming guides that would enable them to
program favorite channels and also allow parents to restrict their children's
viewing habits. The construction of the planned digital distribution platform
would involve a significant amount of capital investment and the use of new
technologies. There can be no assurance that we will be able to complete the
construction of the digital distribution platform on the planned schedule. See
"Risk Factors -- Failure to Raise Necessary Capital Could Restrict the
Development of Our Network, the Introduction of New Services and the
Acquisition of Cable Systems" and "Technology -- Planned Digital Distribution
Platform".
UPC Telephone Services: Priority Telecom
Overview
We believe that our existing customer base and upgraded network give us a
unique opportunity to provide telephone service in Europe. We plan to offer
local telephone services, called Priority Telecom in our Austrian, Dutch,
French and Norwegian systems. We call our local telephone services Nedpoint in
the A2000 systems. We also plan to develop national and international long
distance voice and data services. Our operating companies are licensed to
provide telephone services in Austria, France, Hungary, The Netherlands and
Norway. We believe that our fiber and broadband, coaxial cable and cable-based
subscriber relationships provide ready access to potential residential
telephone subscribers. We believe our networks and facilities also provide the
opportunity for cost-effective access to potential business telephone customers
on a pan-European basis.
A2000 began offering cable telephone services in July 1997 on a trial basis
in Purmerend, a town outside Amsterdam, and since then has begun to offer these
services to its customers in Hilversum, Zaanstad and part of Amsterdam. In
November 1998, we launched Priority Telecom's cable telephone service on a
trial basis in Vienna.
We are negotiating to connect our local fiber networks, primarily through
interconnections and capacity leases with other new telecommunications
55
<PAGE>
service providers, to provide long-distance telephone services across several
European markets. This strategy will allow us to keep a greater number of calls
on our own network, thereby reducing the amount of interconnect fees we must
pay to other telecommunication operators.
Market Opportunity
We believe there are significant growth opportunities in the European
telecommunications market as a result of the January 1, 1998 liberalization of
the telephone industry in most EU member
countries and Norway. This liberalization allows new providers to offer
telephone and other telecommunications services. The telephone market is large
in our Western European markets as evidenced by the revenues of the respective
incumbent national telecommunications operators, which substantially dominate
these markets. The current local telephone rates charged to subscribers are
especially high in comparison to those in the United States, where the market
has been liberalized for a longer period. The following table shows this
disparity. The source for this information is the Organization for Economic
Cooperation and Development. The monthly revenue comes from their average
monthly basket of local residential charges.
<TABLE>
<CAPTION>
Total 1995 Revenue
Incumbent of National Average 1996 Monthly
Telecommunications Telecommunications Local Telephone Revenue
Operator Operators per Residential Line
------------------ ------------------ -----------------------
(U.S. dollars)
(in millions)
<S> <C> <C> <C>
Austria.......... PTA $ 4,306 $69.95
Belgium.......... Belgacom 4,310 53.89
France........... France Telecom 26,648 43.25
The Netherlands.. KPN 8,488 50.58
Norway........... TeleNor 3,134 44.33
United States.... Various 191,026 13.93
</TABLE>
With approximately 3,225 kilometers of telephone-capable fiber optic cable
already deployed in its Western European systems, we believe that Priority
Telecom has an advantage over other new entrants in the telephone services
market. Currently, Priority Telecom has broadband, coaxial cable access to
approximately 2.9 million homes and, through us, long standing cable
television-based relationships with approximately 2.2 million residential
subscribers in its planned telephone markets. We believe that our international
telephone backbone capacity needs, especially when combined with our branded
Internet/data services business, chello broadband, will create international
traffic volumes that will provide significant economies of scale, thereby
allowing the long-term lease of fiber capacity and the resale of excess
capacity to business and carrier customers.
Competition
Priority Telecom will face competition in its markets from incumbent
telecommunications operators and other competitive operators that have
substantially more experience in providing, and significantly greater resources
devoted to, telephone services. In addition, we will depend on interconnect
arrangements provided by incumbent telecommunications operators. We believe,
however, that our strategy for Priority Telecom will allow us to compete
effectively with incumbent telecommunications operators and any other local
loop providers who subsequently enter the market. See "Risk Factors -- The
Competitiveness of the Telephone Industry Will Make It Difficult for Our New
Telephone Service to Enter the Market".
Priority Telecom Growth Strategy
Our strategy for Priority Telecom is to achieve high-growth from early
market entry with the goal of establishing a strong market position prior to
market entry by other potential local loop competitors. The key elements of our
telephone penetration strategy are:
. pricing at a discount to the incumbent telecommunications operators,
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. waiving or substantially discounting installation fees,
. integrating telephone with our video and Internet/data services, and
. providing an equal or superior quality of service than that of other
providers.
We also plan to use short-term promotions, special calling plans and non-
cash incentives to support the marketing of our telephone services. We intend
to concentrate on building brand awareness for Priority Telecom as a pan-
European telecommunications brand, which may be co-branded with our existing
local video services brands. We also plan to integrate Priority Telecom's
residential and small office/home office telephone products with our video
services and chello broadband's Internet access services, thus enabling us to
offer pricing packages designed to encourage multiple product purchases and
minimize churn.
Priority Telecom will pursue this pricing, branding and integration
strategy in the following three market segments:
1.Residential and Small Office/Home Office Served by Cable Phone. In most
cases, Priority Telecom is the only operator other than the incumbent in its
respective operating areas that has direct, facilities-based access to many
potential residential and small office/home office customers.
2.Medium Businesses Served by Cable Phone. Priority Telecom's network will
be able to reach many medium businesses that may not be reached economically
with direct fiber connections.
3.Large Businesses and Other Licensed Operators Served Directly by Fiber or
Point-to-Point Microwave. Priority Telecom plans to exploit its expected early
entry advantage from its existing local fiber rings to provide high quality,
cost competitive telephone service to businesses as an alternative to the
incumbent telecommunications operators.
We believe the residential and small office/home office market sectors
represent the primary business opportunity for Priority Telecom. Simple
marketing offers will be used to encourage rapid take-up by overcoming consumer
inertia and increasing brand awareness of our products. The approach will
include, for example, innovative offers and periodic deep discounts. Large and
medium business customers will be marketed through a key account management
direct sales force targeting specific industry sectors such as other licensed
operators, Internet service providers, banks and financial services, retail and
professional services.
We plan to utilize cable phone equipment with various line capabilities.
For the residential and small office/home office market, a one-, two- or four-
line unit will be utilized. Five- and twelve-line cable phone equipment units
will be used to provide service to segments of the medium business market.
Large businesses generally will be connected to the network with direct fiber
connections using self-healing fiber optic ring synchronous digital hierarchy
technology. This technology automatically detects disruptions in the fiber and
reroutes calls within 1/20 of a second, thereby providing reliable service to
these customers. See "Technology".
The A2000 Experience
A2000 has successfully launched cable telephone services in parts of its
systems under the brand name Nedpoint. As of September 30, 1998, A2000 had
approximately 16,000 lines covering 13,850 cable telephone subscribers. As of
the same date, A2000 achieved a penetration rate of approximately 10.8% of the
homes marketed in Purmerend, its first market where the service was launched in
July 1997. The installation rate for A2000 averaged over 350 installations per
week during the three months ended September 30, 1998. Current churn rates are
approximately 4.8% on an annualized basis, although we expect churn rates to
increase due to typical subscriber moves and the introduction of telephone
number portability, which is expected to be introduced in A2000's operating
areas in early 1999.
Following the common European pricing model, A2000's tariffs are usage-
based rather than a flat fee and every call is metered. In September 1998,
A2000's average monthly
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<PAGE>
revenue per telephone subscriber was approximately NLG76.36. This compares with
approximately NLG64.50 for KPN subscribers during 1997, although this amount
may decrease as a result of KPN rate cuts in January 1999. A2000 believes that
interconnect rates with KPN may decline, thereby reducing its costs. See
"Regulation -- The Netherlands".
Cost of Implementation
Traditional telephone service is carried over twisted copper pair in the
local loop. Cable phone technology allows telephone traffic to be carried over
our upgraded network without requiring the installation of twisted copper pair.
Therefore, instead of the expensive addition of a second cable into every home
and small business, cable phone technology only requires the addition of
equipment at the master telecom center, the distribution hub and in the
customer's home to transform voice communication into signals capable of
transmission over the fiber and coaxial cable. The equipment required in the
home is housed in a small, secure, self-contained unit that is usually mounted
on the wall inside the home. This box is capable of passing through cable
television, Internet cable modem and radio signals and providing standard
telephone services. It also includes an emergency back-up battery. See
"Technology".
Once the network has been upgraded to two-way capability, the cost of
implementation for telephone services will include a typical estimated
equipment cost of $72 per line for the voice switch, $36 per line for the host
digital terminal and $404 for two lines of capacity for the equipment required
in the home. Nortel has supplied the Company's DMS 100E telephone switches. We
have cable phone equipment supply agreements with Tellabs and Nortel. We will
also need to undertake a substantial upgrade of our customer care and billing
system for each operating system providing telephone services. See "Risk
Factors -- Our New Telephone and Internet/Data Services Could Run Into System,
Marketing, Competition and Timing Problems that Would Impede Our Revenue
Growth" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources".
Interconnect Agreements
A2000 and KPN have entered into an interconnect agreement covering all of
A2000's homes and businesses passed that will be capable of receiving telephone
service. Similarly, each of Telekabel Wien, Janco Multicom and Mediareseaux has
completed an interconnect agreement with the national incumbent
telecommunications service provider covering all of their homes and businesses
passed by cable in their networks. Interconnect agreements are in advanced
stages of negotiations for our UTH systems in The Netherlands representing the
balance of the customers planned to be marketed by late 1999. There can be no
assurance that incumbent telecommunications operators will agree to
interconnections in a timely manner or at rates and on other terms that will
permit us to offer profitable telephone services. See "Regulation".
Roll-Out and Implementation Schedule
Cable telephone service in The Netherlands to areas outside of the A2000
systems will be provided by UTH. The rollout for these areas is scheduled to
begin during the second half of 1999. We plan to set tariffs at a rate
discounted from those of the incumbent telecommunications operator. Priority
Telecom launched its service on a trial basis in Vienna in November 1998. It
intends to launch service to business and residential areas in Vienna passing
approximately 100,000 homes in early 1999. Priority Telecom's service is
scheduled to be rolled out in Vienna to an additional 362,000 homes during the
second quarter 1999, with plans to offer the service to the balance of the
approximately 217,000 remaining homes passed in Vienna capable of receiving the
service by the end of 1999.
Priority Telecom is scheduled to be launched on the entire network in
France and on upgraded portions of the network in Norway during the first half
of 1999.
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Because strong back office systems are important to support and integrate
successfully Priority Telecom and our other services, we have dedicated
significant resources to the development of our support plan. The plan
includes a convergent customer care and billing system that will allow
residential customers to receive a single bill for all of the services we
intend to offer. See "Risk Factors -- Our New Telephone and Internet/Data
Services Could Run Into System, Marketing, Competition and Timing Problems
that Would Impede Our Revenue Growth" and "-- Large Numbers of New Customers
for Our New Telephone and Internet/Data Services Could Harm the Quality of
Service and Thus Customer Demand".
Pan-European Backbone
We intend to develop a pan-European backbone and telecommunications resale
business. This backbone is designed to link our major cable and telephone
networks through a combination of leased capacity arrangements to allow us to
capture more traffic between our operating areas. In October 1998, we entered
into a contract with Hermes Europe Railtel for the purchase of high-speed
fiber optic-based transmission capacity. This network is currently expected to
be in place for international telephone traffic by late-1999. See
"Technology".
Traditional Telephone System
In addition to our cable telephone operations, our recently acquired Monor
system has offered traditional telephone services since December 1994 and as
of September 30, 1998, had approximately 66,900 traditional telephone lines.
Regulation
Regulation significantly affects our telephone business, including its
profitability and the timing of its introduction. See "Regulation".
UPC Internet/Data Services: High Speed Access and chello broadband
Overview
At year-end 1997, International Data Corporation estimated that there were
approximately 69 million World Wide Web users, of which approximately 24% were
in Western Europe. By 2002, International Data Corporation estimates that the
number of World Wide Web users will increase to approximately 320 million,
with approximately 26% of these in Western Europe. To capitalize on this
opportunity, we have created chello broadband, our portal Internet and data
service division.
chello broadband is launching a European portal with broadband content
enabled by its pan-European AORTA-branded broadband Internet protocol backbone
to service our operating companies, as well as third-party cable operators
across Europe.
We believe we can gain more residential and business Internet customers by
using our existing cable network and customer base and by continuing to
improve our network. We have launched a cable modem-based, high speed Internet
access service in Austria, Belgium, The Netherlands and Norway. The launch of
chello broadband in our upgraded Western European markets is scheduled to
begin during the first quarter of 1999. As of September 30, 1998, we had more
than 12,125 residential and 600 business cable modem Internet access
subscribers.
Market Opportunity
We believe there are significant growth opportunities in the European
Internet market, as evidenced by the projected rapid growth in World Wide Web
users in its Western European markets. The following information comes from
International Data Corporation.
<TABLE>
<CAPTION>
Number of
World Wide
Web Users
-------------------
1997 2001
--------- ---------
<S> <C> <C>
Austria..................................................... 279,000 1,280,000
Belgium..................................................... 370,000 1,390,000
France...................................................... 1,140,000 4,030,000
The Netherlands............................................. 1,070,000 4,540,000
Norway...................................................... 481,000 1,330,000
</TABLE>
With approximately 3,225 kilometers of high-capacity two-way active fiber
plant deployed throughout our Western Europe systems, we believe that chello
broadband has a competitive advantage over traditional Internet service
providers that rely on dial-up access. chello broadband also has broadband,
coaxial cable access to approximately 3.0 million homes, and is able to
leverage our long standing cable television-based relationships with
approximately 2.3 million residential subscribers in chello broadband's
planned Internet markets. As
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an Internet portal, chello broadband also plans to associate with other cable
television operators to provide service to their subscribers.
Current Internet Access Technologies
We believe that the slow speed of current residential Internet access is a
significant deterrent for Internet users. This slowness results from the
predominance of telephone dial-up modems, which have a maximum access speed of
only 56 kb/sec and an actual realized speed that is generally lower. Although a
number of different technologies designed to provide much faster access than
dial-up modems have been proposed and are being tested, we believe that cable
modem access technology is superior to all other current technologies because:
.cable modem technology is based on the widely used Transport Control
Protocol/Internet Protocol (TCP/IP), which is used on local area networks
(LANs) and the Internet,
.a global standard has been created and accepted, and
.customers are served by a shared infrastructure, which allows for lower cost
service offerings.
Cable modem service, such as that employed by chello broadband, consists of
a cable modem in the customer's home or office that permits the customer's
personal computer to connect to the Internet at speeds up to 100 times faster
than most dial-up modem services. Cable modem service initially will be
targeted primarily to high-end Internet users frustrated with the speed of
access, quality of service and high telephone bills associated with their
existing dial-up service. chello broadband intends to store the most popular
Internet sites locally, thus making them available at the high speeds made
possible by our network. The existence of the AORTA pan-European backbone will
enable chello broadband to aggregate the volume of data stored for availability
at high speeds to its customers. Although chello broadband will price its
service at a subscription level that is above that of dial-up services, cable
modem users do not incur any telephone usage charges and thus, depending on
usage, the overall monthly cost to the subscriber may actually be lower than
the cost of an analog modem connection over the telephone network. We also
intend to target chello broadband's service to small office/home office and
medium-sized business customers who may view the services as a lower cost
alternative to leased lines.
We will also enable our cable television operators to offer customers an
"Internet TV" service. Internet TV service consists of a set-top box that
allows customers to use their existing television to access the chello
broadband network and the Internet. See "Technology".
Competition
The Internet services business in Europe is highly competitive. We believe,
however, that our strategy for chello broadband, which encompasses competitive
pricing and superior service combined with high speed access and compelling
content, will mitigate the effects of competition from other Internet service
providers in its markets. We currently compete with traditional dial-up
Internet service providers and other providers (including many incumbent
telecommunications service providers) and expect that chello broadband will
face competition from other broadband cable modem service providers, such as
@Home and Roadrunner as they move to the European market. In the future, we
expect competition from providers using other broadband technologies.
chello broadband Growth Strategy
We are creating chello broadband as part of a pan-European strategy
designed to capture value by developing economies of scale and market share by
leveraging our existing cable television and telephone subscriber base. To
accomplish this goal, chello broadband intends to provide, over the AORTA-
branded pan-European backbone, local cable television operators with high speed
broadband access, server farms, proprietary high-bandwidth content, and
centralized customer service and billing. These server farms can store the most
popular content locally for quick retrieval by subscribers.
We intend to market chello broadband to the residential, small office/home
office and medium business segments. We believe that local partners, in
addition to our operating systems, will be crucial for chello broadband's
success. chello broadband intends to enter into partnerships with non-UPC local
cable operators in order to share responsibilities in creating the service and
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<PAGE>
revenues generated by the service. We may offer equity securities of chello
broadband to its partners or other investors to fund further development or to
encourage third-party cable operators to become chello broadband affiliates,
as we plan to do with Microsoft. See "Relationship with Microsoft". In these
partnering arrangements, we expect that chello broadband will provide
connection to the AORTA-branded pan-European backbone network, purchase and
maintain the regional server farms, provide general customer service and
billing and develop proprietary broadband content. The local cable operators
would generally install the customer premise cable modems and termination
modems and offer first level telephone-based technical support. The precise
division of responsibility will be negotiated on a case-by-case basis.
chello broadband Content Strategy
chello broadband intends to develop an Internet portal business by
partnering with providers of local, regional, national and international
content, rather than attempting to create the majority of its own content. We
believe that high bandwidth and compelling content are necessary from the
outset to provide users with a rewarding broadband experience that is superior
to our competitors' offerings. chello broadband intends to develop as part of
its portfolio interactive content for set top boxes designed to provide cable
affiliates with Internet-enabled content such as electronic programming
guides, electronic banking, home shopping and on-line gaming. chello broadband
also intends to leverage its "first-screen advantage" to drive traffic into
its Internet portal.
Cost of Implementation
Cable modem technology allows access to the Internet over our existing
upgraded network. All that is required to transform data communication into
signals capable of transmission over fiber and coaxial cable is the addition
of incremental electronic equipment, including servers, routers and switches
at the master telecom center. The equipment in the home is a small, self-
contained cable modem that is placed nearby the customer's personal computer
and connected to the cable system. We also plan to offer our customers an
Internet TV service. The Internet TV service will consist of a set-top box
that allows customers to use their existing television as a platform for
accessing chello broadband's network. See "Technology".
Once the network has been upgraded to two-way capability, the cost of
implementation for Internet/data services will include the estimated
incremental master telecom center and distribution hub equipment costs of
approximately NLG400 per subscriber and approximately NLG600 per cable modem
for the required equipment in the home in early 1999. We are currently
negotiating with the cable modem suppliers, however, and expect that prices
for cable modems will decrease to approximately NLG400 by 2000. We have
entered into supply agreements to obtain cable modems primarily from Bay
Networks/Nortel and Motorola.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Risk Factors --
Failure to Raise Necessary Capital Could Restrict the Development of Our
Network, the Introduction of New Services and the Acquisition of Cable
Systems".
Internet Access Experience To Date
We have launched a residential and business cable modem-based, high-speed
Internet access service in Austria, Belgium, The Netherlands and Norway. We
have marketed our current Internet service as a high speed Internet access
product excluding many of the value added services that chello broadband
expects to provide. Marketing efforts for our Internet access service have
been limited to date but we intend to implement a more substantial brand
marketing program from the launch of chello broadband's service.
Roll-Out and Implementation Schedule
The launch of chello broadband in our upgraded Western European markets is
scheduled to begin during the first quarter of 1999. The back office support
plan described under "-- UPC Telephone Services: Priority Telecom -- Roll-Out
and Implementation Schedule" is similar to the back office support plan that
chello broadband intends to implement.
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<PAGE>
Operating Companies
Pan-European Backbone
chello broadband intends to develop its AORTA-branded pan-European
backbone. This backbone is designed to link our major cable networks through a
combination of leased capacity arrangements to allow us to capture more traffic
between our operating areas. The pan-European backbone will also enable chello
broadband to aggregate the volume of data stored for availability at high
speeds to its customers and will facilitate a direct U.S. Internet link in the
future. In October 1998, we entered into a contract with Hermes Europe Railtel
for the purchase of high-speed fiber optic-based transmission capacity. This
network is currently expected to be in place for international Internet traffic
by early to mid-1999. See "Technology".
Regulation
Our Internet access business currently is subject to limited regulation.
However, the legal and regulatory environment applicable to the Internet is in
a fluid state. Adverse regulatory developments could negatively affect our
Internet business. See "Regulation".
We have operations in 10 countries in Europe and in Israel. While they all
offer a basic video service, their other services vary. We are also currently
upgrading the network in some countries but not in others. We therefore
describe each of our operating companies and their operations below. We believe
understanding them individually will help you to understand our business as a
whole and our consolidated financial information in this prospectus.
We also provide selected financial and operating data for them. For all of
our operating companies, we have calculated average monthly service revenues
per subscriber using service revenues excluding installation revenues. For the
operating companies that do not use Dutch guilders as their operating currency,
we have converted the amounts to Dutch guilders using the average exchange rate
for the first nine months of 1998.
Austria: Telekabel Group
The following selected financial data have been derived from the
financial statements of Telekabel Group ("Telekabel Group"). These
financial statements have been prepared in accordance with Dutch GAAP with
the Austrian schilling as the functional currency. The following selected
financial data includes a translation using the September 30, 1998 average
exchange rate of 0.16019 Dutch guilders per Austrian schilling.
<TABLE>
<CAPTION>
Translation
Year Ended December 31, to Guilders
------------------------------- Nine Months ------------------
Ended Nine Months Ended
1995 1996 1997 September 30, 1998 September 30, 1998
---------- -------- --------- ------------------ ------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Selected Financial Data:
Revenues................ (AS) 921,000 985,338 1,018,095 813,333 NLG130,288
Net operating income
(loss)................. (AS) 148,300 103,139 105,866 (20,475) NLG (3,280)
Adjusted EBITDA......... (AS) 468,200 512,356 507,022 391,631 NLG 62,735
Adjusted EBITDA margin.. 50.8% 52.0% 49.8% 48.2% 48.2%
Total capital
expenditures........... (AS) 287,849 388,813 374,717 325,095 NLG 52,077
Cash flows from
operating activities... 413,440 387,679 494,891 424,632 NLG 68,022
Cash flows from
investing activities... (2,238,561) (416,432) (519,511) (331,264) NLG (53,065)
Cash flows from
financing activities... 1,852,232 30,001 124,137 (186,890) NLG (29,938)
</TABLE>
<TABLE>
<CAPTION>
At December 31,
------------------------- At September 30,
1995 1996 1997 1998
------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Other Data:
Homes passed............... 855,246 872,016 890,305 897,938
Basic video subscribers.... 414,775 428,453 435,859 442,596
Basic video penetration.... 48.5% 49.1% 49.0% 49.3%
Avg. mo. service rev. per
video subscriber.......... (NLG) 26.43 27.54 27.79 29.01
Two-way homes passed....... -- -- 339,900 487,055
Internet subscribers:
Residential............... -- -- 1,177 5,106
Business.................. -- -- 21 312
</TABLE>
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<PAGE>
Overview/Growth Strategy. We own 95% of the Telekabel Group, which provides
communications services to the Austrian cities of Vienna, Klagenfurt, Graz,
Baden and Wiener Neustadt and is the largest video distribution system in
Austria with over 40% of the market. Telekabel Group's largest subsidiary,
Telekabel Wien, which serves Vienna and represents approximately 87% of
Telekabel Group's total subscribers, owns and operates one of the larger
62--1
<PAGE>
clusters of cable systems in the world in terms of subscriber numbers served
from a single headend.
We are capitalizing on Telekabel Group's strong market position and
positive perception by its customers by aggressively expanding Telekabel
Group's service offerings as its network is upgraded to full two-way
capability. The upgraded network enabled Telekabel Group to launch an expanded
basic tier, impulse pay-per-view services and Internet/data services in 1997.
Telekabel Group was the first Austrian cable television company to offer tiered
and pay-per-view services when it launched such services in Vienna. The pay-
per-view buy rate has since grown to more than two movies per expanded basic
subscriber per month, although Telekabel Group expects this average to decrease
because high-demand customers subscribed early to the expanded basic tier and
later subscribers will likely have a lower demand for pay-per-view services.
Telekabel Group is considering restructuring its basic and expanded tiers to
increase further its average revenue per subscriber, although the extent and
timing of any such restructuring would depend upon market studies and, in
Vienna, the approval of the municipality. See "Regulation -- Austria".
Telekabel Group launched an Internet access service in September 1997 and
had approximately 5,400 Internet access subscribers as of September 30, 1998,
with current average monthly additions of 1,200 customers. It plans to
introduce the chello broadband service in early 1999. In addition, Telekabel
Group launched Priority Telecom's cable telephone service in Vienna on a trial
basis in November 1998. Following intervention of regulatory authorities on
behalf of Telekabel Group, Telekabel Group entered into an interconnect
arrangement with PTA, the incumbent telecommunications service operator, in
November 1998. See "Regulation -- Austria -- Telephone and Internet/Data
Services".
Network. Telekabel Group owns the complete cable television infrastructure
for each of its systems from the headend to the home. In early 1992, Telekabel
Wien initiated the rebuild and upgrade of its existing cable network in Vienna.
The upgrade, which incorporates high capacity 860 Mhz technology and is
expected to be 75% complete by the end of 1999, was approximately 54% complete
and passed approximately 487,050 homes as of September 30, 1998.
Programming. Telekabel Group offers basic subscribers 32 channels of cable
programming, including substantially all of the broadcast channels from Austria
and Germany, as well as CNN, Super Channel, MTV, an informational channel, Tips
and Hits, Telekino Heute and Vienna cable text. Telekabel Group launched an
expanded basic tier in May 1997 by providing subscribers whose homes are passed
by the upgraded network an advanced analog decoder box, the cost of which is
provided for in the monthly rate. The expanded basic tier currently provides
seven channels of additional programming: ONYX, VH-1 Germany, BET, Muzzik, BBC
World, BBC Prime and an adult channel. In conjunction with the launch of this
tier, Telekabel Group launched an impulse pay-per-view service with up to ten
channels of programming. Telekabel Group also offers approximately 50 channels
of pay digital radio programming to subscribers in Vienna.
Results of Operations. For the nine months ended, September 30, 1998,
Telekabel Group had total revenues of approximately NLG130.3 million
representing approximately 42.7% of our consolidated revenues for the same
period, and Adjusted EBITDA of approximately NLG62.7 million. For the year
ended December 31, 1997, Telekabel Group had total revenues of approximately
NLG162.8 million, which represented approximately 48.3% of our consolidated
revenues for the year, and Adjusted EBITDA of approximately NLG81.1 million.
Telekabel Group's Adjusted EBITDA margin declined slightly from 49.8% for the
year ended December 31, 1997 to 48.2% for the nine months ended September 30,
1998. This decline was due primarily to the increased start up costs associated
with Telekabel Group's cable telephone and Internet/data services. These costs
were approximately NLG6.5 million for the first nine months of 1998. The
Adjusted EBITDA margin for Telekabel Group's video services
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business on a stand-alone basis was approximately 55.0% for the nine months
ended September 30, 1998. A large component of Telekabel Group's operating
expenses are franchise and other fees paid to the respective municipalities,
which were approximately NLG17.5 million and approximately NLG17.1 million,
respectively, for the nine months ended September 30, 1997 and 1998.
Budgeted Capital Expenditures and Capital Resources. Telekabel Group has
budgeted approximately NLG86.3 million and NLG208.0 million for capital
expenditures in 1998 and 1999, respectively, primarily to continue to upgrade
its network to full two-way capacity, purchase customer premise equipment for
its new services, install a telephone switch and implement a subscriber
management system. Telekabel Group expects to fund these expenditures through
available cash flow and support from us.
Telekabel Group incurred through September 30, 1998 capital expenditures of
approximately NLG9.2 million since December 1997 for the development of its
telephone business and approximately NLG22.4 million since the end of 1996 for
its Internet/data business.
Competition. Telekabel Group's cable systems compete with a direct to home
satellite service that is available throughout Austria. Currently, direct to
home satellite service penetration of the Austrian market is approximately 35%
and is concentrated primarily in the rural areas of the country. There is less
competition from direct to home satellite service in Vienna where we estimate
that the penetration is approximately 8%. Competition in the Internet/data
business in Austria is intensifying. PTA, the national incumbent telephone
service provider, is promoting its high speed lines and a number of other
companies recently have entered, or are expected to enter, the market. Upon
launch of its telephone service in Vienna, Telekabel Group began competing with
PTA. New facilities-based competitors in Telekabel Group's operating areas
include United Telkom Austria, Tele.ring and Citykom. In addition, there are
three wireless telephone providers in Telekabel Group's operating areas.
Regulatory Issues. The regulatory environment in which the Telekabel Group
operates significantly affects the operations of its business, including the
profitability and the timing of introduction of our new business lines. See
"Regulation -- European Union" and "-- Austria".
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Belgium: Radio Public N.V./S.A.
The following selected financial data have been derived from the
financial statements of Radio Public N.V./S.A., which is marketed under the
name "TVD". These financial statements have been prepared in accordance
with Dutch GAAP with the Belgian franc as the functional currency. The
following selected financial data includes a translation using the
September 30, 1998 average exchange rate of 0.05463 Dutch guilders per
Belgian franc.
<TABLE>
<CAPTION>
Translation
Year Ended December 31, to Guilders
---------------------------- Nine Months ------------------
Ended Nine Months Ended
1995 1996 1997 September 30, 1998 September 30, 1998
-------- -------- -------- ------------------ ------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Selected Financial Data:
Revenues................ (BEF) 681,539 693,990 710,521 493,216 NLG 26,944
Net operating income
(loss)................. (BEF) 21,183 (78,805) (70,861) (134,536) NLG (7,350)
Adjusted EBITDA......... (BEF) 255,000 268,232 267,815 179,513 NLG 9,807
Adjusted EBITDA margin.. 37.4% 38.7% 37.7% 36.4% 36.4%
Total capital
expenditures........... (BEF) 47,915 56,018 213,728 294,710 NLG 16,100
Cash flows from
operating activities... (BEF) 19,423 (37,483) (112,423) 28,502 1,557
Cash flows from
investing activities... (BEF) (137,619) (187,667) 485,745 (41,486) (2,266)
Cash flows from
financing activities... (BEF) 130,651 259,336 (405,133) -- --
<CAPTION>
At December 31,
---------------------------- At September 30,
1995 1996 1997 1998
-------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Other Data:
Homes passed............ 133,000 133,000 133,000 133,000
Basic video
subscribers............ 127,843 127,815 127,529 127,574
Basic video
penetration............ 96.1% 96.1% 95.9% 95.9%
Avg. mo. service rev.
per video subscriber... (NLG) 18.92 19.20 19.58 19.76
Two-way homes passed.... -- -- 27,600 85,939
Internet subscribers:
Residential............ -- -- 214 926
Business............... -- -- 42 204
</TABLE>
Overview/Growth Strategy. TVD, our 100% owned subsidiary, provides cable
television and communications services in selected areas of Brussels and nearby
Leuven in Belgium. We estimate that there are currently approximately 133,000
homes under license in TVD's franchise areas.TVD, which currently has 96%
penetration, plans to grow through the introduction of new services that
currently are not subject to the price regulations applicable to basic cable
services.
TVD's management believes there is a strong demand for enhanced services in
its market. TVD introduced expanded basic tier in October 1996 and an Internet
access service in September 1997. As of September 30, 1998, TVD had 5,003
expanded basic subscribers and 926 residential and 204 business Internet access
subscribers. TVD plans to introduce the chello broadband service in 1999. As
TVD upgrades additional portions of its network to full two-way capability, it
plans to introduce impulse pay-per-view in the second quarter of 1999. We are
exploring the possibility of providing cable telephone services.
Network. TVD owns the complete cable television infrastructure for each of
its systems from the headend to the home, with the exception of Etterbeek, with
15,000 subscribers, where TVD has an agreement with the municipality to operate
the network until at least 2016. In late 1996, TVD began upgrading its network
through fiber optic overlay of its trunk lines and replacement of all
amplifiers. Employing high capacity 860 Mhz technology, TVD's upgraded networks
passed approximately 85,925 homes, or 65% of its total network as of September
30, 1998. TVD expects to complete this upgrade by mid-1999.
Programming. TVD offers in Brussels a basic tier consisting of 32 channels,
17 expanded
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basic programs in six tiers, 20 FM radio channels and 42 premium digital radio
channels. Its system in Leuven offers a basic tier consisting of 37 channels,
an expanded basic tier with six channels, 20 FM radio channels and 42 premium
digital radio channels. TVD also distributes five premium channels, three in
Brussels and two in Leuven, which are provided by Canal+.
Results of Operations. For the nine months ended September 30, 1998, TVD
had total revenues of approximately NLG26.9 million, representing approximately
8.8% of our consolidated revenues for the same period, and Adjusted EBITDA of
approximately NLG9.8 million. For the year ended December 31, 1997, TVD had
total revenues of approximately NLG38.7 million, which represented
approximately 11.5% of our consolidated revenues for the year, and Adjusted
EBITDA of approximately NLG14.6 million. TVD's Adjusted EBITDA margin declined
from 37.7% for the year ended December 31, 1997 to 36.4% for the nine months
ended September 30, 1998. This decline was due primarily to the increased start
up costs associated with TVD's Internet/data services. These costs were
approximately NLG1.8 million, for the nine months ended September 30, 1998. The
Adjusted EBITDA margin for TVD's video services business on a stand-alone basis
was approximately 47.2% for the nine months ended September 30, 1998. In early
1998, TVD ceased providing engineering services for some of our affiliates and
third parties. This resulted in a slight decrease in revenue in 1998; however,
Adjusted EBITDA was not effected.
Budgeted Capital Expenditures and Capital Resources. TVD has budgeted
approximately NLG20.2 million and NLG25.7 million for capital expenditures in
1998 and 1999, respectively, primarily to continue its network upgrade to full
two-way capacity, purchase customer premise equipment for its new services and
implement a subscriber management system. TVD expects to fund these
expenditures through available cash flow.
Since June 1997, TVD incurred through September 30, 1998 capital
expenditures of approximately NLG2.9 million for the development of its
Internet/data business.
Competition. TVD has approximately 96% penetration in its market. TVD faces
competition, however, from one other cable television provider, Iverlek, which
was granted a license for the provision of cable television services in Leuven
and is constructing a cable network. As of September 30, 1998, TVD had
approximately 28,400 subscribers in Leuven. To date, TVD has experienced only
limited competition from direct to home satellite service providers. In its
Internet access business, TVD competes with traditional dial-up Internet
service providers. Also, the Company understands that in Leuven, Telenet will
offer a broadband access and content service using Iverlek's new cable network.
Regulatory Issues. The regulatory environment in which TVD operates
significantly affects the operations of its business, including the
profitability and the timing of introduction of our new business lines. See
"Regulation -- European Union" and "-- Belgium".
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The Netherlands: United Telekabel Holding (UTH)
Our Dutch operations are held through UTH, an unconsolidated subsidiary, of
which we hold 51% and NUON holds 49%. We will acquire the remaining 49% of UTH
at the closing of this offering. UTH holds three principal operating companies:
CNBH, which holds the combined KTE and Combivisie systems, Telekabel Beheer,
both of which it wholly owns, and A2000, of which it owns 50%. MediaOne owns
the other 50% of A2000. UTH does not consolidate the results of A2000.
Financial and operating information for UTH's consolidated companies, which are
KTE, Combivisie and Telekabel Beheer, are presented separately in this section
because of the separate history of each entity. A2000 is also presented
separately.
Prior to the creation of UTH and CNBH, our first investment in The
Netherlands was a 3.8% ownership interest in KTE, which operates in Eindhoven.
KTE was contributed by Philips upon our formation. Shortly after formation, we
acquired 50% of A2000, the Amsterdam and surrounding areas system, and the
remaining 96.2% of the KTE system. Effective January 1, 1998, we acquired the
Combivisie cable system, which we subsequently combined with KTE to form CNBH.
In August 1998, we formed UTH with NUON. We contributed 100% of CNBH and
our 50% interest in A2000 and NUON contributed 100% of Telekabel Beheer. UTH is
in the process of integrating all of the operations of CNBH and Telekabel
Beheer. See "Corporate Ownership Structure -- The Netherlands -- UTH". UTH owns
and operates systems in the regions of Brabant, Flevoland, Friesland and
Gelderland, and holds the 50% of A2000. Because of the large number of current
subscribers located in four large clusters in The Netherlands, UTH is
constructing a fiber backbone to interconnect its region-wide networks.
In September 1998, UTH acquired 80% of Uniport, a carrier select telephone
service with approximately 16,000 subscribers.
67
<PAGE>
The following selected financial data have been derived from the
financial statements of Kabeltelevisie Eindhoven, which we call "KTE",
Stichting Combivisie Regio, which we call "Combivisie" and NV TeleKabel
Beheer, which are now wholly owned by UTH. We combined the assets of KTE
and Combivisie in January 1998 to form CNBH. In August 1998, we contributed
CNBH and 50% of A2000 and NUON contributed Telekabel Beheer to form UTH.
Because UTH began operations in August 1998, the financial information
presented below for the nine-month period ended September 30, 1998 includes
results of CNBH, Telekabel Beheer and a newly acquired company called
Uniport for the first seven months of 1998 and results of UTH from
formation to September 30, 1998. In July 1997, we acquired a cable system
in Son en Breugel with approximately 5,000 subscribers. KTE's December 31,
1997 data includes financial data for the six months of the Son en Breugel
system as it has been integrated into KTE. Telekabel Beheer acquired
several networks during 1997. The financial information below has been
prepared in accordance with Dutch GAAP with the Dutch guilder as the
functional currency.
<TABLE>
<CAPTION>
KTE Combivisie Telekabel Beheer
-------------------------- ------------------------- ----------------------------
Year Ended December 31, Year Ended December 31, Year Ended December 31,
-------------------------- ------------------------- ----------------------------
1995 1996 1997 1995 1996 1997 1995 1996 1997
-------- ------- ------- ------- ------- ------- ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Financial Data:
Revenues................ (NLG) 16,544 17,932 20,669 25,661 27,143 29,001 3,656 113,917 137,167
Net operating income
(loss)................. (NLG) 5,152 1,650 2,156 10,547 11,958 12,864 (1,628) 22,846 27,395
Adjusted EBITDA......... (NLG) 9,948 11,298 12,719 17,948 19,816 21,032 (188) 45,041 58,813
Adjusted EBITDA margin.. 60.0% 63.0% 61.5% 69.9% 73.0% 72.5% (5.1)% 39.5% 42.9%
Total capital
expenditures........... (NLG) 2,006 5,591 8,192 6,847 9,250 19,121 2,802 36,000 71,875
Cash flows from
operating activities... (NLG) 9,491 6,939 4,207 10,969 16,204 14,456 75,376 280,130 216,547
Cash flows from
investing activities... (NLG) (85,857) (5,592) (8,441) (6,848) (9,251) (19,726) (78,794) (536,645) (202,298)
Cash flows from
financing activities... (NLG) 79,056 (2,602) 3,505 (1,267) (7,715) (101) 4,396 255,537 3,216
<CAPTION>
At December 31, At December 31, At December 31,
-------------------------- ------------------------- ----------------------------
1995 1996 1997 1995 1996 1997 1995 1996 1997
-------- ------- ------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Homes passed............ 88,290 89,116 95,442 136,375 139,062 143,376 96,250 511,300 642,000
Basic video
subscribers............ 83,408 84,660 90,671 130,429 133,775 139,249 89,500 475,000 595,000
Basic video
penetration............ 94.5% 95.0% 95.0% 95.6% 96.2% 97.1% 93.0% 92.9% 92.7%
Average mo. service rev.
per video subscriber... (NLG) 16.60 17.69 18.03 15.65 16.21 17.19 14.93 15.69 16.20
Two-way homes passed.... -- -- 90,000 -- -- 35,000 -- -- 50,000
</TABLE>
<TABLE>
<CAPTION>
UTH
------------------
Nine Months
Ended
September 30, 1998
------------------
(in thousands)
<S> <C> <C>
Selected Financial Data:
Revenues............................................. (NLG) 156,690
Net operating income................................. (NLG) 10,571
Adjusted EBITDA...................................... (NLG) 79,034
Adjusted EBITDA margin..................................... 50.4%
Total capital expenditures........................... (NLG) 117,814
Cash flows from operating activities................. (NLG) 24,485
Cash flows from investing activities................. (NLG) (96,578)
Cash flows from financing activities................. (NLG) 77,090
<CAPTION>
At September 30,
1998
------------------
<S> <C> <C>
Other Data:
Homes passed............................................... 907,078
Basic video subscribers.................................... 855,277
Basic video penetration.................................... 94.3%
Average mo. service rev. per video subscriber........ (NLG) 17.95
Two way homes passed....................................... 422,902
</TABLE>
68
<PAGE>
Overview/Growth Strategy. Both KTE and Combivisie introduced an expanded
basic tier in December 1996. KTE and Combivisie were combined into CNBH in
1998, which then launched impulse pay-per-view services in June 1998.
UTH intends to launch chello broadband's Internet/data services in the CNBH
systems in early 1999. In addition, UTH plans to introduce the initial phase of
cable telephone services in the CNBH systems in early 1999 upon completion of
an interconnect agreement. Telekabel Beheer introduced an Internet access
service in November 1997 in parts of its networks and also delivers a business
telephone service, including leased line management, on-site services and
telephone equipment, to its former 100% shareholder, NUON, and several other
companies. As part of the purchase agreement with NUON for the remaining 49% of
UTH, UTH and NUON have agreed to enter into a preferred supplier arrangement
through December 31, 2007, whereby UTH will be the preferred supplier for NUON
and its subsidiaries for telecommunications and Internet services and NUON will
be the preferred supplier to UTH for energy and energy-related services.
In August, 1998, UTH acquired from Nutsbedrijf Regio Eindhoven, a 16,700
subscriber cable television system in the Eindhoven region. This acquisition
enabled us to increase its cluster of operations in and around the Eindhoven
area. See "Corporate Ownership Structure -- The Netherlands -- UTH".
Network. Each of UTH's systems owns the complete cable television
infrastructure from the headend to the home. In 1997, Combivisie and Telekabel
Beheer began upgrading their networks with high capacity 860 MHz technology.
The upgrade is expected to be 89% completed by year-end 1999. As of September
30, 1998, approximately 47.0% of UTH's homes were passed by the upgraded
network.
Programming. UTH currently offers its subscribers an average of 28 channels
of basic programming along with a music channel and 33 FM radio channels. UTH
also distributes two premium channels provided by Canal+. In addition, UTH
offers an impulse pay-per-view service, consisting of four movie channels and
one adult channel. UTH's basic service includes Dutch broadcasting channels, as
well as a variety of German, French and English channels. The eight channels in
UTH's expanded basic tier consist of sports, travel, news, science fiction,
music and general entertainment. UTH is discussing with some of its higher
value programming suppliers the migration of their channels from the basic tier
to the expanded basic tier. UTH is not certain when it will successfully
conclude these discussions. See "Risk Factors -- Inability to Obtain the
Necessary Programming Could Reduce Demand for Our Services".
Results of Operations. For the nine months ended September 30, 1998, UTH
had total revenues of approximately NLG156.7 million, representing
approximately 28.4% of our consolidated revenues for the same period if we
consolidated the results of UTH and A2000, and Adjusted EBITDA of approximately
NLG79.0 million. For the year ended December 31, 1997, KTE had total revenues
of approximately NLG20.7 million, which represented approximately 6.1% of our
consolidated revenues for the year, and Adjusted EBITDA of approximately
NLG12.7 million. During the same period, Combivisie had revenues and Adjusted
EBITDA of NLG29.0 million and NLG21.0 million, respectively and Telekabel
Beheer had revenues and Adjusted EBITDA of NLG137.2 and NLG58.8, respectively.
Budgeted Capital Expenditures and Capital Resources. UTH has budgeted
approximately NLG191.9 million and NLG187.5 million for capital expenditures in
1998 and 1999, respectively, primarily to continue its network upgrade to full
two-way capacity, purchase customer premise equipment for its new services,
install a telephone switch and implement a subscriber management system. UTH
expects to fund these expenditures through available cash flow, drawings from
CNBH's facility and proceeds from the anticipated refinancing of UTH's existing
term facility. After we have purchased the remaining 49% of UTH from NUON, we
will have full responsibility for UTH's projected capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources --Current Debt Facilities" and
"-- Consolidated Capital Expenditures".
69
<PAGE>
UTH incurred through September 30, 1998 capital expenditures of
approximately NLG5.0 million since May 1998 for the development of its
telephone business and approximately NLG6.8 million since June 1997 for its
Internet/data business.
Competition. UTH is the only cable system in its franchise area. To date,
UTH has maintained approximately 94% penetration. Competition from television
signals received by antenna, direct to home satellite services and local
private cable systems has been limited. In its Internet access business, UTH
will compete with dial-up Internet service providers such as KPN's World
Access/Planet Internet, NLNet and World Online. Upon launch of telephone
services, UTH will compete primarily with KPN.
Regulatory Issues. The regulatory environment in which UTH operates
significantly affects the operations of its business, including the
profitability and the timing of introduction of our new business lines. See
"Regulation -- European Union" and "-- The Netherlands".
The Netherlands: A2000 Holding N.V.
The following selected financial data have been derived from the
financial statements of A2000 Holding N.V. ("A2000"). These financial
statements have been prepared in accordance with Dutch GAAP with the Dutch
guilder as the functional currency. Since August 6, 1998, through UTH, we
have a net 25.5% interest in A2000. When we purchase the remaining 49% of
UTH from NUON, our interest in A2000 will increase to 50%.
<TABLE>
<CAPTION>
Year Ended
Six Months December 31, Nine Months
Ended ----------------- Ended
December 31, 1995 1996 1997 September 30, 1998
----------------- ------- -------- ------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Data:
Revenues................ (NLG) 37,493 89,893 101,450 90,234
Net operating income
(loss) ................ (NLG) (2,715) (2,960) (17,083) (27,542)
Adjusted EBITDA......... (NLG) 17,115 40,829 33,763 21,620
Adjusted EBITDA margin.. 45.6% 45.4% 33.3% 24.0%
Total capital
expenditures........... (NLG) 6,917 44,740 120,242 80,170
Cash flows from
operating activities... (NLG) 33,393 35,215 33,304 16,931
Cash flow from investing
activities............. (NLG) (343,666) (83,754) (119,824) (80,270)
Cash flows from
financing activities... (NLG) 319,653 72,547 60,000 57,000
<CAPTION>
At December 31,
----------------------------------- At September 30,
1995 1996 1997 1998
----------------- ------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Other Data:
Homes passed............ 516,998 555,459 565,740 569,459
Basic video
subscribers............ 488,631 523,940 518,160 516,729
Basic video
penetration............ 94.5% 94.3% 91.6% 90.7%
Avg. mo. service rev.
per video subscriber... (NLG) 12.96 12.96 13.29 14.25
Two way homes passed.... -- -- 125,180 329,101
Telephone subscribers... -- -- 3,255 13,849
Internet subscribers.... -- -- 450 5,456
</TABLE>
Overview/Growth Strategy. A2000, a 50/50 joint venture between UTH and
MediaOne, currently enjoys basic penetration rates of approximately 91% in its
two systems that serve Amsterdam and its surrounding communities of Landsmeer,
Purmerend, Zaanstad and Ouder-Amstel, and Hilversum. As a result of this high
penetration and the rate regulation of the basic tier in A2000's franchise
areas, A2000 has focused its efforts on increasing its average revenue per
subscriber through the introduction of new video, telephone and Internet/data
services.
A2000 launched a nine channel expanded basic tier in October 1996, impulse
pay-per-view services in April 1997, cable telephone service on a trial basis
in July 1997 and an Internet/data access service in October 1997. A2000
launched its Nedpoint-branded cable telephone service in August 1998. See "--
UPC Telephone Services:
70
<PAGE>
Priority Telecom -- The A2000 Experience". As of September 30, 1998, A2000 had
approximately 12,000 subscribers to its expanded basic tier, approximately
13,850 cable telephone subscribers and approximately 5,450 subscribers to its
Internet/data access service. Approximately 15% of subscribers who subscribe
for its Internet/data services also subscribe to an integrated package
including one or both of its telephone and expanded basic tier services and
approximately 30% of the subscribers who subscribe to its telephone services
also subscribe to one or both of the other services. We plan to use the
information gathered from our telephone experience in A2000 as we launch cable
telephone services in our other primary markets. See "-- UPC Telephone
Services: Priority Telecom".
See "Corporate Ownership Structure -- The Netherlands -- A2000".
Network. A2000 owns its infrastructure from the head end to the home and is
in the process of upgrading its cable television infrastructure. As of
September 30, 1998, approximately 329,100 homes, or 58% of A2000's systems,
were passed by the high capacity 860 Mhz upgraded network, with total rebuild
expected to be completed by the end of 1999.
Programming. A2000 currently offers 26 channels of cable programming and 39
FM radio channels to its basic tier subscribers in the A2000 systems. A2000
offers programming in many languages, including Dutch, English, German,
Italian, French and Turkish.
A2000's expanded basic tier carries 13 channels. Programming includes both
ethnic content, such as Asian, Chinese and Arabic, and thematic content, such
as science fiction, travel, music, adult and art. A2000 has moved some popular
channels, including MBC and the National Geographic Channel, from the basic
tier service to the expanded basic tier. A2000 also distributes two premium
channels provided by Canal+. Canal+ has recently commenced litigation against
A2000 demanding direct access to A2000's network in order to introduce its own
digital decoder. We do not believe A2000 will be obliged to provide the access
demanded by Canal+ and, even if it were, we do not believe providing such
access would have a material effect on A2000's business.
Increases in the price of the basic tier service are restricted by
agreements between A2000 and Amsterdam and the other municipalities in its
franchise areas. Because these prices are kept at a low level, A2000's basic
tier revenues are limited. A2000, therefore, charges programming suppliers
carriage fees for the transmission of their channels. See "Regulation -- The
Netherlands -- Video Services". Some of A2000's programming suppliers have been
unwilling to pay such carriage fees and Discovery, Eurosport, CNN and MTV have
withdrawn their channels from A2000's basic tier offering. A2000 has offered to
include these channels in its expanded basic tier or in separate mini-tiers,
although it does not expect this issue to be resolved in the near term. While
A2000 has experienced typical and anticipated customer dissatisfaction with the
change of programs in the basic tier, it has not experienced additional churn
that can be directly attributed to these changes.
A2000 plans to continue to introduce new channels on its tiered services when
such programming is available. A2000's impulse pay-per-view service offers
movies from all major studios on four movie channels. This service also
includes an adult channel and one "barker" channel that provides previews of
upcoming pay-per-view events.
Results of Operations. For the nine months ended September 30, 1998, A2000
had total revenues of approximately NLG90.2 million. For the same period, A2000
had Adjusted EBITDA of approximately NLG21.6 million. For the year ended
December 31, 1997, A2000 had total revenues of approximately NLG101.5 million
and Adjusted EBITDA of approximately NLG33.8 million. A2000's Adjusted EBITDA
margin declined from 33.3% for the year ended December 31, 1997 to 24.0% for
the nine months ended September 30, 1998. This decline was due primarily to the
increased start up and operating costs associated with A2000's Internet/data
and cable telephone services. The costs associated with these services were
approximately NLG13.8 million for the nine months ended September 30, 1998. The
Adjusted EBITDA margin for A2000's video services business on a stand-alone
basis was approximately 43.5% for the nine months ended September 30, 1998.
71
<PAGE>
Budgeted Capital Expenditures and Capital Resources. A2000 has budgeted
approximately NLG146.4 million and NLG135.4 million for capital expenditures in
1998 and 1999, respectively, primarily to continue its network upgrade to full
two-way capacity, purchase customer premise equipment for its new services and
implement a subscriber management system. A2000 expects to fund these
expenditures through available cash flow and support from its shareholders.
Since January 1997, A2000 has incurred capital expenditures through
September 30, 1998 of approximately NLG34.3 million for the development of its
telephone business and approximately NLG11.3 million for its Internet/data
business.
Competition. A2000 currently has a penetration rate of approximately 91% in
its service area. Its primary competition is from direct to home satellite
service providers. To date, however, A2000's programming rights, low basic
cable fees, restrictive regulations on the installation of dishes and high
installation costs have limited direct to home satellite services as a
meaningful competitor. In its Internet access service, A2000 currently is the
only high speed access provider in its operating area. A2000 expects to compete
with KPN, which is testing a high speed Internet access service, in the near
future. A2000 also competes with traditional dial-up providers, including KPN's
World Access/Planet Internet, NLNet and Euronet. In its telephone business,
A2000 currently competes with KPN, Telfort and Worldcom. A2000 is competing on
the basis of price and the ability to integrate certain of its services.
Regulatory Issues. The regulatory environment in which A2000 operates
significantly affects the operations of its business, including the
profitability and the timing of introduction of our new business lines. See
"Regulation -- European Union" and "-- The Netherlands". As discussed above
under "-- Programming", price increases of basic tier video services are
restricted by agreements with local municipalities, which has led to some
difficulties with programming suppliers. See "Regulation -- The Netherlands".
72
<PAGE>
Norway: Janco Multicom
The following selected financial data have been derived from the
financial statements of Norkabelgruppen A/S ("Norkabel"), Janco Kabel-TV
A/S ("Janco") and Janco Multicom ("Janco Multicom"). Norkabel and Janco
merged in 1997 to form Janco Multicom. The 1995 and 1996 financial
statements have been prepared in accordance with Norwegian GAAP with the
Norwegian kroner as the functional currency. Because Janco Multicom's
financial statements are consolidated with our financial statements, the
1997 and September 30, 1998 financial statements have been prepared in
accordance with Dutch GAAP with the Norwegian kroner as the functional
currency. There is no material difference between Dutch and Norwegian GAAP
for the purposes of the financial information provided below. The following
selected financial data includes a translation using the September 30, 1998
average exchange rate of 0.26689 Dutch guilders per Norwegian kroner.
<TABLE>
<CAPTION>
Norkabel Janco
-------------------------------- --------------------------
Year Ended December 31, Year Ended December 31,
-------------------------------- --------------------------
1995 1996 1995 1996
--------------- ---------------- -------------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Data:
Revenues................ (NKr) 216,062 215,621 101,488 101,699
Net operating income
(loss)................. (NKr) (1,749) 9,114 17,418 17,329
Adjusted EBITDA......... (NKr) 67,939 68,446 37,837 39,619
Adjusted EBITDA margin.. 31.4% 31.7% 37.3% 39.0%
Total capital
expenditures........... (NKr) 10,857 16,518 24,533 28,600
Cash flows from
operating activities... (NKr) (50,570) (29,859) 31,473 27,100
Cash flows from
investing activities... (NKr) (10,857) (15,651) (24,207) (27,716)
Cash flows from
financing activities... (NKr) 57,076 48,276 (1,295) (29,098)
<CAPTION>
At December 31, At December 31,
-------------------------------- --------------------------
1995 1996 1995 1996
--------------- ---------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Other Data:
Homes passed............ 217,267 221,441 222,500 225,000
Basic video
subscribers............ 152,257 156,915 159,210 160,331
Basic video
penetration............ 70.1% 70.9% 71.6% 71.3%
Average mo. service rev.
per video subscriber... (NLG) 28.17 27.54 12.14 12.16
<CAPTION>
Janco Multicom
-----------------------------------------------
Translation to
Guilders
--------------
Nine Months Nine Months
Year Ended Ended Ended
December 31, September 30, September 30,
1997 1998 1998
--------------- ---------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Selected Financial Data:
Revenues................ (NKr) 332,192 258,663 NLG 69,035
Net operating income
(loss)................. (NKr) (101,216) (98,216) NLG (26,213)
Adjusted EBITDA......... (NKr) 134,660 96,482 NLG 25,750
Adjusted EBITDA margin.. 40.5% 37.3% 37.3%
Total capital expendi-
tures.................. (NKr) 74,863 114,549 NLG 30,572
Cash flows from
operating activities... (NKr) 43,859 3,539 945
Cash flows from
investing activities... (NKr) (75,608) (114,732) (30,621)
Cash flows from
financing activities... (NKr) 111,445 20,670 5,517
<CAPTION>
At December 31, At September 30,
1997 1998
--------------- ----------------
<S> <C> <C> <C>
Other Data:
Homes passed............ 457,551 461,759
Basic video
subscribers............ 319,654 319,769
Basic video
penetration............ 69.9% 69.3%
Average mo. service rev.
per video subscriber... (NLG) 20.13 21.14
Two way homes passed.... 5,171 10,942
Internet subscribers.... 153 471
</TABLE>
73
<PAGE>
Overview/Growth Strategy. Since our acquisition of control, our strategy
for our Norwegian systems has been to integrate more fully these operating
subsidiaries to take advantage of economies of scale in implementing our
technical, operational and marketing expertise. In an effort to increase our
position in the Norwegian cable television market, we acquired from Helsinki
Media in January 1997, 70.2% of Janco, a cable system with a non-exclusive
license to provide cable television services in the Oslo area. In November
1997, we merged Norkabel into Janco forming Janco Multicom. Following the
merger, we retained 87.3% of Janco Multicom. We acquired the remaining 12.7%
interest in Janco Multicom in November 1998.
As a result of the merger, Janco Multicom is Norway's largest cable
television operator with approximately 47% of the total Norwegian cable
television market as of September 30, 1998. Janco Multicom owns and operates 16
cable television systems in Norway located primarily in the southeast and along
the southwestern coast, as well as its main network in Oslo. The well-
established Norwegian cable television market has 69% penetration, as of
September 30, 1998, primarily due to poor over-the-air reception in much of
Norway and a significant demand for television entertainment.
Our goals for our Norwegian operating systems are to continue to increase
Janco Multicom's homes passed and penetration rate, improve its average revenue
per subscriber by providing additional programming and services and increase
average revenue per subscriber in the former Janco systems at least up to the
levels in the former Norkabel systems. During the nine months ended September
30, 1998, the average revenue per subscriber for the former Norkabel systems
was over twice that for the former Janco systems. We believe that this is the
result of Norkabel's implementation of expanded basic tiers and its aggressive
migration of channels from the basic tier to the expanded basic tier. Although
the former Janco systems also launched an expanded basic tier, the basic tier
continued to carry the most popular channels. These revenue enhancing
techniques are currently being implemented in the former Janco systems.
Janco Multicom launched an Internet access service in March 1998 and plans
to introduce the chello broadband service in the first quarter of 1999. We also
plan to introduce Priority Telecom's cable telephone service in 1999 in the
upgraded portions of Janco Multicom's network. See "-- UPC Internet/Data
Services: High Speed Access and chello broadband ", and "-- UPC Telephone
Services: Priority Telecom ".
Network. Janco Multicom owns the complete cable television infrastructure
for each of its systems from the headend to the home, except for cable and
plant located on housing association property, which is legally owned by the
housing association. Janco Multicom is currently upgrading its network to full
high capacity 860 Mhz two-way capability, with the exception of 75,000 homes in
western rural areas. Its networks vary in capacity from 300 MHz to 550 MHz .
This varying architecture requires us to replace more of the network than in
our other primary markets, thereby increasing the costs of this upgrade. The
upgrade, which began in April 1998, is scheduled to be completed over the next
three to four years.
Programming. Janco Multicom currently offers subscribers 31 channels of
programming in four tiers:
. basic, including "must carry", a limited number of broadcast channels
required by the government to be carried,
. an expanded basic tier,
. a "mini-tier" of certain selected channels, and
. premium services.
Because English is widely understood in Norway, Janco Multicom is able to use
English-language programming to supplement the limited, but increasing, supply
of available Scandinavian-language programming.
Results of Operations. For the nine months ended September 30, 1998, Janco
Multicom had total revenues of approximately NLG69.0 million, representing
approximately 22.6% of our consolidated revenues for the same period, and
Adjusted EBITDA of approximately NLG25.8 million. For the year ended December
31, 1997, Janco Multicom had total revenues of approximately NLG91.5 million,
which represented approximately 27.1% of UPC's consolidated revenues for the
year, and Adjusted EBITDA of approximately NLG37.1 million. Janco Multicom's
Adjusted EBITDA margin declined from 40.5% for the year ended December 31, 1997
to 37.3% for
74
<PAGE>
the nine months ended September 30, 1998. This decline was due primarily to the
increased start up costs associated with Janco Multicom's Internet/data
services launched in early 1998 and telephone service scheduled for launch in
1999. For that period, the Adjusted EBITDA margin for Janco Multicom's video
services business on a stand-alone basis was approximately 39.1% for the nine
months ended September 30, 1998.
Budgeted Capital Expenditures and Capital Resources. Janco Multicom has
budgeted approximately NLG56.2 million and NLG86.9 million for capital
expenditures in 1998 and 1999, respectively, primarily to continue its network
upgrade to full two-way capacity, purchase customer premise equipment for its
new services, install a telephone switch and implement a subscriber management
system. Janco Multicom expects to fund these expenditures through available
cash flow and support from us.
Since December 1997, Janco Multicom has incurred capital expenditures
through September
30, 1998 of approximately NLG6.6 million for the development of its telephone
business and, since January 1997, capital expenditures of approximately NLG4.0
million for its Internet/data business.
Competition. Janco Multicom experiences limited competition from direct to
home satellite service providers. In its Internet access business, Janco
Multicom expects to compete with TeleNor, the Norwegian incumbent
telecommunications operator, which is expected to launch a broadband Internet
access service this fall; and Tele2, a subsidiary of NetCom Systems, which
operates a dial-up Internet access service and has recently launched a high
speed wireless Internet access service. Upon the launch of telephone services,
Janco Multicom will also compete in this business with TeleNor.
Regulatory Issues. The regulatory environment in which Janco Multicom
operates significantly affects the operations of its business, including the
profitability and the timing of introduction of our new business lines. See
"Regulation -- European Union" and "-- Norway".
75
<PAGE>
Israel: Tevel Israel International Communications Ltd.
The following selected financial data have been derived from the
financial statements of Tevel Israel International Communications Ltd. In
April 1998, Tevel acquired the approximately 144,000-subscriber Gvanim
cable television systems in two areas adjacent to Tevel's existing
operations. The financial data as of September 30, 1998 includes six months
of Gvanim's operating results. These financial statements have been
prepared in accordance with Israeli GAAP with the New Israeli shekel as the
functional currency adjusted for changes in the general purchasing power of
the New Israeli shekel using the consumer price index as of September 30,
1998. The following selected financial data includes a translation using
the September 30, 1998 average exchange rate of 0.55342 Dutch guilders per
New Israeli shekel.
<TABLE>
<CAPTION>
Translation
Year Ended December 31, to Guilders
------------------------- -------------
Nine Months Nine Months
Ended Ended
September 30, September 30,
1995 1996 1997 1998 1998
------- ------- ------- ---------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Selected Financial Data:
Revenues................ (NIS) 309,430 341,966 373,021 402,011 NLG222,481
Net operating income
(loss)................. (NIS) 59,859 83,487 97,590 89,345 49,445
Adjusted EBITDA......... (NIS) 155,561 185,288 204,251 219,251 NLG121,338
Adjusted EBITDA margin.. 50.3% 54.2% 54.8% 54.5% 54.5%
Total capital
expenditures........... (NIS) 73,315 50,099 58,963 72,820 NLG40,300
Cash flows from
operating activities... (NIS) 109,362 134,371 135,941 121,209 67,079
Cash flows from
investing activities... (NIS) (74,453) (53,545) (61,194) (1,037,362) (574,097)
Cash flows from
financing activities... (NIS) (34,898) (80,444) (74,754) 923,853 511,279
<CAPTION>
At December 31,
------------------------- At September 30,
1995 1996 1997 1998
------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Other Data:
Homes passed............ 318,721 334,426 350,392 568,999
Basic video
subscribers............ 218,230 231,712 241,874 395,680
Basic video
penetration............ 68.5% 69.3% 69.0% 69.5%
Avg. mo. service rev.
per video subscriber... (NLG) 60.88 62.54 64.20 67.68
Two-way homes passed.... 318,721 334,426 350,392 359,050
</TABLE>
Overview/Growth Strategy. Tevel has exclusive cable television broadcasting
franchises for the entire Tel Aviv metropolitan area, the region of Ashdod-
Ashkelon, which is 30 miles south of Tel Aviv, and the Jezreel Valley, which is
80 miles northeast of Tel Aviv. We currently own 46.6% of Tevel. In April 1998,
Tevel acquired 100% of Gvanim Cable Television Ltd. and has since integrated
fully Gvanim's operations with its own. Gvanim and its 90%-owned subsidiary
Gvanim-Krayot operate cable television systems in the Rishon-Leziyon, Ramla-
Lod, Modiin, Haifa Bay, Karmiel, Maalot and Lower Galilee areas of Israel.
There are approximately 207,000 homes passed in the Gvanim franchises and as of
September 30, 1998, Gvanim and its subsidiary had approximately 144,500
subscribers. The Gvanim acquisition increased Tevel's total subscribers as of
September 30, 1998 to more than 395,675 in franchise areas representing over
594,000 homes, or approximately 40% of the total homes in Israel.
Tevel's growth strategy is to increase its subscriber base by completing
build out within existing franchise areas, particularly in the Gvanim franchise
areas, increase penetration rates by offering a wider variety of programming
and increase sales of enhanced services, such as impulse pay-per-view in the
Gvanim franchise areas. Should liberalization occur, Tevel may consider
launching its own telephone and Internet/data services. See "Regulation --
Israel".
76
<PAGE>
In addition to its cable operations, Tevel owns 50% of Globcall, a
telecommunications company that designs, installs and maintains switching
systems for businesses. As of September 30, 1998, Globcall served approximately
47,100 outlets. Tevel also owns 33% of Netvision, one of Israel's leading
Internet service providers that had over 80,000 dial-up subscribers as of
September 30, 1998.
Network. Tevel owns the complete cable television infrastructure for each
of its cable systems from the headend to the home. The systems' construction
incorporates 550 MHz capability, representing approximately 50 channels, with a
60 MHz return path providing approximately 359,050 homes passed with two-way
capability for impulse pay-per-view services only. Tevel plans to upgrade all
of its systems to 860 MHz HFC technology capable of providing cable telephone
and Internet/data services. Currently, Gvanim's network is a one-way system
with a substantial overlay of fiber optic backbone, but it is being upgraded to
full two-way capability with the installation of 860 MHz HFC technology. Tevel
expects that the upgrade of all of its systems will be substantially complete
by mid-1999.
Programming. Tevel offers basic subscribers 45 channels of programming,
including a wide range of entertainment, news, sports, performing arts and
educational channels, as well as five pay-per-view channels in all of Tevel's
areas. Currently, over 40% of Tevel's subscribers purchase at least one pay-
per-view buy per month. Tevel has applied to extend its license to provide pay-
per-view services in all of its franchise areas. Tevel has also applied for a
license to provide pay-per-view services in Gvanim's franchise areas. The grant
of such licenses may be conditional upon Tevel and Gvanim obtaining their
programming from independent third parties. As explained below, their
programming is currently provided by an affiliate.
Tevel and the other Israeli cable television operators own a programming
company, I.C.P. Israel Cable Programming Company Limited. See "Regulation --
Israel". ICP purchases programming rights for subsequent sale to cable
television operators in Israel and produces two cable-exclusive channels: a
general entertainment channel and a movie channel. A children's channel, a
sports channel and a channel showing nature, science and art documentaries are
produced by third parties.
Results of Operations. For the nine months ended September 30, 1998, Tevel
had total revenues of approximately NLG222.5 million and Adjusted EBITDA of
approximately NLG121.4 million. These amounts include six months of revenue
from the Gvanim systems acquired in April 1998. For the year ended December 31,
1997, Tevel had total revenues of approximately NLG206.0 million and Adjusted
EBITDA of approximately NLG112.8 million. Tevel's Adjusted EBITDA margin
declined slightly from 54.8% for the year ended December 31, 1997 to 54.5% for
the nine months ended September 30, 1998. This decline was due primarily to
reorganization costs after the merger with Gvanim. The costs associated with
the reorganization reduced Tevel's Adjusted EBITDA by approximately NIS2.5
million (NLG1.4 million).
Budgeted Capital Expenditures and Capital Resources. Tevel has budgeted
approximately NLG50.6 million and NLG42.6 million for capital expenditures in
1998 and 1999, respectively, primarily to continue to upgrade its network.
Tevel expects to fund these expenditures through available cash flow. To
finance the Gvanim acquisition, Tevel has borrowed NIS928.3 million under a
nine-year term loan. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations --Liquidity and Capital Resources --
Current Debt Facilities -- Tevel Facilities".
Competition. Because Tevel has exclusive cable television licenses, to date
it has experienced no competition from other multi-channel television
providers. The Israeli government recently passed legislation, however, to
grant licenses to direct to home satellite service operators. To date,
applications for these licenses have been submitted by Bezeq, the Israeli
incumbent telecommunications service provider, Clal and Canal+. These operators
are expected to begin providing direct to home satellite services by mid-1999.
ICP may be required to sell to direct to home satellite service operators its
channels that are currently offered exclusively to cable television operators.
See "Regulation -- Israel".
77
<PAGE>
Regulatory Issues. The regulatory environment in which Tevel operates
significantly affects the operations of its business, including the
profitability and the timing of introduction of our new business lines. See
"Regulation -- Israel".
France: Mediareseaux Marne, S.A.
Overview/Growth Strategy. We have an approximate 99% ownership interest and
a 95% economic interest in Mediareseaux Marne S.A., which currently holds cable
television franchises for 114,000 homes in the Marne-la-Vallee area east of
Paris. See "Corporate Ownership Structure -- France". Mediareseaux began
construction of its network in September 1996, and as of September 30, 1998,
Mediareseaux's system passed approximately 60,700 homes and had approximately
20,950 basic subscribers, giving it a penetration rate of 34.5%. To increase
its average monthly revenue per subscriber, Mediareseaux began offering pay-
per-view services in May 1998, and to date, the pay-per-view buy rate is
approximately 0.24 movies per expanded basic tier subscriber per month. Since
inception, Mediareseaux's average monthly service revenue per subscriber has
averaged over NLG26.
In July 1998, Mediareseaux obtained a 15 year telephone license for an area
that includes 1.5 million homes in the eastern suburbs of Paris and in
September 1998, Mediareseaux began installing a telephone switch. Mediareseaux
plans to begin offering telephone services by mid-1999 within its cable
television franchise area and has obtained frequencies for a trial offering of
local wireless services. Mediareseaux also plans to offer chello broadband's
Internet access services in 1999. To expand its operations, Mediareseaux is
pursuing potential acquisition opportunities and plans to develop these
franchises as one clustered system offering integrated video, cable telephone
and Internet/data services.
Network. Mediareseaux owns the complete cable television infrastructure for
each of its cable systems from the headend to the home. The HFC network was
started with a 750 MHz UHF-VHF frequency band network with a 5-65 MHz return
path. The systems' post-1998 construction incorporates 860 MHz HFC capacity
with a 5-65 MHz return providing full two-way capability. As of September 30,
1998, Mediareseaux's network passed approximately 71% of the 86,000 homes then
in its franchise areas. Since September 1998, we have increased the number of
our franchises and we expect the network to pass all 114,000 homes in our
current franchise areas by the end of 1999.
Programming. Mediareseaux's current programming offers:
. a basic eight-channel package containing off-air, local and promotional
programs,
. four extended basic tiers, called News & Current Events, Youth &
Discovery, International Channels and Sports & Leisure, with five to ten
channels each,
. three premium tiers containing three children's channels, three sports
channels and four movie channels, and
. ten impulse pay-per-view channels.
Results of Operations. As of September 30, 1998, Mediareseaux had total
revenues of approximately NLG5.2 million for the nine months then ended,
representing approximately 1.7% of our consolidated revenues for the same date,
and Adjusted EBITDA of approximately negative NLG3.0 million. For the year
ended December 31, 1997, Mediareseaux had total revenues of approximately
NLG2.5 million, which represented approximately 0.7% of our consolidated
revenues for the year, and Adjusted EBITDA of approximately negative NLG4.5
million.
Budgeted Capital Expenditures and Capital Resources. Mediareseaux has
budgeted approximately NLG56.7 million and NLG64.0 million for capital
expenditures in 1998 and 1999, respectively, primarily to complete construction
of the network in its franchise area, purchase customer premise equipment for
its new services, install a telephone switch and implement a subscriber
management system. Mediareseaux expects to fund these expenditures through
drawings under its debt facility and equity contributions from us to match the
debt to equity ratio of the facility. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources -- Debt Facilities -- Mediareseaux Facility".
78
<PAGE>
Competition. Mediareseaux competes with other video service providers in
its license areas including satellite providers such as Canal Satellite and
TPS. Mediareseaux expects to face competition mainly from France Telecom, the
French incumbent telecommunications provider and Cegetel when it launches its
cable telephone services. Upon the launch of its Internet access service,
Mediareseaux expects to face competition from France Telecom's Wanadoo service,
Cegetel, which now includes AOL, Compuserve and HOL, and Infonie, among others.
Regulatory Issues. Mediareseaux is authorized to operate cable networks for
audio-visual services in the territory of Syndicat Mixte de Videocommunication
de l'Est parisien and the territory of the city of Rosny-sous-Bois pursuant to
two licenses, valid until 2026 and 2022 respectively, granted by the Conseil
Superieur de l'Audiovisuel in September 1997. In order to operate its cable
television infrastructure, however, Mediareseaux was required to enter into
public service delegation agreements with local authorities. The terms of
Mediareseaux's agreements with these two territories govern, among other
things, Mediareseaux's channel line-up and cable subscription rates. The
agreements also give the respective territories the option to purchase
Mediareseaux's network at the expiration of the agreements for a price equal to
its usage value as estimated under the terms and conditions of the agreements.
Mediareseaux has also entered into public domain occupancy agreements with each
city in its region giving Mediareseaux the right to establish its cable network
in the public domain. Mediareseaux did not conclude separate public domain
occupancy agreements with Rosny-sous-Bois as such rights were contained in the
public service delegation agreement.
Mediareseaux holds licenses granted by the Minister of Telecommunications
in June 1998 for the establishment and operation of a public telecommunications
network and for the provision of voice telephone in three French departments of
the Paris region. The licenses were granted for a period of 15 years, are non-
transferable and can only be revoked for a material breach of
telecommunications regulations. Mediareseaux is currently negotiating an
interconnect agreement with France Telecom. Pursuant to Article L34.8 II of the
Post and Telecommunication Code, France Telecom's interconnection rates must be
cost oriented and offered on non-discriminatory terms. Mediareseaux has entered
into an interconnect agreement with France Telecom. Mediareseaux expects,
however, that it will seek to renegotiate some provisions of the interconnect
agreement during 1999.
Malta: Melita Cable TV P.L.C.
Overview/Growth Strategy. Melita Cable TV P.L.C. operates an exclusive
franchise network in Malta. Currently, we and Melita Cable Holdings each own
50% of Melita. As of September 30, 1998, Melita passed approximately 161,300
homes and had 68,150 basic video subscribers representing a 42.3% penetration
rate. Melita's growth strategy is to continue to market aggressively its
service to homes in its franchise areas, as well as to provide more programming
to increase its appeal to subscribers.
Network. Melita owns the complete cable television infrastructure from the
headend to the home. Currently, Melita passes over 161,300 homes, or 96% of the
network. The upgrade to high capacity 860 Mhz two-way capability, which has
been initiated this year and is expected to be completed by 2000, will enable
Melita to provide Internet access and other enhanced services.
Programming. Melita currently provides 52 channels of programming, grouped
in three tiers:
. reception, which includes local and foreign off-air channels that are
received with an antenna and retransmitted over the cable network,
. basic,which includes reception service plus nine additional satellite
services that are received with a satellite dish and retransmitted over
the cable network, and
. TV Plus (reception and basic services plus nine additional satellite
services).
Because English is spoken in Malta by over 90% of the population, Melita is
able to take advantage of the abundant supply of English language programming
available for licensing. In 1996, Melita created a "live" sports channel
showing English Premier League Football and in 1997, introduced a second "live"
sports channel
79
<PAGE>
featuring Italian soccer, as well as four other new channels. In August 1998,
Melita combined the features into a full-time sports channel, which includes
other sports events and local productions.
Results of Operations. For the nine months ended September 30, 1998, Melita
had revenues of approximately NLG22.2 million and Adjusted EBITDA of
approximately NLG9.4 million. For the same period, Melita had average monthly
service revenue per video subscriber of NLG36.91. For the year ended December
31, 1997, Melita had total revenues of approximately NLG23.0 million and
Adjusted EBITDA of approximately NLG9.7 million.
Budgeted Capital Expenditure and Capital Resources. Melita has budgeted
approximately NLG15.4 million and NLG24.4 million for capital expenditures in
1998 and 1999, respectively, primarily to upgrade its network to full two-way
capacity, purchase customer premises equipment, implement a subscriber
management system and purchase its own premises. The network upgrade and the
introduction of new services is expected to be funded through available cash
flow and bank financing. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources --
Current Debt Facilities -- Melita Facility".
Competition. With the exception of a small number of home satellite
receivers and a few hotel private cable installations, competition in Malta is
limited primarily to approximately 15 Italian and Sicilian broadcast channels.
Regulatory Issues. In 1991, Melita was awarded an exclusive 15 year
renewable license to deliver cable television services for Malta. Rates for the
basic tiers are subject to regulation and requests for rate increases made to
the government must be accompanied by a cost analysis of the increases in cost.
Premium services, "pay-per-view" and other additional services are not subject
to rate regulation.
80
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Eastern Europe
The following selected financial data have been derived from the
financial statements of the respective companies. The financial statements
for our operating companies in Hungary, the Czech Republic, Romania and the
Slovak Republic have been prepared in accordance with generally accepted
accounting principles in the respective jurisdictions or The Netherlands
with the functional currency of such jurisdictions the Hungarian forint,
Czech koruna, the Romanian lei and the Slovakian koruna, respectively. The
following December 31, 1997 and September 30, 1998 selected financial data
has been converted to Dutch guilders using the same exchange rates used in
the 1997 financial statements and the September 30, 1998 average exchange
rates, respectively. See "Exchange Rate Data".
<TABLE>
<CAPTION>
Year Ended December 31, 1997
-----------------------------------------------------------------------------
Net Total Cash Flows Cash FLows Cash Flows
Operating Adjusted Capital From From From
Income Adjusted EBITDA Expendi- Operating Investing Financing
Revenue (Loss) EBITDA Margin tures Activities Activities Activities
------- --------- -------- -------- -------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hungary(1)
Kabelkom............... (NLG) 32,717 11,660 14,857 45.4% 11,213 10,973 (11,213) (854)
Kabeltel............... (NLG) 9,555 (283) 778 8.1% 6,759 (6,298) (6,759) 14,409
Telekabel Hungary...... (NLG) -- -- -- -- -- -- -- --
Czech Republic.......... (NLG) 7,492 (13,116) (6,730) n/a 4,217 (13,608) (2,293) 14,563
Romania(2).............. (NLG) 2,192 1,049 1,359 63.4% 857 1,232 (1,012) (192)
Slovak Republic......... (NLG) 1,547 (1,826) (1,011) n/a 2,799 (2,594) (3,863) 6,396
<CAPTION>
Nine Months Ended September 30, 1998
-----------------------------------------------------------------------------
Net Total Cash Flows Cash Flows Cash Flows
Operating Adjusted Capital From From From
Income Adjusted EBITDA Expendi- Operating Investing FInancing
Revenue (Loss) EBITDA Margin tures Activities Activities Activities
------- --------- -------- -------- -------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hungary(1)
Kabelkom............... (NLG) -- -- -- -- -- -- -- --
Kabeltel............... (NLG) -- -- -- -- -- -- -- --
Telekabel Hungary...... (NLG) 39,225 9,919 14,416 36.8% 16,141 6,322 (18,746) 17,006
Czech Republic.......... (NLG) 6,618 (6,554) (1,818) n/a 831 (89) (2,167) 2,806
Romania(2).............. (NLG) 2,857 1,032 1,382 48.3% 616 612 (697) 215
Slovak Republic......... (NLG) 1,163 (750) (73) n/a 3,117 (2,591) (2,595) 5,258
</TABLE>
<TABLE>
<CAPTION>
At September 30, 1998
------------------------------------------------------
Avg. Mo.
Service
Basic Basic Rev.
Homes Video Video per Video UPC Net
Passed Subscribers Penetration Subscriber Ownership
------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Hungary............... 490,966 413,119 84.1% NLG11.06 79.3%
Czech Republic........ 148,963 52,268 35.1% NLG13.20 100.0%
Romania............... 95,674 58,900 61.6% NLG 6.27 51.0-100.0%
Slovak Republic....... 26,966 14,636 54.2% NLG 8.20 75.0-100.0%
</TABLE>
--------
(1) Kabelkom and Kabeltel were contributed to Telekabel Hungary on June 30,
1998 and since then their results have been consolidated at Telekabel
Hungary. The financial information presented for the nine months ended
September 30, 1998 comprises:
. Kabelkom's results for the first six months of 1998 (revenues of
approximately NLG18.6 million, Adjusted EBITDA of approximately NLG8.6
million, Adjusted EBITDA Margin of 46.2%, net operating income of
approximately NLG6.7 million and capital expenditures of approximately
NLG3.2 million, cash flows from operating activities of NLG3,711, cash
flows from investing activities of NLG(3,200) and cash flows from
financing activitites of NLG 218,),
. Kabeltel's results for the first six months of 1998 (revenues of
approximately NLG6.8 million, Adjusted EBITDA of approximately NLG1.1
million, Adjusted EBITDA Margin of 16.2%, net operating income of
approximately NLG0.5 million and capital expenditures of approximately
NLG8.7 million, cash flows from operating activities of NLG(8,623),
cash flows from investing activities of NLG(8,700) and cash flows from
financing activities of NLG16,747), and
. Telekabel Hungary's results for the three months ended September 30,
1998 (revenues of approximately NLG13.8 million, Adjusted EBITDA of
approximately NLG4.7 million, Adjusted EBITDA Margin of 34.1%, net
operating income of approximately NLG2.7 million and capital
expenditures of approximately NLG4.2 million, cash flows from operating
activities of NLG11,234, cash flows from investing activities of
NLG(6,846) and cash flows from financing activities of NLG41).
81
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(2) Because Eurosat was acquired in May 1998, only four months of its
results have been included in the financial results for the Romanian
Systems.
Hungary: Telekabel Hungary
Overview/Growth Strategy. In June 1998, we increased our interest in
Kabelkom, Hungary's largest operator of cable television systems, from 50% to
100%. Shortly thereafter, Kabelkom combined operations with Kabeltel, Hungary's
second largest operator of cable television systems, creating Telekabel
Hungary, in which we retain a 79.25% interest. As of September 30, 1998,
Telekabel Hungary had approximately
81--1
<PAGE>
413,100 subscribers. There are no current plans to launch telephone or
Internet/data services in Telekabel Hungary's systems.
When Kabelkom was formed in 1991, its systems had average monthly revenue
per subscriber of less than NLG2.0. Through the addition of local language
programming and other enhanced video services, these systems had average
monthly revenue per subscriber of more than NLG10.50 for the year ended
December 31, 1997.
Network. Telekabel Hungary, together with local minority partners for some
systems, owns the complete cable television infrastructure for each of its
systems from the headend to the home. We are upgrading these networks. As of
September 30, 1998, approximately 17,300 customers were already served by the
rebuilt network. The upgraded network throughout Budapest will be 750 MHz HFC
technology with 65 MHz return path. As of September 30, 1998, Telekabel
Hungary's network passed approximately 64,000 HFC homes.
Programming. Telekabel Hungary offers subscribers four tiers of programming
comprising approximately 35 channels:
. basic tier, which includes a limited number of broadcast and satellite
channels required by the government to be carried,
. an expanded basic tier, and
. a premium service, HBO-Hungary.
Approximately 15 channels, including HBO-Hungary, are available in Hungarian.
In the Telekabel Hungary systems, 75% of all subscribers passed by the upgraded
network take the expanded basic tier package.
Results of Operations. As of September 30, 1998, combined revenues and
Adjusted EBITDA for the nine months then ended were approximately NLG39.2
million and NLG14.4 million, respectively. For the year ended December 31,
1997, Kabelkom had total revenues of approximately NLG32.7 million and Adjusted
EBITDA of approximately NLG14.9 million. For the year ended December 31, 1997,
Kabeltel had total revenues of approximately NLG9.6 million and Adjusted EBITDA
of approximately NLG0.8 million. The relative increase in combined revenue is
the result of acquisitions in January 1998 (20,000 subscribers), May 1998
(18,000 subscribers) and the rebuild of approximately 60,000 homes. This
rebuild permits Telekabel Hungary to offer enhanced services in the former
Kabeltel systems, generating an average additional monthly revenue of
approximately NLG3.0 per subscriber.
Budgeted Capital Expenditures and Capital Resources. Telekabel Hungary has
budgeted approximately NLG39.0 million and NLG57.1 million for capital
expenditures in 1998 and 1999, respectively, primarily to continue the network
upgrade, line extensions and acquisitions. Telekabel Hungary expects to fund
these expenditures through available cash flow, the Telekabel Hungary Facility
and support from us. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations --Liquidity and Capital Resources".
Competition. Telekabel Hungary currently averages over 84% penetration in
its service area and faces limited competition. We understand, however, that
potential competitors may begin to offer direct to home satellite services in
Budapest.
Regulatory Issues. Cable operators in Hungary are not granted franchises;
however, all cable operators must be properly registered with the appropriate
government agency. Moreover, although there is no rate regulation in Hungary,
rates are subject to consumer pricing and anti-competition reviews by the
government. Further, a single cable operator may not provide service to homes
exceeding in the aggregate one-sixth of the Hungarian population.
Hungary: Monor
Monor, our Hungarian operating company in which we own a 44.75% economic
interest, has offered traditional telephone services since December 1994. Monor
has 85,000 homes in its franchise area, with approximately 84,000 traditional
telephone homes passed and approximately 67,350 cable television homes passed.
It served approximately 66,900 traditional telephone access lines and
approximately 29,150 cable television subscribers as of September 30, 1998.
Revenues for the year ended December 31, 1997 of approximately NLG28.1 million.
As of September 30, 1998, Monor had total revenues of
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approximately NLG26.6 million and EBITDA of approximately NLG16.8 million for
the nine months then ended. Monor had approximately $46.0 million of
outstanding bank debt as of September 30, 1998.
Czech Republic
Overview/Growth Strategy. We own 100% of KabelNet, its Czech Republic
subsidiaries that provide cable and "wireless" cable television services in the
cities of Prague and Brno, the Czech Republic's second largest city. At
September 30, 1998, the wireless cable system served approximately 42,600
subscribers in both cities and the cable system served approximately 9,500
subscribers in Prague. KabelNet's penetration rate was 35.1% as of September
30, 1998. There are no current plans to launch telephone or Internet/data
services in KabelNet's systems.
Network. KabelNet's systems currently offer programming over an MMDS
network and an HFC cable network. KabelNet owns the complete cable system
infrastructure for each of its systems from the headend to the home. KabelNet
has no plans to introduce two-way services to its network at this time.
Programming. The Czech wireless cable systems offer subscribers three tiers
of programming comprising approximately 16 channels:
. five "must carry" channels,
. a 15-channel basic tier, which includes the "must carry" channels, and
. one premium channel, HBO-Czech.
Approximately nine channels, including HBO Czech, are available in
Czech/Slovak. Currently, approximately 12% of KabelNet's cable subscribers take
the expanded basic tier package.
Result of Operations. For the nine months ended September 30, 1998,
KabelNet had total revenues of approximately NLG6.6 million and Adjusted EBITDA
of approximately negative NLG1.8 million. For the year ended December 31, 1997,
KabelNet had total revenues of approximately NLG7.5 million and Adjusted EBITDA
of approximately negative NLG6.7 million.
Budgeted Capital Expenditures and Capital Resources. KabelNet has budgeted
approximately NLG1.1 million and NLG2.5 million for capital expenditures in
1998 and 1999 respectively, primarily to expand MMDS distribution. KabelNet
expects to fund these expenditures through available cash flow and funding from
us. KabelNet has no bank debt.
Competition. KabelNet faces competition in its service area. Currently,
parts of its service areas have been overbuilt by Cable Plus, a subsidiary of
US WEST, and Dattel Kabel in Prague and Cable Plus in Brno. Overbuilding is
when a cable network is installed where one already existed.
Regulation. There is no rate regulation of cable or wireless cable services
in the Czech Republic. Rate increase notifications must be sent out ninety days
in advance, however, as conditions of the franchises awarded by the
municipalities. All cable operators must have a valid establishment and
operating permit, which is issued by the Czech Telecommunications office.
Additionally, all cable operators must be registered with the council for radio
and television broadcasting.
Romania
Overview/Growth Strategy. We are currently involved in the development of
three cable companies in Romania:
. our 100%-owned Control Cable Ventures, with operations in Ploiesti and
Slobozia,
. our 100%-owned Multicanal Holdings, located in Bucharest, Romania's capital,
and
. our 51%-owned Eurosat in Bacau.
Since 1993, when we first entered the Romanian market, we have widened our
customer base through acquisition and marketing activities in conjunction with
build out. As of September 30, 1998, our combined Romania operations passed
approximately 95,675 homes and served approximately 58,900 subscribers,
representing a penetration rate of 61.6%. There are no current plans to launch
telephone or Internet/data services in the Romanian systems.
Network. In 1994, we initiated an intensive upgrade of our Romanian systems
to rebuild the network from 300 MHz to 550 MHz. In Bacau, it
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<PAGE>
will be 750 MHz. The rebuild in Ploiesti, which has 24,000 subscribers, is
complete. The rebuild in Slobozia and Bacau, which together have 30,000
subscribers, is expected to be completed by 2000. The Romanian systems have no
plans to introduce two-way services at this time.
Programming. The Romanian systems offer subscribers one to three tiers of
programming with approximately 28-34 channels:
.basic tier,
.an expanded basic tier, and
. a premium service, HBO Romania.
HBO Romania was launched in Ploiesti and Bucharest in February and April
1998, respectively. We also launched an expanded basic tier in Ploiesti in
April 1998. Approximately 12 channels, including HBO Romania, are available in
Romanian. Currently, 15.8% of the basic tier subscribers take the expanded
basic tier package.
Result of Operations. As of September 30, 1998, the combined Romanian
systems had total revenues of approximately NLG2.9 million for the nine months
then ended and Adjusted EBITDA of approximately NLG1.4 million. For the year
ended December 31, 1997, our combined Romanian operations had total revenues of
approximately NLG2.2 million and Adjusted EBITDA of approximately NLG1.4
million.
Budgeted Capital Expenditures and Capital Resources. The combined Romanian
systems have budgeted approximately NLG1.1 million and NLG1.5 million for
capital expenditures in 1998 and 1999 respectively, primarily to finish
upgrading the networks. The Romanian networks are self funding and have no
third party debt.
Competition. Because there are no exclusive franchises awarded in Romania,
we face competition in all four franchise areas in which we operate. While
there is little overbuild within the cities, the homes are divided among a
variety of competitors in each city. Including our systems, there are three
operators in Ploiesti, four operators in Bacau, two operators in Slobozia and
eight major operators in Bucharest.
Regulation. Exclusive franchises are not awarded in Romania. We have
received non-exclusive licenses to operate cable television systems in all of
its service areas. These renewable licenses are valid for another six years.
The cable television industry is regulated by the Romanian audiovisual law,
which went into effect in June 1996, and is administered by the National
Audiovisual Council.
Slovak Republic
Overview/Growth Strategy. We entered the Slovakian market in 1995 and
currently have over 68,000 homes in our franchise areas. Together with a local
partner, we are developing projects in the cities of Trnava, Zvolen, Nove Zamky
and Levice. We own 75% of our projects in Trnava and 100% of our projects in
Zvolen, Nove Zamky and Levice. Construction of the network in Trnava has been
completed. The cities of Zvolen, Nove Zamky and Levice are all currently under
construction, which is expected to be completed by the end of 1999. As of
September 30, 1998, our Slovakian operations passed approximately 27,000 homes
and served approximately 14,625 subscribers, representing a penetration rate of
54.2%. There are no current plans to launch telephone or Internet/data services
in the Slovakian systems.
Network. The Slovakian systems own the HFC cable network from the headend
to the home. There are no plans to introduce two-way services to the Slovakian
systems' network at this time.
Programming. The Slovakian systems offer subscribers three tiers of
programming on approximately 34 channels:
.a basic tier,
.an expanded basic tier, and
.a premium service, HBO Czech.
Approximately 12 channels, including HBO Czech, are available in Slovak/Czech.
Currently, 92.7% of the subscribers take the expanded basic tier package.
Result of Operations. As of September 30, 1998, the Slovakian systems had
combined total revenues of approximately NLG1.2 million for the
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nine months then ended and Adjusted EBITDA of approximately negative NLG0.1
million. For the year ended December 31, 1997, the Slovakian operations had
total revenues of approximately NLG1.5 million and Adjusted EBITDA of
approximately negative NLG1.0 million.
Budgeted Capital Expenditures and Capital Resources. The Slovakian systems
have budgeted approximately NLG3.4 million and NLG2.0 million for capital
expenditures in 1998 and 1999, respectively, primarily to complete construction
of the network. The Slovakian systems expect to fund these expenditures through
available cash flow and support from us. The Slovakian systems have no third-
party debt.
Competition. In the cities of Levice and Nove Zamky, there are no
competitors to our systems. In Zvolen, there are two competitors. One is an
unencrypted wireless cable service operated by Cable Plus, a subsidiary of US
WEST, and the other is a small private cable operator. Trnavatel faces no
direct competition.
Regulation. There is no regulatory body in the Slovak Republic that issues
cable franchises, however, an operating permit is required. Most private cable
operators have their own agreements with each city and/or large co-operative
housing associations. Moreover, there is no rate regulation on cable
activities. Cable operators are subject, however, to consumer pricing reviews
and the laws on monopolistic positioning in the market and must register with
the broadcast council and submit channel line-ups as part of the permit
process.
Other Business Information
Employees
As of September 30, 1998, we, together with our consolidated subsidiaries,
had approximately 1,360 employees. We believe that our relations with our
employees are generally good.
At December 31, 1995, 1996 and 1997 we, together with our consolidated
subsidiaries, had approximately 407, 704 and 815 employees, respectively.
Certain of our operating subsidiaries, including our Austrian, Dutch and
Norwegian systems, are parties to collective bargaining agreements with some of
their respective employees.
Legal Proceedings
We and our operating companies are not parties to any material legal
proceedings. From time to time, we and our operating companies may become
involved in litigation relating to claims arising out of its operations in the
normal course of business. See also "Business --Operating Companies -- The
Netherlands: A2000 Holding N.V. -- Programming".
Properties
We lease our corporate offices in Amsterdam and London. Our operating
companies and subsidiaries generally lease their offices as well. We own small
parcels of property in various countries that we use for our network equipment.
In other countries, we have been able to obtain easements for this equipment.
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TECHNOLOGY
The following is a general discussion of the technology we employ. It is
presented for illustrative purposes only and, except where indicated, is not
intended to reflect the technology of any particular operating system. For more
information regarding the technology status of our operating companies, see the
"Network" sections of each operating company in "Business --Operating
Companies". In order to explain some of the technical terms in this section, we
have included a glossary following this section.
Our Network
We typically own the complete cable television infrastructure for each of
our systems from the headend to the home. Since 1994, we have been rebuilding
and upgrading the existing one-way video distribution infrastructure in the
majority of our operating systems by replacing the entire coaxial trunk network
with a fiber optic trunk network and upgrading the remaining coaxial
neighborhood distribution network to full two-way capability. Our upgraded
network incorporates two-way capable 860 MHz Hybrid Fiber Coaxial technology
that provides sufficient bandwidth in the upstream portion from the subscriber
to the master telecom center, and the downstream portion, from the master
telecom center to the subscriber, of the network. This provides us with
increased channel capacity and permits the introduction of digital services,
such as enhanced video, telephone and Internet/data services.
Our network upgrade to fiber optic cable enables us to offer analog video,
digital video, and digital telephone and Internet/data services that are not
possible with our non-upgraded network. In addition, our fiber optic network
supports higher penetration rates for these services and provides a higher
level of quality and reliability than the network that is being upgraded. As a
result of the upgrade, our customers are able to receive new competitive
services that they could not receive before, including:
. better voice quality from our digital telephone services than the
incumbent telecommunications operator provides,
. a much faster Internet service than dial-up services and without local
telephone connection charges, and
. digital television signals that provide better picture quality and more
channel capacity than the current analog signals.
The network upgrade consists of two phases: (1) the basic network upgrade
and (2) the enhanced upgrade that includes the incremental investments
necessary to introduce digital video, telephone or Internet/data services. The
basic upgrade includes the installation of HFC technology throughout the
network. This includes the fiber optic cable, fiber nodes, fiber optic
transmitters and receivers, and the replacement of coaxial amplifiers and
multi-port taps in the coaxial neighborhood distribution network.
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Non-Upgraded Network Architecture. Our typical non-upgraded network
architecture (from the headend to the subscriber) is depicted in the diagram
below:
[FLOW CHART APPEARS HERE]
Our non-upgraded cable systems usually consist of stand-alone cable
television headends that are connected to a coaxial dual 45-450 MHz trunk
network. The trunk network is connected to a neighborhood distribution network
that terminates at a multi-port tap device, which connects individual
subscribers. The traditional cable television headend collects the satellite
and terrestrial video signals and distributes these signals to the trunk
network. The trunk network carries small numbers of analog television channels,
which have 15-20 channels on each dual trunk, to a neighborhood substation
combiner. This substation combines each of the dual 45-450 MHz trunk systems so
that the 30-40 analog television channels can be distributed on one 45-860 MHz
coaxial distribution network. The smaller cascades of distribution amplifiers
then relay these signals to the final amplifiers where the signal is
transferred through a passive multi-port tap device. These multi-port tap
devices allow individual subscribers to be connected to the network through in-
home coaxial cable connected directly to a television set, thereby terminating
the cable television signal. The majority of our systems acquired from Philips
did not use set-top converters to terminate the signals at the television sets.
Our Israeli, Maltese and Norwegian systems use analog set-top technology,
however, to decode scrambled analog channels before subscribers can view the
channels on their television sets.
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BASIC NETWORK UPGRADE
The architecture of the basic network upgrade, which is the first phase, is
depicted in the diagram below:
[FLOW CHART APPEARS HERE]
The basic network upgrade consists of the following steps:
CONVERTING HEADENDS INTO DISTRIBUTION HUBS AND THE MASTER TELECOM CENTER
Existing headends are converted into distribution hubs by adding fiber
optic transmitters and fiber optic receivers. The distribution hubs will also
house certain telephone and Internet equipment installed during the enhanced
services upgrade. See "-- Upgrade for Enhanced Services". For telephone and
Internet/data services, these distribution hubs are connected by high speed
synchronous digital hierarchy fiber optic rings to the master telecom center.
These fiber optic rings have transmission speeds of up to 2.4 Gbps per fiber
pair. Synchronous digital hierarchy technology automatically detects
disruptions in the fiber and reroutes signals within 1/20th of a second,
thereby providing reliable service to these customers. The master telecom
center aggregates the video, voice and data signals in one central location for
transmission to the distribution hubs. Several distribution hubs are then
connected to each other by high-speed synchronous digital hierarchy backbone
networks throughout each country. Video is also distributed to the distribution
hubs over fiber optic cables.
INSERTING FIBER NODES AND CONNECTING THEM TO DISTRIBUTION HUBS
Our basic fiber upgrade consists of replacing the trunk network with a high
capacity fiber network. First, fiber optic transmitters and receivers are
installed in the distribution hub. Next, the dual 45-450 MHz trunk amplifiers
are replaced with fiber optic nodes. These nodes consist of conversion
equipment to change the optical signals back to radio frequencies. Eight to
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twelve fiber nodes are connected by fiber optic cable in a ring configuration
to the distribution hub. The fiber node transmits signals between the fiber
connected to the distribution hub and the coaxial neighborhood distribution
network. Each distribution hub can support enough fiber subrings to
interconnect 20,000-40,000 subscribers. This phase is where the majority of the
construction activity takes place. The old trunk network typically was directly
buried underground without ducts.This phase of construction replaces existing
direct-buried cable with fiber optic cable in underground conduits.
Replacing the Distribution Amplifiers in the Remaining Coaxial Plant
The remaining distribution amplifiers typically have to be replaced to be
able to transmit the two-way signals necessary for enhanced services such as
impulse pay-per-view, telephone and Internet/data services. Typically, these
older generation amplifiers are not capable of operating without distorting the
extra channels or digital signals required for telephone or Internet/data
services. The expanded channel requirements and the "density" of the digital
signals will distort the older distribution amplifiers, causing either poor
picture quality or inadequate performance of telephone or Internet services.
Therefore, replacement of distribution amplifiers is usually required.
Upgrade the Final Amplifier and Multi-port Tap
The final stage of the basic two-way upgrade program is the replacement of
final amplifiers and multi-port taps. The final amplifiers are typically one-
way and of an older generation technology, similar to the distribution
amplifiers. Although the multi-port taps are capable of passing frequencies up
to 860 MHz, they are only one-way devices. After these devices are replaced,
the network from the distribution hub to the subscriber's home becomes fully
two-way capable.
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Final Configuration of the Basic Upgrade
The following diagram depicts the actual structure of the basic upgrade
being constructed for our system in Vienna, Austria. This architecture is
typical of our other upgraded systems. Five distribution hubs are shown
interconnected by fibers configured in a bi-directional synchronous digital
hierarchy ring architecture operating at 2.4 Gbps per fiber pair. Distribution
hub number one is located with the master telecom center, where the telephone
switch and Internet servers are located.
The master telecom center is in the process of being connected to the pan-
European backbone network operating at 140 Mbps.
After the Vienna city backbone is constructed and interconnected to each
distribution hub, the local fiber subrings are constructed to extend fiber into
a neigborhood. The diagram depicts how distribution hub number two fans out
with four separate fiber subrings and connects each fiber node.
[MAP APPEARS HERE]
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Concurrent Broadband Bandwidth
Our upgraded network architecture will provide cost-effective methods to
distribute the greatest amount of concurrent broadband bandwidth into
subscribers' homes. We have dedicated one fiber transmitter and associated
receiver per fiber node, thereby allocating the full 5-65 MHz upstream / 85-860
MHz downstream of two-way bandwidth to each home passed. The following two
diagrams show the allocation of upstream bandwidth. Upstream bandwidth runs
from the subscriber to the master telecom center and downstream bandwidth runs
from the master telecom center to the subscriber.
In the upstream direction, we have constructed an architecture to support
frequencies from 5-65 MHz. We place non-critical upstream transmissions from
subscriber set-top terminals in the 5-15 MHz portion of the bandwidth.
Typically, our analog set-top boxes transmit impulse pay-per-view buy
information at 10 MHz. This type of upstream information can be collected at
operator- defined polling intervals and is not disturbed by impulse noise
typical in the 5-15 MHz frequency range. Real-time services such as
Internet/data and telephone require frequencies undisturbed by impulse noise or
other transient disturbances and are allocated upstream spectrum in the 15-
65 MHz range. The following diagram details the allocated spectrum in the
upstream path from the subscriber's home to the fiber node. The fiber node then
converts the electrical signals to optical wavelengths for further transmission
to the distribution hub, then to the master telecom center.
[DIAGRAM APPEARS HERE]
Upstream Scalability. We are currently deploying impulse pay-per-view set-
top boxes, Internet cable modems and telephone cable phone modems in fiber
nodes averaging 1,000 homes passed. Because the impulse pay-per-view set-top
boxes transmit movie purchase information infrequently, the fiber node could
support more than two set-top boxes per home passed.
We have allocated two 6 MHz channels for upstream communications from
Internet cable modems to the master telecom center. The currently deployed
technology allows 10 Mbps of digital transmission capacity per 6 MHz channel.
One 6 MHz channel can be allocated to residential subscribers and the other 6
MHz channel is allocated to small and medium enterprises
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These two 6 MHz channels have been designed to support 600 customers in total
with a minimum throughput for each customer of four to five times the ISDN BRI
speed of 128 Kbps, or approximately 512-640 Kbps. The design allows for 25% of
the 600 customers, or 150, to be accessing the bandwidth simultaneously at this
speed. However, burst speeds for an individual subscriber can reach 2 Mbps.
Our current suppliers of cable phone technology both use the same
transmission format to transmit thirty 64 Kbps time-slots in a 2 Mbps
bitstream. This means that one 2 Mbps bitstream fits into a 1.5 MHz radio
frequency channel and could support 30 simultaneous phone calls. However, we
deploy technology at the distribution hub via the host digital terminal that
provides a 4 to 1 concentration. This concentration allows 120 customers to use
the same bandwidth without experiencing a call blocking problem. Our deployment
of this concentration technology is designed to allow the customer at least 99%
accessability to the network, the standard for most public networks.
We then allocate 1.5 MHz channels in the upstream direction to allow for
telephone penetrations of 600 lines in the fiber node. More
1.5 MHz channels can be added to support increased penetration.
In summary, assuming 1,000 homes passed per fiber node, our current
technology would support simultaneously in excess of two set-top boxes per home
passed, 600 cable modems and 600 telephone lines.
Improvements in Upstream Transmission Technologies. We intend to deploy the
U.S.-based cable modem standard (MCNS/DOCSIS) in 1999, which will increase the
transmission capacity in the same 6 MHz upstream channel from the current 10
Mbps to 30 Mbps. Likewise, we expect to take advantage of improving
technologies for placing more phone calls within the same amount of radio
frequency bandwidth.
Downstream Scalability. In the downstream direction, we have the
flexibility to allocate the combination of analog and digital channels. The
diagram below depicts a model where we would allocate a maximum of 65 analog
television channels and 240 MHz of bandwidth for digital services:
[DIAGRAM APPEARS HERE]
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Because both the upstream and downstream frequencies are transmitted
simultaneously and received on a single coaxial cable, the above model would
provide capacity for: 65 analog television channels occupying 520 MHz of
bandwidth, 100 FM radio channels occupying 20 MHz of bandwidth, Digital Video
Broadcast streams (280 channels) occupying 224 MHz of digital bandwidth (840
Mbps of transmission capacity), 24 MHz of Internet capacity (40 Mbps of
transmission capacity) and 16 MHz of telephone capacity (eight 2.048 Mbps
channels). In this example, we would bring 65 analog television channels and
approximately 900 Mbps of concurrent digital capacity into each home. We have
the flexibility, however, to define the ratio of analog to digital channels
allocated in each market.
Upgrade for Enhanced Services
The second phase of our network upgrade is the incremental investment
necessary to introduce digital video, telephone or Internet/data services. This
enhanced upgrade involves the installation of certain equipment in the master
telecom center, the distribution hubs and the customer premises required to
connect subscribers for digital video, telephone or Internet/data services
through the upgraded network.
The master telecom center includes the headend and all central network
equipment needed for services provided through the operating system. For cable
television, this includes satellite antennas, encryption devices and original
transmission facilities. For telephone service, this includes the central
office switch, the voice mail platform, synchronous digital hierarchy
transmission and other telephone-related equipment. For Internet/data service,
this includes servers and equipment for connection to the Internet.
Cable Telephone Network and Infrastructure
Traditional telephone signals are carried over twisted copper pairs in the
local loop. Cable phone technology allows telephone signals to be carried over
upgraded HFC technology infrastructure without requiring the costly overbuild
of the local loop in order to install twisted copper pair. Therefore, instead
of an expensive rebuild, cable phone technology only requires the addition of
equipment at the master telecom center, the distribution hub and in the home to
transform voice communication into signals capable of transmission over the
fiber and coaxial cable. The equipment required in the home is housed in a
small, secure, self-contained customer interface unit, that is usually mounted
on the wall inside the home. Cables run from the customer interface unit to
other parts of the home where services are required. This box is capable of
passing through cable television, Internet cable modem and radio signals and
providing standard telephone services. It also includes an emergency back-up
battery. The subscriber is connected to the cable phone network using the
existing home telephone wiring and telephones.
We plan to utilize cable phone equipment with various line capabilities.
For the residential and small office/home office market, a one-, two- or four-
line unit will be utilized. Eight- and twelve-line cable phone equipment units
will be used to provide service to both multiple dwelling units and segments of
the medium business market. This type of installation uses the hybrid fiber
coax-based network to terminate into the multiple dwelling unit or business
customer's premise. The interface with the subscriber's phone will be the
existing twisted-pair in-house wiring system. The subscribers receive all the
services with voice quality that is equal to or better than that of the
incumbent telecommunications operator.
Large businesses generally will be connected to the network with direct
fiber connections using "self-healing" synchronous digital hierarchy fiber
optic ring technology. This technology automatically detects disruptions in the
fiber and reroutes calls within 1/20th of a second, thereby providing reliable
service to these customers. Typically, these medium to large businesses will be
served by installing synchronous digital hierarchy add/drop multiplexors at the
business premises.
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The diagram below depicts the technology for adding cable phone at the
distribution hub and subscriber residence, as well as the telephone
configuration for multiple dwelling units and medium and large businesses:
[DIAGRAM OF TELEPHONE ARCHITECTURE APPEARS HERE]
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Our upgraded network has been designed to support up to 600 telephone lines
per fiber node. Assuming 1,000 homes passed per fiber node and 35% of telephone
subscribers order a second line, this configuration would support over 440
subscribers, or approximately 44% of homes passed. Higher penetration rates
could be supported either by allocating another radio frequency channel or sub-
dividing the fiber node by adding another fiber optic transmitter/receiver
pair. Another 1.5 MHz channel could support an additional 120 lines. To add
another transmitter/receiver pair would require an investment of about NLG20
per line. Our network architecture has been designed to allow for future fiber
node subdivision without having to spend incremental capital on fiber optic
construction. We also have the extra fiber capacity at each fiber node to
connect directly businesses that require more capacity than cable phone
installations.
Most of our networks have been constructed in a similar manner to utility
networks. These networks are underground, access to the plant is from access-
restricted cabinets and wiring is inside the homes. Some non-UPC cable phone
installations have experienced noise in the line caused by ingress resulting
from a wide range of factors including poor construction practices, improperly
used fittings or cable plant that is exposed to the elements (overhead, aeriel
plant) typical of cable television networks constructed in the United States
before the use of two-way plant was contemplated. The high quality construction
of our Western European networks allows very little noise in cable phone lines
due to ingress.
Consumers expect their telephones, unlike cable television services, to be
powered separately from the main power and thus continue to function in the
event of a power outage. To meet this requirement, we are installing
uninterruptable power supplies at the master telecom center, distribution hubs
and fiber nodes to ensure that the network can continue a "lifeline" service if
the local power supply fails. To enable the customer interface unit to function
in a power outage, we provide standard emergency back-up power by installing
rechargeable, sealed lead acid batteries with a projected five-year life. These
batteries are housed within the customer interface unit and are able to provide
over eight hours of standby time or two hours of talk time in the event of a
power outage. The batteries recharge themselves from the main electricity
source when the power resumes. If the power outage is longer than eight hours,
however, these customer interface units would likely not remain functional. See
"Risk Factors -- Large Numbers of New Customers for Our New Telephone and
Internet/Data Services Could Harm the Quality of Service and Thus Customer
Demand".
Internet Access Technologies
We believe that the slow speed of current residential Internet access is a
significant deterrent for Internet users. This slowness results from the
predominance of telephone dial-up modems as the access means, where the maximum
speed of the fastest dial-up modem on the market is either 56 Kbps or 64-128
Kpbs. Although a number of different technologies designed to provide much
faster access than dial-up modems have been proposed and are being tested, we
believe that cable modem access technology is superior to all other current
technologies because:
. cable modem technology is based on the widely used Transport Control
Protocol/Internet Protocol, which is used on local area networks and the
Internet,
. a global standard, MCNS/DOCSIS, has been created and accepted, and
. customers are served by a shared infrastructure, which allows for lower
cost service offerings.
Cable modem technologies were launched in our Austrian, Belgian, Dutch and
Norwegian networks on a trial basis in 1997. Our existing two-way
infrastructure is used to provide high speed Internet access to the subscribing
home or business. Cable modem service, such as that employed by chello
broadband, consists of a cable modem in the customer's home or office that
permits the customer's personal computer to connect to the Internet through the
network at speeds up to 100 times faster than the fastest dial-up modem
services. This service provides extremely fast downloading of most commonly
viewed pages, CD quality video and sound and quality desktop audio/video
conferencing.
Pan-European Backbone
We intend to develop a pan-European backbone. The backbone is designed to
link our
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major cable networks through a combination of leased capacity arrangements
between Vienna, Amsterdam, Brussels and Oslo. Our pan-European backbone will
also be capable of being linked to the United States through two leased fiber
routes. In October 1998, we entered into a contract with Hermes Europe Railtel
for the purchase of transmission capacity. This agreement allows chello
broadband and Priority Telecom to purchase fiber-optic based high speed
transmission capacity for their services.
When fully developed, this pan-European backbone would link Priority
Telecom's and chello broadband's national networks and points-of-presence with
other countries and international gateway facilities, including international
Internet network access points and international voice and data switching
hubs. Through the use of this network, Priority Telecom and chello broadband
plan to offer solutions for international carrier traffic distribution and
other voice and data services.
The following diagram depicts this architecture:
[MAP APPEARS HERE]
In the above diagram, chello broadband's pan-European backbone, branded
AORTA, will interconnect the 155 Mbps ring to three major Internet exchange
points -- Amsterdam (AIX), Stockholm (GIX) and Vienna (E-Bone). Each of these
major European Internet exchange points will provide chello broadband with
Tier 1 Internet connectivity, which is the highest level of interconnection
performance on the Internet backbone, when chello broadband expands to
strategic Internet exchanges. Tier 1 Internet peering offers transit network
rights to and from the large Internet providers throughout Europe. chello
broadband intends to interconnect to the U.S. network access points in
Washington D.C. and New York via a 45 Mbps transatlantic fiber link.
To provide additional capacity and provide redundancy for the pan-European
backbone, we intend to implement a satellite Internet network.
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This network will augment the backbone to provide high capacity Internet
connectivity in countries where the costs for high fiber bandwidth is
prohibitive. This satellite architecture also would provide a more cost-
effective method to transmit data from the U.S. to Europe than the
transatlantic fiber.
The pan-European backbone and the satellite Internet network will allow
broadband Internet subscribers to experience access speeds that are up to 100
times faster than traditional dial-up services. chello broadband will also
implement caching technology at the local master telecom centers that keeps the
most popular Web content close to the local customer for quick retrieval.
Local Access Network Architecture. We have implemented in Austria,
Belgium, The Netherlands and Norway a local Internet access architecture with
server farms located in each master telecom center. The broadband content and
backbone interconnection are interfaced with the local Internet access platform
through the caching and other chello broadband servers.
Digital Distribution Platform
We are seeking partners to construct a pan-European digital video
distribution platform. The pan-European digital video distribution platform, if
constructed, would provide an economical way to deploy digital video avoiding
the expense of separate encoding and conditional access systems at every
headend. The aggregation of programming through a central UPC uplink facility
would provide cost-efficient digital distribution to multiple cable companies
throughout Europe, making it easier for both us and other companies to buy
services. We would carry programming versioned for multiple languages in one
data stream and use remote storage and playout to deliver near video on demand
services.
Our planned digital distribution platform would accomodate video
compression, playout and overall conditional access control for us and non-
affiliates. We have designed this distribution architecture to provide the
basis for additional revenues beyond the cost-efficient delivery of digital
channels. First, it includes a unique way to overcome the complexity of rights
issues for near video on demand. Simultaneous pan-European broadcasting is not
possible with near video on demand, because rights windows vary by country. Our
solution is to broadcast near video on demand programming to remote content
servers at the headend, which will store the programming and play it out
according to local schedules.
We believe that if this digital distribution platform is constructed, it
will provide the first pan-European digital video distribution platform with
coverage, content and conditional access mechanisms to attract European cable
companies, including our own operations.
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GLOSSARY OF TECHNICAL TERMS
Backbone - A high-capacity network that links together other networks of
lower capacity.
Bandwidth - The capacity, in terms of volume and speed, of cable to
transmit information. This is measured in Hertz (cycles per second) or bits per
second (bps).
Bitstream - A stream of data produced by compressing analog video or audio
information into digital signals.
Cable Modem Termination System (CMTS) - Equipment located in the
Distribution Hub that converts optical Internet/data signals into radio
frequency signals.
Call Blocking - The restriction of telephone lines from making calls to
other lines due to a lack of available capacity.
Central Content Server (CCS) - This is the centralized server element of
the Near Video On Demand (NVOD) portion of the digital distribution platform.
All NVOD programs are stored on this server for subsequent delivery to the
Remote Content Servers (RCS) located within the various cable headends. See "--
Remote Content Server".
Coaxial Cable (Coax) - A transmission medium consisting of one or more
central wire conductors, surrounded by dielectric insulator, and encased in
either a woven wire mesh or extruded metal sheathing. The electromagnetic wave
travels between the outer shield and the conductor. Coax can carry a much
higher bandwidth than the wire pair used in traditional telephone networks.
Compression - A method that reduces the bandwidth or bits necessary to
transmit or store information.
Conditional Access - The part of the digital distribution platform that is
used to control access to what a subscriber may view and how the digital set-
top box will function. Coupled with data encryption, conditional access
provides the primary security element of the distribution system.
Data over Cable System Interface Specification (DOCSIS) - U.S.-based
standard for increasing the amount of data that can be transmitted over HFC-
based networks.
Digital Video Broadcasting (DVB) - Extensive set of standards that defines
the way digital entertainment services (television in particular) are packaged
and transported throughout Europe. The DVB standards have been adopted by the
European Union as the standard for digital broadcasting.
Distribution Amplifier - A device used to increase the radio frequency
signal to compensate for signal loss.
Distribution Hub - A building or equipment facility that houses voice,
video and data equipment before sending these signals to the Fiber Nodes.
Downstream - Signals travelling to the subscriber's home from the Master
Telecom Center.
Encoding - The act of changing data into a series of electrical or optical
pulses for more efficient travel, thus reducing overhead and bandwidth
requirements.
Fiber Node - A device that receives and transmits optical signals and
reconverts the optical signal to an electrical signal for transmission on
coaxial cables.
Final Amplifier - The last coaxial amplifier between the fiber node and the
subscriber connection. The amplifier feeds the subscriber multi-port tap.
Gbps - Giga bits per second. One billion bits of information transmitted in
one second.
Headend - The equipment at a cable system that receives the program
signals, whether by satellite, broadcast or tape, processes them and
retransmits them to subscribers through the network.
Host Digital Terminal (HDT) - Equipment located in the Distribution Hub
that converts
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optical telephone signals into radio frequency channels.
Hybrid Fiber Coax (HFC) - A technology designed to receive multiple
broadcast and/or non-broadcast signals and to distribute them through a
combination of coaxial and fiber-optic cable to subscribers. HFC technology
also enables service providers to offer two-way telecommunications services.
Impulse Pay-Per-View (IPPV) - Pay-per-view service that enables the
subscriber to purchase programming by using the subscriber's set-top box and
remote control (i.e. on impulse) rather than calling the cable operator in
advance of transmission.
Integrated Services Digital Network (ISDN) - A set of standards for the
transmission of simultaneous voice, data and video information over fewer
channels than would otherwise be needed.
Internet Protocol (IP) - A standard used in routing, transmitting and
delivering packets of data between Internet servers, where web pages and email
messages are stored.
Kbps - Kilo bits per second. One thousand bits of information transmitted
in one second.
Local Area Network (LAN) - A network that covers a limited geographical
area (usually within one building site) and interconnects a variety of
computers and terminals.
Master Telecom Center (MTC) - The primary technical facility of each cable
system. This facility typically includes the cable television equipment,
telephone switch equipment, voice mail platform, fiber optic equipment,
Internet servers and modem interfaces.
Mbps - Mega bits per second. One million bits of information transmitted in
one second.
Multichannel Multipoint Distribution System (MMDS) - Wireless cable
transmitting a number of television channels to households in a limited area.
Multi-Port Tap - A device that interconnects one or more customers to the
coaxial network. The device provides isolation between each individual
subscriber's connection and the network.
Near Video-On-Demand (NVOD) - An advanced form of impulse pay-per-view that
offers more "purchase opportunities" to the consumer by showing programs more
frequently than IPPV. NVOD operations require a greater number of channels on a
system than traditional IPPV.
Neighborhood Substation Combiner - A device that combines radio frequencies
from the network so the combined output is in the frequency range of 54-860
MHz.
Radio Frequency - The medium that carries information. A typical broadband
network uses radio frequencies between 80 and 860 MHz to carry signals from the
Master Telecom Center to the subscriber.
Receiver (Rx) - A device used to receive radio frequency signals. This
could be a satellite receiver or a television receiver in a subscriber's home.
Remote Content Server (RCS) - This is the remote server in the digital
distribution platform that is used for NVOD services. The RCS is located in the
Master Telecom Center of a broadband network. All NVOD programs are stored on
this server for playout to the digital set-top box. See "-- Central Content
Server ".
Subscriber Management System - Refers to the system used by a network
operator to manage its subscribers. Typical functions can include billing,
marketing, workforce management and scheduling.
Synchronous Digital Hierarchy (SDH) -The European version of the
synchronous optical network (SONET) transmission standard designed for "self-
healing" broadband optical networks. These can detect a break in the fiber and
reroute the signal.
Transmitter (Tx) - A device that typically uses radio frequencies to
transmit information to one or more locations where the information is
recovered by a receiver. See "-- Receiver (Rx)".
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Transport Control Protocol (TCP) - One of the components of the
transmission control protocol/Internet protocol (TCP/IP) that provides routing
among networks and, in some cases, within a particular network.
Trunk Amplifier - A device that increases the electrical signal on the main
transportation cables of a coaxial network and usually carries signals to and
from the fiber optic node and the distribution amplifier or final amplifier.
Upstream - Signals travelling from the subscriber's home to the Master
Telecom Center.
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CORPORATE OWNERSHIP STRUCTURE
We own 100% of our operating systems in Norway, Belgium and the Czech
Republic. Below is a description of those operating systems in which we hold
less than 100%.
AUSTRIA
Telekabel Group consists of five Austrian corporations, each of which owns
a cable television operating system. We own 95% of, and manage, each Telekabel
Group company. Each of the respective cities in which the operating systems are
located owns, directly or indirectly, the remaining 5% interest in each
company.
Telekabel Wien's 5% shareholder Kabel-TV-Wien Gesellschaft m.b.H is owned
by the City of Vienna. KTV has the right to appoint a member to Telekabel
Wien's supervisory board. If four to six members have been appointed by
shareholder resolution, KTV has the right to appoint two members. KTV's
director has a veto right with respect to the introduction and provision of new
cable television and other services. These other services include the provision
of tiered channels, pay-per-view, Internet/data services and telephone
services. He also has a veto right over the enlargement of the current cable-
network, pricing arrangements and integration of different services. Although
we believe the cooperation between KTV's director and the other directors has
been successful in the past, there can be no assurance that KTV's director will
approve the planned new activities in Austria.
In connection with the UPC Acquisition in December 1997, KTV and Philips
agreed that Philips will continue to guarantee the capital level to be
maintained by Telekabel Wien. Philips has also agreed to guarantee the
continued fulfillment of the agreements that were originally concluded between
KTV and Philips and that were assigned by Philips to us. We have agreed to
indemnify Philips for any liability under Philips' guarantee.
Due to its position as a guarantor, Philips has the right to appoint one
member to our Supervisory Board. This Supervisory Director has a veto right
that is limited to fundamental decisions and exceptional business matters, such
as the sale or disposition of our interests in Telekabel Wien, if certain
threshold values are met. See "Certain Transactions and Relationships--
Relationship with Philips".
Philips, KTV and ourselves have agreed that the agreements concluded
between KTV and Philips will run until December 31, 2022 with an option to
extend them.
The articles of association of the companies in the Telekabel Group
restrict their shareholders from divesting their interests for periods ranging
from the end of 2009 to 2022. In addition, a sale of shares requires notice of
two years and is subject to a right of first refusal of the other shareholders.
The City of Vienna's approval is required for any change of control over
us, which approval cannot be unreasonably withheld if the buyer is a reputable
telecommunications and/or cable television operator. In the absence of such
approval, the City of Vienna can require UIH to own Telekabel Wien separately
from us. See "Certain Transactions and Relationships".
We may provide Priority Telecom's services to Telekabel Group's subscribers
through a wholly-owned subsidiary, even though the services will continue to be
marketed by Telekabel Group.
THE NETHERLANDS
UTH
We and NUON own 51% and 49%, respectively, of the ordinary share capital of
UTH. We will purchase NUON's 49% of UTH at the closing of this offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- History of UPC".
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UTH has pledged its interest in Telekabel Beheer and its subsidiaries to
secure the UTH Facility, which it has received commitments from its banks to
replace. If NUON is not repaid, it will have the right to sell the relevant
companies to repay the indebtedness. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations --Liquidity and Capital
Resources -- Current Debt Facilities -- UTH Facility".
A2000
UTH and MediaOne International, an international developer and manager of
cable television, telephone and wireless communications properties, each own
50% of the ordinary share capital of A2000. A2000 owns 100% of Kabeltelevisie
Amsterdam B.V., which operates cable systems in Amsterdam, Landsmeer,
Purmerend, Zaanstad and Ouder-Amstel, and 100% of A2000 Hilversum B.V., which
operates a cable system in Hilversum. The Municipality of Amsterdam owns one
priority share in Kabeltelevisie Amsterdam, which gives the municipality the
right to block the merger, demerger, dissolution and liquidation of
Kabeltelevisie Amsterdam, certain amendments to Kabeltelevisie Amsterdam's
articles of association, the issue of Kabeltelevisie Amsterdam shares to
persons other than A2000, the appointment of a legal entity as a managing
director and the granting of voting rights to a pledgee of A2000's shares of
Kabeltelevisie Amsterdam. Furthermore, the Municipality of Amsterdam's approval
is required for any change of control over A2000. Approval cannot be withheld
if the buyer is a reputable telecommunications and/or cable television operator
or financial institution.
A2000, Kabeltelevisie Amsterdam and Kabeltelevisie Hilversum are each
managed by a management board, responsible for day-to-day management, under the
supervision of a non-executive supervisory board. The supervisory boards of
A2000 and Kabeltelevisie Hilversum consist of an even number of directors: one
half are appointed upon binding nomination from MediaOne and one half are
appointed upon binding nomination from UTH. Certain major decisions require
approval by at least 75% of the shareholders. Kabeltelevisie Amsterdam's
supervisory board consists of three directors, one appointed by each of
MediaOne, UTH and the municipality. The Kabeltelevisie Amsterdam and
Kabeltelevisie Hilversum management boards consist of at least one managing
director (the chief executive officer), appointed by UTH, and a chief financial
officer, appointed by MediaOne, as well as other members appointed by both. The
A2000 management board consists of an even number of directors, currently two,
one appointed by UTH and one appointed by MediaOne. Certain major decisions
affecting Kabeltelevisie Amsterdam, such as approval of business plans and
annual budgets, require approval of the majority of the supervisory board of
Kabeltelevisie Amsterdam.
A2000 is a 50/50 joint venture that requires the agreement of both owners
for certain management decisions. From time to time, there has been
disagreement between its owners as to some of the operations of A2000. We do
not believe, however, that A2000's operations or prospects have been materially
affected by these disagreements.
France
We own 99.6% of Mediareseaux, our French operating system. The other owner
of Mediareseaux is an entity controlled by Patrick Drahi, its founder and
current chairman, which holds warrants giving it the right to purchase for a
nominal amount new shares corresponding to 4.6% of Mediareseaux's share
capital. Accordingly, we have only a 95% economic interest in Mediareseaux.
Pursuant to an agreement dated June 16, 1998, we and the entity controlled by
Patrick Drahi have granted to each other options to purchase and sell, at a
price based on fair market value, the shares of Mediareseaux that the entity
may hold in the future.
Israel
We currently own indirectly 46.6% of Tevel, our Israel operating system. We
acquired 23.3% of this interest in November 1998. An Israeli corporation owned
by DIC Communication and Technology Ltd. and PEC Israel Economic Corporation
and whom we call the "Discount Group" owns 48.4% of Tevel and a private Israeli
investor holds the remaining 5% of Tevel.
Tevel is managed by a board of directors. We have the right to designate
one of Tevel's five
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directors for each 17% of Tevel that we own. Currently, two Tevel directors are
our appointees. Each of Tevel's shareholders has agreed to grant a right of
first refusal to the other shareholders in the event of a transfer of any Tevel
shares. If the other shareholders do not exercise this right, they are
permitted to participate in the sale and may require the selling shareholder to
include in the
transferred shares such number of shares equal to each shareholders' pro rata
amount.
In addition, any shareholder of Tevel that holds more than a 30% interest
may offer its shares to the other shareholders at a price based upon the
appraised fair market value of Tevel. If the other shareholders do not accept
the offer, the offering shareholder may require that all of the shares of Tevel
be sold to a third party at the appraised value. Any such sales would be
conditioned on receipt of appropriate regulatory and other consents. If a third
party has not agreed to purchase the Tevel shares at the appraised value within
six months of the date the appraisal is delivered to Tevel and the
shareholders, the right to exercise the forced buyout option lapses, and any
shareholder that thereafter desires to exercise the forced buyout option must
first offer to sell its shares to the other shareholder at fair market value
based on a new appraisal. No shareholder may exercise this forced buyout option
more than once in any 12-month period. Neither party has exercised the forced
buyout option. We and the Discount Group have agreed not to exercise this
forced buy out option while our loan from DIC is outstanding. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources --Current Debt Facilities -- DIC Loan".
Tevel's shareholders, other than the private Israeli investor, have agreed
not to compete with Tevel in respect of certain cable telecommunications
services and complementary businesses in Israel unless the Tevel board of
directors decides that Tevel will not participate in such systems or
businesses.
Tevel has entered into two consulting agreements with affiliates of the
Discount Group and us. Pursuant to these agreements, Tevel is required to pay
to each of us and the Discount Group up to 2.5% of Tevel's annual gross
revenues, excluding customer premise equipment deposits. Tevel is entitled to
terminate the consulting agreement with either us or the Discount Group if such
holder's share ownership in Tevel falls below 20%. The validity of the
consulting agreements has been challenged by Tevel's minority shareholder,
claiming that the consulting fee is not proportionate to the services rendered.
Accordingly, the minority shareholder has claimed that these agreements
constitute an oppression of the minority under Israeli law and has demanded
cancellation of the consulting agreements. Tevel, we and the Discount Group
have rejected these claims and the parties are attempting to settle such
disagreement.
Malta
We currently own indirectly 50% of the ordinary share capital of Melita. We
acquired 25% of this interest in November 1998. See "Prospectus Summary --
Recent Developments". The remaining 50% is owned by Melita Cable Holdings
Ltd., a Maltese company owned by Maltese citizens, as required by Melita's
franchise agreement.
The day-to-day management of Melita is vested in its board of directors.
Melita currently has nine directors of whom we appointed four, Melita Cable
Holdings appointed four and we and Melita Cable Holdings jointly appointed the
president. Certain major actions require our approval and the approval of a
majority of the directors of Melita Cable Holdings.
Neither we, Melita Cable Holdings nor our affiliates may compete with
Melita with respect to providing video signals to homes in Malta. Each of us
now may offer our interest in Melita to the other. If either of us elects not
to purchase the other's interest, we both must cooperate to sell all of Melita.
If either of us sells our interest in Melita to a third party, the one which is
selling must give the other an opportunity to sell to that third party.
We provide management services and second personnel to Melita pursuant to a
management agreement that expires
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December 31, 2004, for which we are paid a fee equal to 5% of the gross
revenues of Melita and are reimbursed for expenses, including costs of our
personnel, who provide substantially full-time service to Melita.
Hungary
Telekabel Hungary
We and The First Hungary Fund Ltd., an investment fund, indirectly own
79.25% and 20.75%, respectively, of the ordinary share capital of Telekabel
Hungary. Telekabel Hungary owns interests ranging from approximately 96.88% in
one and 100% in seven of the eight Kabelkom systems contributed by us and 100%
in five and 99.96% in one of the Kabeltel systems contributed by The First
Hungary Fund. Our shares of Telekabel Hungary are pledged in favor of Telekabel
Hungary's DEM65.6 million bridge finance lenders. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources --Current Debt Facilities -- Telekabel Hungary Facility".
One of our wholly-owned subsidiaries is solely responsible for day-to-day
management of Telekabel Hungary, under the supervision of Telekabel Hungary's
supervisory board. The supervisory board has four members, three of which are
appointed by us and one by The First Hungary Fund. The parties have agreed that
the supervisory director appointed by The First Hungary Fund may block the
required supervisory board approval of any element of the business plans and
budgets of Telekabel Hungary and its subsidiaries that he reasonably determines
would decrease the shareholders' value of Telekabel Hungary to the detriment of
The First Hungary Fund while we would obtain an increase in value other than
through Telekabel Hungary or its subsidiaries. Certain major decisions
concerning Telekabel Hungary and its subsidiaries, such as the merger,
demerger, liquidation and sale of all or substantially all of the assets of
those entities, the amendment of their articles of association, and the
issuance of certain preference shares, require approval of The First Hungary
Fund's representative so long as The First Hungary Fund owns at least 10% of
Telekabel Hungary's share capital.
Moreover, we and The First Hungary Fund can dispose of our shares in
Telekabel Hungary after December 31, 1999, either to the other at fair market
value, to a third party or through a registration of such shares under the U.S.
Securities Act of 1933 or on a European exchange. The selling shareholder must
first offer its shares to the other and, if the non-selling shareholder
declines to purchase such shares, the shares may be sold to a third party on
terms no less favorable than the terms offered to the non-selling shareholder
for a six-month period after the non-selling shareholder so declines.
Monor
Monor Telefon Tarsasag Rt has the exclusive, local-loop telephone
concession for the region of Monor, Hungary. We and our partner, PenneCom B.V.,
each own about a 44.75% economic interest and about a 37.5% voting interest in
Monor. The remaining economic and voting interests are owned by several
Hungarians.
Romania
We have interests in three Romanian cable companies: indirect 100%
interests in Multicanal Holdings, SRL, located in Bucharest, and Control Cable
Ventures, SRL, with operations in Ploiesti and Slobozia, and a 51% interest in
Eurosat, with operations in Bacau. The other shareholders of Eurosat are local
investors.
Slovak Republic
We operate in the Slovak Republic through two Slovak limited liability
companies: KabelTel S.R.O., and Trnavatel S.R.O. We have a 100% indirect
interest in KabelTel, and a 75% indirect interest in Trnavatel. Salko Ltd., a
Slovak corporation, owns 20% and the City of Trnava owns 5% of the remaining
interest in Trnavatel. KabelTel has operations in the cities of Zvolen, Levice
and Nove Zamky, while Trnavatel operates in Trnava.
Programming Companies
Tara
We own 80% of Tara. The remaining 20% of Tara is owned by RTE Commercial
Enterprises Ltd., an affiliate of the Irish national broadcasting company. Tara
is managed by a board of directors.
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IPS
IPS is a group of three related entities, one corporation and two
partnerships, focusing on the Spanish and Portuguese markets. Following our
acquisition of UIH's interest, we will hold an approximately 33.5% interest in
these entities. The other partners of IPS are a subsidiary of The Walt Disney
Corporation and entities owned by the Urbina Group.
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REGULATION
The provision of video, telephone and Internet/data services in the
countries in which we operate is regulated. See "Risk Factors -- Adverse
Regulation of Our Video Services Could Limit Our Revenues and Growth Plans" and
"-- Regulation May Adversely Affect Our Plans to Introduce Our New Telephone
and Internet/Data Services or How Fast Our New Services Grow". The scope of
regulation varies from country to country, although in some significant
respects regulation in our Western European markets is harmonized under the
regulatory structure of the European Union. Below is a summary of the
regulatory environment in the European Union and the European Economic Area
member countries in which we operate and of the regulatory environment in
Israel. See "Business -- Operating Companies" for a discussion of certain
regulations in other of our operating markets.
European Union
Austria, The Netherlands, Belgium and France are all member states of the
EU. As such, these countries are required to enact national legislation which
implements directives issued by the EU Commission and other EU bodies. In
recent years, the EU has led the opening of competition and the liberalization
of the telecommunications and video services sectors, which includes the use of
cable networks to provide public voice telephone and other telecommunications
services, in EU member states. Although not an EU member state, Norway is a
member of the European Economic Area and has generally implemented or is
implementing the same principles on the same timetable as EU member states. As
a result, most of the markets in which we operate have been significantly
affected by regulation initiated at the EU level. As it develops, such EU
regulation will continue to have a significant effect on these markets,
including future developments relating to the convergence of
telecommunications, media and information technology.
The EU Commission has started to review the consequences of this
convergence for the regulatory environment. This review will take place during
1999 and may result in changes of the current regulatory framework, but the
scope of such changes cannot be predicted at this time.
Telephone and Internet/Data Services
Liberalization of Telecommunications Services and Infrastructure. A central
aim of the liberalization process has been to reduce the monopoly power of the
incumbent telecommunications operators in order to introduce competition in the
European telecommunications market. Following the EU Commission's Services
Directive (90/388/EEC), dated June 28, 1990, as amended, the exclusive rights
of such incumbent operators to provide telecommunications services were
gradually removed so that competing operators and service providers would be
entitled to offer such services. The incumbent telecommunications operators
invariably owned the national networks, however, and the lack of an alternative
infrastructure to provide such liberalized services operated as a major barrier
to entry into the market by competitors. In an effort to overcome this barrier,
the EU introduced the "Cable Television Networks Directive" (95/51/EC), dated
October 18, 1995, which required member states to remove existing restrictions
on the use of cable television networks to provide communications services
other than cable television services. As a result, cable television operators
became able to use their networks to provide telecommunications services except
for public voice telephone. In 1996, the EU Commission issued the "Full
Competition Directive" (96/19/EC), which required most member states to remove
the exclusive rights of incumbent public voice telephone operators by January
1, 1998. The establishment and provision of telecommunications networks was
also liberalized under this directive. As a result of this directive, our
Western European operating companies may establish and provide
telecommunications networks and/or services, including public voice telephone
and Internet/data services, through their cable networks.
Under the Cable Television Networks Directive, telecommunications operators
that have exclusive rights to provide cable television network infrastructure
in a given area and achieve an annual turnover of more than ECU50 million must
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account separately for their telecommunications services and any cable
television services. In The Netherlands, Belgium and in certain circumstances,
Norway, this requirement applies to all telecommunications operators providing
both cable television and other telecommunications services under national law
irrespective of the above-mentioned requirements. Should any of our operating
companies in the EU with exclusive rights to cable television infrastructure
achieve the requisite turnover, they would become subject to these
requirements.
A draft Directive of the EU Commission, if issued, will require member
states to enact legislation directing incumbent telecommunications operators to
separate their cable television and telecommunications operations into distinct
legal entities. This directive is likely to affect how incumbent
telecommunications operators position themselves in cable television or
broadband services by encouraging them to restructure their existing
operations, which may increase their competition with us, although the
incumbent operators do not currently compete in the cable television services
market.
Interconnection. Because new telecommunications operators need to
interconnect their networks with the fixed public telephone network, the EC
Council of Ministers and the European Parliament adopted the Directive on
Interconnection in Telecommunications (97/33/EC), which sets forth the general
framework for interconnection, including general obligations to allow other
telecommunications operators to interconnect with their networks. The directive
requires member states to impose obligations on telecommunications network
operators with significant market power (which, although it may vary, is
presumed when an operator has 25% or more of the relevant market). They must
offer interconnection without discriminating between operators, which offer
similar services, and their interconnection charges must follow the principles
of transparency and be based on the actual cost of providing the
interconnection. As a result, if the principles in the directive are fully
applied, our operating companies in the EU and Norway should be able to
interconnect with the public fixed network and other major telecommunications
networks on a cost basis in order to provide their services. There can be no
assurance, however, that we will be able to obtain from incumbent
telecommunications operators interconnection on terms and conditions or at
prices satisfactory to us without protracted negotiations or involvement in
time-consuming regulatory proceedings. See "Risk Factors -- Regulation May
Adversely Affect Our Plans to Introduce Our New Telephone and Internet/Data
Services or How Fast Our New Services Grow" and "-- Our New Telephone and
Internet/Data Services Could Run Into System, Marketing, Competition and Timing
Problems that Would Impede Our Revenue Growth".
Licensing. EU telecommunications policy has also aimed to harmonize the
licensing requirements for the provision of public telecommunications services.
As a result of the "Licensing Directive" (97/13/EC), which became effective on
December 31, 1997, member states are required to change national legislation so
that providers of telecommunications services require either no authorization
or a general authorization which is conditional upon "essential requirements",
such as the security and integrity of the network's operation. Licensing
conditions must be objective, transparent and non-discriminatory. Member states
may issue individual licenses in certain situations. For example, the provision
of public voice telephone and the establishment or provision of public
telecommunication networks may be subject to individual licenses. In addition,
telecommunications operators with significant market power may be required by
member states to hold individual licenses carrying more burdensome conditions
than the authorizations held by other providers. Significant market power is
typically 25% of the relevant market.
Regulation of the Internet. Although Internet-specific regulations have not
been issued, EU policy may develop harmonized principles of "responsibility of
content" to apply to Internet access providers analogous to those applicable to
publishing companies. We do not expect such regulations to materially adversely
affect our Internet business plans.
Video Services
Video Services through Telecommunications Networks. Most of our operating
companies are the only cable television operators in their
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franchise areas. As with the telecommunications sector, the cost of building a
network to provide video services is a considerable disincentive to potential
new entrants in the video services market. Our operating companies may face
competition in the long term in their franchise areas from new entrants
providing video services through the infrastructure of incumbent
telecommunications operators and potential new entrants. In The Netherlands,
for example, where there are no restrictions on the use of telecommunications
infrastructure for the provision of cable television services, the incumbent
telecommunications operator is testing whether it will be able to provide video
services through its fixed networks.
Conditional Access. In order to enable further competition in the video
services market, the EU Commission passed the "Advanced Television Standards
Directive" (95/47/EC), dated October 24, 1995, which requires member states to
regulate the offering of conditional access systems, such as program decoders
used for the expanded basic tier services offered by many of our operating
companies. Providers of such conditional access systems are required to make
them available on a fair, reasonable and non-discriminatory basis to other
video service providers, such as broadcasters.
Broadcasting. The "Television Without Frontiers Directive" (97/36/EG),
dated June 30, 1997, is intended to introduce freedom of broadcasting in the
EU. Generally, broadcasts emanating from and intended for reception within a
country have to respect the laws of that country. Under the directive, other EU
member states will be required to allow broadcast signals to be made into their
territories so long as the broadcaster complies with the law of the originating
member state. Television advertising and sponsorship in member states will have
to comply with certain minimum rules and standards, although member states may
set more detailed and stricter rules for certain matters.
We plan to enter into joint venture agreements with programming providers
in order to launch eight new channels in late 1999, which we intend to
broadcast to our operating companies and other cable television operators for
distribution through their networks. We understand that the Television Without
Frontiers Directive will apply to the broadcasting of these joint-venture
channels to such operating companies so that one broadcasting license within an
EU member state will permit us to broadcast such channels to cable operators
throughout the EU. Where the joint-venture partner is already a licensed
broadcaster within the EU, we believe the joint venture activities may fall
within the scope of our partner's broadcast license, and that the joint venture
could operate under the terms and conditions of that license. We also plan to
apply for a broadcasting license in an EU country to accommodate joint ventures
with those partners that do not have a broadcast license in a member state of
the EU or channels created without a partner. We are currently in discussions
with the regulatory authorities in The Netherlands and plan to obtain a
broadcasting license in The Netherlands.
Austria
Relationship with Municipalities
Each of the five municipalities in which the Telekabel Group offers
services holds, directly or indirectly, 5% of the local operating company. Each
member of the Telekabel Group has entered into an agreement with its
municipality. Under the agreement between Telekabel Wien and the City of
Vienna, significant decisions of the operating company must be approved by a
unanimous vote of the board of directors, one member of which is currently
appointed by the municipality. In Vienna, the municipality's appointee is
currently in charge of the Vienna system's programming. The municipality's
appointee has a veto right over the introduction and provision of new cable
television and other services. These services include the provision of tiered
channels, pay-per-view, Internet/data services and telephone services. He also
has a veto right over the enlargement of the current cable-network, pricing
arrangements and integration of different services. While the municipality has
not used its veto power in the past, there can be no assurance that the
municipality will not use its veto power in the future and hinder the
implementation of our strategies for our video, telephone or Internet/data
services. The agreements between the other Telekabel Group members and their
municipalities require each member to consult with its
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municipality prior to making similar business decisions.
Video Services
Regulatory Framework. The Cable and Satellite Broadcast Radio Law governs
the provision of video services in Austria. The Regional Radio and Cable
Broadcast Authorities regulate the operation of cable television networks.
Notifications. Telekabel Group does not require a license to provide video
services. It need only notify the Regional Radio and Cable Broadcast Authority
of the services it intends to provide. The right to provide such services is
not exclusive.
Programming. Under the Cable and Satellite Broadcast Radio Law, Telekabel
Group is required to carry two "must carry" public Austrian channels in its
basic tier service. In July 1997, previous prohibitions on cable network
operators transmitting programming produced by them were lifted. Pursuant to
the terms of the agreement with Vienna, however, Telekabel Wien is prohibited
from producing programming.
Price Regulation. Pricing of the basic tier service is subject to price
control by the Austrian Wage and Price Commission. Approval from the Wage and
Price Commission generally must be sought where the desired increase is greater
than 50% of the consumer price index. Historically, all of Telekabel Group's
price increase applications have been approved. Pricing of services other than
the basic tier is not regulated.
Telephone and Internet/Data Services
Regulatory Framework. The Telecommunications Act which came into force
August 1, 1997 liberalized the telecommunications sector in Austria as of
January 1, 1998, in compliance with EU directives. As a result, cable
television networks may be used to provide telecommunications services as
described above under "-- European Union -- Telephone and Internet/Data
Services".
Licenses. A telecommunications operator or service provider must obtain a
license issued by the Austrian telecommunications regulatory agency, the
Telekom Control Commission, to provide public voice telephone services and for
the public offer of leased lines. Telekabel Wien has received a license to
provide public voice telephone services in the entire Republic of Austria and a
license for the public offer of leased lines through its cable network. The
licenses are granted for an unlimited period of time provided that the offering
of each respective service begins by February 1999 at the latest.
Interconnection. Austria's Telecommunications Act generally implements the
terms of the EU Directive on Interconnection in Telecommunications. In November
1998, the Telekabel Group entered into an interconnect agreement with PTA, the
incumbent operator. Difficulty and delay in negotiations and agreement led
Telekabel Group to seek the intervention of the Austrian telecommunications
regulator, which determined the principal terms of the agreement. See
"Business -- UPC Telephone Services: Priority Telecom -- Interconnect
Agreements".
Price Regulation. Although there are no voice-telephone pricing
regulations, the Telekom Control Commission must be notified of the tariff
structure and any subsequent rate increases. In addition, if the Telekabel
Group were held to have significant market power (as defined in Austria's
Telecommunications Act) with respect to the services offered, certain matters
including tariffs would become subject to the approval of the Telekom Control
Commission.
Internet/Data Services. Internet/data services are regulated as
telecommunications services under the Telecommunications Act. Under Austria's
Telecommunications Act, Telekabel Group does not require licenses to provide
Internet/data services. It need only notify the Telekom Control Commission of
the services it intends to provide.
Belgium
Video Services
Regulatory Framework. The law of March 30, 1995, for Brussels, the decree
of January 25, 1995 of the Council of the Flemish Community
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and the decree of July 17, 1987 of the Council of the French Community govern
the provision of video services in Belgium. Only the first two regulations are
relevant to TVD's operations.
Authorizations. In Belgium, a cable operator needs to obtain a governmental
authorization from the appropriate Community to operate a cable television
system. The Belgium Communities, which are the French Community, the Flemish
Community and the German-speaking Community, have exclusive jurisdiction to
regulate cable television, including programming content, in their respective
language areas. The Flemish and French Communities, as well as the Federal
government, have overlapping jurisdiction in the bilingual area of Brussels
where TVD operates. During 1996, 1997 and 1998, all of TVD's non-exclusive
authorizations were renewed for nine years. Special authorizations are also
required for the distribution of non-EU programs, both in Flanders and in
Brussels and we have requested a special authorization in Brussels.
Programming. In all of the regions of Belgium, cable television operators
are required to transmit particular local, national and other channels as part
of their basic tier service. There are usually between 11 and 13 of these
"must-carry" channels.
Price Regulation. Price increases require the approval of the Ministry of
Economic Affairs and must be justified by an increase in the cost of providing
the service. Increases are generally approved as long as the increase is below
the level of inflation. Historically, all of TVD's price increases have been
approved.
Franchise Fees. Since 1995, cable regulations came into force, which
granted cable operators a right of way for the use of public and private
property to install and exploit cable networks. Prior to the 1995 regulations,
TVD was a party to concession agreements with the municipalities in its
franchise areas, which obliged it to pay certain franchise fees. TVD has not
paid franchise fees since 1995 when the cable regulations went into effect. In
Etterbeek, however, TVD pays the municipality an annual amount. Nonetheless,
certain municipalities have requested payment of the old franchise fees, which
amount to 5% of the operating system's annual gross revenues. TVD does not
believe that it is obliged to pay these fees because it believes that the 1995
regulations have superseded the concession agreements.
TELEPHONE AND INTERNET/DATA SERVICES
Regulatory Framework. The provision of cable telephone is governed by the
law of March 21, 1991, as amended by the law of 1997, together with secondary
regulations. These provisions allow telecommunications services to be provided
through cable television networks as described above under "-- European
Union -- Telephone and Internet/Data Services". In line with the liberalization
process in the EU, the Belgian Parliament adopted in December 1997 a law
amending the law of 1991 and abolishing the remaining monopoly rights of
Belgacom, the incumbent telecommunications operator. As a result, other
telecommunications operators may begin to offer public voice telephone in
Belgium.
Licenses. TVD had a provisional license to build and operate a public
telecommunications network and has applied for a permanent license to build and
operate a telecommunications network. TVD has submitted an application for a
license to offer voice telephone services and expects to receive a license
during the first half of 1999.
Internet/Data Services. The provision of Internet/data services in Belgium
is also governed by the law of March 21, 1991, as amended, pursuant to which
TVD must make certain notifications to the Institut Belge des Postes et
Telecommunications regarding the services it intends to provide. In addition,
TVD is required to hold either a provisional or a permanent license to build
and operate a telecommunications network in order to offer Internet/data
services on its own infrastructure.
THE NETHERLANDS
VIDEO SERVICES
Regulatory Framework. The liberalization of the Dutch telecommunications
and cable television sector has generally proceeded at a quicker pace than set
by the EU directives. The new Telecommunications Act took effect, with the
exception of a few provisions, on December 15, 1998 and further liberalizes
these sectors. The
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Dutch Telecommunications Act governs the installation and operation of fixed
telecommunications infrastructures, which include cable television networks,
and the provision of telecommunications services, including the provision of
telephone and Internet/data services. The provision of video services through
the cable television network, and more specifically content, is regulated
primarily by the Dutch Media Act, as amended, and the Media Decree.
Under the new Dutch Telecommunications Act, the Dutch Independent Post and
Telecommunications Authority is charged with regulating the provision of
telecommunications services. Under the Media laws, video service providers are
subject to certain content requirements, which are overseen by the
Commissariaat voor de Media.
Registration. The new Dutch Telecommunications Act does not require a
license for the installation, maintenance or operation of a cable network.
Existing network operators need only register with the Dutch Independent Post
and Telecommunications Authority within six months after December 15, 1998. The
registration of a network does not give an operator any exclusive right. Any
person may install, maintain and operate a new network alongside an existing
one. The new Dutch Telecommunications Act gives cable network operators and
providers of other public telecommunication networks rights of way to install
and maintain cable, which are identical to those currently enjoyed by KPN, our
principal competitor in The Netherlands.
Programming. Pursuant to the Dutch Telecommunications Act and the Media
laws, cable television network providers must transmit to all of its
subscribers at least 15 programs for television and at least 25 programs for
radio, including approximately seven television and nine radio "must carry"
channels. The Dutch Independent Post and Telecommunications Authority may grant
a total or partial exemption from these obligations if the provider does not
have significant market power in its area of coverage.
Our Dutch operating companies originally purchased their cable television
networks from the local municipalities. Pursuant to the terms of the agreements
with the municipalities, the Dutch operating companies are obligated to
continue to provide basic tier services of between 20 and 30 television
channels, including the 15 required under the Media laws.
Cable television operators are allowed to transmit their own programs
within The Netherlands upon obtaining a broadcast license from the
Commissariaat voor de Media. The licensee must comply with the advertising and
sponsorship rules set forth in the Media laws, which are consistent with the EU
Television without Frontiers Directive.
Price Regulation. Under several of the agreements with the municipalities
described above, for a number of years the respective municipality's consent is
required for increases of the price of the basic tier service which exceed
certain agreed levels. Such consent is not required for price increases
resulting from costs beyond the control of the operating companies, such as
copyright fees, consumer price index increases and municipal duties and levies,
which can be passed on to subscribers. Because the base subscription rate for
the basic tier service has been kept at a low level, particularly in Amsterdam,
the operating companies make up their revenue by charging programming suppliers
carriage fees for the transmission of their channels. As A2000's basic tier
price has been particularly restricted, A2000's carriage fees have been higher
than those of the other Dutch systems held by UTH. Some of A2000's programming
suppliers have been unwilling to pay such carriage fees and have withdrawn
their channels from A2000's offering. Some of them have brought legal actions
challenging the carriage fees, arguing that A2000's carriage fees are an abuse
of its market strength. To date, none of A2000's programming suppliers have
succeeded in their actions against A2000. See "Business -- Operating
Companies -- The Netherlands: A2000 Holding N.V. -- Programming".
The price of the basic tier service may also be regulated by the Dutch
Ministry of Culture, but it has not yet intervened to stop price increases.
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Telephone and Internet/Data Services
Regulatory Framework. Until recently, the fixed telecommunications
infrastructure was a statutory monopoly of KPN, the Dutch incumbent
telecommunications provider. As described above, the Dutch telecommunications
sector has been liberalized in advance of and in accordance with European Union
telecommunications policy and cable television networks may now be used for the
provision of all telecommunications services.
Interconnection. The Dutch Telecommunications Act generally implements EU
telecommunications policy. A2000 has entered into an interconnect agreement
with KPN and UTH is currently negotiating an interconnect agreement for its
systems.
Price Regulation. While A2000's telephone service is not currently subject
to price regulation, the prices of its competitor, KPN, are. The Dutch
Independent Post and Telecommunications Authority has recently indicated that
KPN should reduce its end-user tariffs and substantially reduce its
interconnection prices to reflect costs.
Internet/Data Services. Under the Dutch Telecommunications Act,
Internet/data services are regulated as telecommunications services. As such,
our Dutch operating systems need only register with the Dutch Independent Post
and Telecommunications Authority as providers of public telecommunication
services and/or networks.
Norway
As a member state of the European Economic Area, Norway implements EU
directives in the telecommunications sector.
Video Services
Regulatory Framework. The provision of video services in Norway is
regulated by the Telecommunications Act of June 23, 1995 and The Broadcast Act
of December 4, 1992.
Registration. Under Norway's Telecommunications Act, the installation and
operation of the cable infrastructure and equipment must be authorized by and
registered with the Norwegian Post and Telecommunications Authority on the
basis of certain necessary technical qualifications.
In Norway, the simultaneous and unchanged transmission of television
signals over a cable television network is not subject to any licensing or
registration requirements.
Programming. Cable television providers have "must-carry" obligations
obliging them to include three national channels and typically one local
television channel in their basic tier services. Distribution of any
programming that is not a simultaneous and unchanged retransmission requires a
programming license issued by the Ministry of Cultural Affairs. Because pay-
per-view programming and some other services are not strictly simultaneous
retransmission, Janco Multicom has obtained a three-year programming license.
Price Regulation. The provision of the basic tier service is subject to
price control. A cable operator is only allowed to increase the basic package
subscription fee in line with the Official Consumer Price Index. There are no
specific pricing restrictions on expanded basic tier services.
Telephone and Internet/Data Services
Regulatory Framework. Since January 1, 1998, alternative networks in Norway
have been permitted to offer voice telephone services in accordance with the
terms of the applicable EU directives. See "-- European Union -- Telephone and
Internet/Data Services".
Registration. For telephone operators and service providers without
significant market power, as is currently the case with Janco Multicom, no
license is required to offer voice telephone services. Such providers need only
register with the Norwegian Post and Telecommunications Authority.
Interconnection. Norway's telecommunications legislation generally
implements EU policy on interconnection. Cable network companies have the right
to interconnect with the public telecommunications network and the national
incumbent operator, TeleNor, has the duty to provide any telecommunication
company with interconnection to its network on a non-discriminatory basis.
Interconnection rates charged by TeleNor must be on a cost-basis. Janco
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Multicom has entered into an interconnection agreement with TeleNor.
Pricing. Providers of public telephone without significant market power,
including Janco Multicom, are not subject to any specific pricing regulations.
Internet/Data Services. Cable television networks do not require a license
or notification to provide Internet/data services. They need only register the
service with the Norwegian Post and Telecommunications Authority.
Israel
Video Services
Regulatory Framework. As part of the liberalization policy adopted by the
Israeli Communications Ministry, the telecommunications and cable television
market in Israel is expected to undergo significant reforms in 1999. We expect
that these reforms will include opening the multi-channel television business
to competition by granting licenses to DTH operators and opening the local
telephone and Internet/data transmission markets to competition by granting
licenses to independent operators, thereby allowing competition with Bezeq, the
Israeli incumbent telecommunications operator. Upon expiration of the existing
cable television licenses, franchise exclusivity will be eliminated and other
operators will be permitted to apply for cable television licenses to compete
in the cable television market.
The 1987 Bezeq law, which allowed the introduction of cable television,
gave the new cable companies exclusive rights to download and rebroadcast
satellite programming until 2003. The cable television operators therefore
challenged the legal basis of the Ministry of Communications policy of
introducing DTH before that date. In November 1998, the Israeli High Court of
Justice decided that DTH service could be introduced before 2003. The cable
television operators are seeking compensation for the loss of exclusivity prior
to 2003. This could come in the form of some additional right or rights with
respect to the content or services they provide.
The Communications Ministry announced its schedule in July 1998 for
granting DTH licenses and we understand that the Ministry has now received
three license applications.
Franchise Agreements. Tevel holds exclusive cable television franchise
agreements that were granted for a period of 12 years and expire in 2002. These
franchises include a four-year renewal option. Gvanim, which was recently
acquired by Tevel, holds exclusive franchises which expire in 2005 and 2002. As
with the Tevel franchises, the Communications Ministry is authorized to extend
both of these franchises for an additional four years. Tevel and Gvanim pay the
government royalties of 5% of their gross revenues. Upon the opening of the
telecommunications market to competition, exclusive cable television franchises
are expected to be replaced with long-term renewable, non-exclusive licenses
that will permit cable operators to continue providing cable television
services and to begin to offer additional telecommunications services such as
voice telephone and Internet/data services.
Programming. Pursuant to its franchise agreements, Tevel must provide
within its basic service five tape-delivered channels subtitled in Hebrew: a
movie channel, a general entertainment channel, a children's channel, a nature
and science channel, and a sports channel. The movie channel and the general
entertainment channel are produced by I.C.P. Israel Cable Programming Company
Limited, a programming company owned by Tevel, Gvanim and the other Israeli
cable television companies. The other three channels are produced by
independent parties. The ownership by the Israeli cable television operators of
ICP is considered a "restrictive arrangement" under Israeli Restrictive Trade
Practices law and is regulated by an arrangement approved by the Restrictive
Trade Practices Tribunal in June 1996, which expires in June 1999. Pursuant to
this arrangement, ICP may continue to produce the general entertainment and
movie channels but must pay $8.5 million in annual production fees to the three
independent channels. In addition, ICP is obligated to spend 15% of its
programming expenses on programming from local producers.
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The Restrictive Trade Practices Tribunal is currently considering requiring
cable network operators either to divest their interests in content suppliers
(which may increase programming costs) or to supply the previously cable-
exclusive content they produce to the direct to home satellite service
providers once they are operational.
In addition, pursuant to the 1987 Bezeq Law, cable operators must obtain
authorization to add or remove channels from their service from the Ministry of
Communications. Further restrictions prohibit cable television operators from
carrying advertisements on their tape-delivered channels. Tevel currently is
required to provide three "must-carry" off-air channels. Its current
arrangement currently prohibits "tiering" of video services.
Since its establishment, Tevel has offered its subscribers the "super-basic
package", which is currently comprised of 45 channels of programming. In light
of expected future competition by the direct to home satellite service
providers, including the fact that the direct to home satellite service
providers will be entitled to provide "tiering" of their video services, Tevel
and other cable television providers have applied to the Ministry of
Communications for approval of "tiering" of their respective services upon
opening the multi-channel television business to competition. The Ministry has
not yet responded to this request. It appears that the Ministry intends to
delay introduction of "tiering" by the cable television operators to ease the
entering of the direct to home satellite service providers into the market.
Tevel and the other cable television operators have filed an appeal to the High
Court of Justice challenging the Ministry's intention. The Court has decided
that it will commence the appeal hearing if the parties do not reach an
arrangement by the end of February 1999.
Pricing. Cable television service subscription fees are subject to
regulation through the franchise agreements and through the arrangement
approved by the Restrictive Trade Practices tribunal. Currently, this
arrangement is more restrictive than the franchise agreements and permits basic
service subscription fees to be increased by a maximum of 1.9% per year above
the cost of living index.
Telephone and Internet/Data Services
As part of the proposed liberalization of the telecommunications market in
1999, Tevel and Gvanim expect to be permitted to supply Internet/data and local
telephone services in their franchise areas.
Other
EU directives and national consumer protection and competition laws in our
Western European markets impose limitations on the pricing and marketing of
integrated packages of services, such as video, telephone and Internet/data
services. These limitations are common in developed market economies and are
designed to protect consumers and ensure a fair competitive market. While we
may offer our services in integrated packages in our Western European markets,
we are generally not permitted to make subscription to one service, such as
cable television, conditional upon subscription to another service, such as
telephone, that a subscriber might not otherwise take. In addition, we must not
abuse or enhance a dominant market position through unfair anti-competitive
behavior. For example, cross-subsidization between our business lines that
would have this effect would be prohibited. We have to be careful, therefore,
in accounting for discounts in services provided in integrated packages. We
believe we can implement our strategy of offering integrated packages of
services without infringing any of these consumer protection and anti-
competition laws. We do not, therefore, expect any of these limitations to
significantly affect our operating strategy.
Our Israeli operating companies are not currently permitted to offer
integrated services.
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MANAGEMENT
Immediately after this offering, UIH will own approximately 63% of our
outstanding ordinary shares and all of our priority shares. Because we are a
strategic holding of UIH, UIH will continue to control us for the foreseeable
future. Currently two members of our three-member Supervisory Board are also
directors or officers of UIH and upon completion of the offering, five members
of our seven-member Supervisory Board will be directors, officers or employees
of UIH.
SUPERVISORY BOARD
Our general affairs and business and the board that manages us are
supervised by a Supervisory Board appointed by the general meeting of
shareholders upon proposal of UIH as the holder of our priority shares. The
Supervisory Board also provides advice to the Board of Management and certain
decisions of the Board of Management specified in our articles of association
require the Supervisory Board's prior approval. The Supervisory Board may also
decide that certain other resolutions of the Board of Management are subject to
its approval. In fulfilling their duties, all members of the Supervisory Board
must serve our best interests.
Our articles of association provide for at least three supervisory
directors to serve on the Supervisory Board. Under Dutch law, Supervisory
Directors cannot serve as members of our Board of Management, nor may a person
serve as a Supervisory Director after the annual general meeting of
shareholders during the fiscal year of such person's 72nd birthday.
Accordingly, Mr. Gene Schneider, UIH's Chairman and Chief Executive Officer and
the current Chairman of the Supervisory Board, will resign from the Supervisory
Board immediately prior to the closing of this offering. Pursuant to the rules
and procedures of the Supervisory Board, he will become a non-voting advisor to
the Supervisory Board with the right to attend and participate in the meetings
of the Supervisory Board.
Other than the Supervisory Director that Philips may appoint directly, the
Supervisory Directors are appointed at the general meeting of shareholders from
a list proposed by UIH as the holder of the priority shares. The proposal may
be set aside by two-thirds of the votes cast at the general meeting of
shareholders representing more than one-half of the issued nominal capital. See
"Summary of Certain Provisions of the Articles of Association and Other
Matters" and "Certain Transactions and Relationships --Relationship with
Philips".
The Discount Group, our partner in our Israeli system, has the right to
nominate a Supervisory Director. See "Certain Transactions and Relationships --
The Discount Group's Option".
Decisions of the Supervisory Board generally require the approval of a
majority of the votes cast at a meeting where a majority of the Supervisory
Directors are present and represented.
Other than the Supervisory Director Philips appoints, which only Philips
may remove, the general meeting may remove any Supervisory Director by two-
thirds of the votes cast representing more than one-half of the issued nominal
capital. If UIH as the holder of the priority shares proposes the removal, the
Supervisory Director may be removed by a majority of the votes cast at a
general meeting. The general meeting also decides the remuneration of the
Supervisory Directors.
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Our Supervisory Board currently consists of three members. Five additional
persons will become Supervisory Board members and Mr. Gene Schneider will
resign immediately prior to the closing of this offering and become an advisor
to the Supervisory Board. UIH has selected four nominees and the Discount Group
will select one nominee following this offering. The Supervisory Directors and
UIH's nominees are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gene W. Schneider.......................... 72 Supervisory Director and
Chairman of Supervisory Board
Richard De Lange........................... 53 Supervisory Director
Michael T. Fries........................... 35 Supervisory Director
John P. Cole, Jr. ......................... 68 Supervisory Director Nominee
Antony P. Ressler.......................... 38 Supervisory Director Nominee
Ellen P. Spangler.......................... 50 Supervisory Director Nominee
Tina Wildes................................ 38 Supervisory Director Nominee
</TABLE>
GENE W. SCHNEIDER has served as a member of the Supervisory Board since
July 1995. Immediately prior to this offering, Mr. Schneider will resign from
and become an advisor to the Supervisory Board. Mr. Schneider is also the
Chairman of the Board of Directors of UIH, a position he has held since its
inception in May 1989. In addition to serving as UIH's Chairman, Mr. Schneider
has served as UIH's Chief Executive Officer since October 1995. From October
1995 until September 1998, Mr. Schneider also served as UIH's President.
RICHARD DE LANGE has been a member of the Supervisory Board since April
1996. Since October 1998, Mr. De Lange has been Chairman of the Dutch Philips
organization (Philips Nederland B.V. and Nederlandse Philips Bedrijven B.V.).
He also continues to serve as President and Chief Executive Officer of Philips
Media B.V., which position he assumed in February 1996. From April 1995 until
October 1998, Mr. De Lange was Chairman and Managing Director of Philips
Electronics UK Ltd. Previously, Mr. De Lange served since 1970 in various
capacities with subsidiaries of Philips, including President of Philips
Lighting Europe from December 1990 until April 1995.
MICHAEL T. FRIES has been a member of the Supervisory Board since September
1998. He is also President of UIH and President and Chief Executive Officer of
UIH Latin America, Inc., a wholly-owned subsidiary of UIH, positions he has
held since September 1998. Mr. Fries also serves as President and Chief
Executive Officer of UIH Asia/Pacific Communications, Inc., a majority-owned
subsidiary of UIH, positions he has held since June 1995 and December 1996,
respectively. Prior to becoming President of UIH Asia/Pacific Communications,
Inc., Mr. Fries served as UIH's Senior Vice President, Development, in which
capacity he was responsible for managing UIH's acquisitions and new business
development activities since March 1990, including UIH's expansion into the
Asia/Pacific, Latin American and European markets.
JOHN P. COLE JR. has been nominated for membership on the Supervisory Board
following this offering and has been a director of UIH since March 1998. Mr.
Cole has practiced law in Washington, D.C. since 1956 and has been counsel over
the years in many landmark proceedings before the U.S. Federal Communications
Commission, reflecting the development of the cable television industry. In
1966, he founded the law firm of Cole, Raywid & Braverman, a 30-lawyer firm
specializing in all aspects of communications and media law. Mr. Cole is also a
director of Century Communications Corporation.
ANTONY P. RESSLER has been nominated for membership on the Supervisory
Board following this offering and has been a director of UIH since October
1993. Mr. Ressler is one of the founding principals of Apollo Advisors, L.P.
and Ares Management, L.P., which through several funds
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represent institutional investors with respect to corporate acquisitions and
securities investments. Mr. Ressler is also a director of Allied Waste
Industries, Inc., Vail Resorts, Inc. and Koo Koo Roo Enterprises, Inc.
Ellen P. Spangler has been nominated for membership on the Supervisory
Board following this offering. Ms. Spangler is the Senior Vice President of
Business and Legal Affairs and Secretary of UIH, positions she has held since
December 1996. Prior to assuming her current positions, she served as a Vice
President of UIH and her responsibilities included business and legal affairs,
programming and assisting on development projects. Prior to joining UIH in
January 1991, she served as Director of Business Affairs, Programming at Tele-
Communications, Inc. from 1987 to 1991 and as Acquisitions Counsel at Tele-
Communications, Inc. from 1984 to 1987.
Tina Wildes has been nominated for membership on the Supervisory Board
following this offering. Ms. Wildes is the Senior Vice President of Operations
and Development Oversight of UIH, a position she has held since May 1998. From
October 1997 until May 1998, Ms. Wildes served as Senior Vice President of
Programming for UIH. From 1994 to 1997, she was Regional Vice President of UIH
Latin America, Inc. From 1988 to 1994, Ms. Wildes served as either a director
or vice president for development, programming and operations for several of
UIH's European operating companies, including operations in Sweden, Norway,
Malta, Israel, Spain and Portugal.
Immediately prior to this offering, the Supervisory Board will establish an
Audit Committee and a Compensation Committee. Both committees will be comprised
of Mr. Fries, Ms. Spangler and Ms. Wildes.
Family Relationships
Tina Wildes, Supervisory Board Nominee, and Mark L. Schneider, the Chairman
of our Board of Management and our Chief Executive Officer, are sister and
brother. Gene W. Schneider is their father. No other family relationships exist
between any other members of our Supervisory Board or Board of Management.
Board of Management and Other Key Employees
Management and policy making for us and our subsidiaries is entrusted to
the Board of Management under the supervision of the Supervisory Board. The
Board of Management must have at least one member and, if there are two or more
members, the Supervisory Board may designate one member as our Chief Executive
Officer and one member as our President, although one person could have both
designations. Members of the Board of Management are appointed by the general
meeting of shareholders from a list proposed by UIH as the holder of the
priority shares. The proposal may be set aside by two-thirds of the votes cast
at the general meeting representing more than one-half of the issued nominal
capital.
The general legal authority to represent the company is vested in the Board
of Management and two Board of Management members acting jointly are authorized
to represent the company. Certain decisions by the Board of Management set
forth in the articles of association or otherwise determined from time to time
by the Supervisory Board require the approval of the Supervisory Board.
Moreover, UIH may, after consultation with the Supervisory Board, determine
that certain decisions by the Board of Management require UIH's approval as the
holder of our priority shares.
The general meeting may remove any member of the Board of Management by
two-thirds of the votes cast representing more than one-half of the issued
nominal capital. If UIH as the holder of the priority shares proposes the
removal, the member of the Board of Management may be removed by a majority of
the votes cast at a general meeting. In addition, such members may be suspended
by the vote of a majority of the Supervisory Board at a meeting at which at
least half of the Supervisory Directors are present or represented. Such
suspension may be discontinued by the general meeting of shareholders at any
time. The remuneration and other conditions of employment of each member of the
Board of Management are determined by the Supervisory Board.
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The members of the Board of Management and our other key employees are:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Board of Management
Mark L. Schneider................ 43 Chairman of Board of Management and Chief
Executive Officer
John F. Riordan.................. 55 Vice Chairman of Board of Management and
President, Advanced Communications
J. Timothy Bryan................. 37 Board of Management Member, President and
Chief Financial Officer
Anton H.E. v. Voskuijlen......... 41 Board of Management Member, Senior Vice
President, Legal and General Counsel
Nimrod J. Kovacs................. 49 Board of Management Member and Managing
Director, Eastern Europe
Other Key Employees
Scott Bachman.................... 43 Managing Director, Technology and
Purchasing
Steven D. Butler................. 39 Managing Director, UPC Capital and
Treasurer
Timothy Morel.................... 37 Managing Director, Internet/Data Services
and Chief Executive Officer, chello
broadband
Simon Oakes...................... 40 Managing Director, Programming
Ray D. Samuelson................. 45 Managing Director, Finance and Accounting
Joseph Webster................... 36 Managing Director, Telephony Services and
Chief Executive Officer, Priority Telecom
</TABLE>
Mark L. Schneider has been our Chief Executive Officer and Chairman of our
Board of Management since April 1997. Since December 1996, he has served as
Executive Vice President of UIH and President and Chief Executive Officer of
UIH Europe/Middle East Communications, Inc. and from May 1996 to December 1996,
Mr. Schneider was Chief of Strategic Planning and Operational Oversight of UIH.
He served as President of UIH from July 1992 until March 1995 and was Senior
Vice President of UIH from May 1989 until July 1992. Mr. Schneider also worked
as a consultant for UIH from March 1995 to May 1996. Mr. Schneider has been a
member of the board of directors of UIH since 1993.
John F. Riordan was appointed our Executive Vice President in March 1998,
and a member of our Board of Management in September 1998. In September 1998,
Mr. Riordan also was appointed Vice Chairman and President of our Advanced
Communications division, overseeing implementation of our Internet/data
services and digital distribution platform. From April 1997 until March 1998,
he was a member of our Supervisory Board. Mr. Riordan also has served as a
director of UIH since March 1998. Mr. Riordan was Chairman and Chief Executive
Officer from 1992 to November 1998 of Princes Holdings Limited, the Irish
multi-channel television operating company of which we owned 20% until its sale
in November 1998. From 1987 to 1990, Mr. Riordan was chairman of the Riordan
Group.
J. Timothy Bryan has been our President and Chief Financial Officer and a
member of our Board of Management since September 1998. Prior to that, he
served as a member of our Supervisory Board since December 1996. He was also
Chief Financial Officer, Treasurer and Assistant Secretary of UIH from December
1996 until September 1998. From 1993 until joining UIH, Mr. Bryan served as
Treasurer of Jones Financial Group, Inc., an affiliate of Jones
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International Limited, where he was primarily responsible for corporate finance
activities. Mr. Bryan also served as Treasurer of Jones Intercable, Inc. from
1990 until 1993.
Anton H.E. v. Voskuijlen has served as our Senior Vice President and
Managing Director, Legal and General Counsel since April 1997, where he is
responsible for all of our legal affairs, and a member of our Board of
Management since September 1998. From July 1996 until April 1997, Mr. van
Voskuijlen served as our Vice President and General Counsel. From March 1994
until joining us, he served as Vice President, Business Affairs and Legal
Counsel of Philips Media in New York, New York and prior to that time, Mr. van
Voskuijlen spent 15 years as an attorney with the Philips Group in its mergers
& acquisitions and corporate legal departments in Eindhoven, The Netherlands.
Nimrod J. Kovacs was appointed our Managing Director of Eastern Europe in
March 1998 and a member of our Board of Management in September 1998. He has
served in various positions with UIH, including President of UIH Programming,
Inc., since December 1996, President, Eastern Europe Electronic Distribution &
Global Programming Group from January to December 1996 and Senior Vice
President, Central/Eastern Europe from March 1991 until December 1995.
Scott Bachman has served as our Managing Director of Technology and
Purchasing since February 1998. From March 1996 until February 1998, Mr.
Bachman was our Vice President of Engineering and the Chief Technology Officer.
From April 1991 to March 1996, Mr. Bachman was Vice President of Operations &
Technology Projects for Cable Television Laboratories, Inc.
Steven D. Butler was appointed Managing Director of UPC Capital and our
Treasurer in February 1998, responsible for all corporate and project
debt/equity financing activities, as well as banking and investor relations.
From July 1995 until February 1998, Mr. Butler served as our Vice President and
Treasurer. Prior to that, Mr. Butler served as Director of Finance at UIH since
May 1991.
Timothy Morel was appointed our Managing Director of Internet/Data Services
in January 1998. In that role, Mr. Morel is responsible for chello broadband
and all of our related Internet and data activities. Prior to joining us, Mr.
Morel worked with AT&T UK Ltd. as Managing Director of AT&T Worldnet Dial
Services from January 1997 to January 1998, where he was responsible for the
business operations, marketing, technology, sales, publishing and personnel,
developed the Internet commerce strategy and implemented the service delivery.
From May 1995 to December 1996, Mr. Morel served as Director of Internet
Commerce and Multimedia with AT&T and from 1992 to 1995, he served as Business
Development Director, Finance sector at Novell UK Limited.
Simon Oakes was appointed our Managing Director of Programming in March
1998, responsible for our programming operations and development activities.
From 1994 until joining us, Mr. Oakes independently developed and produced
feature films including Single Girls' Diary (Granada Films), The Main of
Buttermere (Tribeca and United Artists) and Cave (Working Title and Polygram).
From 1989 until 1994, Mr. Oakes served as Co-chairman of Crossbow Films, a film
production company.
Ray D. Samuelson was appointed our Managing Director of Finance and
Accounting in February 1998, responsible for all of our accounting, reporting,
budgeting, management information systems and administrative activities. From
our formation in July 1995 until February 1998, Mr. Samuelson served as Vice
President of Finance & Accounting. From 1992 to 1995, he was Vice President of
Finance and Administration of the Cable Operations Division at UIH. Prior to
Mr. Samuelson's appointment with UIH, he was seconded as a U S WEST employee
from 1990 to 1992 as the Chief Financial Officer of UIH and U S WEST's Norway,
Sweden and Hungary cable television partnership and from 1978 to 1990, was a
certified public accountant with Arthur Andersen & Co.
Joseph Webster has served as our Managing Director of Telephony Services
since February 1998 and is also the Chief Executive Officer of Priority
Telecom. From February 1997 until his appointment with us, Mr. Webster served
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as Regional Vice President & General Manager at Time Warner Communications in
Raleigh, North Carolina. From February 1994 to January 1997, Mr. Webster served
as Vice President & General Manager at Time Warner Communications, where he was
responsible for a start-up provider of competitive telecommunications services.
From May 1993 to February 1994, Mr. Webster served as Vice President of
Teleport Communications Group in Detroit, Michigan.
Our Managing Director of Video Entertainment recently resigned for personal
reasons. We are seeking to fill this position with a qualified person from one
of our operating companies, from another UIH system or from outside.
Compensation of Supervisory Board Members
All of the members of the Supervisory Board (including those to be
appointed following this offering) other than Mr. De Lange and the additional
independent director to be nominated by UIH are directors or employees of UIH.
None of these members receive additional compensation for serving on the
Supervisory Board. We have not yet determined the amount of compensation for
the additional independent director.
Compensation of Management Board Members
The aggregate 1999 salary compensation for the entire Board of Management
is approximately NLG3,111,000. In addition, we provide our executive officers
with automobile allowances and other benefits. Expatriates also receive housing
allowances, foreign tax equalization payments and other compensation relating
to their foreign assignments.
Compensation Committee Interlocks and Insider Participation
We and UIH have concluded a secondment arrangement, pursuant to which
certain U.S. citizens employed by UIH are seconded to us. See "Relationship
with UIH and Related Transactions". To date, compensation for all members of
our management who are employees of UIH has been set by the compensation
committee of UIH and compensation for all of our other employees has been
determined by the Supervisory Board. Our Supervisory Board intends to establish
a compensation committee following the completion of this offering composed of
members of the Supervisory Board. The members of our management that are
employees of UIH, however, will continue to have their compensation set by the
UIH's compensation committee. None of the members of the UIH compensation
committee or our Supervisory Board has served as a director or member of a
compensation committee of another company that had any executive officer that
was also one of our Supervisory Directors or a member of the compensation
committee of UIH.
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Executive Compensation
The following table sets forth the 1997 compensation for our current and
former chief executive officers and the four other highest compensated
executive officers at fiscal year end 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation(1)
------------------------------
Other Annual All Other
Name and Principal Position Salary Bonus Compensation(2) Compensation(3)
- --------------------------- ------- ------ --------------- ---------------
(Dutch guilders)
<S> <C> <C> <C> <C>
Mark L. Schneider(4)............ 584,940 -- -- --
Chief Executive Officer
Lars Andersen(5)................ 287,826 75,428 31,829 --
Managing Director, Norway
Scott Bachman(6)................ 356,810 -- 31,673 306,862
Managing Director, Technology
and Purchasing
Michael Simmons(7).............. 379,339 -- 28,783 195,417
Former Managing Director,
Portugal
David D'Ottavio(8).............. 589,202 -- 30,120 130,042
Former Co-Chief Executive
Officer
Robert Gardner(9)............... 295,114 10,000 33,860 101,540
Former Managing Director, Czech
Republic
Jacques Hackenberg(10).......... 257,374 -- 21,614 --
Former Co-Chief Executive
Officer
</TABLE>
- --------
(1) Compensation amounts (except for automobile allowance payments and school
fees, if applicable, which were paid in Dutch guilders) for Mr. Schneider,
Mr. Bachman, Mr. Simmons, Mr. D'Ottavio and Mr. Gardner were converted
from U.S. dollars to Dutch guilders using the 1997 average exchange rate.
Compensation amounts for Mr. Andersen were converted from Norwegian kroner
to Dutch guilders using the 1997 average exchange rate.
(2) Consisted of automobile lease, operating and maintenance payments, and
health and life insurance payments for some of the executive officers
listed above.
(3) Our executive officers who are United States citizens are employed by UIH
and seconded to us. UIH compensates all United States citizens working for
us outside the United States for certain expenses and adjustments related
to non-U.S. assignments and we reimburse UIH for such expenses. These
expenses and adjustments include home leave payments for trips back to the
employee's home country, housing allowance, school tuition fees for the
employee's children and "hypo tax" payments to equalize the employee's
foreign tax rate with what the employee would have paid in the United
States. See "-- Agreements with Executive Officers". Certain compensation
identified in this column also consisted of matching employer
contributions under UIH's Employee 401(k) Plan or our pension plan, as
applicable.
(4) Mr. Schneider was appointed as our Chief Executive Officer in April 1997.
The salary amount shown consisted of salary paid to Mr. Schneider by UIH
for his duties to us and UIH.
(5) Mr. Andersen received a performance-based bonus for 1997. Other annual
compensation consisted of NLG31,829 for Mr. Andersen's automobile
allowance.
(6) Other annual compensation consisted of NLG22,698 for Mr. Bachman's
automobile allowance and NLG8,975 for health and life insurance payments.
Other compensation consisted of NLG232,483 related to Mr. Bachman's non-
U.S. assignment, NLG65,118 of hypo tax payments and NLG9,262 of matching
employer contributions under UIH's Employee 401(k) Plan.
(7) We sold our interest in its Portuguese system in February 1998. Mr.
Simmons no longer is our employee. Other annual compensation consisted of
health and life insurance payments and other compensation consisted of
NLG70,193 related to Mr. Simmons' non-U.S. assignment, NLG115,962 of hypo
tax payments and NLG9,262 of matching employer contributions under UIH's
Employee 401(k) Plan.
(8) Mr. D'Ottavio served as our Co-Chief Executive Officer with Mr. Hackenberg
until May 1997. The above salary amounts reflect payments through the end
of the year. Other annual compensation consisted of NLG15,105 for Mr.
D'Ottavio's automobile allowance and NLG15,015 for health and life
insurance payments and other compensation consisted of NLG58,835 related
to Mr. D'Ottavio's non-U.S. assignment, NLG65,118 of hypo tax payments and
NLG6,074 of matching employer contributions under UIH's Employee 401(k)
Plan.
(9) Mr. Gardner received a performance-based bonus for 1997. Other annual
compensation consisted of NLG43,200 for Mr. Gardner's automobile allowance
and NLG7,954 for health and life insurance payments. Other compensation
consisted of NLG33,860 related to Mr. Gardner's non-U.S. assignment and
NLG67,680 of hypo tax payments.
(10) Mr. Hackenberg served as our Co-Chief Executive Officer with Mr. D'Ottavio
until May 1997. The above salary amounts reflect payments through the end
of the year. Other annual compensation consisted of NLG21,614 for Mr.
Hackenberg's housing allowance.
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The following table sets forth information with respect to the only
executive officer listed in the above table holding unexercised options as of
December 31, 1997. None of the executive officers listed in the above table
exercised any options during 1997. See "-- Stock Option Plans" and "Security
Ownership of Certain Beneficial Owners and Management".
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT FISCAL YEAR-END IN-THE-MONEY OPTIONS(1)
------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Jacques Hackenberg........ 362,500 87,500 NLG16,569,875 NLG3,999,625
</TABLE>
- --------
(1) Represents the difference between the price of the ordinary shares in this
offering, based on an estimated initial public offering price of NLG56.20,
which is the midpoint of the offering price range, and the exercise price
of the options, which is NLG10.49 for all options set forth above.
AGREEMENTS WITH EXECUTIVE OFFICERS
We do not have employment agreements with any of the executive officers
listed in the above table. Mr. Gardner and Mr. Simmons had employment
agreements with UIH that have been terminated. Mr. Schneider has a consulting
agreement with UIH and Mr. Bachman has an employment agreement with UIH. Upon
his appointment as president, Mr. Bryan entered into an employment agreement
with UIH. We and UIH are parties to a Secondment Agreement, pursuant to which
Mr. Schneider and Mr. Bryan, together with all of our other U.S. citizen
employees, are seconded to us. See "Relationship with UIH and Related
Transactions". Pursuant to the Secondment Agreement, we reimburse UIH for all
expenses incurred by UIH in connection with the seconded employees.
Mr. Andersen has an employment agreement directly with Janco Multicom.
Mr. Schneider's consulting agreement with UIH is for a term of five years
and expires May 31, 2000. Mr. Schneider receives a fee of NLG759,000 per year.
If Mr. Schneider is terminated without cause or dies prior to the end of the
term of the agreement, he or his personal representative shall receive all
payments due under the agreement through its term.
Mr. Bryan's employment agreement with UIH is for a term expiring on March
31, 2001. Mr. Bryan's employment agreement provides for an initial base salary
of NLG607,200 which was increased to NLG667,920 on January 1, 1999, and is
subject to periodic adjustments. In addition to his base salary, Mr. Bryan is
also entitled to tax equalization payments and other amounts related to his
non-U.S. assignment. If Mr. Bryan's employment is terminated, other than for
cause as specified in the agreement, he is entitled to receive the balance of
payments due under the remaining term of the agreement.
Mr. Bachman's three year employment agreement with UIH will expire on
February 6, 1999. He and UIH are currently negotiating a new agreement. Mr.
Bachman's current employment agreement provides for an initial base salary of
NLG344,080, which was increased to NLG371,606 in February 1998. In addition to
his base salary, Mr. Bachman also is entitled to tax equalization payments and
other amounts related to his non-U.S. assignment.
Mr. Gardner and UIH entered into an employment agreement on October 2,
1995, pursuant to which Mr. Gardner was seconded to us as Managing Director of
KabelNet, our Czech Republic operating company. Mr. Gardner's employment
agreement was for an initial term of three years at a base salary of
NLG293,480. Mr. Gardner's employment agreement was terminated on March 5, 1998.
Mr. Simmons and UIH entered into an employment agreement on July 24, 1995,
pursuant to which Mr. Simmons was seconded to us as Managing Director of UPC
Portugal, our former Portuguese operating company. Mr. Simmons' employment
agreement was for an initial term of three years at an initial base salary of
NLG364,320, which was increased to NLG380,714 on July 1, 1996 and NLG403,563 on
July 1, 1997. We recently sold our Portuguese system and terminated Mr.
Simmons' employment effective November 1, 1998 and in connection therewith,
entered into a severance agreement
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with Mr. Simmons that will pay him the equivalent of three months' salary in
exchange for a release of any claims he may have against UIH or us.
Mr. Andersen and Janco Multicom entered into an amended employment
agreement on February 24, 1997, which expires on December 31, 1999. Under the
amended agreement, Mr. Andersen became the Managing Director of Janco Multicom
effective June 30, 1997. The amended agreement increased Mr. Andersen's base
salary to NKr1,137,500 (NLG303,587) effective April 1, 1997. Mr. Andersen is
also eligible for an annual performance-based bonus of up to 25% of his base
salary, based on Janco Multicom achieving certain financial and operational
milestones, and Mr. Andersen's general management performance. Mr. Andersen
also receives an automobile allowance. If Mr. Andersen remains with Janco
Multicom until the expiration of the amended agreement, he is entitled to a
bonus equal to the total of all bonuses paid to him during his amended
employment term and upon termination of his employment, he is entitled to six
months severance pay, including benefits. Mr. Andersen's employment agreement
contains a confidentiality provision, a covenant not to compete for six months
after termination and a covenant not to interfere with any of our other
employees for one year after termination.
Stock Option Plans
Equity Stock Option Plan.
Under our stock option plan, the Supervisory Board may grant incentive
stock options to our employees. There are 6,000,000 total shares available for
the granting of options under our stock option plan. Options under our stock
option plan must be granted at fair market value (as determined by the
Supervisory Board) at the time of grant. The ordinary shares available under
our stock option plan are held by Stichting Administratiekantoor UPC, a stock
option foundation, which administers our stock option plan. Each option
represents the right to acquire from the foundation a depositary receipt
representing the economic value of one share. Upon termination of the lock-up
period following consummation of the offering, any depositary receipts issued
to employees who have exercised their options will be convertable into
ordinary shares. UIH appoints the board members of the foundation and thus
controls the voting of the foundation's ordinary shares. Proceeds from the
exercise of these options remain in the foundation. Upon liquidation of the
foundation, any remaining assets revert to UIH.
All options are exercisable upon grant and for the next five years. In
order to introduce the element of "vesting" of the options, our stock option
plan provides that even though the options are exercisable immediately, the
shares to be issued or options granted in 1996 are deemed to "vest" 1/36th
each month for a three-year period from the date of option grant. The date of
option grant is generally the employee's employment commencement date. For
options granted in 1998 and thereafter, the vesting period has been increased
to four years and the options vest 1/48th each month. No options were granted
in 1997. If the employee's employment terminates (except in the case of death,
disability or the like), all unvested options previously exercised must be
resold to the foundation at the original purchase price, or all vested options
must be exercised, within 30 days of the termination date. The Supervisory
Board may alter these vesting schedules in its discretion.
Our stock option plan contains limited anti-dilution protection in the case
of stock splits, stock dividends and the like. Our stock option plan also
provides that, in the case of change of control, the acquiring company has the
right to require us to acquire all of the options outstanding at the per share
value determined in the transaction giving rise to the change of control.
In 1996, we loaned the following officers the amounts indicated to enable
such officers either to exercise stock options to acquire our shares, to pay
the tax on such exercise or both: Scott Bachman (exercise and tax,
NLG1,635,835); Steve Butler (exercise and tax, NLG1,226,877); Ray Samuelson
(exercise and tax, NLG2,453,750); Michael Simmons (exercise and tax,
NLG787,000); David D'Ottavio (exercise and tax, NLG6,543,340); and Anton H.E.
van Voskuijlen (tax only, NLG106,245). In 1998, we loaned Mr. van Voskuijlen
NLG40,500 (tax only) in relation to an additional grant. These recourse loans,
except for Mr. van Voskuijlen's, bear interest at the Dutch statutory rate.
For 1998, this rate was 6% per annum. All loans made in 1996
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are due 18 months after the date of this offering. Mr. van Voskuijlen's loans
are due upon exercise of his options and do not bear interest.
Through September 30, 1998, options to acquire a total of 6,333,000 shares
have been granted under the Plan. Of these, options representing 375,000 shares
have been exercised and resold to the foundation and, therefore, are available
for future option grants. Options representing 82,501 shares have been
cancelled. The exercise prices for the options are NLG10.49 (3,990,000 shares,
of which 1,680,000 have been exercised), NLG12.00 (2,195,250 shares) and
NLG13.57 (147,750 shares). In March 1998, we granted Mark Schneider options for
975,000 shares at an exercise price of NLG12.00, the price at which shares were
sold in the UPC Acquisition in December 1997. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview of our
Activities -- Costs of Operations".
Phantom Stock Option Plan
Under our phantom stock option plan, the Supervisory Board has granted
certain employees the right to receive a cash amount equal to the difference
between the fair market value of the shares and the stated grant price for a
specified number of phantom options. Through September 30, 1998, options
representing 2,057,250 phantom shares remained outstanding. The grant prices
for the phantom options are NLG12.00 (1,232,250 options) and NLG13.57 (825,000
options). The phantom options have a four-year vesting period and vest 1/48th
each month. The phantom options may be exercised during the period specified in
the option certificate, but in no event, later than ten years following the
date of grant. 356,265 of the outstanding phantom options were fully vested on
September 30, 1998. Our phantom stock option plan contains limited anti-
dilution protection in the case of stock splits, stock dividends and the like.
Our phantom stock option plan also provides that, in certain cases of a change
of control, all phantom options outstanding become fully exercisable.
Our phantom stock option plan also provides that upon the offering, an
employee holding phantom options may convert these into options for shares
under our stock option plan. If the employee elects not to do so, upon exercise
of the phantom options we may elect to issue such number of shares equal to the
value of the cash difference in lieu of paying the cash. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview of our Activities -- Costs of Operations".
Limitation of Liability and Indemnification Matters
Pursuant to Dutch law, each member of the Supervisory Board and Board of
Management is responsible to us for the proper performance of his or her
assigned duties. Our articles of association provide that the adoption by the
general meeting of shareholders of the annual accounts shall discharge the
Supervisory Board and Board of Management from liability in respect of the
exercise of their duties during the financial year concerned unless an explicit
reservation is made by the general meeting of shareholders. This discharge of
liability also may be limited by mandatory provisions of Dutch law, such as in
the case of bankruptcy, and this discharge only extends to actions or omissions
not disclosed in or apparent from the adopted annual accounts. In case of such
actions or omissions, the members of the Supervisory Board or Board of
Management will be jointly and severally liable toward third parties for any
loss sustained by such third parties as a result of such actions or omissions,
unless the Supervisory Board or Board of Management member proves that he or
she is not responsible for the actions or omissions. Generally, under Dutch
law, directors will not be held personally liable for decisions made with
reasonable business judgment.
Our articles of association also provide that we must indemnify any person
who:
. is or was a member of the Supervisory Board or the Board of Management,
. suffers any loss as a result of their position as a member of such
boards, and
. acted in good faith in carrying out their duties.
This indemnification does not apply if the person seeking indemnification is
found to have acted with gross negligence or wilful misconduct in the
performance of their duty to us unless the court in which the action is brought
determines that indemnification is appropriate. A majority of
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the members of the Supervisory Board must approve any indemnification unless
the entire Supervisory Board is named in the lawsuit, in which case the
indemnification may be approved by independent legal counsel in a written
opinion or by the general meeting of shareholders. The Supervisory Board may
extend the indemnification provisions of our articles of association to any of
our officers, employees or agents.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership
of all classes of securities as of February 4, 1999, by (1) each shareholder
who is known by us to own beneficially more than 5% of the outstanding ordinary
shares at such date; (2) each of our Supervisory Directors and persons
nominated to become Supervisory Directors; (3) each of our executive officers;
and (4) all of our directors, director nominees and executive officers as a
group. Because Messrs. G. Schneider, Cole, Ressler, M. Schneider and Riordan
are directors of UIH, they may be deemed to beneficially own our shares held by
UIH. They disclaim any beneficial ownership of these shares and this table does
not include those shares.
<TABLE>
<CAPTION>
Ordinary Shares
-----------------------------
Percentage
------------------
Prior to Following
Beneficial Owner Number offering offering
---------------- ---------- -------- ---------
<S> <C> <C> <C>
United International Holdings, Inc.(1).......... 83,087,469 100.0% 66.6%
Gene W. Schneider............................... -- -- --
Michael T. Fries................................ -- -- --
Richard De Lange................................ -- -- --
John P. Cole, Jr................................ -- --
Antony P. Ressler............................... -- -- --
Ellen P. Spangler............................... -- -- --
Tina Wildes..................................... -- -- --
Mark L. Schneider(2)............................ 975,000 1.2 *
J. Timothy Bryan................................ -- -- --
John F. Riordan(3).............................. 525,000 * *
Nimrod J. Kovacs................................ -- -- --
Anton H.E. v. Voskuijlen(4)..................... 300,000 * *
All directors, director nominees and executive
officers as a group (11 persons)............... 1,800,000 2.2 1.4
</TABLE>
- --------
* Less than 1%.
(1) Includes 6,000,000 ordinary shares held by the stock option foundation,
the board members of which are appointed by UIH. The address of United
International Holdings, Inc. is 4643 South Ulster Street, Suite 1300,
Denver, Colorado 80237, U.S.A.
(2) Mr. M. Schneider holds currently exercisable options for 975,000 ordinary
shares of which options for 528,125 ordinary shares are subject to our
repurchase right, which expires April 1, 2001.
(3) Mr. Riordan holds currently exercisable options for 525,000 ordinary
shares of which options for 284,375 ordinary shares are subject to our
repurchase right, which expires April 1, 2001.
(4) Represents currently exercisable options for 300,000 ordinary shares of
which options for 54,687 ordinary shares are subject to our repurchase
right, which expires January 1, 2002.
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<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Relationship with Philips
We began operations as a joint venture between UIH and Philips in July
1995. Both shareholders contributed various assets to us.
In December 1997, we and UIH acquired all of Philips' interest in us. As
part of this transaction, we purchased from Philips:
. 3.17 million shares of UIH Class A Common Stock for NLG66.8 million, the
then current market value of such shares,
. a portion of the pay-in-kind convertible notes at their fully accreted
value for NLG170.4 million, and
. 16.252 million ordinary shares for NLG292.6 million.
We also converted the remaining pay-in-kind convertible notes purchased by UIH
into 15.18 million ordinary shares. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- History of UPC".
One of the Supervisory Board members,
Mr. De Lange, continues to be a member of the Supervisory Board pursuant to
amendments to our Articles of Association in connection with the acquisition of
UPC. Under our Articles of Association, Philips may appoint and remove one of
our Supervisory Directors, so long as Philips has any liability in respect of
the agreements relating to the Telekabel Wien system, which is expected to
terminate by 2006. We have agreed to indemnify Philips against such liability.
We and UIH have agreed to use our reasonable best efforts to obtain the release
of Philips by the City of Vienna from such liability. Philips' representative
on the Supervisory Board must approve (1) the disposition of assets aggregating
more than 30% of the consolidated assets or generating more than 30% of the
consolidated revenues of the Telekabel Group, or (2) our merger or
consolidation into any other entity that is not wholly owned by UIH.
Loans to Executive Officers
In 1996, we loaned Mr. van Voskuijlen NLG106,245 and in 1998, we loaned him
NLG40,500 to enable him to pay the tax on the stock options received in those
years. These recourse loans bear no interest. The loans are due upon exercise
of his options. We made similar loans to other employees for the purpose of
exercising and/or paying tax on options. See "Management -- Stock Option
Plans".
Acquisitions and Dispositions
In November 1998, we purchased from RCL, an entity owned by a discretionary
trust for the benefit of the members of the family of John Riordan, a member of
the Board of Management, (1) a 5% interest in Tara and (2) a 5% interest in our
Irish operating system. The price for these interests was 384,531 shares of UIH
Class A Common Stock that we acquired as part of the UPC Acquisition. We
subsequently sold our newly-acquired 5% interest in the Irish operating system,
together with our existing 20% interest in this system, to TINTA. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- History of UPC".
The Discount Group's Option
In connection with the DIC Loan, we granted an option to the Discount
Group, our partner in our Israeli system, to acquire ordinary shares at a price
per share equal to the price in this offering, discounted by a factor of 10%.
The Discount Group has exercised its option and we intend to issue ordinary
shares to it at the same time as the closing of this offering. The aggregate
purchase price for the shares is equal to the sum of $45 million, plus interest
thereon at the rate of 8% per annum from November 9, 1998 through the closing
of the exercise of the option. Assuming an initial public offering price per
share of NLG56.20, the midpoint of the offering price range, the Discount Group
will own about 1.4% of our outstanding ordinary shares after this offering.
The Discount Group's exercise of the option is irrevocable unless the final
price per share in the offering is greater than
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NLG58.67, in which case the Discount Group will be given approximately one
additional business day from the date it receives notice of such final offering
price to revoke its exercise of the option.
In connection with the exercise of the option, we have agreed to enter into
a shareholders' agreement with the Discount Group and UIH.
Under the shareholders' agreement, the Discount Group will receive the
right to appoint one supervisory board member for as long as the Discount Group
and its affiliates retain at least the number of ordinary shares originally
acquired upon the exercise of the option. In addition, the Discount Group will
receive the right to participate on equal terms in connection with sales of
ordinary shares by UIH, including the right to sell the Discount Group's entire
interest in us in connection with a sale by UIH of a controlling interest in
us. The Discount Group will also receive the right to negotiate with UIH prior
to certain sales of ordinary shares by UIH. UIH will receive a right of first
refusal with respect to a sale of ordinary shares by the Discount Group and the
right to require that the Discount Group agree to a merger or sale of all of
our shares proposed by UIH. In addition, there are certain limited restrictions
on the entities or persons to whom the Discount Group may transfer its ordinary
shares.
Upon the exercise of the option, the Discount Group will receive an
additional option to acquire ordinary shares from us at a price per share equal
to the greater of (1) the price in this offering or (2) the average sale price
of our ordinary shares on the Amsterdam Stock Exchange for the 30-day period
immediately preceding the exercise date. The aggregate purchase price for the
ordinary shares purchased pursuant to the additional option would be equal to
the sum of $45 million, plus interest thereon at the rate of 8% per annum from
November 9, 1998 through the closing of the additional option. The transfer
rights and restrictions set forth in the registration rights agreement and the
shareholders' agreement discussed above will be applicable with respect to the
ordinary shares acquired by the Discount Group upon the exercise of the
additional option. The additional option will terminate if it is not exercised
on or before September 30, 1999.
Previously-Issued Shares
9,198,135 of the ordinary shares to be sold in this offering were
previously held by one of our wholly-owned subsidiaries. These shares will be
transferred to us prior to the closing of this offering and we will receive the
proceeds from their sale.
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RELATIONSHIP WITH UIH AND RELATED TRANSACTIONS
UIH is a leading provider of video, voice and data services outside the
United States. Together with its strategic and financial partners, UIH has
ownership interests in multi-channel television systems in operation or under
construction in over 20 countries. UIH's operations are organized in three
geographic regions: (1) Europe, consisting of UIH's interest in us; (2)
Asia/Pacific, including investments in operating systems and development
projects in Australia, New Zealand, the Philippines, Tahiti and China; and (3)
Latin America, including multi-channel television systems in Brazil, Chile,
Mexico and Peru.
As of September 30, 1998, UIH's systems encompassed the following:
<TABLE>
<CAPTION>
September 30, 1998
------------------------
UIH UIH
Aggregate Proportionate
---------- -------------
<S> <C> <C>
Homes in service area.................................. 12,069,286 7,437,097
Homes passed........................................... 9,674,663 6,043,266
Basic video subscribers................................ 4,351,491 2,513,027
Telephone lines........................................ 100,520 40,283
Internet/data subscribers.............................. 12,736 8,278
</TABLE>
Control by UIH
Immediately prior to this offering, UIH held effectively all of the voting
control over us and held all of our issued and outstanding ordinary shares,
other than approximately 7.7% of such shares that have been registered in the
name of the stock option foundation to support our stock option plan. The
shares registered in the name of the foundation will represent 4.8% of our
issued and outstanding ordinary shares after this offering. UIH appoints the
board members of the foundation and thus controls the voting of these shares as
well. See "Management -- Stock Option Plan". Upon completion of this offering,
UIH will own approximately 62% of our outstanding ordinary shares and all of
our outstanding priority shares. Because we are a strategic holding of UIH, UIH
will continue to control us for the foreseeable future. See "Risk Factors -- We
Will Continue to be Controlled by UIH, Whose Interests May Be Different from
Other Shareholders, and Restricted by the Terms of UIH's Debt Securities".
Currently two members of our three-member Supervisory Board are also directors
or officers of UIH and upon completion of this offering, five members of our
seven-member Supervisory Board will be directors, officers or employees of UIH.
Transactions with UIH
Since the UPC Acquisition, UIH has loaned us approximately $79.0 million,
excluding interest, to repay indebtedness and fund new business. Our loan from
UIH is payable on March 31, 2001 and bears interest at a rate of 10.75% per
annum. It is convertible into ordinary shares at UIH's option at the initial
public offering price. UIH also loaned us an additional $7.5 million in
December 1998, which we have repaid. We plan to repay the outstanding loan from
UIH with proceeds from this offering. See "Use of Proceeds".
As part of the acquisition of UPC, we acquired approximately 3.17 million
shares of UIH's Class A Common Stock. We subsequently sold 384,531 of these
shares for certain interests in the Irish system and Tara. We currently hold
approximately 2.8 million shares, which currently represents approximately 7%
of UIH's outstanding common stock. We have given UIH the right to acquire these
shares of UIH Class A Common Stock at their market value, based on a ten-
trading day average.
UIH has sold to us, in exchange for 6,330,340 of our ordinary shares, UIH's
37.5% voting and 44.75% economic interest in Monor and its interest in the Tara
programming joint venture. UIH has also sold to us its interest in the IPS
programming joint venture in exchange for 4,955,264 ordinary shares.
Agreements with UIH
Subject to certain limitations, beginning one year after the date of this
offering, UIH may require us to file a registration statement under the
Securities Act of 1933 with respect to all or a portion of UIH's Ordinary
Shares or ADSs, and we are required to use our best efforts to effect such
registration, subject to certain conditions and limitations. We are not
obligated to effect more than three of these demand registrations using forms
other than Form S-3 or F-3, as the case may be. UIH may
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demand registration of such securities an unlimited number of times on Form S-3
or F-3, as the case may be, except that we are not required to register UIH's
ordinary shares on Form S-3 more than once in any six-month period. UIH also
has the right to have its ordinary shares included in any registration
statement we propose to file under the Act except that, among other conditions,
the underwriters of any such offering may limit the number of shares included
in such registration. We have also granted UIH rights comparable to those
described above with respect to the listing or qualification of the ordinary
shares held by UIH on the Amsterdam Stock Exchange or on any other exchange and
in any other jurisdiction where we previously have taken action to permit the
public sale of our securities.
UIH incurs certain overhead and other expenses at the corporate level on
behalf of us and its other operating companies. These include expenses not
readily allocable among the operating companies, such as accounting, financial
reporting, investor relations, human resources, information technology,
equipment procurement and testing expenses, corporate offices lease payments
and costs associated with corporate finance activities. UIH also incurs direct
costs for its operating companies such as travel and salaries for UIH employees
performing services on behalf of its respective operating companies. We and UIH
are parties to a management service agreement, with an initial term through
2009, pursuant to which UIH will continue to perform these services for us.
Under the management service agreement, we will pay UIH a fixed amount each
month as its portion of such unallocated expenses. This fixed amount is
initially $300,000 per month. After the first year of the management services
agreement, the fixed amount may be adjusted from time to time by UIH to
allocate these corporate level expenses among UIH's operating companies,
including us, taking into account the relative size of the operating companies
and their estimated use of UIH resources. In addition, we will continue to
reimburse UIH for costs incurred by UIH that are directly attributable to us.
We and UIH are also parties to a secondment agreement that specifies the
basis upon which UIH may second certain of its employees to us. UIH's
secondment of employees to us helps us attract and retain U.S. citizens and
other employees who want U.S. benefit plans, without creating a separate U.S.
employment
subsidiary. We generally are responsible for all costs incurred by UIH with
respect to any seconded employee's employment and severance. UIH may terminate
a seconded employee's employment if the employee's conduct constitutes willful
misconduct that is materially injurious to UIH. During the year ended December
31, 1997, we incurred approximately NLG11.9 million, for costs associated with
the seconded employees, reimbursable to UIH.
We have agreed with UIH that so long as UIH holds 50% or more of our
outstanding ordinary shares, (1) UIH will not pursue any video services,
telephone or Internet access business in Europe or the Middle East or any
programming or Internet content business specifically directed to the European
or the Middle Eastern markets, unless it has first presented such business
opportunity to us and we have elected not to pursue such business opportunity,
and (2) we will not pursue any video services, telephone or Internet access
business in markets outside of Europe and the Middle East in which UIH then
operates unless we have first presented such business opportunity to UIH and
UIH has elected not to pursue such business opportunity.
We have agreed to sell to UIH, upon request, all or any portion of the UIH
Class A Common Stock held by us at a price based upon the trading price of such
stock during a specified period prior to sale. UIH and we have also agreed that
we will provide audited financial statements to UIH in such form and with
respect to such periods as shall be necessary or appropriate to permit UIH to
comply with its reporting obligations as a publicly traded company and that we
will not change our accounting principles without UIH's prior consent. We have
consented to the public disclosure by UIH of all matters deemed necessary or
appropriate by UIH in its sole discretion to satisfy the disclosure obligations
of UIH or any affiliate thereof under the United States federal securities laws
or to avoid potential liability thereunder. We have also agreed to indemnify
UIH against all liabilities UIH may incur in connection with UIH's
indemnification obligations under the underwriting agreement.
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UIH Indenture
We, as a subsidiary of UIH, are subject to the provisions of the indenture
governing UIH's senior secured discount notes due 2008. This Indenture contains
covenants that, among other things, limit the ability of UIH and its
subsidiaries, including us, to:
. incur indebtedness and issue certain preferred stock in amounts exceeding
that permitted based upon financial ratio and other tests,
. repurchase equity interests from third parties other than UIH,
. make investments in non-controlled entitie,
. enter into agreements that would restrict the ability to make
distributions, loans or other payments to equity holders,
. create certain liens,
. sell assets or issue equity for other than cash or fail to invest the cash
proceeds of such sales within 360 days of the sale periods, and
. enter into transactions with affiliates of UIH.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Restrictions Under UIH
Indenture" and "Risk Factors". We will continue to be controlled by UIH and
governed by the terms of its debt securities. We have agreed with UIH that, for
as long as we are subject to the provisions of UIH's indenture, as amended or
supplemented, or any other indenture or agreement to which UIH is a party
governing indebtedness of UIH that replaces or refinances any indebtedness
governed by UIH's indenture, as amended or supplemented, we will not take any
action that will result in a breach of UIH's indenture.
UIH's senior secured discount notes were issued pursuant to the Indenture,
dated as of February 5, 1998, by and between UIH and Firstar Bank of Minnesota
N.A., as trustee. The foregoing description of certain covenants of this
indenture is a summary only, does not purport to be complete and is qualified
in its entirety by reference to all of the provisions of this indenture, which
are hereby incorporated by reference. A copy of UIH's indenture has been
incorporated as an exhibit to the registration statement filed with the United
States Securities and Exchange Commission of which this prospectus forms a
part.
RELATIONSHIP WITH MICROSOFT
We have signed a non-binding letter of intent with Microsoft Corporation to
establish a technical services relationship and, as part of this, have agreed
to set up a series of joint projects to deliver Internet, non-traditional
telephone and other interactive video and general services to digital cable
set-top devices, personal computers and other devices within and beyond our
service areas. The particular terms of each joint project will be negotiated by
us and Microsoft. As part of this relationship, we plan to establish a
technology board to review technology issues and develop technology
specifications and directions. This board would be chaired by Scott Bachman,
our Managing Director of Technology, and would include representatives from
Microsoft and us. In addition, we and Microsoft would be preferred suppliers to
one another, with Microsoft having the first opportunity to license
technologies to us. We would be given the opportunity to present and offer our
products to Microsoft offices in Europe. We and Microsoft would also cooperate
to advocate mutually-agreed standards and regulations to the bodies in our
service territories who set technical standards. We would also have the right
to license Microsoft software for the delivery of Internet content services
over our network. See "Risk Factors -- Our Relationship with Microsoft May Not
Work Out".
As part of this technology relationship, we have agreed that, on the
earlier of three months from the date of the letter of intent and the signing
of the first binding agreement with Microsoft, we will grant Microsoft warrants
to purchase up to 3,800,000 ADSs, which would represent approximately 3.0% of
our outstanding share capital following this offering. Microsoft will have the
option under these warrants to purchase ordinary shares instead of ADSs. These
warrants can be exercised at a price equal to the lesser of $28.00 and the per
share price in this offering. These warrants will not be exercisable until at
least one year after the date of the closing of this offering and will expire
three years after they become exercisable. In addition, half of the warrants
will not vest until certain performance standards are met. We have agreed to
grant Microsoft certain registration rights to be
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negotiated with respect to the ADSs or shares to be issued upon exercise of
these warrants. In addition, we will grant Microsoft a preemptive right to
purchase up to an aggregate of 10% of chello broadband in any public or private
equity offering at such offering's price and the right of first negotiation in
any private equity offering, other than to our or other cable operators in
exchange for carriage of chello broadband.
Microsoft has agreed that, if it purchases any ordinary shares or ADSs in
this offering, it will agree not to dispose of such shares or ADSs for six
months following this offering nor will it acquire more than 15% of our total
share capital without the prior written approval of our Supervisory Board. If
we enter into this binding agreement, as expected, Microsoft will extend its
six-month lock-up period to one year. See "Underwriting" and "Shares Eligible
for Future Sale".
DESCRIPTION OF SHARE CAPITAL
Pursuant to our articles of association, as these will be amended prior to
the closing of this offering, our authorized share capital is ^135,000,000, and
includes 200,000,000 ordinary shares, 100 priority shares, 49,999,900 class A
preference shares, and 200,000,000 class B preference shares. Each of our
shares has a nominal value of ^0.30. Upon completion of the offering,
123,087,469 ordinary shares and 100 priority shares will be issued and fully
paid. No preference shares will be outstanding. The following description of
our share capital is qualified in its entirety by reference to the full text of
the articles of association, which have been included as an exhibit to the
registration statement.
Ordinary Shares
Ordinary shares may, at the option of the shareholder, be registered shares
or bearer shares. A shareholder may convert ordinary shares in bearer form into
registered ordinary shares at any time, and vice versa. We have applied for
listing of the ordinary shares in bearer form on the Amsterdam Stock Exchange.
Ordinary shares in bearer form will be embodied in a single global share
certificate, which we will lodge with The Netherlands Centraal Instituut voor
Giraal Effectenverkeer B.V., the Dutch clearing house known as NECIGEF, for
safe-keeping on behalf of the parties entitled to such ordinary shares. The
ordinary shares in bearer form can only be transferred through the giro-based
securities transfer system of NECIGEF.
Holders of registered ordinary shares will be entered in our shareholders
register and share certificates will not be issued. At the request of the
registered shareholder, we will, without fee, issue a non-negotiable extract
from the shareholders register in the name of the holder. A deed of transfer,
together with our acknowledgment in writing, is required to transfer registered
shares.
Issue of Ordinary Shares; Preemptive Rights; Voting Rights. Pursuant to the
articles of association, all unissued shares of the authorized capital may be
issued by the Board of Management upon approval of both the Supervisory Board
and UIH as holder of the priority shares. The authority of the Board of
Management to issue ordinary shares will end five years after the amendment to
our articles of association being completed prior to this offering unless
extended by the articles of association or by resolution of the general meeting
of shareholders, for a period not exceeding five years in each instance. If no
such extension is given, issues of ordinary shares will require a resolution of
the general meeting of shareholders in addition to approval of the Supervisory
Board and UIH. A resolution of the general meeting of shareholders to extend
the authority of the Board of Management to issue shares requires the approval
of both the Supervisory Board and UIH.
Except for issues of ordinary shares in return for non-cash consideration
and shares issued to our employees or employees of any of our subsidiaries as
defined under Dutch law, holders of ordinary shares will have preemptive rights
to subscribe for their pro-rata amount of all our new ordinary share issuances.
These rights may be restricted or excluded, however, by a resolution of the
Board of Management upon approval of both the Supervisory Board and UIH.
Each ordinary share represents the right to cast one vote at a general
meeting of shareholders.
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Priority Shares
All of the priority shares are held by UIH. Except for the transfer of
priority shares to us, priority shares can only be transferred with the
approval of the Board of Management and the Supervisory Board. In addition to
holding a controlling majority of ordinary shares, UIH, as the holder of the
priority shares, has some specific rights and powers over us including:
. the right to approve the issuance by us of our shares,
. the right to approve the exclusion or restriction of the preemptive
rights of existing shareholders,
. the right to nominate members for appointment to the Management and
Supervisory Boards, which nominations may only be set aside by a
resolution of the general meeting of shareholders adopted by two-thirds
of the votes cast representing more than one-half of the issued nominal
capital,
. the right to approve certain decisions of our Board of Management, and
. the exclusive right to propose amendments to the articles of association
and to propose our merger, split up or dissolution.
Priority shares are issued in the same way as ordinary shares, but carry no
preemptive rights. Priority shares are entitled to a nominal annual dividend of
5% of their nominal value, to the extent of distributable profits.
At such time as UIH holds less than 15% of the issued and outstanding
ordinary shares, UIH will transfer all of the priority shares to a foundation,
the trustees of which will be our Supervisory Directors.
Preference Shares
The Articles of Association provide for the issuance of class A and class B
preference shares.
Class A preference shares may be issued exclusively for financing purposes.
Holders of class A preference shares do not share in our reserves although they
may be entitled to a share premium reserve if it were so decided at the time of
their first issuance. Class A preference shares are not listed. The class A
preference shares will be registered shares and shares certificates will not be
issued. Class A preference shares can be issued in the same way as ordinary
shares, but carry no preemptive rights. Each class A preference share will
represent the right to cast one vote at a general meeting of shareholders.
Class A preference shares will be paid an annual dividend, the amount of which
will be determined at the time of their first issuance by the Board of
Management, to the extent of distributable profits.
Class B preference shares are designed as a preventive measure against
unfriendly takeover bids. The minimum amount required to be paid on the class B
preference shares upon issuance is 25% of the nominal amount issued. In the
event of a hostile takeover bid, class B preference shares may be issued to a
legal entity charged with caring for our interests and preventing influences
that may threaten our continuity, independence or identity. Holders of class B
preference shares do not share in our reserves and such shares are not listed.
The class B preference shares will be registered shares and share certificates
will not be issued. Class B preference shares can be issued in the same way as
ordinary shares, but carry no preemptive rights. Each class B preference share
will represent the right to cast one vote at a general meeting of shareholders.
Class B preference shares will be paid a cumulative annual dividend calculated
on the basis of the deposit interest rate of the European Central Bank to the
paid up part of their nominal value, to the extent of distributable profits.
Class B preference shares may be issued by the Board of Management upon
approval of both the Supervisory Board and UIH, as the holder of the priority
shares, if such power has been granted to the Board of Management by the
general meeting of shareholders or by the articles of association.
Notwithstanding, if class B preference shares are proposed to be issued and
such shares would exceed 100% of all of our other outstanding shares, such
issuance will require the approval of the general meeting of shareholders. In
all instances where class B preference shares are issued, we must explain the
reason for the issuance within four weeks thereof at a general meeting of
shareholders. Within two
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years after the first issuance of class B preference shares, a general
shareholders meeting must be held to vote on whether the class B preference
shares should be repurchased or cancelled. If such a resolution is not adopted,
another meeting is held within two years of the previous meeting and this
procedure is repeated until no more class B preference shares are outstanding.
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SUMMARY OF ADDITIONAL MATERIAL PROVISIONS
OF THE ARTICLES OF ASSOCIATION AND OTHER MATTERS
General
We were incorporated under Dutch law on December 21, 1990 as a private
limited liability company ("besloten vennootschap met beperkte
aansprakelijkheid"), and were converted in connection with the UPC Acquisition
on December 11, 1997 into a public limited liability company ("naamloze
vennootschap"). We have our corporate seat in Amsterdam, The Netherlands and
are registered in the Amsterdam Commercial Register under number 33-274-976. We
are not subject to the rules for large companies ("structuurvennootschappen").
Set forth below is a summary of certain additional material provisions of
the articles of association, as the same were amended on February , 1999, and
Dutch corporate law. This summary does not purport to be complete and is
qualified in its entirety by reference to the Articles of Association and the
law of The Netherlands. Copies of the Articles of Association and our most
recent annual accounts and annual report may be obtained in both Dutch and
English upon written request to us at our principal office.
Corporate Purpose
Article 3 of our articles of association provides that our business
activity shall be, among other things:
. to own, operate, and develop subscription and multi-channel television
systems, to render related consulting, engineering and programming
services and to provide other communications services,
. to incorporate, manage and finance, and to participate in other companies
and enterprises, and
. to take up loans, land and make investments and acquire, transfer and
dispose of claims and assets in general.
Acquisition of Our Own Shares
We may acquire our own shares subject to certain provisions of Dutch law.
We may only acquire our own shares for consideration if (1) the shareholders'
equity less the payment required to make the acquisition does not fall below
the sum of the paid-up and called portion of the share capital and any
statutory reserves, and (2) we and our subsidiaries would thereafter not hold
or hold in pledge shares with an aggregate nominal value exceeding one-tenth of
our issued share capital. Shares held by us in our own capital may not be voted
or counted for quorum purposes at shareholders' meetings.
Acquisitions by us of our own shares may be effected by our Board of
Management, subject to the approval of the Supervisory Board and UIH as the
holder of our priority shares, only if the general meeting of shareholders has
authorized the Board of Management to effect such acquisitions. It is expected
that such a resolution of the general meeting will be adopted prior to the
completion of the offering. Such resolutions expire within 18 months and must
be renewed. Acquisitions by us of our own shares that are listed on a stock
exchange do not require the above-mentioned authorization of the general
meeting if made for the purpose of transferring such shares to our employees or
employees of a company in our group.
Obligations to Disclose Holdings
Pursuant to the Dutch Act of Disclosure of Holdings in Listed Companies
1996 ("Wet melding zeggenschap in ter beurze genoteerde vennootschappen 1996"),
any holder of five percent or more of our issued capital or voting control at
the time the ordinary shares are listed on the Amsterdam Stock Exchange must
notify both us and the Securities Board of The Netherlands. Moreover, anyone
obtaining or divesting ordinary shares after listing on the Amsterdam Stock
Exchange and thereby causing that holder's percentage of issued capital or
voting control to come under a different range must also notify us and the
Securities Board of The Netherlands. The aforementioned ranges are: 0 to 5%, 5
to 10%, 10 to 25%, 25 to 50%, 50 to 66 2/3% and 66 2/3% or more. Failure to
disclose one's shareholdings is a violation of the Dutch Economic Offenses Act,
and may result in civil penalties, including suspension of voting rights.
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Shareholders Meeting
We are required to hold a shareholders' meeting annually, as well as if
convened by the Supervisory Board, the Board of Management or UIH, as the
holder of our priority shares. Unless otherwise required by law or our articles
of association, all decisions of the general meeting of shareholders may be
adopted by a majority of the votes cast.
Adoption of Annual Accounts and Discharge
Within five months following the end of each fiscal year, the Board of
Management must prepare annual accounts accompanied by an annual report. This
period may be extended by the general meeting of shareholders on account of
special circumstances for up to six months. The annual accounts and report must
then be submitted to the Supervisory Board, which will present a report on it
to the general meeting of shareholders. The annual accounts and the annual
report will be available to shareholders from the day of notice convening the
annual general meeting of shareholders.
The general meeting of shareholders may discharge the members of the Board
of Management and Supervisory Board from liability in respect of the exercise
of their duties during the fiscal year concerned. Such discharge is subject to
mandatory provisions of Dutch law, including those relating to liability of
members of supervisory boards and management boards upon bankruptcy of a
company. Moreover, this discharge does not extend to actions or omissions not
disclosed in or apparent from the adopted annual accounts.
Dividends
Subject to certain exceptions, dividends are only paid by us on profits as
shown in our annual financial statements. We may not pay dividends if the
payment would reduce shareholders' equity below the sum of the paid-up capital
and any reserves required by Dutch law. Pursuant to the articles of
association, the priority shares have preferential dividend rights. See
"Description of Share Capital -- Priority Shares". Thereafter, the Board of
Management, upon approval of the Supervisory Board, shall determine how much of
the remaining profit shall be allocated to our reserves before dividends are
paid on the ordinary shares. To date, we have not paid dividends on our
ordinary shares and do not intend to do so for the foreseeable future. See
"Dividend Policy" and "Risk Factors -- We Do Not Intend to Pay Dividends for
the Foreseeable Future". The Board of Management may declare, upon approval of
the Supervisory Board and the general meeting of the shareholders, that some or
all of the dividends will be paid in our shares rather than in cash. The Board
of Management may, with the prior approval of the Supervisory Board and subject
to certain statutory provisions, distribute one or more interim dividends. Any
dividends paid but not claimed by the recipient within five years revert to us.
Capital Reduction
Upon the proposal of our Board of Management and after approval by the
Supervisory Board, the general meeting of shareholders may resolve to reduce
the issued share capital by cancellation of shares or by reducing the nominal
value of our shares, subject to certain statutory provisions and the provisions
of the articles of association.
Amendment of the Articles of Association; Dissolution; Legal Merger; Split-up
Only UIH, as the holder of our priority shares, may propose amendments to
our articles of association as well as to effect our legal merger, split-up or
dissolution. The general meeting of shareholders cannot effect our merger,
split-up or dissolution or amend our articles of association if the proposal is
made by any one other than UIH as the holder of our priority shares.
Liquidation Rights
In the event that we are dissolved or liquidated, the assets remaining
after payment of all debts are to be distributed to holders of our share
capital as follows: first, to any issued and outstanding class B preference
shares in an amount equal to any previously declared but unpaid dividend and
the paid-up amount of such class B preference shares; second, to any issued and
outstanding class A preference shares in an amount equal to any previously
declared but
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unpaid dividend and the paid-up amount of such class A preference shares;
third, to the holders of priority shares in an amount equal to their nominal
value; and, fourth any remaining assets shall be distributed to the holders of
ordinary shares in proportion to the nominal value of their holdings.
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
We have summarized below the material terms of the ADSs and the material
provisions of the deposit agreement among us, Citibank N.A., as the depositary
and all holders and beneficial owners of the ADSs represented by American
Depositary Receipts issued under the deposit agreement. This is only a summary
of the terms of the ADSs and provisions of the deposit agreement. For complete
information, you should read the entire deposit agreement and the ADR which is
filed as an exhibit to the Registration Statement of which this prospectus
forms a part. You may also review a copy of the deposit agreement at the
principal office of Citibank at 111 Wall Street, New York, New York 10043,
U.S.A.
American Depositary Shares
Citibank will issue ADSs. ADSs represent an ownership interest in us much
like a share of common stock represents an ownership interest in a corporation.
An ADS represents one of our ordinary shares or right to an ordinary share. An
ADR is a certificate issued by Citibank that represents an issued ADS and may
represent one or more ADSs. In this summary we refer to the ordinary shares or
rights to ordinary shares, together with other securities, cash or property
held with respect to the ordinary shares or rights, as deposited securities.
Our ordinary shares will be deposited in Amsterdam in accounts maintained
by Citibank N.A., Amsterdam as the custodian with the Dutch central depositary
for equity securities Nederlandse Centraal Instituut voor Giraal
Effectenverkeer B.V., known as NECIGEF. We and Citibank will treat only the
person in whose name an ADS is registered as the owner of the ADS.
Deposit of Ordinary Shares
The ordinary share represented by an ADS will be deposited in bearer form
with Citibank-Amsterdam and credited to Citibank-Amsterdam's account at
NECIGEF. Citibank-Amsterdam will be the holder of record of these ordinary
shares. Once Citibank-Amsterdam confirms the deposit of ordinary shares to its
account at NECIGEF, Citibank will sign and deliver the ADRs representing the
ADSs. The records maintained by NECIGEF or institutions with accounts at
NECIGEF ("NECIGEF Participants") will show the ownership of the beneficial
interests in the deposited ordinary shares and transfers of the ownership
interests.
Because Citibank-Amsterdam will own the ordinary shares, you must rely on
it to exercise your rights as a shareholder. The obligations of Citibank-
Amsterdam are set out in the deposit agreement.
Requirements to Deposit
Any NECIGEF Participant may deposit ordinary shares or rights to receive
ordinary shares other than (1) restricted securities, or (2) fractional
ordinary shares or deposited securities, by delivery of the ordinary shares to
the account of Citibank-Amsterdam along with
. appropriate transfer or endorsement documents,
. certain certifications and payment of required fees, expenses and taxes,
stock transfer taxes and charges,
. a written order directing Citibank to sign and deliver an ADR for the
number of ADSs representing the deposited ordinary shares,
. evidence of necessary Dutch governmental approvals or compliance with the
applicable Dutch rules and regulations, and
. any agreement, instrument or proxy required by Citibank or Citibank-
Amsterdam for the ordinary shares until they are registered in the name
of Citibank or Citibank-Amsterdam.
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Pre-Release of ADSs
Citibank may issue ADRs against the right to receive ordinary shares. In
certain circumstances Citibank may issue ADSs before the deposit of the
underlying ordinary shares and may deliver ordinary shares prior to receiving
and canceling ADSs. This is called a pre-release transaction. A person to whom
the ADSs or ordinary shares are to be issued or delivered must sign a written
agreement and provide certain collateral to Citibank before Citibank will
engage in a pre-release transaction.
Withdrawal of Deposited Securities
You may turn in your ADSs at Citibank's principal office in order to
withdraw the deposited securities represented by the ADSs. You may turn in your
ADSs by delivering the ADR representing the ADSs or by book-entry delivery of
the ADSs to Citibank. Upon payment of certain fees, charges and expenses and
taxes, a NECIGEF Participant you designate will be entitled to delivery of the
deposited securities represented by the ADSs turned in. To turn in an ADR, you
will be required to sign and deliver to Citibank a written order with delivery
instructions meeting Citibank's requirements.
Once Citibank or Citibank-Amsterdam receives the required documents,
Citibank-Amsterdam will deliver to you for your account by means of electronic
transfer recorded on the books of NECIGEF, on behalf of the NECIGEF Participant
you designate, the deposited securities represented by the ADSs. Citibank may
deliver to you at its principal office any dividends or cash distributions on
the deposited securities represented by the surrendered ADSs, or any proceeds
of sale of the dividends, distributions or rights, which Citibank may hold.
Citibank will not accept an ADR representing an ADS that represents less
than one ordinary share. If you surrender an ADR representing less than one
ADS, Citibank will deliver a whole number of ordinary shares and will deliver
to you the cash proceeds from the sale of any fractional share.
At your request, risk and expense, Citibank will direct Citibank-Amsterdam
to send to you any cash or other property (other than securities) relating to
your surrendered ADR to Citibank for delivery to you. You must instruct
Citibank to do this by letter or by cable, telex or facsimile transmission.
Dividends, Other Distributions and Rights
Citibank has agreed to pay you cash dividends and to make share and other
distributions it or Citibank-Amsterdam receives on the ordinary shares or other
deposited securities. You will receive these dividends or distributions in
proportion to the number of ordinary shares your ADSs represent on the
applicable record date. Citibank may deduct certain fees and expenses and may
withhold required taxes or other governmental charges.
Cash Dividends. Citibank will convert any cash dividends, distributions or
proceeds from the sale of ordinary shares or related rights and securities into
U.S. dollars if it can do so on a practicable basis and can transfer the U.S.
dollars to the United States. If this not practicable or if any approval from
the Dutch government is needed and cannot be received at reasonable cost or in
a reasonable time, Citibank may (1) convert the foreign currency and distribute
in U.S. dollars to holders for whom it is practicable, (2) distribute the
foreign currency to holders for whom it is practicable, or (3) hold the foreign
currency for the accounts of those holders entitled to receive the foreign
currency. Citibank will not invest the foreign currency and will not be liable
for any interest.
Share Dividend. Citibank will set a record date once it receives
confirmation from Citibank-Amsterdam of a deposit of a share dividend or a free
distribution of ordinary shares and either
. distribute additional ADSs in proportion to the number of ADSs held by
you as of the record date, net of fees, charges and expenses and taxes,
or
. each outstanding ADS after the record date will then also represent the
additional ordinary shares distributed upon the deposited securities
represented by the ADS, net of fees, charges and expenses and taxes.
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Citibank will distribute only whole ADSs. It will sell the ordinary shares
which would require it to issue a fractional ADS and distribute the net
proceeds in the same manner as its distributes cash distributions.
If we distribute property (including ordinary shares) that requires
Citibank to withhold from you taxes or other governmental charges, or, if the
ordinary shares must be registered in order to be distributed, Citibank may
sell all or a part of the property as it considers advisable. Citibank will
distribute the proceeds of the sale to you. It will deduct fees, charges and
expenses and taxes. Citibank will handle any unsold balance of the property
according to the deposit agreement.
Elective Dividend. If we wish to distribute a dividend payable in cash or
in additional ordinary shares, and we decide to let you choose which to accept,
Citibank will determine whether it is legal and reasonably practicable for you
to choose.
Citibank has agreed to let you choose only if (1) Citibank has determined
that the distribution is reasonably practicable and (2) Citibank has received
certain documents.
If these conditions are not satisfied, Citibank will, to the extent
permitted by law, distribute to you either cash or additional ADSs representing
the additional ordinary shares. If these conditions are satisfied, Citibank
will fix a record date and establish procedures to enable you to choose to
receive the proposed dividend in cash or in additional ADSs upon the terms
described in the deposit agreement.
Citibank is not obligated to make available to you a method to choose the
dividend in ordinary shares (rather than ADSs). We can not assure you that you
will be given the opportunity to choose the form of distribution on the same
terms and conditions as the holders of the deposited securities.
Rights. If we offer holders of our ordinary shares rights and we wish to
make the rights available to you, Citibank will make those rights available you
only if:
. we have asked that the rights be made available to you,
. Citibank has received required legal documents from us, and
. Citibank has decided that the distribution of rights is reasonably
practicable.
If these conditions are not satisfied, Citibank will sell the rights as
described below. If these conditions are satisfied, Citibank will set a record
date and establish procedures to distribute the rights to enable you to
exercise the rights on their terms. We will help Citibank establish these
procedures. Citibank is not obligated to make available to you a method to
exercise the rights to subscribe for ordinary shares rather than ADSs.
If these conditions are not satisfied, Citibank will decide whether it can
sell the rights in a manner it may deem proper. Upon the sale, Citibank will
convert and distribute proceeds of the sale, net of fees, charges, and expenses
and taxes, as described in the deposit agreement.
If Citibank cannot make any rights available to holders or arrange for the
sale of the rights, Citibank will allow the rights to lapse. In that case you
will receive no value for the rights. Citibank has no responsibility for:
. any failure by Citibank to decide that it is legal or feasible to make
the rights available to you,
. any foreign exchange risk or loss to you from the sale or exercise, or
. the content of any materials forwarded to you on our behalf in connection
with the rights distribution.
If the rights or the securities represented by the rights must be
registered before we can offer the rights or the securities to you and to sell
the securities represented by the rights, Citibank will not distribute the
rights to you until they are registered.
Citibank will reduce the amount to be distributed to you for taxes or other
charges that it must withhold. If any distribution in property including
ordinary shares or rights to subscribe to ordinary shares requires any
withholding, Citibank may sell all or a part of the property to pay the taxes
or charges.
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We cannot assure you will be given the opportunity to exercise rights on
the same terms and conditions as the holders of deposited securities.
The deposit agreement does not require us to register any rights or
ordinary shares or other securities that you might acquire upon the exercise of
the rights.
Distributions Other Than Cash, Shares or Rights. Citibank will not
distribute to you property other than cash, ordinary shares or rights to
purchase additional ordinary shares, unless Dutch law allows the distribution
and (1) we have asked Citibank to make the distribution to you, (2) Citibank
has received required legal documents, and (3) Citibank has decided that the
distribution is reasonably practicable.
If these conditions are satisfied, Citibank will distribute any property to
you, in proportion to the number of ADSs held by you on the record date after
deducting fees, charges and expenses and taxes. Citibank may sell all or a part
of the property to pay any taxes including applicable interest and penalties or
other governmental charges applicable to the distribution.
If these conditions are not satisfied, Citibank will sell or cause the
property to be sold as it may wishes. Citibank will distribute the proceeds of
the sale to you in the same manner as it distributes cash distributions, net of
fees, expenses and charges and taxes. If Citibank cannot sell the property, it
may dispose of the property in any way it wishes.
Changes Affecting Deposited Securities
If:
. the nominal value of deposited securities changes,
. the deposited securities are split-up, consolidated or reclassified or,
. there is a recapitalization, reorganization, merger or consolidation or
sale of assets affecting us or to which we are a party,
any securities Citibank or Citibank-Amsterdam receives will be treated as newly
deposited securities under the deposit agreement. The ADSs will from that point
on represent the new deposited securities received in that exchange or
conversion. Citibank may, however, with our approval, and will, if we request,
deliver new ADRs or call for the surrender of outstanding ADRs to be exchanged
for new ADRs so long as the distributions do not violate any laws.
Voting of the Shares
You may instruct Citibank to vote the ordinary shares or deposited
securities underlying your ADSs as described below.
When Citibank receives notice of an upcoming vote, Citibank will fix a
record date for the holders of ADSs and provide you with voting materials that
we have provided. The materials will (1) describe the matters to be voted on,
and (2) explain in English how you will be entitled to instruct Citibank how to
exercise the voting or other rights for the ordinary shares or deposited
securities underlying your ADSs. In order for your instructions to be valid,
Citibank must receive them on or before a date that it will specify.
The ordinary shares or other deposited securities represented by your ADSs
will not be voted except as you instruct. Citibank will not vote ordinary
shares or other deposited securities represented by ADSs for which it does not
receive specific voting instructions. Citibank, Citibank-Amsterdam and each of
their nominees may not exercise any voting discretion over any ordinary shares
or other deposited securities.
We cannot assure you that you will receive the notice of an upcoming vote
with sufficient time to enable you to return voting instructions to Citibank in
time.
Reports and Notices
When we give notice of an upcoming vote, we will send to Citibank and
Citibank-Amsterdam a copy of the notice of the upcoming vote in English in the
form that we gave or will give to holders of ordinary shares or other deposited
securities. We will also give to Citibank-Amsterdam and Citibank a summary in
English of any applicable provisions or proposed provisions of our articles of
association concerning the notice or the upcoming vote.
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Citibank will arrange for Citibank-Amsterdam to send to Citibank the
notices and any other reports and communications that are both received by
Citibank and made generally available by us to the registered holders of
ordinary shares or other deposited securities. Citibank will arrange for the
mailing of copies of these materials to you or make the materials available to
you.
Citibank will make a copy of any other notices, reports and other
communications issued by us in connection with an upcoming vote available for
inspection by you at Citibank's principal office, at Citibank-Amsterdam's
office and at any other designated transfer office.
Disclosure of Beneficial Ownership
We or Citibank may ask you to provide information as to the capacity in
which you hold or held ADSs and the name of any other person then or previously
holding any beneficial or other interest in your ADRs and various other
matters. You agree to provide the requested information pursuant to the deposit
agreement whether or not you are still a holder at the time of the request.
If the deposit agreement or applicable law requires disclosure relating to
our ordinary shares and other securities or limits beneficial or other
ownership of deposited securities and provides for blocking transfer and voting
or other rights to enforce disclosure or limit ownership, Citibank will use its
reasonable efforts to comply with our instructions as to ADRs concerning
enforcement or limitation. You must comply with all disclosure requirements and
ownership limitations and must cooperate with Citibank's compliance with our
instructions. See also "Summary of Additional Material Provisions of the
Articles of Association and Other Matters--Obligations to Disclose Holdings".
Upon our request, Citibank will provide to us a list, as of a recent date,
of the names, addresses and holdings of ADSs by all persons in whose names ADSs
are registered on the books of Citibank.
Inspection of Transfer Books
Citibank will keep books at its principal office for the registration and
transfer of ADRs. The books will be open for inspection by you and us at all
reasonable times. Citibank will not knowingly allow an inspection for the
purpose of communicating with holders in the interest of a business or object
other than our business or a matter related to the deposit agreement or
the ADSs.
Amendment of the Deposit Agreement
We may agree with Citibank to amend the deposit agreement and the form of
ADR without your consent for any reason and at any time. If an amendment adds
or increases any fees or charges (except for taxes and other governmental
charges and certain depositary expenses), or prejudices an important right of
yours, it will only become effective 30 days after Citibank gives notice of the
amendment. An amendment will not be considered to materially prejudice any of
your important rights if it:
. is reasonably necessary in order for the ADSs to be registered under the
Securities Act or for ADSs or ordinary shares to be traded solely in
electronic book-entry form, and
. does not add or increase any of your fees or charges.
At the time the amendment becomes effective, you are considered, by
continuing to hold your ADS or ADSs, to agree to the amendment and to be bound
by the deposit agreement as amended. No amendment will impair your right to
surrender an ADR and receive the deposited securities represented by it, except
in order to comply with applicable law.
If a government adopts new laws, rules or regulations that would require an
amendment to the deposit agreement, to ensure compliance with the new law, rule
or regulation, we and Citibank may amend the deposit agreement and the ADR at
any time in accordance with the changed laws, rules or regulations. The
amendment may become effective before a notice of the amendment is given to you
or within any other period of time as required for compliance with the laws,
rules or regulations.
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Termination of the Deposit Agreement
Citibank must terminate the deposit agreement at any time at our written
request, by mailing notice of the termination to you at least 30 days prior to
the date set in the notice for the termination. If 60 days have expired after
(1) Citibank has delivered to us a written notice of its resignation, or (2) we
have delivered to Citibank a written notice of our removal of Citibank, and in
either case a successor depositary has not been appointed and accepted its
appointment, Citibank may terminate the deposit agreement by mailing notice of
the termination to you at least 30 days prior to the date set for the
termination.
On and after the date the deposit agreement terminates and upon surrender
of an ADR at Citibank's principal office, you will be entitled to delivery, to
a NECIGEF participant you have designated, of the amount of deposited
securities represented by the surrendered ADR, net of fees, expenses and
charges and taxes. If any ADRs remain outstanding after the termination of the
deposit agreement, the registrar will stop the registration of transfers of
ADRs, and Citibank will suspend the distribution of dividends to you, and will
not give any further notices or perform any further acts under the deposit
agreement, except that Citibank will:
. continue to collect dividends and other distributions relating to
deposited securities,
. sell rights as provided in the deposit agreement, and
. continue to deliver deposited securities, together with any dividends or
other distributions received with respect to the deposited securities and
the proceeds of the sale of any rights or other property, in exchange for
ADRs surrendered to Citibank, net of fees, charges and expenses and
taxes.
At any time after six months after termination, Citibank may sell any of
the remaining deposited securities. Citibank will hold the proceeds from the
sale, together with any other cash then held by it for the pro rata benefit of
the ADR holders that have not surrendered their ADRs. It will not invest the
money and has no liability for interest. After termination, Citibank's only
obligations will be to account for the proceeds and other cash, net of fees,
charges and expenses and taxes. After termination, our only obligations will be
with respect to certain specified obligations to Citibank under the deposit
agreement.
Charges of Depositary
Citibank will charge you fees for receiving deposits and issuing ADRs, for
delivering deposited securities against your surrender of ADRs, for splitting
and combining ADRs, for selling or exercising rights or for other services
performed under the terms of the deposit agreement. Citibank and we reserve the
right to modify, reduce or increase any fees or charges for services performed.
If an ADR is issued to you or you surrender an ADR to Citibank, Citibank
will charge you following fees:
You must pay: For:
$5.00 (or less) per 100 ADRs . Each issuance of an ADR
. Each cancellation of an ADR, including if the
agreement terminates
$2.00 (or less) per 100 ADRs . Any cash distribution (excluding cash and
share dividends to registered holders but
including the sale of rights and other
distributions)
$5.00 (or less) per 100 ADRs . Any distribution of ADSs pursuant to a free
share distribution or the exercise of rights
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Citibank will provide to you, without charge, a copy of its latest fee
schedule upon your request. In addition, when depositing shares you will be
requested to pay taxes and other governmental charges, registration fees,
cable, telex and facsimile transmission and delivery expenses, and customary
and other expenses. When you deposit ordinary shares or surrender ADRs in order
to withdraw deposited securities you will pay:
. taxes (including applicable interest and penalties) and other
governmental charges,
. any registration fees as may be required for the registration of ordinary
shares or other deposited securities on our share register and that
applies to the transfer of ordinary shares, and
. the air courier, cable, telex and facsimile transmission, delivery
expenses and the expenses for the conversion of foreign currency into
dollars.
Payment of Taxes
You will pay to Citibank any tax, assessment or other governmental charge
or expense payable by Citibank or Citibank-Amsterdam or their nominees as a
result of Citibank-Amsterdam being the holder of any deposited securities.
Citibank-Amsterdam may refuse the deposit of ordinary shares and Citibank may
refuse to issue ADSs, to deliver ADRs, to register the transfer, split-up or
combination of ADRs and in certain circumstances it may refuse the withdrawal
of deposited securities until Citibank receives full payment of the tax,
charge, penalty or interest. You agree to indemnify Citibank, us, Citibank-
Amsterdam, and any of our or their agents, officers, employees and affiliates
for any claims with respect to taxes including applicable interest and
penalties thereon arising from any tax benefit you obtain.
Limitations on Execution, Transfer and Surrender of ADSs
Transfers of ADSs will be registered on the books of Citibank upon your
surrender to Citibank of the ADRs evidencing the ADSs. Citibank requires that
the ADR must be properly endorsed or accompanied by a proper transfer
instrument (including medallion signature guarantees in accordance with
standard industry practice) and duly stamped, if necessary.
Before Citibank will sign and deliver, register, register transfers, split-
ups, combinations or surrenders of any ADR or deliver any distribution on the
ADR or allow the withdrawal of any deposited securities, Citibank or Citibank-
Amsterdam may require:
. payment of stock transfer or other taxes or other governmental charges
and transfer or registration fees charged by any third parties and any of
Citibank's fees and charges,
. production of satisfactory proof of the identity and genuineness of any
signature, and
. compliance with any laws relating to the execution and delivery of ADRs
or ADSs or to the withdrawal of the deposited securities and other
regulations established by us and Citibank consistent with the deposit
agreement and applicable law.
Citibank may refuse to deliver, transfer or register transfers of ADRs
generally when the transfer books of Citibank, the share registrar or NECIGEF
are closed or if we or Citibank deem it advisable.
You have the right to cancel your ADRs and withdraw the underlying
deposited securities, except as permitted by law and regulations in connection
with
. temporary delays caused by closing the transfer books of Citibank or our
transfer books or the deposit of ordinary shares in connection with
voting at a shareholders' meeting, or the payment of dividends,
. when you owe Citibank the payment of fees, taxes and similar charges, and
. when it is necessary to comply with any U.S. or foreign laws relating to
the ADRs or to the withdrawal of the deposited securities.
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TAXATION
The following discussion, written from our perspective, is the opinion of
Holme Roberts & Owen LLP on the material U.S. federal income tax consequences
and of Arthur Andersen on the material Dutch tax consequences, under current
law, regarding the acquisition, ownership and disposition of the ordinary
shares or ADSs. This opinion does not, however, address the income taxes
imposed by any political subdivision of the United States or The Netherlands or
any tax imposed by any other jurisdiction. This opinion does not discuss every
aspect of taxation that may be relevant to a particular taxpayer under special
circumstances or who is subject to special treatment under applicable law and
is not intended to be applicable in all respects to all categories of
investors. For example, certain types of investors, such as:
. insurance companies,
. tax-exempt persons,
. financial institutions,
. regulated investment companies,
. dealers in securities,
. persons who hold ordinary shares or ADSs as part of a hedging, straddle,
constructive sale or conversion transaction,
. persons whose functional currency is not the U.S. dollar, and
. U.S. persons owning (directly, indirectly, or constructively), 10% or
more of the ordinary shares or ADSs,
may be subject to different tax rules not discussed below. This opinion assumes
that the deposit agreement and any related agreement will be performed in
accordance with its terms and that we are organized and our business conducted
in the manner outlined in this prospectus. Changes in our organizational
structure or the manner in which we conduct our business may invalidate this
opinion. The laws upon which this opinion is based are subject to change,
perhaps with retroactive effect. A change to such laws may invalidate this
opinion which will not be updated to reflect changes in laws. PROSPECTIVE
INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THEIR PARTICULAR PERSONAL
TAX CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF THE ORDINARY SHARES OR
THE ADSs.
In general, for U.S. federal income tax and Dutch tax purposes, holders of
ADSs will be treated as owners of the ordinary shares represented by such ADSs.
Dutch Taxes
The following is the opinion of Arthur Andersen Belastingadviseurs
regarding the material Dutch tax consequences of investing in the ordinary
shares and ADSs. This opinion represents Arthur Andersen Belastingadviseurs's
interpretation of existing law. No assurance can be given that tax authorities
or courts in The Netherlands will agree with such interpretation.
Substantial Interest
A shareholder that owns, either via shares or options, directly or
indirectly, five percent or more of any class of, or five percent or more of
the total issued share capital of a company resident in The Netherlands (a
"Substantial Interest") is subject to special rules. With respect to
individuals, certain attribution rules exist in determining the presence of a
Substantial Interest. Unless indicated otherwise, the term "shareholder", as
used herein, includes an individual and entities as defined under Dutch tax law
holding ordinary shares or ADSs, but does not include any such person owning a
Substantial Interest in us.
Dutch Tax Consequences for Residents or Deemed Residents of the Netherlands
Dutch Dividend Withholding Tax
Dividends we distribute are subject to withholding tax at a rate of 25%,
unless:
(1) the participation exemption applies and the ordinary shares or ADSs are
attributable to the business carried out in The Netherlands,
(2) or dividends are distributed to a qualifying EU corporate shareholder
satisfying the conditions of the EU directive, or
(3) the rate is reduced by treaty.
Dividends may include:
. distributions of cash,
. distributions of property in kind,
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. constructive dividends,
. hidden dividends,
. liquidation proceeds in excess of recognized paid-in capital,
. proceeds from the redemption of shares in excess of recognized paid-in
capital,
. stock dividends equal to their nominal value (unless distributed out of
our recognized paid-in share premium), and
. and the repayment of paid-in capital not recognized as capital.
The term recognized paid-in capital or share premium relates to our paid-in
capital or share premium as recognized for Dutch tax purposes.
Generally, a shareholder that resides, or is deemed to reside, in The
Netherlands will be allowed a credit against Dutch income tax or corporation
tax for the tax withheld on dividends paid on ordinary shares or ADSs. A legal
entity resident in The Netherlands that is not subject to Dutch corporate
income tax, may, under certain conditions, request a refund of the tax
withheld.
Dividends we pay to a corporate shareholder that qualifies for the
"participation exemption", as defined in Article 13 of The Netherlands
Corporation Tax Act 1969, will not be subject to the dividend withholding tax
if the ordinary shares or ADSs are attributable to the shareholder's business
carried out in The Netherlands. A resident corporate shareholder will qualify
for the participation exemption if, among other things, the resident
shareholder owns at least five percent of our nominal paid-up capital.
Dutch Individual Income Tax and Corporation Income Tax
If the ordinary shares or ADSs are held by an individual who resides, or is
deemed to reside, in The Netherlands, income derived from the ordinary shares
or ADSs is subject to Dutch income tax on a net income basis at graduated
rates. An individual generally is entitled to a dividend exemption of NLG1,000
a year (NLG2,000 a year for married couples). Ordinary shares or ADSs
distributed to individual shareholders from our share premium account (as
recognized for Dutch tax purposes) are also exempt from Dutch income tax. The
dividend exemption is not available to an individual shareholder if the
ordinary shares or ADSs are;
(1) attributable to a trade or business carried on by the shareholder, or
(2) form part of a Substantial Interest.
Dividends accruing to individual shareholders that hold a Substantial Interest
are subject to income tax at a rate of 25% on a net basis.
Dividends received from ordinary shares or ADSs by an entity that resides,
or is deemed to reside, in The Netherlands will be subject to Dutch corporation
tax on a net basis unless the company's shareholding qualifies for the
participation exemption. Dividends received from ordinary shares or ADSs by a
pension fund as defined in the Corporation Tax Act are not subject to Dutch
corporation tax.
Capital Gains Realized From the Sale or Exchange of Ordinary Shares or ADSs
Capital gains derived from the sale, conversion or disposition of ordinary
shares or ADSs by an individual shareholder who resides, or is deemed to
reside, in The Netherlands are not subject to Dutch income tax provided:
(1) the ordinary shares or ADSs were not acquired directly or indirectly by
us or our subsidiaries,
(2) the shareholder did not have a Substantial Interest in our share
capital at the time of the sale or exchange, and
(3) the ordinary shares or ADSs were not assets of a business.
Capital gains realized by an individual shareholder that is a resident or a
deemed resident of The Netherlands on the disposal of ordinary shares or ADSs
forming part of a Substantial Interest are subject to tax at a rate of 25%.
Capital gains realized by an individual resident shareholder from the sale or
exchange of ordinary shares or ADSs forming part of the assets of a
shareholder's business are subject to tax on a net income basis at the
progressive income tax rates.
If the ordinary shares or ADSs are held by an entity that is a resident or
a deemed resident of The Netherlands, capital gains realized from the
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sale or exchange of ordinary shares or ADSs are subject to corporation tax
unless the shareholding qualifies for the participation exemption. If the
ordinary shares or ADSs are held by a qualifying pension fund, gains realized
from the sale or exchange of ordinary shares or ADSs are exempt from Dutch
corporation tax.
Dutch Net Wealth Tax
An individual who resides, or is deemed to reside, in The Netherlands
generally will be subject to a net wealth tax at a rate of 0.7% on the fair
market value of the ordinary shares or ADSs, with certain exceptions.
Dutch Gift Tax and Inheritance Tax
Dutch gift tax or inheritance tax will be due with respect to a gift or
inheritance of ordinary shares or ADSs from an individual who resided, or was
deemed to have resided, in The Netherlands at the time of the gift or his or
her death. A Dutch national is deemed to have been a resident of The
Netherlands if he or she was a resident in The Netherlands at any time during
the 10 years preceding the date of the gift or the date of his or her death.
For gift tax purposes, each person regardless of nationality is deemed to be a
Dutch resident if he or she was a resident in The Netherlands at any time
during the 12 months preceding the date of the gift. The 10-year and 12-month
residency rules may be modified by treaty.
Liability for payment of the gift tax or inheritance tax rests with the
donee or heir, respectively. The rate at which these taxes are levied is
primarily dependent on the fair market value of the gift or inheritance and
the relationship between the donor and donee or the deceased and heir(s).
Exemptions may apply under specific circumstances.
Dutch Tax Consequences for Non-Residents of The Netherlands
Dutch Dividend Withholding Tax
Dividends we distribute are subject to withholding tax at a rate of 25%,
unless:
(1) the participation exemption applies and the ordinary shares or ADSs are
attributable to the business carried out in The Netherlands, or
(2) dividends are distributed to a qualifying EU corporate shareholder
satisfying the conditions of the EU directive, or
(3) the rate is reduced by treaty.
Dividends may include
. distributions of cash,
. distributions of property in kind,
. constructive dividends,
. hidden dividends,
. liquidation proceeds in excess of recognized paid-in capital,
. proceeds from the redemption of shares in excess of recognized paid-in
capital,
. stock dividends equal to their nominal value unless distributed out of
our recognized paid-in share premium, and
. the repayment of paid-in capital not recognized as capital.
The term recognized paid-in capital or share premium relates to our paid-in
capital or share premium as recognized for Dutch tax purposes.
A non-resident shareholder may benefit from a reduced dividend withholding
tax rate pursuant to an income tax treaty in effect between the shareholder's
country of residence and The Netherlands. Under most Dutch income tax
treaties, the withholding tax rate is reduced to 15% or less provided:
(1) the recipient shareholder does not have a permanent establishment in
The Netherlands to which the ordinary shares and ADSs are attributable,
and
(2) the recipient shareholder is the beneficial owner of the dividends.
Under the Income Tax Treaty of December 18, 1992, concluded between The
Netherlands and the United States, dividends we pay to a resident of the
United States generally will be subject to a dividend withholding tax rate of
15%. The rate may be reduced to five percent if the beneficial owner is a
United States corporation that directly holds 10% or more of our voting power.
The Income Tax Treaty exempts from withholding tax, dividends received by
exempt pension trusts and exempt organizations, under conditions as defined in
the Income Tax Treaty. Except in the case of exempt organizations, dividends
paid may benefit from the
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reduced dividend withholding tax rate (or exemption from dividend withholding
tax) by filing the proper forms in advance of the dividend payment. Exempt
organizations remain subject to the statutory withholding rate of 25% and must
file a return to claim a refund of the tax withheld.
A shareholder may not claim the Income Tax Treaty benefits unless:
(1) it is a "resident" of the United States, as that term is defined in the
Income Tax Treaty, and
(2) Article 26 (the "treaty shopping rules") does not preclude the
shareholder's ability to claim Income Tax Treaty benefits.
The withholding of tax on ordinary share or ADS dividend distributions to a
non-resident corporate shareholder carrying on a business through a Dutch
permanent establishment is not required as long as:
(1) the Dutch participation exemption applies, and
(2) the ordinary shares or ADSs form a part of the permanent
establishment's business assets.
To qualify for the participation exemption, this entity should hold at least
five percent of our nominal paid-up capital and the ordinary shares or ADSs
must form a part of the permanent establishment's business assets.
Dutch Individual Income Tax and Corporation Income Tax
A non-resident shareholder will not be subject to Dutch income tax on
dividends received from us provided such shareholder does not or has not:
(1) carried on a business in The Netherlands through a permanent
establishment or a permanent representative that includes in its assets
the ordinary shares or ADSs,
(2) held a Substantial Interest in our share capital or, in the event the
non-resident shareholder, has held a Substantial Interest in us, such
interest was a business asset in the hands of the shareholder,
(3) shared directly (not through the beneficial ownership of shares or
similar securities) in the profits of an enterprise managed and
controlled in The Netherlands that owned or was deemed to have owned
the ordinary shares or ADSs, and
(4) carried out employment activities in The Netherlands or served as a
director or board member of any entity resident in The Netherlands, or
served as a civil servant of a Dutch public entity with which the
holding of the ordinary shares or ADSs was connected.
Capital Gains Realized From the Sale or Exchange of Ordinary Shares or ADSs
A non-resident shareholder will not be subject to Dutch income tax on
capital gains derived from the sale, conversion or disposition of ordinary
shares or ADSs provided the non-resident shareholder does not or has not:
(1) carried on a business in The Netherlands through a permanent
establishment or a permanent representative that included in its
assets, the ordinary shares or ADSs,
(2) held a Substantial Interest in our share capital or, in the event the
non-resident shareholder has held a Substantial Interest in us, such
interest was a business asset in the hands of the shareholder,
(3) shared directly (not through the beneficial ownership of shares or
similar securities) in the profits of an enterprise managed and
controlled in The Netherlands which owned or was deemed to have owned
ordinary shares or ADSs, and
(4) carried out employment activities in The Netherlands, or served as a
director or board member of any entity resident in The Netherlands, or
served as a civil servant of a Dutch public entity, with which the
holding of the ordinary shares or ADSs was connected.
Capital gains derived from the sale, conversion or disposition of ordinary
shares or ADSs by a non-resident corporate shareholder, carrying on a business
through a permanent
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establishment in The Netherlands, are not subject to Dutch corporation tax
provided:
(1) the Dutch participation exemption would apply, and
(2) the ordinary shares or ADSs are attributable to the business carried
out in The Netherlands.
To qualify for the participation exemption, the shareholder must hold at least
5% of our nominal paid-up capital and meet certain other requirements.
Under most Dutch tax treaties, the right to tax capital gains realized by a
non-resident shareholder from the sale or exchange of ordinary shares or ADSs
is allocated to the shareholder's country of residence.
Dutch Net Wealth Tax
A non-resident individual shareholder will not be subject to Dutch net
wealth tax in respect of the ordinary shares or ADSs provided the non-resident
shareholder does not or has not:
(1) carried on a business in The Netherlands through a permanent
establishment or a permanent representative that included in its assets
the ordinary shares or ADSs, and
(2) shared directly (not through the beneficial ownership of shares or
similar securities) in the profits of an enterprise managed and
controlled in The Netherlands, which owned or was deemed to have owned
ordinary shares or ADSs.
Dutch Gift Tax and Inheritance Tax
A gift or inheritance of ordinary shares or ADSs from a non-resident
shareholder will not be subject to Dutch gift tax or inheritance tax in the
hands of the donee or heir provided the non-resident shareholder was not:
(1) a Dutch national who has been resident in The Netherlands at any time
during the 10 years preceding the date of gift or the date of death or,
in the event he or she was resident in The Netherlands during such
period, the non-resident shareholder was not a Dutch national at the
time of gift or death,
(2) solely for the purpose of the gift tax, a resident of The Netherlands
at any time during the 12 months preceding the time of the gift,
(3) engaged in a business in The Netherlands through a permanent
establishment or a permanent representative which included in its
assets the ordinary shares or ADSs, and
(4) shared directly (not through the beneficial ownership of shares or
similar securities) in the profits of an enterprise managed and
controlled in The Netherlands which owned or is deemed to have owned
ordinary shares or ADSs.
United States Federal Income Tax
The following is the opinion of Holme Roberts & Owens LLP regarding the
material U.S. federal income tax consequences to U.S. Shareholders of an
investment in the ordinary shares or ADSs. To the extent the following
summarizes the Dutch taxation rules on the reduction of the amount of dividend
withholding tax to be paid over to the Dutch Tax Administration, it is based on
the opinion of Arthur Andersen Belastingadviseurs.
For purposes of this opinion a "U.S. Shareholder" is a holder of ordinary
shares or ADSs that is an individual citizen or resident of the United States,
a corporation organized under the laws of the United States or any state of the
United States, or any other person subject to U.S. federal income tax on a net
income basis with respect to the ordinary shares or ADSs.
Taxes on Income
The gross amount of any distribution, including Dutch withholding tax
thereon, actually or constructively received by a U.S. Shareholder with respect
to ordinary shares or ADSs will be a dividend. The dividend will be included in
the gross income of the U.S. Shareholder as ordinary income to the extent of
our current and accumulated earnings and profits as determined
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under U.S. federal income tax principles. Dividends paid on ordinary shares or
ADSs generally will constitute income from sources outside the United States
and will not be eligible for the dividends received deduction that may be
allowed to United States corporate shareholders on dividends paid out of income
from sources within the United States.
A distribution in excess of our current and accumulated earnings and
profits will be treated first as a nontaxable return of capital to the extent
of such U.S. Shareholder's adjusted tax basis in its ordinary shares or ADSs,
and any distribution in excess of such basis will constitute gain, which gain
will be capital gain if the ordinary shares or ADSs are held as capital assets.
The amount of any distribution paid in Dutch guilders will be the dollar
value of the Dutch guilders on the date of distribution, regardless of whether
the U.S. Shareholder converts the payment into dollars. Gain or loss, if any,
recognized by a U.S. Shareholder on the sale, conversion or disposition of
Dutch guilders will be ordinary income or loss. Such gain or loss will
generally be income or loss from sources within the United States for foreign
tax credit limitation purposes.
Subject to certain conditions and limitations, tax withheld in The
Netherlands in accordance with the Treaty will be treated as a foreign tax that
U.S. Shareholders may elect to deduct in computing their U.S. federal taxable
income or credit against their U.S. federal income tax liability. Amounts paid
in respect of dividends on ordinary shares or ADSs will generally be treated as
"passive income" or, in the case of certain holders, "financial services
income" for purposes of calculating the amount of the foreign tax credit
available to a U.S. Shareholder. Additional withholding tax, if any, in excess
of the rate applicable under the Treaty generally will not be eligible for
credit against the U.S. Shareholder's U.S. federal income tax liability.
Dutch withholding tax may not be creditable against the U.S. Shareholder's
federal income tax liability however, to the extent we are allowed to reduce
the amount of dividend withholding tax paid over to the Dutch Tax
Administration by crediting withholding tax imposed on certain dividends paid
to us. We will endeavor to provide to U.S. Shareholders the information they
will need to calculate their foreign tax credit.
Sale or Other Disposition of the Ordinary Shares or ADSs
A U.S. Shareholder will generally recognize gain or loss for U.S. federal
income tax purposes upon the sale or exchange of ordinary shares or ADSs in an
amount equal to the difference between the amount realized from such sale or
exchange and the U.S. Shareholder's tax basis for such ordinary shares or ADSs.
Such gain or loss will be a capital gain or loss if the ordinary shares or ADSs
are held as a capital asset. Any such gain or loss generally would be treated
as U.S. source.
Passive Foreign Investment Company
We have determined that we were not a passive foreign investment company
("PFIC") for U.S. federal income tax purposes in 1998 and we do not anticipate
that we will be a PFIC in 1999 or in future years. This is a factual
determination that must be made annually and thus may change. If we were
determined to be a PFIC, any gain from the sale or exchange of ordinary shares
or ADSs by a U.S. Shareholder would be allocated ratably to each year in the
holder's holding period and would be treated as ordinary income. U.S. federal
income tax would be imposed on the amount allocated to each year prior to the
year of disposition at the highest rate in effect for that year. In addition,
interest would be charged at the rate applicable to underpayments on the tax
payable in respect of the amount so allocated. The same rules would apply to
"excess distributions", which are defined generally as distributions exceeding
125% of the average annual distributions made by us over the shorter of the
holder's holding period or the three preceding years. We will evaluate our PFIC
status on an annual basis and will inform U.S. Shareholders in the event that
we determine that we are a PFIC.
The tax consequences described above would not apply if the U.S.
Shareholder made a qualified electing fund ("QEF") election for the first tax
year in the U.S. Shareholder's holding period in which we were a PFIC. If a QEF
election is made, a U.S. Shareholder would include in income its pro rata share
of our ordinary income
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and net capital gain for years in which we are a PFIC (regardless of whether
amounts are distributed to an electing U.S. shareholder.) In the event that we
become a PFIC, we will provide the information necessary for our U.S.
Shareholders to make a QEF election.
A U.S. Shareholder who owns ordinary shares or ADSs during any year that we
are a PFIC must file Internal Revenue Service Form 8621.
Foreign Personal Holding Company Classification
We could be classified as a foreign personal holding company ("FPHC") if in
any taxable year:
(1) five or fewer individuals who are U.S. citizens or residents own
(directly or constructively through certain attribution rules) more
than 50% of the total voting power of all classes of our stock entitled
to vote or the total value of our stock, and
(2) at least 60% (50% in certain cases) of our gross income consists of
"foreign personal holding company income", which generally includes
passive income such as dividends, interest, gains, rent and royalties.
Classification as an FPHC would in general require each U.S. Shareholder who
held ordinary shares or ADSs on the last day of the taxable year to include in
gross income as a dividend such shareholder's pro rata portion of our
undistributed foreign personal holding company income.
After giving effect to certain ownership attribution rules, five or fewer
U.S. individuals are presently treated as owning more than 50% of the total
voting power of all classes of UPC stock. However, 60% of our gross income for
1998 is not expected to consist of passive income and we do not expect to meet
the 60% passive income test for 1999. Thus, we do not expect to be a FPHC for
1999 or for the foreseeable future. This is a factual determination that must
be made annually and thus the status of whether we are a FPHC is subject to
change.
Backup Withholding
A U.S. shareholder of ordinary shares or ADSs may be subject to backup
withholding at a rate of 31% with respect to dividends on, or the proceeds of a
sale or other disposition of, such ordinary shares or ADSs unless such U.S.
Shareholder:
(1) is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact, or
(2) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with
applicable backup withholding rules.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the ordinary
shares or the ADSs and no prediction can be made of the effect, if any, that
the sale or availability for sale of ordinary shares or ADSs will have on the
market price of the ordinary shares or the ADSs. Sales of substantial amounts
of such securities in the public market, or the perception that such sales
could occur, could adversely affect the market price of the ordinary shares and
the ADSs and could impair our future ability to raise capital through an
offering of its equity securities.
Upon consummation of this offering, we will have outstanding 124,815,969
ordinary shares and 100 priority shares. The ordinary shares and ADSs sold in
this offering will be freely tradable in the United States by persons other
than us or our "affiliates" as that term is defined in SEC Rule 144, which is
discussed below. All of the issued and outstanding priority shares and ordinary
shares held by UIH and the Discount Group, are "restricted securities" within
the meaning of Rule 144 and may be sold in the public market only if registered
or (discussed below) sold under an exemption from registration under the
Securities Act, including the exemption provided by Rule 144.
We and UIH have agreed with the underwriters that, without the prior
written consent of the underwriters, we will not directly or indirectly offer,
other than in the offering, sell, contract to sell, announce our intention to
sell, pledge, grant any option to purchase or otherwise dispose of, or file a
registration statement or similar document relating to, any shares or any
security convertible into or exchangeable for shares, or in any manner transfer
all or a portion of the economic consequences associated with, or any security
convertible into or exchangeable for shares, for a period of one year from the
date of this prospectus, subject to certain exceptions. We have also agreed not
to permit any of our subsidiaries to take any such action without the prior
written consent of the underwriters, subject again to certain exceptions.
Certain of our employees have made a similar agreement with the underwriters
for a period of 180 days. Microsoft has agreed that, if it purchases any shares
or ADSs in this offering, it will agree to abide by similar resale restrictions
for at least a six-month period. See "Relationship with Microsoft" and
"Underwriting". The Discount Group has agreed to similar restrictions for six
months.
Because we do not have a history of net profits, Amsterdam Stock Exchange
regulations prohibit members of our Supervisory Board and Board of Management
from disposing of their ordinary shares owned prior to this offering for a
period of four years from the date on which the ordinary shares begin trading
on the Amsterdam Stock Exchange. Because no members of the Supervisory Board or
Board of Management have exercised their options or otherwise own ordinary
shares, however, this provision is not applicable. In addition, under the
Amsterdam Stock Exchange Rules, UIH and any other holder of 5% or more of our
outstanding share capital collectively may not, for three years after this
offering, subject to certain exceptions, sell more than 25% of the shares
outstanding upon completion of this offering. This lock-up requirement applies
unless we report a profit, in which case these shareholders collectively are
entitled to dispose of a maximum of (1) 50% of the shares outstanding upon
completion of this offering if a profit was made during one year or (2) 75% of
the shares outstanding upon completion of this offering if a profit was made
during two years. The Amsterdam Stock Exchange has agreed to grant permission
to these shareholders to dispose of their remaining interest if such
disposition is consummated through a public secondary offering involving a due
diligence investigation, the issuance of a prospectus and compliance with the
other listing rules of the Amsterdam Stock Exchange occurring at least one year
after this offering. If the interest of any 5% holder in us falls below 5%,
such holder will no longer be subject to the lock-up requirements of the
Amsterdam Stock Exchange.
In general, under Rule 144 of the Securities Act, any of our affiliates, or
a person or persons whose shares are aggregated who has beneficially owned
restricted securities for at least one year (including the holding period of
any prior owner except an affiliate) is entitled to sell in any three-month
period a number of shares that does not exceed the greater of (1) 1% of the
number of shares then outstanding, or approximately 1,248,000 shares
immediately after this offering; or (2) the average weekly trading volume of
the ADSs on the Nasdaq National Market
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during the four calendar weeks immediately preceding. Sales under Rule 144 are
also subject to requirements relating to manner of sale, notice and
availability of current public information about us. Under Rule 144(k), a
person or persons whose shares are aggregated who has not been one of our
affiliates at any time during the 90 days immediately preceding the sale and
who has beneficially owned his or her shares for at least two years is entitled
to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. In general,
under Rule 701 of the Securities Act, any of our employees, consultants or
advisors who purchases shares from us pursuant to Rule 701 in connection with a
compensatory stock or option plan or other written agreement is eligible to
resell, unless contractually restricted, such shares 90 days after the
effective date of this offering in reliance on Rule 144, but without compliance
with certain restrictions, including the holding period, contained in Rule 144.
EXPERTS
Our consolidated financial statements for the six months ended December 31,
1995 and as of and for the years ended December 31, 1996 and 1997 and the nine
months ended September 30, 1998 included in this prospectus have been audited
by Arthur Andersen, independent auditors, as indicated in their report with
respect thereto, and are included herein upon the authority of said firm as
experts in giving said report.
The consolidated financial statements of Telekabel Beheer for the period
from August 22, 1995 to December 31, 1995, and as of and for the years ended
December 31, 1996 and 1997 included in this prospectus have been audited by
PricewaterhouseCoopers, independent public accountants, and are included herein
upon the authority of said firm as experts in giving said report.
LEGAL MATTERS
Holme Roberts & Owen LLP, Denver, Colorado U.S.A., have advised us on
certain U.S. securities law matters in connection with this offering and have
passed on the validity of the ADSs offered hereby. The validity of the ordinary
shares offered hereby will be passed upon for us by Loeff Claeys Verbeke,
Amsterdam, The Netherlands. Debevoise & Plimpton, U.S. counsel to the
underwriters, will pass for the underwriters upon the registration requirements
of the U.S. securities laws.
ENFORCEMENT OF CIVIL LIABILITIES
We are organized under the laws of The Netherlands and certain members of
our Supervisory Board, our Board of Management and certain of the experts named
herein are residents of The Netherlands or other countries outside the United
States. Substantially all of our assets and the assets of such persons are
located outside the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon us or such
persons, or to enforce against us or such persons in courts in the United
States judgments of such courts predicated upon the civil liability provisions
of United States securities laws. We have been advised by legal counsel in The
Netherlands, Loeff Claeys Verbeke, that because there is no convention on
reciprocal recognition and enforcement of judgments in civil and commercial
matters between the United States and The Netherlands, a final judgment
rendered by a United States court will not automatically be enforced by the
courts in The Netherlands. In order to obtain a judgment that is enforceable in
The Netherlands, the relevant claim may have to be relitigated before a
competent Dutch court. Under current Dutch law, however, a final judgment
rendered by a United States court will be given effect by a Dutch court (1) if
the final judgment results from proceedings compatible with Dutch concepts of
due process and (2) if the final judgment does not contravene public policy of
The Netherlands. If the final judgment is given effect by a Dutch court, that
court generally will grant the same judgment without relitigation on the
merits. In addition, Dutch law does not recognize a shareholder's right to
bring a derivative action on behalf of a corporation.
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AVAILABLE INFORMATION
We have filed with the U.S. Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act about the
securities offered hereby. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedules thereto. For further information with respect to us and the ordinary
shares and ADSs, please refer to the registration statement, including the
exhibits and schedules thereto, which may be inspected at, and copies thereof
may be obtained at prescribed rates from, the public reference facilities of
the Commission at the addresses set forth below.
After consummation of this offering, we will be subject to the
informational reporting requirements of the Securities Exchange Act of 1934, as
amended, and in accordance therewith, will file reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information and the registration statement and exhibits and schedules thereto
may be inspected without charge at, and copies thereof may be obtained at
prescribed rates from, the public reference facilities of the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, U.S.A. and
at the Commission's regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, U.S.A. and 7 World Trade Center, Suite 1300, New York,
New York 10048, U.S.A. The public may obtain information on the operation of
the Commission's public reference facilities by calling the Commission in the
United States at 1-800-SEC-0330. The Commission also maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. When the ADSs begin trading on the Nasdaq National Market, copies
of reports, proxy statements and other information may be inspected at the
offices of the National Association of Securities Dealers, Inc. 1735 K Street,
N.W., Washington, D.C. 20006, U.S.A. Copies of these documents will also be
filed with the Amsterdam Stock Exchange.
We will furnish to the depositary copies of our annual reports in English,
which will include a review of our operations and annual audited consolidated
financial statements presented in conformity with U.S. GAAP. We will also
furnish the depositary with our consolidated unaudited quarterly condensed
balance sheets and statements of income in English, presented in conformity
with U.S. GAAP, as well as English language versions of all notices of
shareholders' meetings, proxy statements and other reports and communications
that we make generally available to our shareholders. The depositary will, at
our request and to the extent permitted by law, make such notices, reports and
communications available to record holders of ADRs and will mail to all record
holders of ADRs a notice containing the information or a summary of the
information contained in any notice of a shareholders' meeting received by the
depositary. See "Description of American Depositary Shares".
We will also comply with our obligations under Dutch law to prepare annual
financial statements complying with the corporate law of The Netherlands and to
deposit the same at the Commercial Register of the Chamber of Commerce and
Industry in Amsterdam, The Netherlands.
AMSTERDAM STOCK EXCHANGE LISTING
On February , 1999, the Board of Management after obtaining the approval
of the general meeting of shareholders and the Supervisory Board, resolved to
file an application for admission to listing of the ordinary shares on the
Official Market of the Amsterdam Stock Exchange. On February , 1999, the Board
of Management authorized thereto by the general meeting of shareholders by a
written resolution dated February , 1999 and having obtained the approval of
the Supervisory Board, resolved to issue ordinary shares to a nominal amount of
approximately ^0.30 per share and to exclude the pre-emptive rights in this
respect.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
Independent Auditors' Report......................................... F-2
Consolidated Balance Sheets as of December 31, 1996 (Pre-
Acquisition), December 31, 1997 and September 30, 1998 (Post-
Acquisition)........................................................ F-3
Consolidated Statements of Operations for the Six Months Ended
December 31, 1995, for the Years Ended December 31, 1996 and 1997
and for the Nine Months Ended September 30, 1997 (Unaudited) (Pre-
Acquisition) and September 30, 1998
(Post-Acquisition).................................................. F-4
Consolidated Statements of Shareholders' Equity for the Six Months
Ended December 31, 1995, for the Years Ended December 31, 1996 and
1997 (Pre-Acquisition) and for the Nine Months Ended September 30,
1998 (Post-Acquisition)............................................. F-5
Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 1995, for the Years Ended December 31, 1996 and 1997
and for the Nine Months Ended September 30, 1997 (Unaudited) (Pre-
Acquisition) and September 30, 1998 (Post-Acquisition).............. F-6
Notes to Consolidated Financial Statements........................... F-8
N.V. TELEKABEL BEHEER
Report of Independent Accountants.................................... F-39
Consolidated Balance Sheets as of December 31, 1996 and 1997......... F-40
Consolidated Statements of Operations from August 22, 1995 (date of
incorporation) until December 31, 1995 and for the Years Ended
December 31, 1996 and 1997.......................................... F-41
Consolidated Statements of Cash Flows from August 22, 1995 (date of
incorporation) until December 31, 1995 and for the Years Ended
December 31, 1996 and 1997.......................................... F-42
Consolidated Statement of Changes in Shareholder's Equity from August
22, 1995 (date of incorporation) until December 31, 1995 and for the
Years Ended December 31, 1996 and 1997.............................. F-43
Notes to Consolidated Financial Statements........................... F-44
Condensed Consolidated Balance Sheet as of September 30, 1998
(Unaudited)......................................................... F-54
Condensed Consolidated Statements of Operations for the Nine Months
Ended September 30, 1997 and 1998 (Unaudited)....................... F-55
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1998 (Unaudited)....................... F-56
Notes to Condensed Consolidated Financial Statements................. F-57
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To United Pan-Europe Communications N.V.
We have audited the accompanying consolidated balance sheets of United Pan-
Europe Communications N.V. (a N.V. registered in The Netherlands) and
subsidiaries as of December 31, 1996 (pre-acquisition -- see Note 1), December
31, 1997 and September 30,1998 (post-acquisition -- see Note 1), and the
related consolidated statements of operations, shareholders' equity and cash
flows for the six months ended December 31, 1995, the years ended December 31,
1996 and 1997 (pre-acquisition -- see Note 1) and September 30, 1998 (post-
acquisition -- see Note 1). These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in The Netherlands, which are substantially the same as those
generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial statements, the
Company's parent company (United International Holdings, Inc.) acquired the
remaining 50% interest in the Company effective December 11, 1997. Accordingly,
the assets, liabilities and shareholders' equity acquired have been adjusted to
reflect its parent's basis in the underlying net assets of the Company as of
December 11, 1997. The proportional assets and liabilities acquired were
recorded based upon their relative fair market values at the date of
acquisition. Accordingly, the pre-acquisition and post-acquisition consolidated
financial statements are not comparable in certain significant respects since
these consolidated financial statements report the financial position, results
of operations and cash flows on two separate accounting bases.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of United Pan-
Europe Communications N.V. as of December 31, 1996 (pre-acquisition --see Note
1), December 31, 1997 and September 30,1998 (post-acquisition -- see Note 1),
and the results of its operations and its cash flows for the six months ended
December 31, 1995, the years ended December 31, 1996 and December 31, 1997
(pre-acquisition -- see Note 1) and the nine months ended September 30, 1998
(post-acquisition -- Note 1) in conformity with accounting principles generally
accepted in the United States of America.
ARTHUR ANDERSEN
Amstelveen, The Netherlands,
January 14, 1999
F-2
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands of Dutch guilders, except share and per share amounts)
As a result of the UPC Acquisition in December 1997 (see Note 1), the purchase
method of accounting was used to record assets acquired and liabilities assumed
by the parent company. Such accounting generally results in increased
amortization and depreciation reported in future periods. Accordingly, the
accompanying financial statements of the Company are not comparable in certain
significant respects since these financial statements report financial
position, results of operations, and cash flows on two separate accounting
bases.
<TABLE>
<CAPTION>
As of As of
December 31, September 30,
---------------------- -------------
1996 1997 1998
------------ --------- -------------
(Pre-
Acquisition) (Post-Acquisition)
<S> <C> <C> <C>
ASSETS:
Current assets
Cash and cash equivalents............................................................... 42,631 99,315 44,340
Restricted cash......................................................................... -- 22,220 9,265
Subscriber receivables, net of allowance for doubtful accounts of 5,835, 6,445 and
7,902, respectively.................................................................... 9,581 9,419 12,369
Costs to be reimbursed by affiliated companies, net of allowance for doubtful accounts
of 4,620, 2,210 and 668, respectively.................................................. 14,351 14,970 25,369
Other receivables....................................................................... 44,020 19,103 18,293
Inventory............................................................................... 12,057 13,040 22,140
Prepaid expenses and other current assets............................................... 2,903 6,140 13,741
--------- --------- ---------
Total current assets.................................................................. 125,543 184,207 145,517
Marketable equity securities of parent, at fair value.................................... -- 66,809 58,025
Investments in and advances to affiliated companies, accounted for under the equity
method, net............................................................................. 224,157 384,940 365,724
Property, plant and equipment, net of accumulated depreciation of 91,819, 7,312 and
64,915, respectively.................................................................... 414,669 483,693 527,069
Goodwill and other intangible assets, net of accumulated amortization of 35,013, 3,791
and 43,198, respectively................................................................ 270,407 725,513 678,741
Deferred financing costs, net of accumulated amortization of 0, 217 and 6,870,
respectively............................................................................ -- 23,943 22,142
Non-current restricted cash and other assets............................................. 1,154 50,710 52,750
--------- --------- ---------
Total assets.......................................................................... 1,035,930 1,919,815 1,849,968
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities
Accounts payable, including related party payables of 12,319, 12,233 and 10,781,
respectively........................................................................... 62,082 122,587 102,652
Accrued liabilities..................................................................... 11,473 34,726 34,250
Subscriber prepayments and deposits..................................................... 45,104 24,533 61,611
Short-term debt......................................................................... 424,449 1,696 34,020
Note payable to shareholder............................................................. 22,080 -- 156,030
Current portion of long-term debt....................................................... 3,363 255,819 113,519
--------- --------- ---------
Total current liabilities............................................................. 568,551 439,361 502,082
Long-term debt........................................................................... 19,467 1,004,018 1,039,632
Long-term notes payable to shareholder................................................... 256,335 -- --
Deferred taxes........................................................................... 5,202 44,508 7,978
Other long-term liabilities.............................................................. 6,505 13,619 44,664
--------- --------- ---------
Total liabilities..................................................................... 856,060 1,501,506 1,594,356
--------- --------- ---------
Commitments and contingencies (Notes 11 and 12)
Minority interests in subsidiaries....................................................... 4,554 6,779 34,265
--------- --------- ---------
Shareholders' equity (As adjusted for the 3:2 stock split. Note 10)
Common stock, 0.667 par value, 200,000,000 shares authorized, 81,000,000 shares issued.. 54,000 54,000 54,000
Additional paid-in capital.............................................................. 225,570 615,663 625,822
Deferred compensation................................................................... -- -- (5,826)
Treasury stock, at cost, 9,198,135 shares of common stock............................... -- (122,662) (122,662)
Accumulated deficit..................................................................... (110,615) (140,736) (312,588)
Other cumulative comprehensive income (loss)............................................ 6,361 5,265 (17,399)
--------- --------- ---------
Total shareholders' equity............................................................ 175,316 411,530 221,347
--------- --------- ---------
Total liabilities and shareholders' equity............................................ 1,035,930 1,919,815 1,849,968
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of Dutch guilders, except share and per share amounts)
As a result of the UPC Acquisition in December 1997 (see Note 1), the purchase
method of accounting was used to record assets acquired and liabilities assumed
by the parent company. Such accounting generally results in increased
amortization and depreciation reported in future periods. Accordingly, the
accompanying financial statements of the Company are not comparable in certain
significant respects since these financial statements report financial
position, results of operations, and cash flows on two separate accounting
bases.
<TABLE>
<CAPTION>
For the Six
Months Ended For the Years Ended For the Nine Months Ended
December 31, December 31, September 30,
------------ ------------------------- -------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(Pre- (Pre- (Pre- (Pre- (Post-
Acquisition) Acquisition) Acquisition) Acquisition) Acquisition)
(Unaudited)
<S> <C> <C> <C> <C> <C>
Service and other
revenue................ 100,179 245,179 337,155 250,061 305,237
Operating expense....... (32,806) (80,479) (111,919) (87,206) (97,472)
Selling, general and
administrative
expense................ (33,617) (78,823) (114,024) (80,061) (132,466)
Depreciation and
amortization........... (33,974) (79,832) (134,963) (96,528) (137,231)
---------- ---------- ---------- ---------- ----------
Net operating (loss)
income................ (218) 6,045 (23,751) (13,734) (61,932)
Interest income......... 6,403 2,757 6,512 1,561 4,621
Interest expense........ (8,945) (14,263) (43,801) (22,954) (67,410)
Interest expense,
related party.......... (10,928) (24,212) (28,743) (22,568) (7,148)
Provision for loss on
investment related
costs.................. -- -- (18,888) (10,000) --
Foreign exchange loss
and other expense...... (3,376) (21,135) (41,160) (42,177) 6,609
---------- ---------- ---------- ---------- ----------
Net loss before income
taxes and other
items................. (17,064) (50,808) (149,831) (109,872) (125,260)
Share in results of
affiliated companies,
net.................... (22,179) (17,811) (10,637) (15,807) (42,167)
Minority interests in
subsidiaries........... (191) (2,208) (2,894) (1,339) (4,838)
Income tax benefit
(expense).............. 155 (509) 1,649 409 413
---------- ---------- ---------- ---------- ----------
Net loss............... (39,279) (71,336) (161,713) (126,609) (171,852)
========== ========== ========== ========== ==========
Basic and diluted net
loss per ordinary
share(1)............... (0.48) (0.88) (2.01) (1.56) (2.39)
========== ========== ========== ========== ==========
Weighted-average number
of ordinary shares
outstanding(1)......... 81,000,000 81,000,000 80,488,992 81,000,000 71,801,865
========== ========== ========== ========== ==========
</TABLE>
- --------
(1)As adjusted for the 3:2 stock split (Note 10).
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(2)
(Stated in thousands of Dutch guilders, except share amounts)
As a result of the UPC Acquisition in December 1997 (see Note 1), the purchase
method of accounting was used to record assets acquired and liabilities assumed
by the parent company. Such accounting generally results in increased
amortization and depreciation reported in future periods. Accordingly, the
accompanying financial statements of the Company are not comparable in certain
significant respects since these financial statements report financial
position, results of operations, and cash flows on two separate accounting
bases.
<TABLE>
<CAPTION>
Other
Ordinary Stock Additional Treasury Stock Cumulative Total
----------------- Paid-In Deferred --------------------- Accumulated Comprehensive Comprehensive
Shares(2) Amount Capital Compensation Shares(2) Amount Deficit Income (Loss)(1) Income (Loss)
---------- ------ ---------- ------------ ----------- -------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances upon
contribution of
properties to
joint venture,
July 1, 1995... 81,000,000 54,000 225,570 -- -- -- -- -- --
Cumulative
translation
adjustments.... -- -- -- -- -- -- -- 1,495 1,495
Net loss........ -- -- -- -- -- -- (39,279) (39,279)
--------
Total
comprehensive
income (loss).. -- -- -- -- -- -- -- -- (37,784)
---------- ------ -------- ------- ----------- -------- -------- ------- ========
Balances,
December 31,
1995........... 81,000,000 54,000 225,570 -- -- -- (39,279) 1,495
Change in
cumulative
translation
adjustments.... -- -- -- -- -- -- -- 4,866 4,866
Net loss........ -- -- -- -- -- -- (71,336) (71,336)
--------
Total
comprehensive
income (loss).. -- -- -- -- -- -- -- -- (66,470)
---------- ------ -------- ------- ----------- -------- -------- ------- ========
Balances,
December 31,
1996........... 81,000,000 54,000 225,570 -- -- -- (110,615) 6,361
Change in
cumulative
translation
adjustments.... -- -- -- -- -- -- -- (1,096) (1,096)
Net loss for the
period from
January 1, 1997
to December 10,
1997........... -- -- -- -- -- -- (152,569) -- (152,569)
--------
Total
comprehensive
income (loss).. -- -- -- -- -- -- -- -- (153,665)
---------- ------ -------- ------- ----------- -------- -------- ------- ========
Balances,
December 10,
1997
(Pre-
Acquisition)... 81,000,000 54,000 225,570 -- -- -- (263,184) 5,265
Buyout of
shareholder's
interest....... -- -- -- -- (24,378,396) (292,561) -- -- --
Reissuance of
shares upon
conversion of
PIK Notes...... -- -- -- -- 15,180,261 169,899 -- -- --
Application of
push-down
accounting and
step-up in
basis.......... -- -- 521,685 -- -- -- -- -- --
Elimination of
historical
accumulated
deficit of UPC
attributable to
Philips........ -- -- (131,592) -- -- -- 131,592 -- --
Net loss for the
period from
December 11,
1997 to
December 31,
1997........... -- -- -- -- -- -- (9,144) -- (9,144)
--------
Total
comprehensive
income (loss).. -- -- -- -- -- -- -- -- (162,809)
---------- ------ -------- ------- ----------- -------- -------- ------- ========
Balances,
December 31,
1997
(Post-
Acquisition)... 81,000,000 54,000 615,663 -- (9,198,135) (122,662) (140,736) 5,265
Deferred
compensation
related to
stock options.. -- -- 10,159 (10,159) -- -- -- -- --
Amortization of
deferred
compensation... -- -- -- 4,333 -- -- -- -- --
Unrealized loss
on investment.. -- -- -- -- -- -- -- (8,784) (8,784)
Change in
cumulative
translation
adjustments.... -- -- -- -- -- -- -- (13,880) (13,880)
Net loss........ -- -- -- -- -- -- (171,852) -- (171,852)
--------
Total
comprehensive
income (loss).. -- -- -- -- -- -- -- -- (194,516)
---------- ------ -------- ------- ----------- -------- -------- ------- ========
Balances,
September 30,
1998 (Post-
Acquisition)... 81,000,000 54,000 625,822 (5,826) (9,198,135) (122,662) (312,588) (17,399)
========== ====== ======== ======= =========== ======== ======== =======
<CAPTION>
Total
---------
<S> <C>
Balances upon
contribution of
properties to
joint venture,
July 1, 1995... 279,570
Cumulative
translation
adjustments.... 1,495
Net loss........ (39,279)
Total
comprehensive
income (loss).. --
---------
Balances,
December 31,
1995........... 241,786
Change in
cumulative
translation
adjustments.... 4,866
Net loss........ (71,336)
Total
comprehensive
income (loss).. --
---------
Balances,
December 31,
1996........... 175,316
Change in
cumulative
translation
adjustments.... (1,096)
Net loss for the
period from
January 1, 1997
to December 10,
1997........... (152,569)
Total
comprehensive
income (loss).. --
---------
Balances,
December 10,
1997
(Pre-
Acquisition)... 21,651
Buyout of
shareholder's
interest....... (292,561)
Reissuance of
shares upon
conversion of
PIK Notes...... 169,899
Application of
push-down
accounting and
step-up in
basis.......... 521,685
Elimination of
historical
accumulated
deficit of UPC
attributable to
Philips........ --
Net loss for the
period from
December 11,
1997 to
December 31,
1997........... (9,144)
Total
comprehensive
income (loss).. --
---------
Balances,
December 31,
1997
(Post-
Acquisition)... 411,530
Deferred
compensation
related to
stock options.. --
Amortization of
deferred
compensation... 4,333
Unrealized loss
on investment.. (8,784)
Change in
cumulative
translation
adjustments.... (13,880)
Net loss........ (171,852)
Total
comprehensive
income (loss).. --
---------
Balances,
September 30,
1998 (Post-
Acquisition)... 221,347
=========
</TABLE>
- -------
(1) As of December 31, 1995, 1996 and 1997 Other Cumulative Comprehensive
Income (Loss) represents foreign currency translation adjustments. As of
September 30, 1998 the components of Other Cumulative Comprehensive Income
(Loss) include (8,615) and (8,784) for foreign currency translation
adjustments and unrealized loss on investment, respectively.
(2) As adjusted for the 3:2 stock split (Note 10).
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(STATED IN THOUSANDS OF DUTCH GUILDERS)
As a result of the UPC Acquisition in December 1997 (see Note 1), the purchase
method of accounting was used to record assets acquired and liabilities assumed
by the parent company. Such accounting generally results in increased
amortization and depreciation reported in future periods. Accordingly, the
accompanying financial statements of the Company are not comparable in certain
significant respects since these financial statements report financial
position, results of operations, and cash flows on two separate accounting
bases.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
------------ ------------------------- -------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(PRE- (PRE- (PRE- (PRE- (POST-
ACQUISITION) ACQUISITION) ACQUISITION) ACQUISITION) ACQUISITION)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss................ (39,279) (71,336) (161,713) (126,609) (171,852)
Adjustments to reconcile
net loss to net cash
flows from operating
activities:
Depreciation and
amortization.......... 33,974 79,832 134,963 96,528 137,231
Amortization of
deferred financing
costs................. -- -- 642 -- 6,653
Share in results of
affiliated companies,
net................... 22,179 17,811 10,637 15,807 42,167
Compensation expense
related to stock
options............... -- -- 4,818 -- 32,493
Minority interests in
subsidiaries.......... 191 2,208 2,894 1,339 4,838
Exchange rate
differences in related
party convertible
loans................. 3,474 20,544 43,441 39,301 (12,615)
Provision for loss on
investment related
costs................. -- -- 18,888 10,000 --
Other.................. 1,444 1,173 978 2,452 3,083
Changes in assets and
liabilities:
(Increase) decrease in
receivables........... (50,955) (32,575) 21,504 (131) (20,700)
Increase in
inventories........... (6,956) (2,091) (2,737) (4,721) (4,160)
Increase in other non-
current assets........ (789) (309) (2,544) (63) (2,038)
Increase in other
current liabilities... 76,740 22,353 61,373 31,717 42,729
(Decrease) increase in
deferred taxes and
other long-term
liabilities........... (1,530) 3,932 (560) 10,274 (5,758)
-------- -------- --------- -------- --------
Net cash flows from
operating activities... 38,493 41,542 132,584 75,894 52,071
-------- -------- --------- -------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Restricted cash
(deposited) released... -- -- (22,220) -- 12,955
Purchase of parent
company's stock........ -- -- (66,809) --
(Investments in and
advances to) repayment
from affiliated
companies, net......... (339,737) 146,726 (3,869) (3,354) (13,766)
Capital expenditures.... (132,230) (106,647) (145,630) (92,664) (170,170)
New acquisitions, net of
cash acquired.......... (28,139) (46,473) (127,882) (125,368) (210,272)
Deposit to acquire
minority interest in
subsidiary............. -- -- (47,000) (47,000) --
Sale of affiliated
companies.............. -- -- 11,070 21,449 --
-------- -------- --------- -------- --------
Net cash flows from
investing activities... (500,106) (6,394) (402,340) (246,937) (381,253)
-------- -------- --------- -------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from short-term
borrowings............. 465,699 302,959 260,560 241,604 --
Proceeds from long-term
borrowings............. -- 23,113 1,141,539 128,932 337,969
Deferred financing
costs.................. -- -- (24,585) (4,138) (8,016)
Repayments of long and
short-term borrowings.. -- (440,440) (587,929) (169,480) (215,447)
Borrowings on note
payable to
shareholder............ -- -- -- -- 161,925
Dividends paid to
minority shareholders.. (191) (2,388) (171) (5) (521)
Redemption of
convertible loans...... -- -- (170,371) -- --
Purchase shares from
shareholder............ -- -- (292,561) -- --
-------- -------- --------- -------- --------
Net cash flows from
financing activities... 465,508 (116,756) 326,482 196,913 275,910
-------- -------- --------- -------- --------
EFFECT OF EXCHANGE RATES
ON CASH................ 1,950 344 (42) 334 (1,703)
-------- -------- --------- -------- --------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............ 5,845 (81,264) 56,684 26,204 (54,975)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD.... -- 123,895 42,631 42,631 99,315
CASH CONTRIBUTED UPON
FORMATION.............. 118,050 -- -- -- --
-------- -------- --------- -------- --------
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD................. 123,895 42,631 99,315 68,835 44,340
======== ======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of Dutch guilders)
As a result of the UPC Acquisition in December 1997 (see Note 1), the purchase
method of accounting was used to record assets acquired and liabilities assumed
by the parent company. Such accounting generally results in increased
amortization and depreciation reported in future periods. Accordingly, the
accompanying financial statements of the Company are not comparable in certain
significant respects since these financial statements report financial
position, results of operations, and cash flows on two separate accounting
bases.
<TABLE>
<CAPTION>
For the Six
Months Ended For the Years Ended For the Nine Months Ended
December 31, December 31, September 30,
------------ ------------------------- -------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(Pre- (Pre- (Pre- (Pre- (Post-
Acquisition) Acquisition) Acquisition) Acquisition) Acquisition)
(Unaudited)
<S> <C> <C> <C> <C> <C>
Non-cash investing and
financing activities:
Issuance of shares upon
conversion of PIK
notes................. -- -- 169,899 -- --
====== ======= ======== ======= ========
Contribution of net
assets of Dutch cable
systems to new joint
venture .............. -- -- -- -- 259,153
====== ======= ======== ======= ========
Purchase money notes
payable to sellers.... -- -- -- -- 36,720
====== ======= ======== ======= ========
Unrealized loss on
investment............ -- -- -- -- (8,784)
====== ======= ======== ======= ========
Supplemental cash flow
disclosures:
Cash paid for
interest.............. (8,945) (32,674) (80,810) (17,619) (60,766)
====== ======= ======== ======= ========
Cash received for
interest.............. 6,403 2,757 5,077 1,561 3,539
====== ======= ======== ======= ========
Acquisition of Dutch
cable assets:
Property, plant and
equipment and other
assets................ -- -- -- -- (106,000)
Goodwill............... -- -- -- -- (74,762)
------ ------- -------- ------- --------
Total cash paid........ -- -- -- -- (180,762)
====== ======= ======== ======= ========
Acquisition of Norway
cable systems:
Working capital........ -- 2,221 3,790 -- --
Property, plant and
equipment............. -- (90,413) (23,541) -- --
Goodwill and other
intangible assets..... -- (71,509) (105,785) -- --
Other assets........... -- -- (57) -- --
Short-term debt........ -- 140,619 2,854 -- --
Other liabilities...... -- 10,271 1,557 -- --
------ ------- -------- ------- --------
Total consideration.... -- (8,811) (121,182) -- --
Less obligation to
seller................ -- -- 36,112 -- --
------ ------- -------- ------- --------
Total cash paid........ -- (8,811) (85,070) -- --
====== ======= ======== ======= ========
Acquisition of remaining
interest in UPC:
Property, plant and
equipment............. -- -- 18,271 -- --
Investments in and
advances to
affiliates............ -- -- 129,742 -- --
Goodwill .............. -- -- 294,675 -- --
------ ------- -------- ------- --------
Total allocation of
purchase accounting
adjustments........... -- -- 442,688 -- --
====== ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 (Pre-Acquisition),
AS OF AND FOR THE YEAR ENDED DECEMBER 31 1996 (Pre-Acquisition),
AS OF DECEMBER 31, 1997 (Post-Acquisition),
FOR THE YEAR ENDED DECEMBER 31, 1997 (Pre-Acquisition),
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (Unaudited) (Pre-Acquisition),
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (Unaudited) (Post-
Acquisition)
(Monetary amounts stated in thousands of Dutch guilders, except share and per
share amounts)
1. Organization and Nature of Operations
United Pan-Europe Communications N.V., formerly known as United and Philips
Communications B.V. ("UPC" or the "Company"), was formed for the purpose of
acquiring and developing multi-channel television and telecommunications
systems in Europe. On July 13, 1995, United International Holdings, Inc.
("UIH"), a United States of America corporation, and Philips Electronics N.V.
("Philips"), contributed their respective ownership interests in European and
Israeli multi-channel television systems to UPC. Philips contributed to UPC its
95% interest in cable television systems in Austria, its 100% interest in cable
television systems in Belgium, and its minority interests in multi-channel
television systems in Germany, The Netherlands (KTE) and France (Citecable).
UIH contributed its interests in multi-channel television systems in Israel,
Ireland, the Czech Republic, Malta, Norway, Hungary, Sweden and Spain. UIH also
contributed United States dollars ("$")78.2 million in cash (including accrued
interest of $3.2 million) to UPC and issued to Philips 3,169,151 shares of its
Class A Common Stock having a value of $50.0 million (at date of closing). In
addition, UPC issued to Philips $133.6 million of convertible subordinated pay-
in-kind notes (the "PIK Notes"). As a result of this transaction, UIH and
Philips each owned a 50% economic and voting interest in UPC.
On December 11, 1997, UIH acquired Philips' 50% interest in UPC (the "UPC
Acquisition"), thereby making it an effectively wholly-owned subsidiary of UIH
(subject to certain employee equity incentive compensation arrangements)
through its wholly-owned subsidiary UIH Europe, Inc. ("UIHE"). The entity's
name was changed to United Pan-Europe Communications N.V., and its legal seat
was transferred from Eindhoven to Amsterdam. Through its cable-based
communications networks in 10 countries in Europe and in Israel, UPC currently
offers cable television services and is further developing and upgrading its
network to provide digital video, voice and Internet/data services in its
Western European markets.
As part of the UPC Acquisition, (i) UPC purchased the 3,169,151 shares of
Class A Common Stock of UIH held by Philips (66,800), (ii) UIH purchased
169,899 of the accreted amount of UPC's PIK Notes and redeemed them for
15,180,261 shares of UPC, (iii) UPC repaid to Philips the remaining 170,371
accreted amount of the PIK Notes (339,800), (iv) UIH purchased 13,121,604
shares of UPC directly from Philips, and (v) UPC repurchased Philips' remaining
equity interest in UPC (24,378,396 shares) (450,000). The UPC Acquisition was
financed with proceeds from a long-term revolving credit facility through UPC
with a syndicate of banks (305,200) (the "Tranche A Facility"), a bridge bank
facility through a subsidiary of UPC $111,200 (224,000) (the "Tranche B
Facility") and a cash investment by UIH of 327,400. Approximately 479,000 drawn
on the Tranche A Facility was used to repay existing debt of UPC in conjunction
with the UPC Acquisition.
UIH's acquisition of Philips' interest in UPC was accounted for as a step
acquisition under purchase accounting. As a result of UPC becoming effectively
wholly owned by UIH, such purchase accounting adjustments, along with existing
basis differences, were pushed down to the financial statements of UPC and a
new basis of accounting was established for the UPC net assets acquired by UIH.
As of December 11, 1997, the proportional net assets of UPC acquired by UIH
were recorded at fair market value based
F-8
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
on the purchase price paid by UIH, along with additional basis differences at
the UIH level existing as of that date. The total consideration paid to
Philips for their 50% interest in UPC, the resulting amount paid in excess of
Philips' proportionate share of UPC's net assets at that date plus UIH's
existing basis in excess of their proportionate share of UPC's net assets is
summarized below. In addition, the table below presents how such total excess
was allocated to UPC's underlying assets as of December 11, 1998.
<TABLE>
<S> <C>
UPC's net asset value at December 10, 1997........................ 21,651
Cash paid to Philips by UPC for 24,378,396 shares in UPC.......... (292,561)
Conversion by UIH of PIK notes acquired from Philips at cost to
15,180,261 of UPC's shares....................................... 169,899
--------
UPC's net asset value prior to application of push down
accounting....................................................... (101,011)
--------
UIH's proportionate share of UPC's net assets at December 10,
1997............................................................. 10,823
UIH's existing basis difference related to their original interest
in UPC dating back to July 1995 formation of UPC (as adjusted
through December 10, 1997)....................................... 82,513
Cash paid to Philips by UIH for 13,121,604 shares in UPC.......... 157,439
Conversion by UIH of PIK notes acquired from Philips at cost to
15,180,261 of UPC's shares....................................... 169,899
--------
420,674
--------
Total purchase accounting adjustment 521,685
========
The total purchase accounting adjustments were allocated to UPC's
underlying assets as follows:
Property, plant and equipment..................................... 18,271
Investment in and advances to affiliates.......................... 129,742
Goodwill.......................................................... 373,672
--------
Total........................................................... 521,685
========
</TABLE>
As a result of the UPC Acquisition and the associated push-down of UIH
basis on December 11, 1997, the consolidated balance sheets as of December 31,
1997 and September 30, 1998 as well as the consolidated statements of
operations and cash flows subsequent to December 31, 1997 are presented on a
"post-acquisition" basis. The primary difference in the consolidated statement
of operations presented on a "post-acquisition" basis compared to a "pre-
acquisition" basis consists of additional depreciation and amortization on the
above purchase accounting adjustments. The consolidated statements of
operations and cash flows for the year ended December 31, 1997 include the
post-acquisition results of the Company for the period from December 11, 1997
through December 31, 1997, which reflects (2,001) of new basis depreciation
and amortization resulting from push-down accounting as well as approximately
4,034 of interest expense from purchase related indebtedness. Due to
immateriality, the entire fiscal year ended December 31, 1997 is presented as
"pre-acquisition" in the accompanying consolidated statements of operations
and cash flows.
F-9
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The following pro forma consolidated operating results for the years ended
December 31, 1996 and 1997 give effect to the UPC Acquisition as if it had
occurred at the beginning of the periods presented. This pro forma consolidated
financial information does not purport to represent what the Company's results
of operations would actually have been if such transaction had in fact occurred
on such dates. The pro forma adjustments are based upon currently available
information and upon certain assumptions that management believes are
reasonable.
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1996 December 31, 1997
------------------------- -------------------------
Historical Pro Forma (1) Historical Pro Forma (1)
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Service and other revenue.. 245,179 245,179 337,155 337,155
Operating expense.......... (80,479) (80,479) (111,919) (111,919)
Selling, general and
administrative expense.... (78,823) (78,823) (114,024) (114,024)
Depreciation and
amortization.............. (79,832) (100,695) (134,963) (154,667)
---------- ---------- ---------- ----------
Net operating income
(loss)................... 6,045 (14,818) (23,751) (43,455)
Interest income............ 2,757 2,757 6,512 6,512
Interest expense........... (14,263) (55,465) (43,801) (85,027)
Interest expense, related
party .................... (24,212) -- (28,743) --
Provision for loss on
investment related costs.. -- -- (18,888) (18,888)
Foreign exchange loss and
other expense............. (21,135) (16,841) (41,160) (32,719)
---------- ---------- ---------- ----------
Net loss before income
taxes and other items.... (50,808) (84,367) (149,831) (173,577)
Share in results of
affiliated companies,
net....................... (17,811) (26,460) (10,637) (18,806)
Minority interests in
subsidiaries.............. (2,208) (2,208) (2,894) (2,894)
Income tax benefit
(expense)................. (509) (509) 1,649 1,649
---------- ---------- ---------- ----------
Net loss.................. (71,336) (113,544) (161,713) (193,628)
========== ========== ========== ==========
Basic and diluted net loss
per ordinary share........ (0.88) (1.58) (2.01) (2.70)
========== ========== ========== ==========
Weighted-average number of
ordinary shares
outstanding............... 81,000,000 71,801,865 80,488,992 71,801,865
========== ========== ========== ==========
</TABLE>
- --------
(1) Includes additional depreciation and amortization related to the step-up in
basis in tangible assets, investments in and advances to affiliated
companies and new goodwill, interest expense from the Tranche A Facility
and Tranche B Facility, net of elimination of historical interest expense
on the PIK Notes and refinanced credit facilities, and foreign exchange
loss on the U.S. dollar-denominated Tranche B Facility, net of elimination
of historical foreign exchange loss on the PIK Notes.
F-10
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The following chart presents a summary of the Company's significant
investments in multi-channel television, programming and telephony operations
as of September 30, 1998:
UPC
<TABLE>
<S> <C>
Austria:
Telekabel Group ("Telekabel Group")................................... 95.0%
Belgium:
Radio Public N.V./S.A. ("TVD")........................................ 100.0%
Czech Republic:
KabelNet.............................................................. 100.0%
Ceska Programova Spolecnost SRO ("TV Max")............................ 100.0%
France:
Mediareseaux Marne S.A. ("Mediareseaux").............................. 99.6%
Hungary:
Telekabel Hungary ("Telekabel Hungary")............................... 79.3%
Telekabel Hungary Programming ........................................ 50.0%
Ireland: (through United International Investments ("UII") (1))
Princes Holdings Ltd ("Princes Holdings")............................. 20.0%
Israel: (through UII (1))
Tevel Israel International Communications Ltd. ("Tevel").............. 23.3%
Malta: (through UII (1))
Melita Cable TV P.L.C. ("Melita")..................................... 25.0%
The Netherlands:
United Telekabel Holding N.V. ("UTH") (2)............................. 51.0%
Norway:
Janco Multicom ("Janco Multicom")..................................... 100.0%
Romania:
Multicanal Holdings................................................... 100.0%
Control Cable Ventures................................................ 100.0%
Eurosat............................................................... 51.0%
Slovak Republic:
Trnavatel............................................................. 75.0%
Kabeltel.............................................................. 100.0%
</TABLE>
- --------
(1) UII is a United States general partnership between UPC and Tele-
Communications International, Inc. ("TINTA"). In November 1998, UPC
acquired TINTA's interests in Tevel and Melita, and sold UPC's interest in
Princes Holdings to TINTA for a net payment to TINTA of $68.0 million
(128,520). As a result of the transaction, UPC's interest in Tevel and
Melita increased to 46.6% and 50.0% respectively (see Note 16).
(2) On August 6, 1998, UPC merged its Dutch cable television systems consisting
of its 50% interest in A2000 Holding N.V. ("A2000") and its wholly owned
subsidiary Cable Network Brabant Holding B.V. ("CNBH") with those of a
Dutch energy company ("NUON"), forming a new company, UTH. Following the
merger, UPC holds 51% of UTH, with the ability to increase its interest to
75.5% (see Notes 3 and 16).
F-11
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Liquidity and Capital Resources
For the nine months ended September 30, 1998, the Company incurred a net
operating loss of (61,932) and had a working capital deficit of (356,565). The
Company expects to incur operating losses and net losses for the foreseeable
future as it incurs additional costs associated with the upgrade and expansion
of the Company's network, the expansion of its marketing and sales organization
and the introduction of new services such as digital video, voice and
Internet/data services. The Company is currently in the process of seeking
additional sources of funds, which could include private equity, public equity,
bank financing and/or public debt. The Company may or may not be successful in
completing all or any of such financings. The Company believes, however, that
reduction in the Company's planned capital expenditures combined with, if
necessary, the sale of certain non-strategic assets, are sufficient to sustain
its operations through at least January 1, 2000.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements of the Company have been
prepared in accordance with United States generally accepted accounting
principles. The preparation of financial statements in conformity with United
States generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the operations
of UPC since its formation effective July 1, 1995 and all subsidiaries where it
exercises a controlling financial interest through the ownership of a majority
voting interest, except for UTH, where because of certain minority shareholders
rights the Company accounts for its investment in UTH using the equity method
of accounting. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents include cash and investments with original
maturities of less than three months.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is based upon a percentage of and
specific identification of overdue accounts receivable. An allowance for a
percentage of the account is established once the receivable is overdue. Upon
disconnection of the subscriber, the account is fully reserved. The allowance
is maintained on the books until receipt of payment, the account is deemed
uncollectable or a maximum of three years.
Restricted Cash
Cash held as collateral for letters of credit and other loans is classified
based on the expected expiration of such facilities.
Costs to be Reimbursed by Affiliated Companies
The Company incurs costs on behalf of affiliated companies, such as
salaries and benefits, travel and professional services. These costs are
reimbursed by the affiliated companies.
F-12
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Marketable Equity Securities of Parent
The Company classifies its investments in marketable equity securities of
UIH as available-for-sale and reports such investments at fair market value.
Unrealized gains and losses are charged or credited to equity, realized gains
and losses and other than temporary declines in market value are included in
operations.
Investments in and Advances to Affiliated Companies, Accounted for under the
Equity Method
For those investments in companies in which the Company's ownership
interest is 20% to 50%, its investments are held through a combination of
voting common stock, preferred stock, debentures or convertible debt and/or the
Company exerts significant influence through board representation and
management authority, or in which majority control is deemed to be temporary,
the equity method of accounting is used. Under this method, the investment,
originally recorded at cost, is adjusted to recognize the Company's
proportionate share of net earnings or losses of the affiliates, limited to the
extent of the Company's investment in and advances to the affiliates, including
any debt guarantees or other contractual funding commitments. The Company's
proportionate share of net earnings or losses of affiliates includes the
amortization of the excess of its cost over its proportionate interest in each
affiliate's net tangible assets or the excess of its proportionate interest in
each affiliate's net tangible assets in excess of its cost.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Additions, replacements,
installation costs and major improvements are capitalized, and costs for normal
repair and maintenance of property, plant and equipment are charged to expense
as incurred. Assets constructed by subsidiaries of UPC incorporate overhead
expense and interest charges incurred during the period of construction;
investment subsidies are deducted. Depreciation is calculated using the
straight-line method over the economic life of the asset, taking into account
the residual value. The economic lives of property, plant and equipment at
acquisition are as follows:
<TABLE>
<S> <C>
Cable distribution networks................................... 7-20 years
Subscriber installation costs and converters.................. 5 years
MMDS distribution facilities.................................. 7-20 years
Office equipment, furniture and fixtures...................... 3-8 years
Buildings and leasehold improvements.......................... 20-33 years
Other......................................................... 3-10 years
</TABLE>
Goodwill and Other Intangible Assets
The excess of investments in consolidated subsidiaries over the net
tangible asset value at acquisition is amortized on a straight line basis over
15 years. Licenses in newly-acquired companies are recognized at the fair
market value of those licenses at the date of acquisition. Licenses in new
franchise areas include the capitalization of direct costs incurred in
obtaining the license. The license value is amortized on a straight-line basis
over the initial license period, up to a maximum of 20 years.
Recoverability of Tangible and Intangible Assets
The Company evaluates the carrying value of all tangible and intangible
assets whenever events or circumstances indicate the carrying value of assets
may exceed their recoverable amounts. An impairment
F-13
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
loss is recognized when the estimated future cash flows (undiscounted and
without interest) expected to result from the use of an asset are less than the
carrying amount of the asset. Measurement of an impairment loss is based on
fair value of the asset computed using discounted cash flows if the asset is
expected to be held and used. Measurement of an impairment loss for an asset
held for sale would be based on fair market value less estimated costs to sell.
Deferred Financing Costs
Costs to obtain debt financing are capitalized and amortized over the life
of the debt facility using the effective interest method.
Other Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"), which requires that an
enterprise (i) classify items of other comprehensive income by their nature in
a financial statement and (ii) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position.
Revenue Recognition
Revenue is primarily derived from the sale of cable television services to
subscribers and is recognized in the period the related services are provided.
Initial installation fees are recognized as revenue in the period in which the
installation occurs, to the extent installation fees are equal to or less than
direct selling costs, which are expensed. To the extent installation fees
exceed direct selling costs, the excess fees are deferred and amortized over
the average contract period. All installation fees and related costs with
respect to reconnections and disconnections are recognized in the period in
which the reconnection or disconnection occurs because reconnection fees are
charged at a level equal to or less than related reconnection costs.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
Concentrations of credit risk with respect to trade receivables are limited due
to the Company's large number of customers and their dispersion across many
different countries in Europe.
Stock-Based Compensation
Stock-based compensation is recognized using the intrinsic value method for
the Company's stock option plans, which results in compensation expense for the
difference between the grant price and the fair market value at each new
measurement date.
Income Taxes
The Company accounts for income taxes under the asset and liability method
which requires recognition of deferred tax assets and liabilities for the
expected future income tax consequences of transactions which have been
included in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and income tax basis of assets, liabilities and
loss carryforwards using enacted tax rates in effect for the year in which the
differences are expected to reverse. Net deferred tax assets are then reduced
by a
F-14
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
valuation allowance if management believes it is more likely than not they will
not be realized. Withholding taxes are taken into consideration in situations
where the income of subsidiaries is to be paid out as dividends in the near
future. Such withholding taxes are generally charged to income in the year in
which the dividend income is generated.
Basic and Diluted Loss Per Share
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS 128"). "Basic loss per share" is determined by
dividing net loss available to ordinary shareholders by the weighted-average
number of ordinary shares outstanding during each period. "Diluted loss per
share" includes the effects of potentially issuable common stock, but only if
dilutive. Therefore, the Company's stock option plans and convertible
securities are excluded from the Company's diluted loss per share for all
periods presented because their effect would be anti-dilutive.
Foreign Operations and Foreign Exchange Rate Risk
The functional currency for the Company's foreign operations is the
applicable local currency for each affiliate company. Assets and liabilities of
foreign subsidiaries for which the functional currency is the local currency
are translated at exchange rates in effect at period-end, and the statements of
operations are translated at the average exchange rates during the period.
Exchange rate fluctuations on translating foreign currency financial statements
into Dutch guilders that result in unrealized gains or losses are referred to
as translation adjustments. Cumulative translation adjustments are recorded as
a separate component of shareholders' equity included in Other Comprehensive
Income (Loss).
Transactions denominated in currencies other than the local currency are
recorded based on exchange rates at the time such transactions arise.
Subsequent changes in exchange rates result in transaction gains and losses
which are reflected in income as unrealized (based on period-end translations)
or realized upon settlement of the transactions.
Cash flows from the Company's operations in foreign countries are
translated based on their functional currencies. As a result, amounts related
to assets and liabilities reported on the consolidated statements of cash flows
will not agree to changes in the corresponding balances on the consolidated
balance sheets. The effects of exchange rate changes on cash balances held in
foreign currencies are reported as a separate line below cash flows from
financing activities.
The Company and certain of its operating companies have notes payable and
notes receivable that are denominated in a currency other than their own
functional currency. In general, the Company and the operating companies do not
execute hedge transactions to reduce the Company's exposure to foreign currency
exchange rate risks. Accordingly, the Company may experience economic loss and
a negative impact on earnings and equity with respect to its holdings solely as
a result of foreign currency exchange rate fluctuations.
New Accounting Principles
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which requires that a public
business enterprise report certain financial and descriptive information about
its reportable segments. The Company plans to adopt SFAS 131 for the year ended
December 31, 1998.
F-15
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP 98-1"), "Accounting For the Costs of
Computer Software Developed or Obtained for Internal Use", which provides
guidance on accounting for the costs of computer software developed or obtained
for internal use. SOP 98-1 identifies the characteristics of internal-use
software and provides examples to assist in determining when computer software
is for internal use. SOP 98-1 is effective for financial statements for fiscal
years beginning after December 15, 1998, for projects in progress and
prospectively, with earlier application encouraged. Management believes that
the adoption of SOP 98-1 will not have a material effect on the financial
statements.
The American Institute of Certified Public Accountants recently issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5"), which is required to be adopted by affected companies for fiscal
years beginning after December 15, 1998. SOP 98-5 defines start-up and
organization costs, which must be expensed as incurred. In addition, all
deferred start-up and organization costs existing as of January 1, 1999 must be
written-off and accounted for as a cumulative effect of an accounting change.
The Company does not expect the adoption of SOP 98-5 to have a material effect
on its financial position or results of operations.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which requires that companies recognize
all derivatives as either assets or liabilities in the balance sheet at fair
value. Under SFAS 133, accounting for changes in fair value of a derivative
depends on its intended use and designation. SFAS 133 is effective for fiscal
years beginning after June 15, 1999. The Company is currently assessing the
effect of this new standard.
3. Acquisitions and Dispositions
Norkabel
In October 1996, the Company increased its ownership in Norkabelgruppen A/S
("Norkabel") from 8.3% to 100% for a purchase price of Norwegian kroner
("NKr")32.5 million (8,811). Details of the net assets acquired were as follows
(using the exchange rate as of December 31, 1996):
<TABLE>
<S> <C>
Working capital................................................ (2,221)
Property, plant and equipment.................................. 90,413
Goodwill and other intangible assets........................... 71,509
Short-term debt................................................ (140,619)
Other liabilities.............................................. (10,271)
--------
Total cash paid.............................................. 8,811
========
</TABLE>
F-16
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The following pro forma condensed consolidated operating results for the
periods ended December 31, 1995 and 1996 give effect to the acquisition of
Norkabel as if it had occurred at the beginning of the periods presented. This
pro forma condensed consolidated financial information does not purport to
represent what the Company's results of operations would actually have been if
such transaction had in fact occurred on such date. The pro forma adjustments
are based upon currently available information and upon certain assumptions
that management believes are reasonable.
<TABLE>
<CAPTION>
For the Six Months
Ended For the Year Ended
December 31, 1995 December 31, 1996
---------------------- ----------------------
Historical Pro Forma Historical Pro Forma
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Service and other revenue.. 100,179 129,666 245,179 288,749
========== ========== ========== ==========
Net loss................... (39,279) (56,531) (71,336) (103,818)
========== ========== ========== ==========
Basic and diluted net loss
per ordinary share........ (0.48) (0.70) (0.88) (1.28)
========== ========== ========== ==========
Weighted-average number of
ordinary shares
outstanding............... 81,000,000 81,000,000 81,000,000 81,000,000
========== ========== ========== ==========
</TABLE>
Janco Kabel-TV
In January 1997, UPC purchased a 70.2% interest in Janco Kabel-TV A/S
("Janco") for NKr313.8 million (85,070). Details of the net assets acquired at
100% were as follows (using the exchange rate as of December 31, 1996):
<TABLE>
<S> <C>
Working capital................................................. (3,790)
Property, plant and equipment................................... 23,541
Goodwill and other intangible assets............................ 105,785
Other assets.................................................... 57
Short-term debt................................................. (2,854)
Other liabilities............................................... (1,557)
-------
Total consideration........................................... 121,182
Less obligation to seller..................................... (36,112)
-------
Total cash paid............................................... 85,070
=======
</TABLE>
In November 1997, UPC's wholly-owned subsidiary Norkabel merged with and
into UPC's 70.2%-owned subsidiary, Janco, to give UPC an 87.3% interest in the
new entity Janco Multicom. Concurrent with the transaction, UPC deposited
47,000 with a bank as collateral for a call option to purchase the remaining
12.7% interest. Including accrued interest, the deposit totaled 49,517 as of
September 30, 1998, and is classified as restricted cash in other non-current
assets. UPC has all the rights and obligations of full ownership of Janco
Multicom and therefore consolidates 100% of its financial results. In November
1998, UPC exercised and paid the call obligation for 37,200 (see Note 16).
F-17
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The following pro forma condensed consolidated operating results for the
year ended December 31, 1996 gives effect to the acquisition of Janco as if it
had occurred at the beginning of 1996. This pro forma condensed consolidated
financial information does not purport to represent what the Company's results
of operations would actually have been if such transaction had in fact occurred
on such date. The pro forma adjustments are based upon currently available
information and upon certain assumptions that management believes are
reasonable.
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1996
----------------------
Historical Pro Forma
---------- ----------
<S> <C> <C>
Service and other revenue.......................... 245,179 270,467
========== ==========
Net loss........................................... (71,336) (85,099)
========== ==========
Basic and diluted net loss per ordinary share...... (0.88) (1.05)
========== ==========
Weighted-average number of ordinary shares
outstanding....................................... 81,000,000 81,000,000
========== ==========
</TABLE>
Combivisie
Effective January 1, 1998, UPC acquired certain assets, including The
Netherlands cable systems of Stichting Combivisie Regio ("Combivisie"), for
180,762. The purchase was funded with a 60,000 draw on the Tranche A Facility
and 120,762 of bank financing. Details of the net assets acquired, based on a
preliminary allocation of the purchase price, were as follows:
<TABLE>
<S> <C>
Property, plant and equipment and other assets................... 106,000
Goodwill......................................................... 74,762
-------
Total cash paid................................................ 180,762
=======
</TABLE>
The following pro forma condensed consolidated operating results for the
years ended December 31, 1996 and 1997 give effect to the acquisition of
Combivisie as if it had occurred at the beginning of the periods presented.
This pro forma condensed consolidated financial information does not purport to
represent what the Company's results of operations would actually have been if
such transaction had in fact occurred on such date. The pro forma adjustments
are based upon currently available information and upon certain assumptions
that management believes are reasonable.
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1996 December 31, 1997
---------------------- ----------------------
Historical Pro Forma Historical Pro Forma
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Service and other revenue.. 245,179 272,322 337,155 366,127
========== ========== ========== ==========
Net loss................... (71,336) (73,640) (161,713) (163,001)
========== ========== ========== ==========
Basic and diluted net loss
per ordinary share........ (0.88) (0.91) (2.01) (2.03)
========== ========== ========== ==========
Weighted-average number of
ordinary shares
outstanding............... 81,000,000 81,000,000 80,488,992 80,488,992
========== ========== ========== ==========
</TABLE>
F-18
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Telekabel Hungary
On June 29, 1998, UPC acquired Time Warner Entertainment Company's ("TWE")
interest in its Hungarian multi-channel television system assets for $9,500
(19,380) in cash and a non-interest bearing promissory note in the amount of
$18,000 (36,720) (the "Time Warner Note"). UPC and TWE retained their
respective percentage interests in the programming assets in Hungary. UPC has
granted TWE an option to acquire UPC's interest in such programming assets as
well as TV Max in consideration for the cancellation of the Time Warner Note.
On June 30, 1998, UPC merged its 100%-owned Hungarian multi-channel television
systems ("Kabelkom") with Hungary's second largest multiple system operator to
form the new joint venture Telekabel Hungary. UPC retains a 79.25% ownership
interest in the new entity.
UTH
On August 6, 1998, UPC merged its Dutch cable television systems with those
of NUON, forming a new company, UTH (the "UTH Transaction"), which was
accounted for as the formation of a joint venture with NUON's and UPC's net
assets recorded at their historical carrying values. Following the merger, UPC
holds 51% of UTH. The agreement provides UPC with a call option exercisable
after August 6, 1999 to acquire 50% of NUON's 49% ownership interest in UTH for
approximately 244,000 plus an interest payment of 5.5% over the call price from
January 1, 1998 until the exercise date. If the exercise date is after August
6, 2000, the interest rate will go up to 9.0%. If UPC exercises the call
option, NUON can exercise the secondary put option, requiring UPC to purchase
its remaining interest in UTH for approximately 244,000 plus interest. The
agreement provides NUON with a put option exercisable after August 6, 1999 to
require UPC to purchase 50% of NUON's 49% interest in UTH. The price UPC would
have to pay equals approximately 166,000 plus an interest payment of 4.5% over
the put price from January 1, 1998 until the exercise date. If NUON exercises
the put option, UPC can exercise the secondary call option, requiring NUON to
sell its remaining interest in UTH to UPC for approximately 166,000 plus
interest. The UTH shareholder agreement provides for essentially joint
governance by NUON and UPC on almost all significant participating and
protective type rights until either the call or put option is exercised.
Although UPC retains a majority economic and voting interest in UTH, because of
joint governance on most significant operating decisions, UPC accounts for its
investment in UTH using the equity method of accounting. See Note 16.
A2000
In July 1995, Philips Media and US WEST as equal partners acquired A2000
for a total purchase price of approximately NLG680 million. Upon UPC's
formation, Philips Media assigned its ownership interest in A2000 to UPC, which
allocated its 50% of the purchase price as follows:
<TABLE>
<S> <C>
Licenses 180,000
Advances 115,000
Investment in affiliate 45,000
Debt (340,000)
--------
Total cash paid 0
========
</TABLE>
The acquisition was financed with a bridge loan from a bank to both UPC and
US WEST. Additionally, UPC and US WEST contributed approximately NLG45 million
each to a subsidiary of A2000 in order to increase its statutory equity for
financing purposes. During January 1996, A2000 obtained long-term financing of
NLG320 million and on behalf of UPC and US WEST reduced the bridge loan. UPC
and US WEST repaid the remaining portion of the bridge loan (totaling NLG360
million) through equal contributions of NLG180 million. UPC accounted for its
50% ownership interest in A2000 (until it was contributed into UTH) as an
equity method investment.
F-19
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The following pro forma condensed consolidated operating results for the
nine months ended September 30, 1997 and 1998 give effect to the UTH
Transaction as if it had occurred at the beginning of the periods presented.
This pro forma condensed consolidated financial information does not purport to
represent what the Company's results of operations would actually have been if
such transaction had in fact occurred on such date. The pro forma adjustments
are based upon currently available information and upon certain assumptions
that management believes are reasonable.
<TABLE>
<CAPTION>
For the Nine Months For the Nine Months
Ended Ended
September 30, 1997 September 30, 1998
--------------------- ---------------------
Historical Pro Forma Historical Pro Forma
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Service and other revenue...... 250,061 236,948 305,237 274,091
========== ========== ========== ==========
Net loss....................... (126,609) (118,893) (171,852) (165,804)
========== ========== ========== ==========
Basic and diluted net loss per
ordinary share................ (1.56) (1.47) (2.39) (2.31)
========== ========== ========== ==========
Weighted-average number of
ordinary shares outstanding... 81,000,000 81,000,000 71,801,865 71,801,865
========== ========== ========== ==========
</TABLE>
Other
The assets of Intercabo, Portugal were sold in January 1998 for 4,000.
During 1997, the Company made a strategic decision to sell its interest in
Intercabo due to competitive factors which had recently emerged in Portugal.
After several offers to purchase Intercabo were received by the Company during
1997, it became apparent that the Company's investment in Intercabo had become
permanently impaired based on its decision to sell its investment. Accordingly,
an impairment loss of 18,888 was recognized during 1997, which included the
writedown of our investment, net of expected proceeds, of 13,436 and the
writeoff of intercompany receivables of 5,452.
The operating results of Intercabo included in the Company's 1997
consolidated results included revenue of 549, a net operating loss of 4,945 and
a net loss of 5,227.
4. Investments in and Advances to Affiliated Companies, Accounted for Under the
Equity Method
<TABLE>
<CAPTION>
As of December 31, 1996
--------------------------------------------------------------
Investments in Cumulative
and Advances to Share in Results of Valuation
Affiliated Companies Affiliated Companies Allowance Total
-------------------- ----------------------- --------- -------
<S> <C> <C> <C> <C>
A2000........ 189,802 (26,465) -- 163,337
UII.......... 10,270 487 -- 10,757
Kabelkom..... 41,885 (262) -- 41,623
Other, net... 21,430 (8,804) (4,186) 8,440
------- ------- ------ -------
Total...... 263,387 (35,044) (4,186) 224,157
======= ======= ====== =======
<CAPTION>
As of December 31, 1997
--------------------------------------------------------------
Investments in Cumulative
and Advances to Share in Results of Valuation
Affiliated Companies Affiliated Companies(1) Allowance Total
-------------------- ----------------------- --------- -------
<S> <C> <C> <C> <C>
A2000........ 220,933 (571) -- 220,362
UII.......... 103,029 (64) -- 102,965
Kabelkom..... 57,783 247 -- 58,030
Other, net... 3,583 -- -- 3,583
------- ------- ------ -------
Total...... 385,328 (388) -- 384,940
======= ======= ====== =======
</TABLE>
F-20
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
As of September 30, 1998
-----------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation
Affiliated Companies Received Affiliated Companies Adjustments Total
-------------------- --------- -------------------- ----------- -------
<S> <C> <C> <C> <C> <C>
UTH..................... 257,116 -- (8,325) -- 248,791
UII (2)................. 100,948 (12,212) 3,351 (7,081) 85,006
Telekabel Hungary
Programming (3)........ 24,316 -- (6,728) (996) 16,592
Xtra Music.............. 9,450 -- -- -- 9,450
Other, net.............. 9,536 -- (3,651) -- 5,885
------- ------- ------- ------ -------
Total................... 401,366 (12,212) (15,353) (8,077) 365,724
======= ======= ======= ====== =======
</TABLE>
The Company had the following differences related to the excess of cost
over the net tangible assets acquired for its equity investments. Such
differences are being amortized over 15 years:
<TABLE>
<CAPTION>
As of December 31, 1996 As of December 31, 1997 As of September 30, 1998
----------------------- -------------------------- ----------------------------
Basis Accumulated Basis Accumulated Basis Accumulated
Difference Amortization Difference Amortization(1) Difference Amortization
---------- ------------ ---------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
A2000................... 180,012 (18,000) 231,041 -- -- --
UII (2)................. -- -- 64,618 -- 57,537 (3,605)
Kabelkom................ 33,353 (556) 38,161 -- -- --
Telekabel Hungary
Programming (3)........ -- -- -- -- 14,695 (510)
------- ------- ------- --- ------------ ------------
Total................... 213,365 (18,556) 333,820 -- 72,232 (4,116)
======= ======= ======= === ============ ============
</TABLE>
- --------
(1) In connection with the UPC Acquisition, certain purchase accounting
adjustments were pushed down to the financial statements of UPC, a new
basis of accounting was established on December 11, 1997, and cumulative
share in results of affiliated companies and accumulated amortization was
reset to zero as of that date (see Note 1).
(2) In November 1998 the Company acquired from TINTA its interests in Tevel and
Melita, and sold its interest in Princes Holdings (see Note 16).
(3) Represents the Company's remaining investment in Telekabel Hungary
Programming after the transaction with TWE (see Note 3).
Summary financial information for UTH is as follows:
<TABLE>
<CAPTION>
As of
September 30,
-------------
1998
-------------
<S> <C>
Liquid assets................................................. 2,562
Other current assets.......................................... 83,337
Investments in and advances to affiliated companies accounted
for under the equity method, net............................. 185,521
Tangible fixed assets......................................... 779,629
Intangible fixed assets....................................... 403,629
---------
Total assets................................................ 1,454,678
=========
Current liabilities........................................... 711,775
Provisions.................................................... 35,211
Long-term debt................................................ 224,092
Shareholders' value........................................... 483,600
---------
Total liabilities and shareholders' value................... 1,454,678
=========
</TABLE>
F-21
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
For the
Period from
August 6,
1998
(Inception)
to
September 30,
-------------
1998
-------------
<S> <C>
Revenue....................................................... 36,498
Costs......................................................... (21,180)
Depreciation and amortization................................. (14,730)
-------
Net operating income........................................ 588
Interest income and expense, including interest expense from
related parties, and foreign exchange results................ (7,811)
-------
Net loss before income taxes and other items................ (7,223)
Share in results of affiliated companies...................... (9,053)
-------
Net loss.................................................... (16,276)
=======
</TABLE>
NUON's contribution to UTH included an existing 630,000 debt facility with
an outstanding balance of approximately 543,000 (as of August 6, 1998). The
debt facility is due November 30, 1998, with an extension period of 15 days. As
security for repayment of the debt facility, NUON received a pledge over the
shares of N.V. Telekabel Beheer (the assets contributed by NUON). UTH is
currently negotiating with the lenders to refinance the debt facility, however
there can be no assurance a refinancing will be completed prior to the due date
of the facility. See Note 16.
Summary financial information for A2000 is as follows:
<TABLE>
<CAPTION>
As of
As of July
December 31, 31,
--------------- -------
1996 1997 1998(1)
------- ------- -------
<S> <C> <C> <C>
Liquid assets...................................... 33,389 6,868 2,336
Other current assets............................... 24,997 35,557 53,177
Financial fixed assets............................. 543 543 634
Tangible fixed assets.............................. 230,304 309,291 341,186
Intangible fixed assets............................ 132,018 122,189 117,797
------- ------- -------
Total assets....................................... 421,251 474,448 515,130
======= ======= =======
Current liabilities................................ 40,908 67,652 88,372
Provisions......................................... 11,693 2,154 1,508
Long-term debt..................................... 366,000 426,000 479,000
Shareholders' value................................ 2,650 (21,358) (53,750)
------- ------- -------
Total liabilities and shareholders' value.......... 421,251 474,448 515,130
======= ======= =======
</TABLE>
F-22
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
For the
Period from For the
June 2, 1995 For the Years Seven Months
to Ended December Ended
December 31, 31, July 31,
------------ ---------------- ------------
1995 1996 1997 1998(1)
------------ ------- ------- ------------
<S> <C> <C> <C> <C>
Revenue......................... 37,493 89,893 101,450 69,668
Costs........................... (20,378) (49,064) (67,687) (52,329)
Depreciation and amortization... (19,830) (43,789) (50,846) (36,114)
------- ------- ------- -------
Net operating loss............ (2,715) (2,960) (17,083) (18,775)
Financial charges and other..... (4,621) (12,745) (16,751) (13,617)
Income tax (provision) benefit.. (287) (224) 9,826 --
------- ------- ------- -------
Net loss...................... (7,623) (15,929) (24,008) (32,392)
======= ======= ======= =======
</TABLE>
- --------
(1) Effective August 6, 1998, A2000 was contributed to UTH as part of the UTH
Transaction.
5. Marketable Equity Securities of Parent
As a result of the UPC Acquisition, a subsidiary of UPC acquired 3,169,151
UIH Class A Common shares, valued at fair market value of 66,809 as of December
11, 1997. As of September 30, 1998, the fair value of these shares was 58,025,
resulting in an unrealized loss of (8,784) for the nine months ended September
30, 1998. These shares are pledged under the Tranche B Facility (see Note 9).
6. Property, Plant and Equipment
<TABLE>
<CAPTION>
As of
December 31, As of
---------------- September 30,
1996 1997(1) 1998
------- ------- -------------
<S> <C> <C> <C>
Cable distribution networks................. 325,987 364,655 412,873
Subscriber premises equipment and
converters................................. 128,627 81,301 114,820
MMDS distribution facilities................ 14,845 12,958 13,351
Office equipment, furniture and fixtures.... 15,713 13,074 28,674
Buildings and leasehold improvements........ 6,080 3,713 13,554
Other....................................... 15,236 15,304 8,712
------- ------- -------
506,488 491,005 591,984
Accumulated depreciation.................. (91,819) (7,312) (64,915)
------- ------- -------
Net property, plant and equipment......... 414,669 483,693 527,069
======= ======= =======
</TABLE>
- --------
(1) In connection with the UPC Acquisition, certain purchase accounting
adjustments were pushed down to the financial statements of UPC, a new
basis of accounting was established on December 11, 1997, and accumulated
depreciation was reset to zero as of that date (see Note 1).
F-23
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
7. Goodwill and Other Intangible Assets
<TABLE>
<CAPTION>
As of
December 31, As of
---------------- September 30,
1996 1997(1) 1998
------- ------- -------------
<S> <C> <C> <C>
Telekabel Group........................... 110,307 389,513 390,818
Janco Multicom............................ 71,657 190,283 169,825
CNBH(2)................................... 83,851 80,491 --
Telekabel Hungary......................... -- -- 81,716
TVD....................................... 5,852 42,223 43,721
Other..................................... 33,753 26,794 35,859
------- ------- -------
305,420 729,304 721,939
Accumulated amortization................ (35,013) (3,791) (43,198)
------- ------- -------
Net goodwill and other intangible
assets................................. 270,407 725,513 678,741
======= ======= =======
</TABLE>
- --------
(1) In connection with the UPC Acquisition, certain purchase accounting
adjustments were pushed down to the financial statements of UPC, a new
basis of accounting was established on December 11, 1997, and accumulated
amortization was reset to zero as of that date (see Note 1).
(2) Effective August 6, 1998, CNBH was contributed to UTH as part of the UTH
Transaction.
8. Short-Term Debt
Short-term debt as of December 31, 1996 included 286,028 drawn on a
revolving credit facility and acquisition facility with a Dutch bank as well as
short-term debt of Norkabel of 138,421 assumed as part of the acquisition of
Norkabel in October 1996. The weighted-average interest rate on these short-
term borrowings as of December 31, 1996 was approximately 4.1% per annum. Both
facilities were repaid from proceeds from the Tranche A Facility at the end of
1997. The balance at September 30, 1998 primarily consists of the $18.0 million
(34,020) non-interest bearing Time Warner Note. The Time Warner Note matures on
the earlier of (i) December, 1998 or (ii) 90 calendar days after written notice
from TWE, which notice has not been given as of September 30, 1998.
9. Long-Term Debt
<TABLE>
<CAPTION>
As of
December 31, As of
----------------- September 30,
1996 1997 1998
------ --------- -------------
<S> <C> <C> <C>
Tranche A Facility......................... -- 883,948 971,978
Tranche B Facility......................... -- 252,500 113,519
Mediareseaux Facility...................... -- -- 20,190
Bank and other loans....................... 22,830 123,389 47,464
------ --------- ---------
22,830 1,259,837 1,153,151
Less current portion..................... (3,363) (255,819) (113,519)
------ --------- ---------
Total.................................... 19,467 1,004,018 1,039,632
====== ========= =========
</TABLE>
Tranche A Facility
In October 1997, UPC and Norkabel as borrowers entered into a 1,100,000
multi-currency revolving credit facility with a syndicate of banks. Norkabel
was succeeded as a borrower by Janco Multicom after the merger of Janco and
Norkabel. In December 1997, Telekabel Wien and the other members of the
F-24
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Telekabel Group also became borrowers under the Tranche A Facility. Although
not a borrower, TVD is a guarantor under the Tranche A Facility. As of
September 30, 1998, the amount outstanding under the Tranche A Facility for
UPC, Telekabel Wien and Janco Multicom was 620,000, 213,448 and 138,530,
respectively. Amounts advanced under the Tranche A Facility bear interest at
the London interbank offered rate ("LIBOR") plus a margin ranging from 0.5% to
2.0% per annum. The aggregate amount available for borrowing under the facility
is reduced automatically by 5.0% per quarter beginning December 31, 2001. The
borrowings of the Company and its subsidiaries in Austria, Belgium and Norway
are limited by financial covenants under the Tranche A Facility. The principal
amount of all borrowings by the Company and such subsidiaries may not exceed
certain multiples of total annualized net operating cash flow for the Company
and such subsidiaries. In addition, before December 31, 1998, the principal
amount of all borrowings of the Company and such subsidiaries may not exceed
certain multiples of their cable television net operating cash flow. The
Tranche A Facility generally prohibits dividends and other distributions to
shareholders of the Company unless, among other things, the Company achieves
for at least two consecutive quarters certain financial ratios. The Tranche A
Facility also includes financial covenants relating to interest and debt
service coverage and application of proceeds from asset sales and securities
offerings. Borrowings by UPC and certain of its subsidiaries in Austria,
Belgium and Norway, under the Tranche A Facility together with borrowings under
the Tranche B Facility may not exceed 1,300,000 before September 30, 2001. The
Tranche A Facility also generally limits to 80,000 UPC's investments in, loans
to and guarantees for, certain of the Company's subsidiaries and downstream
affiliates that are not borrowers or guarantors under the Tranche A Facility.
Under this limitation, as of September 30, 1998, the Company would not have
been permitted to make any additional investments, loans and guarantees. In
connection with the potential initial public offering of the Company's
securities (the "Offering"), the Company is negotiating with the Tranche A
Facility banks for certain waivers of covenants and conditions of the Tranche A
Facility. There can be no assurance that the Company will be successful in
obtaining such waivers.
Tranche B Facility
In connection with the UPC Acquisition, the Company entered into the
consolidated $125.0 million term Tranche B Facility with a syndicate of banks.
The Tranche B Facility is a one year bridge financing due December 5, 1998 and
bears interest at LIBOR plus a margin ranging from 4.5% to 6.0% per annum. The
maturity date is extendable to June 5, 1999 upon certain conditions being met.
The Tranche B Facility generally prohibits dividends and distributions and is
secured by various upstream guarantees from, negative pledges over and, in some
cases, share pledges of, certain share holdings or partnership interests of UPC
in operating systems in The Netherlands, France, Israel and Malta, as well as a
first lien over approximately 3,169,151 shares of UIH's Class A Common Stock
which UPC acquired from Philips as part of the UPC Acquisition. The Tranche B
Facility prohibits all of the companies whose interests are pledged from
incurring additional indebtedness, subject to certain exceptions. The Company
must apply proceeds from disposals, if any, of certain share holdings and
partnership interests to prepayment of the facility, which restricts the manner
and terms on which the Company may dispose of these assets. The Company must
maintain on deposit with the bank a compensating balance, restricted for
payment of interest, until the facility matures. The balance in this interest
reserve account was 9,265 as of September 30, 1998. UPC repaid $64.9 million of
the Tranche B Facility during the nine months ended September 30, 1998
resulting in an outstanding amount of $60.1 million (113,519) as of September
30, 1998. In November 1998 the lenders granted an extension of the maturity
date to June 5, 1999, and agreed to provide a waiver, subject to documentation
and other conditions, to allow the Company to keep the proceeds from the sale
of the Company's interest in Princes Holdings (see Note 16).
F-25
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Mediareseaux Facility
In July 1998, Mediareseaux entered into an 9.5 year term facility with a
bank for an amount of French francs ("FRF")680 million ("Mediareseaux
Facility"). The purpose of the facility is to finance on-going capital
expenditures, working capital and acquisitions with a limit of FRF120 million.
The Mediareseaux Facility bears interest at LIBOR plus a margin ranging from
0.75% to 2.0%. The availability of the facility depends on revenue generated
and debt to equity ratios. The availability period ends at December 31, 2002.
The repayment period starts from January 1, 2003 to final maturity in 2007.
During the repayment period, Mediareseaux must apply 50% of its excess cash
flow in prepaying the facility. The Mediareseaux Facility generally restricts
the payment of dividends and distributions. This facility also restricts
Mediareseaux from incurring additional indebtedness, subject to certain
exceptions. In July 1998, Mediareseaux secured an 9.5 year FRF20.0 million
overdraft facility, subject to the same terms and conditions as the
Mediareseaux Facility except that the availability tests are not applicable. As
of September 30, 1998 an amount of FRF60.0 million (20,190) was outstanding
under the Mediareseaux Facility.
Bank and Other Loans
Bank and other loans includes a payable of 37,634 to the minority
shareholder of Janco Multicom, which accretes interest at 5% per annum. The
payable relates to the contemplated exercise price of the call option for the
remaining 12.7% of Janco Multicom, which was exercised and paid in November
1998 (see Note 16).
Debt Maturities
The maturities of the Company's long-term debt are as follows (Unaudited):
<TABLE>
<S> <C>
12 months ended September 30, 1999............................. 113,519
12 months ended September 30, 2000............................. 23
12 months ended September 30, 2001............................. 37,659
12 months ended September 30, 2002............................. --
12 months ended September 30, 2003............................. 1,704
Thereafter..................................................... 1,000,246
---------
Total........................................................ 1,153,151
=========
</TABLE>
Fair Value of Financial Instruments
Fair value is based on market prices for the same or similar issues.
Carrying value is used when a market price is unavailable.
<TABLE>
<CAPTION>
Fair
Book Value Market Value
---------- ------------
<S> <C> <C>
As of September 30, 1998:
Tranche A Facility................................. 971,978 971,978
Tranche B Facility................................. 113,519 113,519
Mediareseaux Facility.............................. 20,190 20,190
Bank and other loans............................... 47,464 47,464
Note payable to UIH(1)............................. 156,030 156,030
Time Warner Note................................... 34,020 34,020
--------- ---------
Total............................................ 1,343,201 1,343,201
========= =========
</TABLE>
- --------
(1) See Note 15 for terms of the note payable to UIH.
F-26
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
10. Shareholders' Equity
The Company's shareholders have approved an amendment and restatement of
the Company's Articles of Association to effect a 3 for 2 stock split and an
increase in the number of authorized ordinary shares to 200,000,000, which will
be legally effected before the Company's planned initial public offering.
Therefore, all share and per share amounts in the accompanying consolidated
financial statements and notes thereto have been retroactively restated to
reflect this event.
The Company's shareholders have also approved the issuance of 100 priority
shares, which have special approval and other rights, to UIH.
In addition, the Company's Articles of Association to be amended and
restated provide for the issuance of 49,999,900 Class A preference shares and
200,000,000 Class B preference shares.
General
The equity classifications and amounts as stated in these consolidated
financial statements do not necessarily reflect the statutory equity of the
Company, as the statutory equity is subject to Dutch generally accepted
accounting principles. The statutory equity is the basis for any distributions
to shareholders. As of September 30, 1998, the Company is unable to make
dividend distributions to shareholders because of its accumulated deficit.
UIH Indenture
As a subsidiary of UIH, the Company's activities are restricted by the
covenants in UIH's indenture dated February 5, 1998 (the "UIH Indenture"). The
UIH Indenture generally limits the additional amount of debt that UPC or its
subsidiaries or controlled affiliates may borrow, or preferred shares that they
may issue. Generally, additional borrowings, when added to existing
indebtedness, must satisfy, among other conditions, at least one of the
following tests: (i) 7.0 times the borrower's consolidated operating cash flow;
(ii) 1.75 times its consolidated interest expense; or (iii) 225% of the
borrower's consolidated invested equity capital. In addition, there must be no
existing default under the UIH Indenture at the time of the borrowing. The UIH
Indenture also restricts UPC's ability to make certain asset sales and certain
payments. In connection with the Offering, UPC has agreed with UIH that it will
not take any action during the term of the UIH Indenture that would result in a
breach of the UIH Indenture covenants. The maturity date of the UIH Indenture
is February 2008 and interest becomes payable in cash in February 2003.
Stock Option Plan
In June 1996, UPC adopted a stock option plan (the "Plan") for certain of
its employees and those of its subsidiaries. There are 6,000,000 total shares
available for the granting of options under the Plan, which are held by the
Stichting Administratiekantoor UPC (the "Foundation"), which administers the
Plan. Each option represents the right to acquire from the Foundation a
certificate representing the economic value of one share. Following
consummation of the Offering, any certificates issued to employees who have
exercised their options will be convertible into UPC common stock. UIH appoints
the board members of the Foundation and thus controls the voting of the
Foundation's common stock. The options are granted at fair market value
determined by the Company's Supervisory Board at the time of the grant. The
maximum term that the options can be exercised is five years from the date of
the grant. In order to introduce the element of "vesting" of the options, the
Plan provides that even though the options are exercisable immediately, the
shares to be issued or options granted in 1996 vest 1/36th each month for a
three-year period from the effective date set forth in the option grant. In
March 1998, the Plan was revised to increase the vesting period for any new
grants of options to four years and the options vest 1/48th each month. Upon
termination of an employee (except in the case of death, disability or the
like), all unvested options previously exercised must be resold to the
Foundation at the original purchase price, or all vested
F-27
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
options must be exercised, within 30 days of the termination date. The
Supervisory Board may alter these vesting schedules in its discretion. An
employee has the right at any time to put his certificates or shares from
exercised vested options to the Foundation at a price equal to the fair market
value. The Company can also call such certificates or shares for a cash payment
upon termination in order to avoid dilution, except for certain awards, which
can not be called by the Company until expiration of the underlying options.
The Plan also contains anti-dilution protection and provides that, in the case
of change of control, the acquiring company has the right to require UPC to
acquire all of the options outstanding at the per share value determined in the
transaction giving rise to the change of control.
A summary of stock option activity for the Plan is as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------- For the Nine Months Ended
1996 1997 September 30, 1998
-------------------------- ------------------------- --------------------------------
Number Weighted- Number Weighted- Number Weighted-
of Average of Average of Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
---------- -------------- --------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- -- 2,300,417 10.49 2,241,552 10.49
Granted during period... 3,990,000 10.49 -- -- 2,343,000 12.10
Cancelled during
period................. (9,583) 10.49 (58,865) 10.49 (14,052) 10.49
Exercised during
period................. (1,680,000) -- -- -- (375,000) 10.49
---------- ----- --------- ----- -------------- ----------
Outstanding at end of
period................. 2,300,417 10.49 2,241,552 10.49 4,195,500 11.39
========== ===== ========= ===== ============== ==========
Vested at end of
period(1).............. 1,786,898 10.49 3,197,331 10.49 4,128,548 10.75
========== ===== ========= ===== ============== ==========
Exercisable at end of
period(1).............. 2,300,417 10.49 2,241,552 10.49 4,195,500 11.39
========== ===== ========= ===== ============== ==========
</TABLE>
- --------
(1) Includes certificate rights as well as options.
The Company granted no stock options during the year ended December 31,
1997. The combined weighted-average fair values and weighted-average exercise
prices of options granted during the year ended December 31, 1996 and the nine
months ended September 30, 1998 are as follows:
<TABLE>
<CAPTION>
For the Year Ended For the Nine Months Ended
December 31, 1996 September 30, 1998
------------------------ -----------------------------
Number Fair Exercise Number Fair Exercise
Options Value Price Options Value Price
--------- ----- -------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Exercise price equal to
market price........... 3,990,000 10.49 10.49 2,343,000 12.10 12.10
</TABLE>
The following table summarizes information about stock options outstanding,
vested and exercisable as of September 30, 1998:
<TABLE>
<CAPTION>
Weighted-Average
Number Remaining Number Number
of Options Contractual Life of Options of Options
Exercise Price Outstanding (Years) Vested Exercisable
-------------- ----------- ---------------- ---------- -----------
<S> <C> <C> <C> <C>
10.49.................... 1,852,500 2.72 3,443,126 1,852,500
12.00.................... 2,195,250 4.88 681,344 2,195,250
13.57.................... 147,750 4.96 4,079 147,750
--------- ---- --------- ---------
4,195,500 3.93 4,128,548 4,195,500
========= ==== ========= =========
</TABLE>
F-28
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The Plan is accounted for as a variable plan because, based on the Plan's
provisions, the rights conveyed to employees are the substantive equivalents to
stock appreciation type rights. Accordingly, compensation expense and deferred
compensation expense is recognized at each financial statement date based on
the difference between the grant price and the estimated fair value of the
Company's common stock. Compensation expense of 4,818 and 28,160 was recognized
for the year ended December 31, 1997 and the nine months ended September 30,
1998, respectively. The Company's estimate of the fair value of its common
stock as of September 30, 1998 utilized in recording compensation expense and
deferred compensation expense under the Plan was NLG17.57. Because the Company
will account for the Plan as a variable plan up until the consummation date of
its planned initial public offering (the "Offering"), and thereafter as a fixed
plan due to modifications to the Plan which will occur on that date, additional
compensation expense and deferred compensation expense will be recognized
subsequent to September 30, 1998 through the Offering date to the extent the
ultimate Offering price is greater than NLG17.57. For each NLG3.33 per share
increase in the Offering price over the NLG17.57 utilized by the Company to
record compensation expense as of September 30, 1998, additional compensation
expense totaling approximately NLG16,600 would have been recognized in the
Company's statement of operations and deferred compensation expense would have
increased by approximately NLG3,000 as of that date.
Phantom Stock Option Plan
In September 1998, the Company's Supervisory Board approved a phantom stock
option plan (the "Phantom Plan") which permits the grant of phantom stock
rights in up to 2,400,000 shares of the Company's common stock. The rights are
granted at fair market value determined by the Company's Supervisory Board at
the time of grant, and generally vest in equal monthly increments over the
four-year period following the effective date of grant and may be exercised for
ten years following the effective date of grant. The Phantom Plan gives the
employee the right to receive payment equal to the difference between the fair
market value of a share of UPC common stock and the option base price for the
portion of the rights vested. UPC, at its sole discretion, may make payment in
(i) cash, (ii) freely tradable shares of UIH Class A Common Stock or (iii) if
the Company's stock is publicly traded, freely tradable shares of its stock. If
the Company chooses to make a cash payment, even though its stock is publicly
traded, employees have the option to receive an equivalent number of freely
tradable shares of stock instead. Concurrent with the approval of the Phantom
Plan, the Supervisory Board ratified the grant of 1,232,250 and 825,000 phantom
stock rights at base prices of 12.00 and 13.57, respectively, and specified
retroactive vesting for several of the grants. The Phantom Plan contains anti-
dilution protection and provides that, in certain cases of a change of control,
all phantom options outstanding become fully exercisable. The Phantom Plan also
provides that upon consummation of the Offering, an employee holding phantom
options may convert these into options for shares under the Plan.
A summary of stock option activity for the Phantom Plan is as follows:
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, 1998
-------------------------------
Number Weighted-
of Average
Shares Exercise Price
-------------- ----------------
<S> <C> <C>
Outstanding at beginning of period............... -- --
Granted during period............................ 2,057,250 12.63
Cancelled during period.......................... -- --
Exercised during period.......................... -- --
-------------- ----------
Outstanding at end of period..................... 2,057,250 12.63
============== ==========
Vested and exercisable at end of period.......... 356,265 12.03
============== ==========
</TABLE>
F-29
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The combined weighted-average fair values and weighted-average exercise
prices of options granted during the nine months ended September 30, 1998 are
as follows:
<TABLE>
<CAPTION>
Number Fair Exercise
Options Value Price
--------- ----- --------
<S> <C> <C> <C>
Exercise price equal to market price................... 2,057,250 12.63 12.63
</TABLE>
The following table summarizes information about stock options outstanding,
vested and exercisable as of September 30, 1998:
<TABLE>
<CAPTION>
Weighted-Average Number of
Number of Remaining Options
Options Contractual Life Vested and
Exercise Price Outstanding (years) Exercisable
- --------------------------------------- ----------- ---------------- -----------
<S> <C> <C> <C>
12.00.................................. 1,232,250 8.79 348,453
13.57.................................. 825,000 9.95 7,812
--------- ---- -------
2,057,250 9.25 356,265
========= ==== =======
</TABLE>
The Phantom Plan is accounted for as a variable plan in accordance with its
terms, resulting in compensation expense for the difference between the grant
price and the fair market value at each financial statement date. Compensation
expense of 4,333 was recognized for the nine months ended September 30, 1998.
The Company's estimate of the fair value of its common stock as of September
30, 1998 utilized in recording compensation expense and deferred compensation
expense under the Phantom Plan was NLG17.57. Because the Company will account
for the Phantom Plan as a variable plan at least until the consummation date
the Offering, additional compensation expense will be recognized subsequent to
September 30, 1998 through the Offering date to the extent the ultimate
Offering price is greater than NLG17.57. For each NLG3.33 per share increase in
the Offering price over the NLG17.57 utilized by the Company to record
compensation expense as of September 30, 1998, additional compensation expense
totaling approximately NLG2,600 would have been recognized in the Company's
statement of operations and deferred compensation expense would have increased
by approximately NLG4,200 as of that date.
Subsidiary Stock Option Plan
In September 1998, the Company's Supervisory Board approved a phantom stock
option plan (the "chello Plan"), which permits the grant of phantom stock
rights in up to 1,500,000 shares of chello, a wholly owned subsidiary of the
Company. The rights are granted at fair market value determined by chello's
Supervisory Board at the time of grant, and generally vest in equal monthly
increments over the four-year period following the effective date of grant and
may be exercised for ten years following the effective date of grant. The
chello Plan gives the employee the right to receive payment equal to the
difference between the fair market value of a share of chello and the option
base price for the portion of the rights vested. UPC, at its sole discretion,
may make payment in (i) cash, (ii) freely tradable shares of UIH Class A Common
Stock or (iii) if the Company's stock is publicly traded, freely tradable
shares of its stock. If the Company chooses to make a cash payment, even though
its stock is publicly traded, employees have the option to receive an
equivalent number of freely tradable shares of stock instead. Concurrent with
the approval of the chello Plan, the Supervisory Board ratified the grant of
570,000 options at a base price of 10.00, and specified retroactive vesting for
several of the grants.
F-30
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
A summary of stock option activity for the chello broadband Plan is as
follows:
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, 1998
------------------------------
Number Weighted-
of Average
Shares Exercise Price
------------- ----------------
<S> <C> <C>
Outstanding at beginning of period............... -- --
Granted during period............................ 570,000 10.00
Cancelled during period.......................... -- --
Exercised during period.......................... -- --
------------- ------------
Outstanding at end of period..................... 570,000 10.00
============= ============
Vested and exercisable at end of period.......... 35,625 10.00
============= ============
</TABLE>
The weighted-average remaining contractual life for these options is 9.72
years as of September 30, 1998.
F-31
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
11. Commitments
The Company has entered into various operating lease agreements for office
space, office furniture and equipment, and vehicles. Rental expense under these
lease agreements totaled 2,528, 4,989, 6,863, 5,147 and 5,769 for the six
months ended December 31, 1995, the years ended December 31, 1996 and 1997 and
the nine months ended September 30, 1997 and 1998, respectively.
The Company has operating lease obligations as follows:
<TABLE>
<S> <C>
12 months ended September 30, 1999................................ 16,126
12 months ended September 30, 2000................................ 13,754
12 months ended September 30, 2001................................ 5,929
12 months ended September 30, 2002................................ 4,539
12 months ended September 30, 2003 and thereafter................. 3,748
------
Total........................................................... 44,096
======
</TABLE>
12. Contingencies
Legal
The Company is not a party to any material legal proceedings, nor is it
currently aware of any threatened material legal proceedings. From time to
time, the Company may become involved in litigation relating to claims arising
out of its operations in the normal course of its business.
Foreign Currency Exposure
The Tranche B Facility and the loan payable to UIH are denominated in U.S.
dollars, totaling $142,619 (269,549) as of September 30, 1998. The Company has
not executed any foreign forward exchange contract, or used any other financial
instrument, to hedge against this foreign currency exposure.
13. Income Taxes
In general, a Dutch holding company may benefit from the so-called
participation exemption. The participation exemption is a facility in Dutch
corporate tax law which allows a Dutch company to exempt any dividend income
and capital gains in relation with its participation in subsidiaries which are
legal entities of a foreign country. Capital losses are also exempted, apart
from liquidation losses (under stringent conditions). All costs incurred at the
UPC level which relate to an investment in a foreign subsidiary are not tax
deductible, e.g. interest expense on loans used for the financing of the
investment in the foreign subsidiary. In addition, currency exchange results on
these loans are covered by the participation exemption, e.g. gains are exempted
and losses are not tax deductible. For companies which only act as pure holding
companies, only the capital tax paid is tax deductible. For UPC, the primary
difference between taxable loss and net loss for financial reporting purposes
relates to the non-consolidation of its consolidated foreign subsidiaries for
Dutch tax purposes. The consolidated financial statements have been prepared
assuming partial tax basis for license fees capitalized relating to certain
acquisitions. Deferred taxes have been provided for that portion of the
licenses which management believes no tax basis will be allowed.
F-32
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The significant components of the net deferred tax liability are as
follows:
<TABLE>
<CAPTION>
As of
December 31, As of
----------------- September 30,
1996 1997 1998
------- -------- -------------
<S> <C> <C> <C>
Deferred Tax Assets:
Tax net operating loss carryforward...... 103,635 149,802 129,125
Other.................................... 6,934 540 706
------- -------- --------
Total deferred tax assets.............. 110,569 150,342 129,831
Valuation allowance...................... (75,630) (136,580) (116,434)
------- -------- --------
Deferred tax assets, net of valuation
allowance............................. 34,939 13,762 13,397
------- -------- --------
Deferred Tax Liabilities:
Intangible assets........................ (31,688) (48,077) (11,229)
Property, plant and equipment, net....... (8,453) (10,193) (10,146)
------- -------- --------
Total deferred tax liabilities......... (40,141) (58,270) (21,375)
------- -------- --------
Deferred tax liabilities, net.......... (5,202) (44,508) (7,978)
======= ======== ========
</TABLE>
The difference between income tax expense provided in the financial
statements and the expected income tax benefit at statutory rates is reconciled
as follows:
<TABLE>
<CAPTION>
For the
For the For the Years Ended Nine Months Ended
Six Months Ended December 31, September 30,
December 31, -------------------- -------------------
1995 1996 1997 1997 1998
---------------- --------- --------- ----------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Expected income tax
benefit at the Dutch
statutory rate of 35%.. (5,972) (17,783) (52,441) (38,455) (43,841)
Tax effect of permanent
and other differences:
Change in valuation
allowance............ 987 14,555 27,471 21,851 9,132
Non-deductible
expenses............. 3,212 2,297 16,939 17,908 34,624
International rate
differences.......... 797 1,105 3,232 1,614 2,424
Provision on
investment........... -- -- 6,611 (3,500) --
Other................. 1,131 (683) (163) 991 (1,926)
------ --------- --------- ------- -------
Total income tax
benefit............ 155 (509) 1,649 409 413
====== ========= ========= ======= =======
</TABLE>
Tax loss carry forwards arise primarily in Norway, The Netherlands, Czech
Republic and Austria. The tax loss carry forwards of Norway, aggregating to
261,967 as of September 30, 1998 will expire during the years 1999-2008. The
tax loss carry forwards of The Netherlands, Belgium and Austria of 110,705 as
of September 30, 1998 have no expiration date. The tax loss carry forwards of
the Czech Republic of 27,950 as of September 30, 1998 will expire in the years
2001-2005.
F-33
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
During 1996, the Austrian tax authorities passed legislation which had the
effect of eliminating approximately 256,000 of tax basis associated with
certain amounts of goodwill recorded at Telekabel Group effective January 1,
1997. This change in tax law is expected to be challenged on constitutional
grounds. However, there can be no assurance of a successful repeal of such
legislation. Accordingly, this change caused Telekabel Group's effective tax
rate to increase from the historical effective tax rate through December 31,
1996, due to the non-deductibility of such goodwill amortization subsequent to
January 1, 1997.
14. Segment Information
The Company's reportable segments are the various geographic regions in
which it operates multi-channel television, programming and/or telephony
operations. The total assets of The Netherlands--corporate include UPC's
investments, advances and current accounts with affiliated companies.
<TABLE>
<CAPTION>
Revenue
----------------------------------------------------
For the
For the Six For the Years Ended Nine Months Ended
Months Ended December 31, September 30,
December 31, ------------------- -------------------
1995 1996 1997 1997 1998
------------ --------- --------- ----------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
The Netherlands:
Corporate............ 1,242 4,433 3,088 1,303 10,221
Operating
companies........... 4,297 21,633 26,712 17,051 39,141
Austria................ 72,802 156,964 162,783 121,063 130,288
Belgium................ 19,752 37,704 38,737 30,585 26,945
Czech Republic......... 2,086 7,746 7,492 5,455 6,618
Norway................. -- 14,541 91,529 70,131 69,035
France................. -- 179 2,526 1,584 5,189
Hungary................ -- -- -- -- 13,777
Other.................. -- 1,979 4,288 2,889 4,023
------- --------- --------- ------- -------
Total.............. 100,179 245,179 337,155 250,061 305,237
======= ========= ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Net Operating (Loss) Income
------------------------------------------------------
For the
For the Six For the Years Ended Nine Months Ended
Months Ended December 31, September 30,
December 31, -------------------- -------------------
1995 1996 1997 1997 1998
------------ --------- --------- ----------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
The Netherlands:
Corporate............. (631) (872) (2,758) (798) (14,199)
Operating companies... 282 4,828 7,313 2,819 1,822
Austria................. 14,421 27,534 26,435 21,123 (2,080)
Belgium................. (3,518) (2,151) (1,892) (260) (8,828)
Czech Republic.......... (10,772) (12,307) (13,116) (10,386) (6,816)
Norway.................. -- (767) (27,885) (16,963) (26,213)
France.................. -- (4,701) (5,933) (4,585) (6,155)
Hungary................. -- -- -- -- 2,749
Other................... -- (5,519) (5,915) (4,684) (2,212)
------- --------- --------- ------- -------
Total............... (218) 6,045 (23,751) (13,734) (61,932)
======= ========= ========= ======= =======
</TABLE>
F-34
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
Total Assets
---------------------------------------
As of December 31,
------------------- As of September 30,
1996 1997 1998
--------- --------- -------------------
<S> <C> <C> <C>
The Netherlands:
Corporate.......................... 271,417 479,983 447,789
Operating companies................ 120,626 128,609 8,442
Austria.............................. 325,857 653,062 631,786
Belgium.............................. 76,574 99,392 102,301
Czech Republic....................... 35,149 30,089 28,080
Norway............................... 168,574 471,327 408,836
France............................... 13,283 36,769 69,467
Hungary.............................. -- -- 128,190
Other................................ 24,450 20,584 25,077
--------- --------- ---------
Total............................ 1,035,930 1,919,815 1,849,968
========= ========= =========
</TABLE>
15. Related Party
Related Party Payables
The Company classifies any unpaid invoices related to seconded employee
expenses or other expenses incurred by UIH on the Company's behalf as related
party payables on the balance sheet.
Loans to Employees
In 1996, UPC loaned certain employees of the Company amounts for the
exercise of the employees' stock options, taxes on options exercised, or both.
These recourse loans bear interest at 5.0% per annum. The employees' liability
to the Company is presented in the consolidated financial statements net of the
Company's obligation to the employees under the plan. As of December 31, 1996
and 1997, the receivable from employees, including accrued interest totaled
18,774 and 18,561, respectively.
Note Payable to Shareholder
UPC has entered into two promissory notes with UIH of $100.0 million (March
1998) and $20.0 million (July 1998). UPC has borrowed $63.0 million and $16.0
million, respectively, under these two notes (together, this "UIH Loan" totals
149,310 as of September 30, 1998). The UIH Loan bears interest at 10.75% per
annum, is payable on demand, and is convertible at UIH's option into ordinary
shares of UPC at 12.00 per share (March 1998) and 13.57 per share (July 1998).
If the Offering is consummated, the UIH Loan would become due on March 31, 2001
and be convertible at UIH's option into ordinary shares of UPC at the offering
price. Total accrued interest as of September 30, 1998 was $3.6 million
(6,720). UPC intends to repay the UIH loan with proceeds from the Offering.
As of December 31, 1996, TVD had drawn down 22,080 (including accrued
interest) on a current line of credit with Philips. This account was repaid in
conjunction with the UPC Acquisition on December 11, 1997.
F-35
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
PIK Notes
In conjunction with the formation of UPC in July 1995, UPC issued to
Philips $133.6 million of convertible subordinated pay-in-kind notes due
January 1, 2005. The PIK Notes had an interest rate of 10.0% and were
convertible ordinary shares of UPC at $5.55 per share prior to the repayment
date. In conjunction with the UPC Acquisition on December 11, 1997, 170,371 of
the outstanding PIK Notes balance was paid by UPC, and UIH acquired the
remaining outstanding balance of 169,899. UIH then converted such PIK Notes
into 15,180,261 ordinary shares of UPC at a conversion rate of 11.19 per share
(see Note 1).
Cost allocations from UIH
Historically, UPC has been self sufficient from a corporate operations
perspective and required nominal assistance from its shareholders, Philips and
UIH, and solely from UIH subsequent to December 11, 1997. UIH and Philips did
not allocate any indirect overhead type costs to the Company from inception
through December 11, 1997 and UIH did not allocate any such costs subsequent
to December 11, 1997 through September 30, 1998. The only costs historically
charged to UPC were direct costs incurred by Philips and UIH on UPC's behalf.
Such costs were charged at cost. In connection with the Company's planned
Offering, UIH and the Company have executed a management services agreement
which will provide for a fixed allocation in addition to direct out-of-pocket
reimbursements.
16. Subsequent Events
Purchase of Certain Telephony and Programming Assets from UIH
In March 1998, in exchange for 11,285,604 newly-issued ordinary shares of
UPC, UIH has agreed to sell to UPC UIH's:
. 50% voting and 46.3% economic interest in Monor Communications Group,
Inc. ("Monor"), a traditional telephony and cable television system in
the Monor region of Hungary;
. 75% interest in Tara Television Limited ("Tara"), a company providing
Irish programming to the U.K. markets; and
. approximately 33.5% interest in Iberian Programming Services ("IPS"), a
group of programming companies focusing on the Spanish and Portuguese-
speaking markets.
In December 1998, UPC closed the Monor and Tara transactions. IPS is
expected to close in February 1999.
Agreement with UIH
UIH and the Company became parties to a Management Service Agreement (the
"UIH Service Agreement"), with an initial term through 2009, pursuant to which
UIH will provide services such as accounting, financial reporting, investor
relations, human resources, information technology, equipment procurement and
testing expenses, corporate offices lease payments and costs associated with
corporate finance activities. Under the UIH Service Agreement, the Company
will pay UIH a fixed amount each month (initially $0.3 million). After the
first year of the UIH Service Agreement, the fixed amount may be adjusted from
time to time by UIH to allocate corporate level expenses among UIH's operating
companies, including UPC, taking into account the relative size of the
operating companies and their estimated use of UIH resources. In addition, UPC
will continue to reimburse UIH for costs incurred by UIH which are directly
attributable to UPC. The UIH Service Agreement also specifies the basis upon
which UIH may second certain of its employees to UPC. The Company generally is
responsible for all costs incurred by UIH with respect to any seconded
employee's employment and severance.
F-36
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Janco Multicom
In November 1998, the Company exercised and paid the call obligation for
37,200 which was funded from the Company's restricted cash established as
collateral for the purchase. Remaining funds in the account were released from
restriction.
UII
In November 1998, the Company (i) acquired from TINTA its indirect 23.3%
and 25% interests in the Tevel and Melita systems for $91.5 million, doubling
the Company's respective ownership in these systems to 46.6% and 50%,
respectively, (ii) purchased an additional 5% interest in Princes Holdings and
5% of Tara in consideration for 384,531 shares of UIH held by UPC, and (iii)
sold the 5% interest in Princes Holdings, together with its existing 20%
interest to TINTA for $20.5 million. The net payment of $71.0 million to TINTA
($68.0 million after closing adjustments) was funded with the proceeds of a
$90.0 million promissory note made by a subsidiary of the Company to its
primary partners in the Tevel system. The promissory note is due in November
2000, bears interest at an effective rate of 11%, including a note premium, and
is secured by a floating charge and pledge on the assets of the Company's
subsidiary which holds the Company's interest in Tevel.
DIC Loan
In November 1998, a subsidiary of Discount Investment Corporation ("DIC")
loaned the Company $90.0 million (the "DIC Loan") to acquire the additional
interests in Tevel and Melita. The DIC Loan matures in November 2000 and is
secured by the Company's pledge of its ownership interest in Tevel. The DIC
Loan bears interest at 8% and is payable, together with 106% of the principal
amount, on maturity. The DIC Loan may be repaid on quarterly prepayment dates
with three months' prior notice by the Company. In connection with the DIC
Loan, UPC granted DIC an option to acquire $90.0 million of ordinary shares of
UPC at a price equal to 90% of the Offering price. The exercise price of this
option, which expires upon the initial public offering, is payable in cash or
delivery of the DIC Loan promissory note. UPC will allocate the $90 million in
loan proceeds between the debt instrument and the equity option element on the
basis of relative fair values. Accordingly, the effective interest rate on the
debt instrument will exceed the stated rate as set forth above.
A2000 Funding
Subsequent to September 30, 1998, UTH entered into a subordinated loan
agreement to provide funding up to $30,000 for A2000. UTH's share of the
funding is $15,000. UPC is obligated to fund drawdowns on the loan in
proportion to its 51% ownership in UTH (representing a total funding obligation
of $7,650). As of January 11, 1999, UPC had funded $5,000 of its commitment.
Time Warner Note
In December 1998, Time Warner extended the maturity date of its note for a
period of 90 days.
UTH
On January 19, 1999, UPC agreed to purchase NUON's 49% ownership interest
in UTH for 487.6 million plus interest of 5.5% from January 1, 1998, until the
closing date. In addition, UPC will repay NUON and assume from NUON a 33.0
million subordinated loan owed by UTH to NUON plus interest of 5.5% from
December 23, 1998, until the closing date. The transaction will close
concurrent with the completion of an IPO, or failing such IPO, on or before
November 30, 1999. In the event of an IPO, NLG445.2 million of the purchase
price will be payable in cash (assuming IPO proceeds of
F-37
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
NLG2,248 million) and, six months after UPC's shares are listed on a stock
exchange, the remaining NLG106 million of the purchase price will be payable in
UPC's shares or, at UPC's option, in cash. Upon consummation of an IPO, UPC
will record the NLG106 million as permanent equity in accordance with EITF
Issue No. 96-13. If the NLG106 million is ultimately settled in cash, the cash
paid will be recorded as a reduction in permanent equity. Failing such IPO, the
purchase agreement provides for payment to NUON on December 31, 2000 in the
form of an 18 month note for 50% of the total purchase price (together with
interest) with the remaining purchase price due in cash upon closing. If UPC is
unable to consummate the purchase of NUON's 49% ownership interest in UTH by
November 30, 1999, NUON has the right to cause the sale of UTH. In such case,
NUON will first receive an amount of the sales proceeds equal to the agreed
upon purchase price and UPC would receive the balance.
Refinancing UTH
In January 1999, N.V. Telekabel Beheer received commitments for a revolving
facility of NLG650,000, which will bear interest at Euro interbank offered rate
("EURIBOR") plus a margin between 0.75% and 2.25%. In addition, in January
1999, UTH received commitments for a NLG225,000 secured debt facility, which
will bear interest at LIBOR plus a margin ranging from 4.75% to 8.5%.
In January 1999, NUON agreed to extend the NLG630,000 debt facility due
date (see Note 4) until March 15, 1999, with an extension period of 14 days.
Relationship with Microsoft
Subsequent to year-end we signed a letter of intent with Microsoft
Corporation providing for the establishment of a technical services
relationship. We have agreed to grant Microsoft warrants to purchase up to
3,800,000 shares or ADSs at Microsoft's option. Half of these warrants will be
immediately vested and will be exercisable after one year for a period of three
years and the other half will vest based on performance criteria to be
established in the definitive agreements, although they also will not be
exercisable until at least one year after the date of the closing of this
offering. The warrants which are immediately vested are for the right to
license technology from Microsoft under definitive agreements to be negotiated
in the future. The value assigned initially to such warrants will be
capitalized and amortized over the life of the warrants until such time as
definitive license agreements are established, and then over the term of such
agreements. The accounting for the cost associated with the warrants, which
will vest based on performance criteria, will depend on the ultimate nature of
the performance criteria giving rise to the earn-out of such warrants. These
warrants will be recorded as such at fair value when it is probable such
performance criteria will be met in accordance with EITF Issue No. 96-18.
F-38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of N.V. TeleKabel Beheer
We have audited the accompanying consolidated balance sheets of N.V.
TeleKabel Beheer, ("TeleKabel" or the "Company"), as of December 31, 1996 and
1997 and the related consolidated statements of operations, shareholder's
equity and cash flows for the period from August 22, 1995 (date of
incorporation) until December 31, 1995 and the years ended December 31, 1996
and 1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in The Netherlands, which are substantially the same as those
generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of N.V. TeleKabel Beheer as of
December 31, 1996 and December 31, 1997 and the results of its operations and
its cash flows for the period from August 22, 1995 (date of incorporation)
until December 31, 1995 and the years ended December 31, 1996 and 1997 in
conformity with accounting principles generally accepted in The Netherlands.
Accounting principles generally accepted in The Netherlands vary in certain
significant respects from generally accepted accounting principles in the
United States of America. The application of the latter would have affected the
determination of consolidated results for each of the two years in the period
ended December 31, 1997 and shareholders' equity as of December 31, 1996 and
1997 to the extent summarized in note 15 to the consolidated financial
statements.
PricewaterhouseCoopers N.V.
Arnhem, The Netherlands,
September 11, 1998, except for Note 14, for which the date is January 14, 1999
F-39
<PAGE>
N.V. TELEKABEL BEHEER
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1997
(in thousands of Dutch guilders, except per share data)
<TABLE>
<CAPTION>
December 31,
----------------
Note 1996 1997
---- ------- -------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. -- 17,465
Subscriber receivables, net............................ 4 5,184 9,608
Related party receivables.............................. 30,639 6,949
Other receivables...................................... 5 10,804 13,521
Inventory.............................................. 2,635 3,830
Investments............................................ 6 1,577 16,413
------- -------
Total current assets................................... 50,839 67,786
Tangible fixed assets, net............................. 7 396,997 553,499
Intangible assets, net................................. 8 187,980 194,562
Long term investments.................................. 6 4,200 1,222
------- -------
Total assets......................................... 640,016 817,069
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable....................................... 13,844 28,989
Payable to banks....................................... 42,916 18,884
Deferred income........................................ 9 4,220 6,341
Short-term debt payable to shareholder................. 10 254,646 500,691
Other payables and accrued expenses.................... 77,518 11,901
------- -------
Total current liabilities............................ 393,144 566,806
=== ======= =======
Minority interest in subsidiaries...................... 11 1,820 2,321
Commitments and contingencies.......................... 12 -- --
Shareholder's equity:
Common stock, NLG 10 par value, 100,000 shares
authorized and issued................................. 1,000 1,000
Additional paid-in capital............................. 251,354 251,354
Accumulated deficit.................................... (7,302) (4,412)
--- ------- -------
Total shareholder's equity........................... 245,052 247,942
--- ------- -------
Total liabilities and shareholder's equity......... 640,016 817,069
=== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-40
<PAGE>
N.V. TELEKABEL BEHEER
CONSOLIDATED STATEMENTS OF OPERATIONS
from August 22, 1995 (date of incorporation) until December 31, 1995 and
the years ended December 31, 1996 and 1997
(in thousands of Dutch guilders)
<TABLE>
<CAPTION>
4 months and
9 days period Years ended
ended December 31,
December 31, ----------------
1995 1996 1997
------------- ------- -------
<S> <C> <C> <C>
Service and other revenue...................... 3,656 113,917 137,167
Operating expenses:
Purchases relating to sales.................... (1,041) (14,515) (18,615)
Personnel expenses............................. (442) (14,366) (18,034)
Depreciation and amortization.................. (1,440) (22,195) (31,418)
Other operating expenses....................... (2,361) (39,995) (41,705)
------ ------- -------
Net operating (loss) income.................... (1,628) 22,846 27,395
Equity results in associates................... -- (1,033) 1,022
Interest expense, related party................ (757) (14,134) (26,210)
Other income/(expense), net.................... -- (12,875) --
------ ------- -------
Income/(loss) before and after income taxes.... (2,385) (5,196) 2,207
Minority interests in subsidiaries............. -- 279 683
------ ------- -------
Net income/(loss).............................. (2,385) (4,917) 2,890
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-41
<PAGE>
N.V. TELEKABEL BEHEER
CONSOLIDATED STATEMENTS OF CASH FLOWS
from August 22, 1995 (date of incorporation) until December 31, 1995 and
the years ended December 31, 1996 and 1997
(in thousands of Dutch guilders)
<TABLE>
<CAPTION>
4 months and 9 Years ended
days period ended December 31,
December 31, ------------------
1995 1996 1997
----------------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income/(loss)....................... (2,385) (4,917) 2,890
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization........... 1,440 22,195 31,418
Share in results of affiliated
companies.............................. -- 1,033 (1,022)
Provision for doubtfull accounts
receivable............................. -- 458 559
Write off of investment in unlisted
securities............................. -- 8,915 --
Minority interests in subsidiaries...... -- (279) (683)
Changes in operating assets and
liabilities:
(Increase)/decrease in receivables...... (2,376) (43,840) 15,990
Increase in inventories................. -- (2,635) (1,195)
Increase in other current liabilities... (5,749) 10,536 (9,583)
------ -------- --------
Net cash flows from operating
activities............................. (9,070) (8,534) 38,374
------ -------- --------
Cash flows from investing activities:
Purchase of unlisted securities......... (900) (9,592) (49)
Investment in affiliated companies...... -- (5,233) (787)
Capital expenditures.................... (2,802) (215,767) (266,118)
New acquisitions, net of cash acquired.. (2,948) -- --
------ -------- --------
Net cash flows from investing
activities............................. (6,650) (230,592) (266,954)
------ -------- --------
Cash flows from financing activities:
Proceeds from short-term debt to parent
company................................ 16,498 238,148 246,045
Capital contribution.................... 200 -- --
------ -------- --------
Net cash flows from financing
activities............................. 16,698 238,148 246,045
------ -------- --------
Net increase (decrease) in cash and cash
equivalents............................ 978 (978) 17,465
Cash and cash equivalents at beginning
of period.............................. -- 978 --
------ -------- --------
Cash and cash equivalents at end of
period................................. 978 -- 17,465
====== ======== ========
Significant non-cash investment and
financing activities:
Contribution in kind of cable networks
by parent company...................... -- 252,154 --
Deferral of payment for acquisition of
CAI Zoetermeer......................... -- 62,800 --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-42
<PAGE>
N.V. TELEKABEL BEHEER
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
for the years ended December 31, 1997, 1996 and 1995
(in thousands of Dutch guilders)
<TABLE>
<CAPTION>
Issued and
fully paid Share Other
capital premium reserves Total
---------- ------- -------- -------
<S> <C> <C> <C> <C>
Balance as of December 31, 1995............ 200 -- (2,385) (2,185)
Capital contribution....................... 800 251,354 -- 252,154
Net loss................................... -- -- (4,917) (4,917)
----- ------- ------ -------
Balance as of December 31, 1996............ 1,000 251,354 (7,302) 245,052
Net income................................. -- -- 2,890 2,890
----- ------- ------ -------
Balance as of December 31, 1997............ 1,000 251,354 (4,412) 247,942
===== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-43
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Dutch guilders)
1. Organization and Nature of Operations
N.V. TeleKabel Beheer and its subsidiaries (TeleKabel or the Company) of
Arnhem was a wholly owned subsidiary of the N.V. NUON Energie-Onderneming voor
Gelderland, Friesland en Flevoland (NUON), a local government owned company.
NUON's main activity is the provision of energy to the provinces of Gelderland,
Friesland en Flevoland.
TeleKabel was incorporated in The Netherlands by NUON on August 22, 1995.
Effective January 1, 1996, NUON contributed all of its cable television
networks to the Company in exchange for its equity interest in the Company.
TeleKabel and its subsidiaries main activities comprise investments in and
management of cable television network and related infrastructures, as well as
developing and rendering information, communication and transaction services.
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in The Netherlands
("Dutch GAAP"). The consolidated financial statements are prepared under the
historical cost convention. The preparation of financial statements in
conformity with Dutch GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
Subsidiary undertakings, which are those companies in which the Company,
directly or indirectly, has an interest of more than one half of the voting
rights or otherwise has power to exercise control over the operations, have
been consolidated. Subsidiaries are consolidated from the date on which
effective interest is transferred to the Company and are no longer consolidated
from the date of disposal. All intercompany transactions, balances and
unrealised surpluses and deficits on transactions between group companies have
been eliminated. Where necessary, accounting policies for subsidiaries have
been changed to ensure consistency with the policies adopted by the Company.
Separate disclosure is made of minority interests.
F-44
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
The following subsidiaries are included in the consolidation as of December
31, 1997. The subsidiaries are wholly-owned, unless indicated otherwise.
<TABLE>
<S> <C>
N.V. TeleKabel (1)........................................... Arnhem
Kabelexploitatie Maatschappij Rijnland B.V. (52.5%).......... Alphen a/d Rijn
TeleKabel Omroep Facilitair Bedrijf B.V...................... Arnhem
Maxinetwerken B.V. .......................................... Ede
TeleKabel Zoetermeer B.V. ................................... Zoetermeer
CAI Over-Betuwe B.V. (1)(2).................................. Utrecht
CAI Heteren B.V. (1)(2)...................................... Heteren
CAI Gendt B.V. (1)(2)........................................ Gendt
CAI Elst B.V. (1)(2)......................................... Elst
CAI Bemmel B.V. (1)(2)....................................... Bemmel
CAI Valburg B.V. (1)(2)...................................... Andelst
CAI Wageningen B.V. (1)(2)................................... Wageningen
Kabelexploitatiemaatschappij CAI Renkum B.V. (1)(2).......... Utrecht
CAI-NKM Nijmegen B.V. (1)(2)................................. Nijmegen
CAI Midden-Betuwe B.V. (1)(2)................................ Veenendaal
</TABLE>
- --------
(1) Statements of joint and several liability pursuant to Article 403, Book 2
of the Dutch Civil Code were issued for these companies.
(2) Cable Networks were acquired through an exchange transaction with Casema as
described in note 3.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents
comprise cash in hand, deposits held at call with banks, and investments in
money market instruments.
Investments in affiliated companies
Investments in affiliated companies are accounted for by the equity method
of accounting. These are investments in which the Company has between 20% and
50% of the voting rights, and over which the Company exercises significant
influence, unless such influence is temporary, in which case the investment is
recorded at cost. Provisions are recorded for long-term impairment in value.
Equity accounting involves recognising in the income statement the
Company's share of the affiliate's profit or loss for the year. The Company's
interest in the affiliate is carried in the balance sheet at an amount that
reflects its share of the fair value of the net assets of the affiliate. The
excess of the consideration over the Company's share of fair value of the
affiliate's net assets is recorded as goodwill and amortized over its expected
usefull life.
Property, plant and equipment
Property, plant and equipment are recorded at cost. Additions, replacements
and major improvements are capitalized, and costs for normal repair and
maintenance of property, plant and equipment are charged to expense as
incurred. Assets constructed by incorporate interest charges incurred during
the period of construction, and investment subsidies are deducted. Depreciation
is calculated using the annuity or straight line method over the economic life
of the asset, taking into account the residual value. The annuity method is a
compounded interest method whereby the depreciation is calculated based on the
assumption that depreciation plus the normal cost of capital to finance the
assets
F-45
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
are constant over the life of the assets. This results in lower depreciation
charges in the earlier years of the assets life and higher charges in the later
years. Upon disconnection of a subscriber, the remaining book value of the
subscriber equipment, excluding converters which are recovered upon
disconnection, and the capitalized labor are written off and accounted for as
an operating cost.
Goodwill and other intangible assets
Goodwill is the excess of investments in consolidated subsidiaries and
affiliated companies over the fair value of the net tangible fixed asset value
at acquisition and is amortized on a straight line basis over its expected
usefull life.
Recoverability of tangible and intangible assets
The Company evaluates the carrying value of all tangible and intangible
fixed assets whenever events or circumstances indicate the carrying value of
assets may exceed their recoverable amounts. An impairment loss is recognized
when the estimated future cash flows (undiscounted and without interest)
expected to result from the use of an asset are less than the carrying amount
of the asset. Measurement of an impairment loss is based on fair value of the
asset computed using discounted cash flows if the asset is expected to be held
and used. Measurement of an impairment loss for an asset held for sale would be
based on fair market value less estimated costs to sell.
Revenue recognition
Revenue is primarily derived from the sale of cable television services to
subscribers and is recognized in the period the related services are provided.
Initial installation fees are recognized as revenue in the period in which the
installation occurs, to the extent installation fees are equal to or less than
direct selling costs, with any excess costs deferred and amortized over the
average subscriber period. To the extent installation fees exceed direct
selling costs, the excess fees would be deferred and amortized over the average
contract period. All installation fees and related costs with respect to
reconnections are recognized in the period in which the reconnection occurs.
Income taxes
The Company accounts for income taxes under the asset and liability method
which requires recognition of deferred tax assets and liabilities for the
expected future income tax consequences of transactions which have been
included in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and income tax basis of assets, liabilities and
loss carryforwards using enacted tax rates in effect for the year in which the
differences are expected to reverse. Net deferred tax assets are only recorded
if management believes it is more likely than not they will be realized.
3. Significant acquisitions and divestitures
During October of 1995 the Company acquired a 72.5% interest in
Kabelexploitatie Maatschappij Rijnland B.V. ("KMR"). The total cash
consideration, for this acquisition amounted to NLG 4,950. The excess of the
total consideration over the fair value of the net assets acquired was
allocated to goodwill.
Effective January 1, 1996 NUON contributed its cable networks with a book
value of approximately NLG 248,550 to TeleKabel. These cable networks were
recorded in TeleKabel at their book values, in exchange for additional paid in
capital by NUON.
F-46
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
Effective January 1, 1996 NUON contributed its shares in N.V. TeleKabel
Friesland to TeleKabel in exchange for 80,000 shares of TeleKabel. The
contribution was recorded at its book value recorded in NUON amounting to NLG
3,604.
In April of 1997 the Company entered into an agreement with Casema to
exchange its cable network interest in TeleKabel Oosterhout B.V., TeleKabel De
Bilt-Bilthoven B.V., TeleKabel Zoetermeer B.V. and Kabelexploitatie
Maatschappij Rijnland B.V. for 100% of the shares of CAI-OverBetuwe B.V., CAI-
Bemmel B.V., CAI-Elst B.V., CAI-Gendt B.V., CAI-Heteren B.V., CAI-Valburg B.V.,
CAI-Midden-Betuwe B.V., Kabelexploitatie Maatschappij CAI-Renkum B.V., CAI-
Buren B.V., CAI-Druten B.V., CAI-Geldermalsen B.V., CAI-Lingewaal B.V., CAI-
NKM-Nijmegen B.V., CAI-Neerijnen-West B.V., CAI-Tiel B.V., CAI-Wageningen B.V.,
CAI-Wychen B.V., CAI-Dodewaard B.V and cable network assets in the cities of
Dronten and Lelystad.
The exchange of cable networks was based on the number of subscriber
connections exchanged, measured as of January 1, 1997. Casema and TeleKabel
agreed that a compensation of NLG 1,200 per subscriber will be paid for any
differences in the number of subscribers exchanged.
Additionally the agreement specified that TeleKabel was to acquire CAI-
Almere B.V. for a consideration of NLG 1,500 per subscriber, based on the
number of subscribers at the date of the share transfer. This acquisition was
not consummated before December 31, 1997.
The transaction with Casema was originally scheduled to be completed as of
December 31, 1997. As of December 31, 1997, TeleKabel transferred its interest
in TeleKabel Oosterhout B.V., TeleKabel De Bilt-Bilthoven B.V. and 47.5% of its
interest in Kabelexploitatie Maatschappij Rijnland B.V. to Casema and received
the interest in the cable networks specified in note 2. Refer to note 14 for
the transfer of the remaining cable networks.
The acquired cable networks were recorded in the books of the Company at
fair value of the cable networks at the date of the exchange.
Effective September 1997 the Company acquired the cable network from the
city of Arnhem and Casema for a total consideration of approximately NLG
84,000, the difference between the consideration and the fair value of the
assets, which approximated NLG 46,000, was recorded as goodwill.
4. Subscriber receivables
Subscriber receivables are stated net of an allowance for doubtfull
accounts of NLG 1,017 and NLG 458 as of December 31, 1997 and 1996,
respectively.
5. Other receivables
Other receivables can be specified as follows:
<TABLE>
<CAPTION>
As of December 31,
-------------------
1996 1997
--------- ---------
<S> <C> <C>
Prepayments and accrued income........................... 7,926 877
Taxes and social security premiums....................... 1,771 --
Other receivables........................................ 1,107 12,644
--------- ---------
10,804 13,521
========= =========
</TABLE>
F-47
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
Other receivables as of December 31, 1997 include an amount of NLG 10,560,
relating to the Casema transaction.
6. Investments in affiliated companies and unlisted securities
Movements in investments in and advances to affiliated companies can be
summarized as follows:
<TABLE>
<CAPTION>
Affiliated Unlisted
companies securities Total
---------- ---------- ------
<S> <C> <C> <C>
Book value as of January 1, 1996............. -- 900 900
Additions.................................. 5,233 10,492 15,725
Write off of investment in unlisted
securities................................ -- (8,915) (8,915)
Share in income of affiliated companies.... (1,033) 0 (1,033)
Other...................................... -- (900) (900)
------ ------ ------
Book value as of December 31, 1996........... 4,200 1,577 5,777
Additions.................................. -- 49 49
Share in income affiliated companies....... 1,022 -- 1,022
Other...................................... -- 787 787
Reclassification........................... (4,000) 14,000 10,000
------ ------ ------
Book value as of December 31, 1997........... 1,222 16,413 17,635
====== ====== ======
</TABLE>
As of December 31, 1996 investment in affiliated companies relate to a
33.3% interest in Interway Holding B.V. and a 30% interest in Euronet Internet
B.V. During 1997 the investment in Euronet Internet B.V. was reclassified to
unlisted securities, because this investment was considered as temporary. The
reclassification in 1997 includes the net book value of Euronet Internet B.V.
of NLG 4,000 and the unamortized goodwill of NLG 10,000. (see note 8).
The write off of investment in unlisted securities in 1996 mainly relates
to the write off of the company's investment in Sport 7, a television channel
that closed its operation in December of 1996.
F-48
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
7. Property, plant and equipment
Tangible fixed assets can be summarized as follows:
<TABLE>
<CAPTION>
Other
Land & Cable fixed Assets under
buildings Networks assets construction Total
--------- -------- ------ ------------ -------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1996
Net book value as of
January 1, 1996......... -- 60,011 378 -- 60,389
Additions................ 2,467 332,341 3,291 13,130 351,229
Disposals................ -- (680) -- -- (680)
Depreciation............. (279) (12,969) (693) -- (13,941)
----- ------- ------ ------- -------
Net book value as of
December 31, 1996....... 2,188 378,703 2,976 13,130 396,997
===== ======= ====== ======= =======
Balance as of December
31, 1996
Historical cost.......... 2,467 391,672 3,669 13,130 410,938
Accumulated
depreciation............ (279) (12,969) (693) -- (13,941)
----- ------- ------ ------- -------
Net book value........... 2,188 378,703 2,976 13,130 396,997
===== ======= ====== ======= =======
Year ended December 31,
1997
Net book value as of
January 1, 1997......... 2,188 378,703 2,976 13,130 396,997
Additions................ 4,438 159,601 12,768 36,748 213,555
Disposals................ -- (26,157) -- (13,130) (39,287)
Depreciation............. (389) (15,359) (2,018) -- (17,766)
----- ------- ------ ------- -------
Net book value as of
December 31, 1997....... 6,237 496,788 13,726 36,748 553,499
===== ======= ====== ======= =======
Balance as of December
31, 1997
Historical cost.......... 6,905 525,454 16,437 36,748 585,544
Accumulated
depreciation............ (668) (28,666) (2,711) -- (32,045)
----- ------- ------ ------- -------
Net book value........... 6,237 496,788 13,726 36,748 553,499
===== ======= ====== ======= =======
</TABLE>
Estimated useful lives and the depreciation method used for tangible fixed
assets are as follows:
<TABLE>
<CAPTION>
Useful
life Depreciation
(years) Methodology
------- ------------
<S> <C> <C>
Land and buildings.................................... 40 Straight line
Cable networks:
Active parts (25%).................................. 7 Annuity method
Passive parts (75%)................................. 20 Annuity method
Other fixed assets.................................... 3-5 Straight line
</TABLE>
During 1995, 1996 and 1997, TeleKabel acquired, exchanged and received cable
networks as a capital contribution from NUON (see note 3). The Company analyzed
the value of its complete network in order to record its cable networks on a
consistent basis under fixed assets. All cable network connections were
analysed on a cost per connection basis and compared to the current cost of a
technologically up to date connection. All connections were valued at the cost
of establishing a new and technologically up to date connection, minus the cost
to upgrade the existing connection to the most current technology, referred to
the "current replacement value". The net difference between the book value and
the current replacement value was reclassified to intangible fixed assets, with
similar useful lives.
F-49
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
8. Intangible fixed assets
Intangible fixed assets movements and balances can be summarized as
follows:
<TABLE>
<S> <C>
Year ended December 31, 1996
Net book value as of January 1, 1996................................ 16,065
Additions........................................................... 180,169
Amortization........................................................ (8,254)
-------
Book value as of December 31, 1996.................................. 187,980
=======
Balance as of December 31, 1996
Historical cost..................................................... 196,234
Accumulated amortization............................................ (8,254)
-------
Net book value...................................................... 187,980
=======
Year ended December 31, 1997
Book value as of January 1, 1997.................................... 187,980
Additions........................................................... 49,057
Reclassification.................................................... (10,000)
Disposals........................................................... (18,823)
Amortization........................................................ (13,652)
-------
Net book value as of December 31, 1997.............................. 194,562
=======
Balance as of December 31, 1997
Historical cost..................................................... 216,444
Accumulated amortization............................................ (21,882)
-------
Net book value...................................................... 194,562
=======
</TABLE>
As described in Note 2 TeleKabel has recorded any differences between the
"current replacement value" of the tangible fixed assets and the book value of
the cable networks on the date of acquisition, contribution or exchange as
goodwill. Such goodwill is amortized on a straight line basis over the
estimated useful life of the cable network (15 years). Goodwill paid on the
acquisition of other types of businesses is amortized over 5-10 years depending
on the nature of the business. The reclassification of goodwill in 1997 relates
to the reclassification of Euronet Internet B.V. from an equity investment to
investment recorded at cost (see note 6).
F-50
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
9. Deferred income
Deferred income relates to connection fees charged to customers in excess
of the normal cost of creating a connection. Deferred income is released to
income over the expected life of the cable connection.
<TABLE>
<CAPTION>
December 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Balance as of January 1.................................... -- 4,220
Addition: connection charges received from clients......... 4,697 2,445
Less: release to income statement.......................... (477) (324)
------ ------
Balance end of period...................................... 4,220 6,341
====== ======
</TABLE>
10. Short term debt payable to shareholder
Relates to loans provided by NUON for financing fixed assets. The interest
rate charged in 1997 was 6.5% (1996: 6.35%).
11. Minority interest
The movements in the minority interest can be summarized as follows:
<TABLE>
<CAPTION>
December 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Balance as of January 1...................................... 2,099 1,820
Changes of minority interest held by third party............. -- 1,184
Less: share third parties in income.......................... (279) (683)
------ ------
Balance end of period........................................ 1,820 2,321
====== ======
</TABLE>
12. Commitments and contingent liabilities
Leases
TeleKabel has commitments for leasing of company cars amounting to NLG 928
yearly as per December 31, 1997. Maximum maturity period of the lease
agreements is four years.
Other commitments
In 1997 TeleKabel had other commitments on account of acquisitions. These
commitments were not material.
Statement of liability
TeleKabel and some subsidiaries can be held liable to a number of group
companies included in the consolidation, as meant by Article 403, Part 9, Book
2 of the Dutch Civil Code. As partner in a partnership firm, one of the group
companies can be held liable for the commitments of this firm. The maximum risk
amounts to NLG 100.
F-51
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
Fiscal unity
Until December 31, 1997, TeleKabel and NUON were included in the same
entity for value added tax and income tax purposes. TeleKabel is severally
liable for the material tax debts of the fiscal entity.
Legal
The Company is not a party to any material legal proceedings, nor is it
currently aware of any material legal proceedings. From time to time, the
Company may become involved in litigation relating to claims arising out of its
operations in the normal course of its business.
13. Income Taxes
Until October of 1996 the Company did not have an obligation to pay income
taxes, as it was a wholly owned subsidiary of a Dutch local government
institution. As a result of changed shareholders of TeleKabel's parent company,
in Dutch tax laws the Company is subject to Dutch income taxes since October
10, of 1996. The Company is in discussion with the Dutch tax authorities
regarding the tax basis of its assets and liabilites. Based on current best
estimates of the outcome of these discussions the Company believes that the tax
basis of the Company's assets and liabilities will not differ significantly
from their bookvalues.
14. Subsequent Events
During 1998 the Company surrendered its interest in TeleKabel Zoetermeer
B.V. and the remaining 52.5% share in Kabelexploitatie Maatschappij Rijnland
B.V.in exchange for shares in CAI-Buren B.V., CAI-Druten B.V., CAI-Geldermalsen
B.V., CAI-Lingewaal B.V., CAI-Neerijnen-West B.V., CAI-Tiel B.V., CAI-Wychen
B.V., CAI-Dodewaard B.V and CAI-Almere B.V., CAI-Dronten B.V., and CAI-Lelystad
B.V. as part of the Casema transaction (see note 3).
Early 1998, NUON and United Pan-Europe Communications N.V. (UPC) signed the
merger documents to combine their cable network activities in The Netherlands.
The companies completed the merger on August 6, 1998. As a result, the
TeleKabel shares have been transferred to the newly incorporated holding
company named United TeleKabel Holding N.V.
On January 19, 1999, UPC agreed to purchase NUON's 49% ownership interest
in UTH, increasing its ownership in UTH to 100%. The transaction will close
concurrent with the completion of an IPO, or failing such IPO, on or before
November 30, 1999.
15. Differences between Generally Accepted Accounting Principles in The
Netherlands and the United States
The Company's consolidated financial statements are prepared in accordance
with Dutch GAAP, which differs in certain respects from accounting principles
generally accepted in the United States ("US GAAP"). The material differences
as they apply to the Company are summarized below:
(a) Depreciation of fixed assets
Under Dutch GAAP the Company depreciates its cable network assets using the
annuity method of depreciation. Under US GAAP cable network assets are
depreciated on a straight line basis.
(b) Accounting for investments in affiliates
Under Dutch GAAP the Company records certain of its investments in
affiliates in which it holds an interest of 20% to 50% at the historical cost
of the investment (see Note 2). Under US GAAP these investments are accounted
for using the equity method of accounting.
F-52
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
(c) Accrued subscriber fees
Under Dutch GAAP the Company created an accrual for subscriber fees on the
acquisition balance sheet of the cable network in Leiderdorp. Monthly
subscription fees for subscribers in this area were lower than fees charged to
customers in other areas. The Company created an accrual, to be released over
the useful life of the cable network, which results in the equalization of
cable revenues. Under US GAAP this accrual was not recorded resulting in a
decrease of the amount of goodwill paid for the cable network.
Reconciliation of net (loss)/profit (in thousands of Dutch guilders):
<TABLE>
<CAPTION>
4 months and
9 days period Years ended
ended December 31,
December 31, --------------
1995 1996 1997
------------- ------ ------
<S> <C> <C> <C>
Net income/(loss) under Dutch GAAP................ (2,385) (4,917) 2,890
US GAAP adjustment:
Depreciation on a straight line basis............. -- (6,477) (8,631)
Equity accounting for affiliates.................. -- 250 (6,540)
Accrued subscriber fees:
Goodwill amortization............................. -- 86 86
Release of subscriber accrual..................... -- (258) (258)
Income tax effect of US GAAP adjustments.......... -- 2,327 3,081
------ ------ ------
Net income/(loss) under US GAAP................... (2,385) (8,989) (9,372)
------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Reconciliation of shareholder's equity:
Total shareholders' equity under Dutch GAAP................ 245,052 247,942
US GAAP adjustment:
Depreciation on a straight line basis...................... (6,477) (15,108)
Equity accounting for affiliates........................... 250 (6,290)
Accrued subscriber fees:
Goodwill................................................... 86 172
Accrued subscriber fees.................................... (258) (516)
Income tax effect of US GAAP adjustments................... 2,327 5,408
------- -------
Total shareholder's equity under US GAAP................... 240,980 231,608
======= =======
</TABLE>
F-53
<PAGE>
N.V. TELEKABEL BEHEER
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(in thousands of Dutch Guilders, except for per share data)
<TABLE>
<CAPTION>
September 30,
1998
-------------
<S> <C>
ASSETS
Current assets
Cash and cash equivalents...................................... 856
Subscriber receivables, net.................................... 59,549
Inventory...................................................... 3,687
-------
Total current assets......................................... 64,092
Tangible fixed assets, net....................................... 625,116
Intangible assets, net........................................... 242,036
Long term investments............................................ 1,327
-------
Total assets................................................. 932,571
=======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Accounts payable............................................... 22,689
Deferred income................................................ 4,990
Short-term debt payable to shareholder......................... 12,410
Related party payables......................................... 576,406
Other payables and accrued expenses............................ 78,118
-------
Total current liabilities.................................... 694,613
Shareholders' equity
Common stock, NLG 10 par value, 100,000 shares authorized and
issued........................................................ 1,000
Additional paid-in capital..................................... 251,354
Accumulated deficit............................................ (14,396)
-------
Total shareholder's equity................................... 237,958
-------
Total liabilities and shareholder's equity................... 932,571
=======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
F-54
<PAGE>
N.V. TELEKABEL BEHEER
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE 9 MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
(in thousands of Dutch guilders)
<TABLE>
<CAPTION>
For the
Nine Months Ended
September 30,
------------------
1997 1998
-------- --------
<S> <C> <C>
Service and other revenue................................... 99,313 111,720
Operating expenses:
Purchases relating to sales............................... (13,582) (16,993)
Personnel expenses........................................ (13,422) (14,999)
Depreciation and amortization............................. (23,681) (34,758)
Other operating expenses.................................. (28,639) (27,560)
-------- --------
Net operating (loss) income................................. 19,989 17,410
Equity results in associates.............................. (20) (64)
Interest expense, related party........................... (18,737) (27,331)
Other income/(expense), net............................... (39) 0
-------- --------
Income/(loss) before and after income taxes................. 1,193 (9,985)
Minority interests in subsidiaries........................ 312 0
-------- --------
Net income/(loss)........................................... 1,505 (9,985)
======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
F-55
<PAGE>
N.V. TELEKABEL BEHEER
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE 9 MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
(in thousands of Dutch guilders)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
Net cash flows from operating activities.......... 43,855 47,537
------------ ------------
Cash flows from investing activities:
Capital expenditures.............................. (244,409) (139,861)
New acquisitions, net of cash acquired............ 0 0
------------ ------------
Net cash flows from investing activities.......... (244,409) (139,861)
------------ ------------
Cash flows from financing activities:
Proceeds from short-term debt to parent company... 200,554 75,715
------------ ------------
Net cash flows from financing activities.......... 200,554 75,715
------------ ------------
Net increase (decrease) in cash and cash
equivalents...................................... -- (16,609)
Cash and cash equivalents at beginning of period.. -- 17,465
------------ ------------
Cash and cash equivalents at end of period........ -- 856
============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
F-56
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Dutch guilders)
1. Basis of presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information, refer
to the consolidated financial statements and footnotes thereto included herein
for the year ended December 31, 1997.
2. Significant acquisitions and divestitures
During 1998 the Company surrendered its interest in TeleKabel Zoetermeer
B.V. and the remaining 52.5% of the shares in Kabelexploitatie Maatschappij
Rijnland B.V. in exchange for shares in CAI-Buren B.V., CAI-Druten B.V., CAI-
Geldermalsen B.V., CAI-Lingewaal B.V., CAI-Neerijnen-West B.V., CAI-Tiel B.V.,
CAI-Wychen B.V., CAI-Dodewaard B.V, CAI-Almere B.V., CAI-Dronten B.V. and CAI-
Lelystad B.V. as part of the Casema transaction.
Early 1998, NUON and United Pan-Europe Communications N.V. (UPC) signed the
merger documents to combine their cable network activities in the Netherlands.
The companies completed the merger on August 6, 1998. As a result, the
TeleKabel shares have been transferred to the newly incorporated holding
company named United TeleKabel Holding N.V.
On January 19, 1999, UPC agreed to purchase NUON's 49% ownership interest
in UTH, increasing its ownership in UTH to 100%. The transaction will close
concurrent with the completion of an IPO, or failing such IPO, on or before
November 30, 1999.
3. Differences between Generally Accepted Accounting Principles in the
Netherlands and the United States
The Company's consolidated financial statements are prepared in
accordance with Dutch GAAP, which differs in certain respects from accounting
principles generally accepted in the United States ("US GAAP"). The material
differences as they apply to the Company are summarized below:
(a) Depreciation of fixed assets
Under Dutch GAAP the Company depreciated its cable network assets using the
annuity method of depreciation. Under US GAAP cable network assets are
depreciated on a straight line basis.
(b) Accounting for investments in affiliates
Under Dutch GAAP the Company records certain of its investments in
affiliates in which it holds an interest of 20% to 50% at the historical cost
of the investment (see Note 2 of the 1997 figures). Under US GAAP these
investments are accounted for using the equity method of accounting.
F-57
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --
(Continued)
(in thousands of Dutch guilders)
(c) Accrued subscriber fees
Under Dutch GAAP the Company created an accrual for subscriber fees on the
acquisition balance sheet of the cable network in Leiderdorp. Monthly
subscription fees for subscribers in this area were lower than fees charged to
customers in other areas. The Company created an accrual, to be released over
the usefull life of the cable network, which results in the equalization of
cable revenues. Under US GAAP this accrual was not recorded resulting in a
decrease of the amount of goodwill paid for the cable network.
Reconciliation of net (loss)/profit (in thousands of Dutch Guilders):
<TABLE>
<CAPTION>
For the
Nine Months
Ended
September 30,
--------------
1997 1998
------ ------
<S> <C> <C>
Net income/(loss) under Dutch GAAP.............................. 1,505 (9,985)
US GAAP adjustment:
Depreciation on a straight line basis........................... (6,473) (8,197)
Equity accounting for affiliates................................ (4,905) 6,290
Goodwill amortization........................................... 65 (172)
Release of subscriber accrual................................... (194) 516
Income tax effect of US GAAP adjustments........................ 2,311 2,748
------ ------
Net income/(loss) under US GAAP................................. (7,691) (8,800)
====== ======
</TABLE>
Reconciliation of shareholders' equity:
<TABLE>
<CAPTION>
As of
September 30, 1998
------------------
<S> <C>
Total shareholders' equity under Dutch GAAP.................. 237,958
US GAAP adjustment:
Depreciation on a straight line basis........................ (23,305)
Equity accounting for affiliates.............................
Income tax effect of US GAAP adjustments..................... 8,156
-------
Total shareholders' equity under US GAAP..................... 222,809
=======
</TABLE>
F-58
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT ON SCHEDULES.................................. S-2
FINANCIAL STATEMENT SCHEDULE I
Condensed Financial Information of Registrant
Condensed Information as to the Financial Condition of Registrant........ S-3
Condensed Information as to the Operations of Registrant................. S-4
Condensed Information as to the Cash Flows of Registrant................. S-5
Note to Schedule......................................................... S-6
FINANCIAL STATEMENT SCHEDULE II
Valuation and Qualifying Accounts........................................ S-8
</TABLE>
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
To United Pan-Europe Communications N.V.
We have audited, in accordance with auditing standards generally accepted
in The Netherlands, which are substantially the same as those generally
accepted in the United States of America, the consolidated financial statements
of United Pan-Europe Communications N.V. included in this Form S-1 and have
issued our report thereon dated January 14, 1999. Our audit was made for the
purpose of forming an opinion on the basic consolidated financial statements
taken as a whole. The following schedules are the responsibility of the
Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
consolidated financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements as indicated in our report with respect thereto and, in our opinion,
based on our audit, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
ARTHUR ANDERSEN
Amstelveen, The Netherlands,
January 14, 1999
S-2
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
PARENT ONLY
SCHEDULE I
Condensed Information as to the Financial Condition of Registrant
(Stated in thousands of Dutch guilders, except share and per share amounts)
<TABLE>
<CAPTION>
As of December 31, As of September 30,
------------------------------------ -------------------
1996 1997 1998
----------------- ------------------ -------------------
(Pre-Acquisition) (Post-Acquisition) (Post-Acquisition)
<S> <C> <C> <C>
ASSETS:
Current assets
Cash and cash
equivalents.......... 20,949 43,306 7,189
Related party
receivables.......... 30,416 36,364 134,144
Other receivables,
net.................. 18,986 18,690 1,946
Other current assets.. 2,054 2,761 3,159
-------- --------- ---------
Total current
assets............. 72,405 101,121 146,438
Investments in, loans
and other advances to
affiliated companies,
accounted for under the
equity method, net..... 689,324 1,119,724 1,168,139
Property, plant and
equipment, net of
accumulated
depreciation of 333, 23
and 351, respectively.. 1,279 1,022 1,042
Deferred financing
costs, net of
accumulated
amortization of 0, 110
and 1,393,
respectively........... -- 16,813 16,200
Non-current restricted
cash and other assets.. 84 48,541 50,158
-------- --------- ---------
Total assets........ 763,092 1,287,221 1,381,977
======== ========= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current liabilities
Related party accounts
payable.............. 17,095 34,402 25,429
Accrued liabilities... 7,408 12,776 13,009
Note payable to
shareholder.......... -- -- 119,070
Short-term debt....... 289,360 -- 34,020
Short-term debt,
related party........ -- 228,097 251,993
-------- --------- ---------
Total current
liabilities........ 313,863 275,275 443,521
Long-term debt ......... -- 528,386 657,634
Long-term notes payable
to shareholder......... 256,335 -- --
Other related party
debt................... 17,578 29,609 26,349
Deferred taxes and
other.................. -- 42,420 33,126
-------- --------- ---------
Total liabilities... 587,776 875,690 1,160,630
-------- --------- ---------
Shareholders' equity
Common stock, 0.667
par value,
200,000,000 shares
authorized,
81,000,000 shares
issued............... 54,000 54,000 54,000
Additional paid-in
capital.............. 225,570 615,663 625,822
Deferred
compensation......... -- -- (5,826)
Other cumulative
comprehensive income
(loss)............... 6,361 5,265 (17,399)
Accumulated deficit... (110,615) (140,736) (312,588)
Treasury stock, at
cost, 9,198,135
shares of common
stock................ -- (122,662) (122,662)
-------- --------- ---------
Total shareholders'
equity............. 175,316 411,530 221,347
-------- --------- ---------
Total liabilities
and shareholders'
equity............. 763,092 1,287,221 1,381,977
======== ========= =========
</TABLE>
S-3
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
PARENT ONLY
SCHEDULE I
Condensed Information as to the Operations of Registrant
(Stated in thousands of Dutch guilders, except share and per share amounts)
<TABLE>
<CAPTION>
For the Six For the Years Ended
Months Ended December 31, For the Nine
December 31, ----------------------------------- Months Ended
1995 1996 1997 September 30, 1998
----------------- ----------------- ----------------- ------------------
(Pre-Acquisition) (Pre-Acquisition) (Pre-Acquisition) (Post-Acquisition)
<S> <C> <C> <C> <C>
Management fee income
from related parties... 1,242 4,433 3,088 10,221
Corporate general and
administrative
expense................ (3,016) (1,679) (11,605) (49,051)
Depreciation and
amortization........... (621) (335) (736) (328)
---------- ---------- ---------- ----------
Net operating loss.... (2,395) 2,419 (9,253) (39,158)
Interest income......... 6,212 1,898 2,830 1,295
Interest income, related
party.................. 9,169 27,353 44,867 47,656
Interest expense........ (6,929) (8,418) (16,949) (27,727)
Interest expense,
related party.......... (11,068) (27,511) (33,362) (16,681)
Foreign exchange loss,
net.................... (4,192) (20,236) (12,864) (9,702)
---------- ---------- ---------- ----------
Net loss before income
taxes and other
items................ (9,203) (24,495) (24,731) (44,317)
Share in results of
affiliated companies,
net.................... (30,076) (46,841) (138,436) (129,231)
Income taxes............ -- -- 1,454 1,696
---------- ---------- ---------- ----------
Net loss.............. (39,279) (71,336) (161,713) (171,852)
========== ========== ========== ==========
Basic and diluted net
loss per common share.. (0.48) (0.88) (2.01) (2.39)
========== ========== ========== ==========
Weighted-average number
of common shares
outstanding............ 81,000,000 81,000,000 80,488,992 71,801,865
========== ========== ========== ==========
</TABLE>
S-4
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
PARENT ONLY
SCHEDULE I
Condensed Information as to the Cash Flows of the Registrant
(Stated in thousands of Dutch guilders)
<TABLE>
<CAPTION>
For the Six
Months Ended For the Years Ended December 31, For the Nine
December 31, ----------------------------------- Months Ended
1995 1996 1997 September 30, 1998
----------------- ----------------- ----------------- ------------------
(Pre-Acquisition) (Pre-Acquisition) (Pre-Acquisition) (Post-Acquisition)
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss................ (39,279) (71,336) (161,713) (171,852)
Adjustments to reconcile
net loss to net cash
flows from operating
activities:
Depreciation and
amortization.......... 621 335 736 328
Share in results of
affiliated companies,
net................... 27,042 49,875 148,826 129,231
Foreign exchange loss,
net................... 4,192 20,236 12,864 9,702
Compensation expense
related to stock
options............... -- -- 4,818 32,493
Other.................. (1,975) (1,545) (3,638) (1,281)
Changes in assets and
liabilities:
(Increase) decrease in
receivables........... (147,454) 86,309 (6,359) (81,036)
Increase in other non-
current assets........ (57) (27) (1,457) (2,015)
Increase (decrease) in
other current
liabilities........... 20,197 22,022 46,600 (8,740)
Increase (decrease) in
deferred taxes and
other................. -- -- 2,303 (37,454)
-------- -------- -------- --------
Net cash flows from
operating activities... (136,713) 105,869 42,980 (130,624)
-------- -------- -------- --------
Cash flows from
investing activities:
Investments in, loans to
and advances to
affiliated companies,
net.................... (325,087) (44,805) (294,532) (166,289)
Capital expenditures.... (1,054) (2,249) (1,308) (348)
Deposit to acquire
minority interest in
subsidiary............. -- -- (47,000) --
Sale of affiliated
companies.............. -- -- 11,070 --
Loans repaid by
subsidiaries........... -- -- 350,250 --
-------- -------- -------- --------
Net cash flows from
investing activities... (326,141) (47,054) 18,480 (166,637)
-------- -------- -------- --------
Cash flows from
financing activities:
Proceeds from short-term
borrowings............. 433,231 -- 91,415 --
Proceeds from short-term
borrowings, related
party.................. -- -- 228,097 23,896
Proceeds from long-term
borrowings............. 23,865 -- 498,699 130,000
Proceeds from note
payable to
shareholder............ -- -- -- 110,508
Deferred financing
costs.................. -- -- (17,139) --
Repayments long and
short-term borrowings.. -- (150,158) (377,443) (3,260)
Redemption of
convertible loans...... -- -- (170,171) --
Purchase shares from
shareholder............ -- -- (292,561) --
-------- -------- -------- --------
Net cash flows from
financing activities... 457,096 (150,158) (39,103) 261,144
-------- -------- -------- --------
Net (decrease) increase
in cash and cash
equivalents............ (5,758) (91,343) 22,357 (36,117)
Cash and cash
equivalents at
beginning of period.... -- 112,292 20,949 43,306
Cash contributed upon
formation.............. 118,050 -- -- --
-------- -------- -------- --------
Cash and cash
equivalents at end of
period................. 112,292 20,949 43,306 7,189
======== ======== ======== ========
Non-cash investing and
financing activities:
Issuance of shares upon
conversion of PIK
notes................. -- -- 169,899 --
======== ======== ======== ========
Supplemental cash flow
disclosures:
Cash paid for
interest.............. (6,713) (9,271) (52,447) 21,580
======== ======== ======== ========
Cash received for
interest.............. 3,949 26,277 25,091 888
======== ======== ======== ========
</TABLE>
S-5
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTE TO PARENT ONLY
SCHEDULE I
AS OF DECEMBER 31, 1996 (Pre-Acquisition), DECEMBER 31, 1997 AND
SEPTEMBER 30, 1998 (Post-Acquisition)
(Monetary amounts stated in thousands of Dutch guilders,
except share and per share amounts)
1. Organization and Nature of Operations
United Pan-Europe Communications N.V., formerly known as United and Philips
Communications B.V. ("UPC" or the "Company") was formed for the purpose of
acquiring and developing multi-channel television and telecommunications
systems in Europe. On July 13, 1995, United International Holdings, Inc.
("UIH"), a United States of America corporation, and Philips Electronics N.V.
("Philips"), contributed their respective ownership interests in European and
Israeli multi-channel television systems to UPC. Philips contributed to UPC its
95% interest in cable television systems in Austria, its 100% interest in cable
television systems in Belgium, and its minority interests in multi-channel
television systems in Germany, The Netherlands (KTE) and France (Citecable).
UIH contributed its interests in multi-channel television systems in Israel,
Ireland, the Czech Republic, Malta, Norway, Hungary, Sweden and Spain. UIH also
contributed United States dollars ("$")78.2 million in cash (including accrued
interest of $3.2 million) to UPC and issued to Philips 3,169,151 shares of its
Class A Common Stock having a value of $50.0 million (at date of closing). In
addition, UPC issued to Philips $133.6 million of convertible subordinated pay-
in-kind notes (the "PIK Notes"). As a result of this transaction, UIH and
Philips each owned a 50% economic and voting interest in UPC.
On December 11, 1997, UIH acquired Philips' 50% interest in UPC (the "UPC
Acquisition"), thereby making it an effectively wholly-owned subsidiary of UIH
(subject to certain employee equity incentive compensation arrangements)
through its wholly-owned subsidiary UIH Europe, Inc. ("UIHE"). The entity's
name was changed to United Pan-Europe Communications N.V., and its legal seat
was transferred from Eindhoven to Amsterdam. Through its cable-based
communications networks in 10 countries in Europe and in Israel, UPC currently
offers cable television services and is further developing and upgrading its
network to provide digital video, voice and Internet/data services in Western
European markets.
As part of the UPC Acquisition, (i) UPC purchased the 3,169,151 shares of
Class A Common Stock of UIH held by Philips (66,800), (ii) UIH purchased
169,899 of the accreted amount of UPC's PIK Notes and redeemed them for
15,180,261 shares of UPC, (iii) UPC repaid to Philips the remaining 170,371
accreted amount of the PIK Notes (339,800), (iv) UIH purchased 13,121,604
shares of UPC directly from Philips, and (v) UPC repurchased Philips' remaining
equity interest in UPC (24,378,396 shares) (450,000). The UPC Acquisition was
financed with proceeds from a long-term revolving credit facility through UPC
with a syndicate of banks (305,200) (the "Tranche A Facility"), a bridge bank
facility through a subsidiary of UPC $111,200 (224,000) (the "Tranche B
Facility") and a cash investment by UIH of 327,400. Approximately 479,000 drawn
on the Tranche A Facility was used to repay existing debt of UPC in conjunction
with the UPC Acquisition.
UIH's acquisition of Philips' interest in UPC was accounted for as a step
acquisition under purchase accounting. As a result of UPC becoming effectively
wholly owned by UIH, such purchase accounting adjustments, along with existing
basis differences, were pushed down to the financial statements of UPC and a
new basis of accounting was established for the UPC net assets acquired by UIH.
As of December 11, 1997, the proportional net assets of UPC acquired by UIH
were recorded at fair market value based on the purchase price paid by UIH,
along with additional basis differences at the UIH level existing as of that
date. The total purchase accounting adjustments of 442,688 were allocated to
UPC's underlying net assets.
S-6
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTE TO PARENT ONLY
SCHEDULE I -- (Continued)
As a result of the UPC Acquisition and the associated push-down of UIH
basis on December 11, 1997, the condensed information as to financial position
of registrant as of December 31, 1997 and September 30, 1998 is presented on a
"post-acquisition" basis. The condensed information as to the operations and
the cash flows of the registrant for the year ended December 31, 1997 include
the post-acquisition results of the Company for the period from December 11,
1997 through December 31, 1997, which reflects 1,640 of new basis depreciation
and amortization resulting from push-down accounting as well as approximately
4,034 of interest expense from purchase related indebtedness which is included
in the Parent's share in result of affiliated companies, net. Due to
immateriality, the entire fiscal year ended December 31, 1997 is presented as
"pre-acquisition" in the accompanying condensed information as to the
operations and cash flows of registrant.
S-7
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
(In thousands of Dutch Guilders)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- --------- -------- ------------ ------------- --------
Additions
---------------------
Balance Balance
at Charged at End
Beginning to of
Description of Period Expense Acquisitions Deductions(1) Period
----------- --------- -------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts receivable:
Nine months ended
September 30, 1998..... 6,445 1,368 1,032 (943) 7,902
===== ===== ===== ====== =====
Year ended December 31,
1997................... 5,835 2,093 543 (2,026) 6,445
===== ===== ===== ====== =====
Year ended December 31,
1996................... 5,342 907 835 (1,249) 5,835
===== ===== ===== ====== =====
Six months ended
December 31, 1995...... -- -- 5,342 -- 5,342
===== ===== ===== ====== =====
Allowance for costs to
be reimbursed:
Nine months ended
September 30, 1998..... 2,209 109 -- (1,650) 668
===== ===== ===== ====== =====
Year ended December 31,
1997................... 4,620 1,221 -- (3,632) 2,209
===== ===== ===== ====== =====
Year ended December 31,
1996................... 5,303 794 -- (1,477) 4,620
===== ===== ===== ====== =====
Six months ended
December 31, 1995...... 4,137 1,166 -- -- 5,303
===== ===== ===== ====== =====
Allowance for
Investments in
Affiliated Companies:
Nine months ended
September 30, 1998..... -- -- -- -- --
===== ===== ===== ====== =====
Year ended December 31,
1997................... 4,186 -- -- (4,186) --
===== ===== ===== ====== =====
Year ended December 31,
1996................... 4,946 -- -- (760) 4,186
===== ===== ===== ====== =====
Six months ended
December 31, 1995...... -- 4,946 -- -- 4,946
===== ===== ===== ====== =====
</TABLE>
- --------
(1) Represents uncollectible balances written off to the allowance account and
the effect of currency translation adjustments.
S-8
<PAGE>
UNDERWRITING
UPC, UIH and the underwriters for the U.S. offering (the "U.S.
Underwriters") named below have entered into an underwriting agreement with
respect to the ordinary shares and ADSs being offered in the United States.
Subject to certain conditions, each U.S. Underwriter has severally agreed to
purchase the number of ordinary shares indicated in the following table.
Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated and Donaldson, Lufkin &
Jenrette Securities Corporation are the representatives of the U.S.
Underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co. ..................................
Morgan Stanley & Co. Incorporated......................
Donaldson, Lufkin & Jenrette Securities Corporation....
----
Total................................................
====
</TABLE>
----------------
The U.S. Underwriters may choose to take some or all of their ordinary
shares in the form of ADSs.
If the U.S. Underwriters sell more ordinary shares than the total number
set forth in the table above, the U.S. Underwriters have an option to buy up to
an additional 1,150,000 ordinary shares from UPC to cover such sales. They may
exercise the option for 30 days after the date of this prospectus. If any
ordinary shares are purchased pursuant to the option, the U.S. Underwriters
will severally purchase ordinary shares in approximately the same proportion as
set forth in the table above. The U.S. Underwriters may choose to take some or
all of their additional ordinary shares in the form of ADSs.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the U.S. Underwriters by UPC. Such amounts are
shown assuming both no exercise and full exercise of the U.S. Underwriters'
option to purchase additional shares.
Paid by UPC
No Exercise Full Exercise
----------- -------------
Per Share... (Euro) (Euro)
Total....... (Euro) (Euro)
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any ordinary shares sold by the underwriters to securities dealers may be sold
at a discount of up to (Euro)(NLG ) per ordinary share or $ per ADS from the
initial public offering price. Any such securities dealers may resell any
shares purchased from the underwriters to certain other brokers or dealers at a
discount of up to (Euro)(NLG ) per ordinary share or $ per ADS from the
initial public offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms. In accordance with customary practice in public offerings on the
Amsterdam Stock Exchange, seatholders of the Amsterdam Stock Exchange who are
not underwriters may, in the offering outside the United States, be allowed a
concession not in excess of % of the initial public offering price.
UPC and UIH have entered into an underwriting agreement with the
underwriters for the sale by UPC of 22,400,000 ordinary shares (in the form of
ordinary shares or ADSs) outside the United States. The terms and conditions of
both offerings are the same and the sale of shares in both offerings are
conditioned on each other. Goldman Sachs International and Morgan Stanley & Co.
International Limited are representatives of the underwriters for the offering
outside the United States (the "International Underwriters"). UPC has granted
the International Underwriters an option to purchase up to an aggregate of an
additional 3,450,000 ordinary shares (in the form of ordinary shares or ADSs)
similar to the option granted to the U.S. Underwriters.
The underwriters for both of the offerings have entered into an agreement
in which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares as a part of the distribution of the
shares. The underwriters also have agreed that they may sell shares between
each of the underwriting groups.
UPC and UIH have each agreed with the underwriters not to dispose of or
hedge any of
U-1
<PAGE>
their shares or securities convertible into or exchangeable for shares, subject
to certain exceptions, during the period from the date of this prospectus
continuing through the date one year after the date of this prospectus, except
with the prior written consent of the Joint Global Coordinators. This agreement
does not apply to any existing employee benefit plans. Certain of UPC's
employees have made a similar agreement with the underwriters for a period of
180 days. At the date of this prospectus, these employees hold options under
our stock option plan which represent the right to acquire about 2,600,000
ordinary shares. See "Management -- Stock Option Plans". The Discount Group has
agreed to similar restrictions for six months for the shares issued to it. See
"Shares Eligible for Future Sale" for a discussion of certain transfer
restrictions.
The representatives do not expect sales to discretionary accounts to exceed
5% of the total number of ordinary shares (including ordinary shares in the
form of ADSs) offered.
Prior to the offerings, there has been no public market for the ordinary
shares or ADSs. The initial public offering price will be negotiated among UPC
and the Joint Global Coordinators. Among the factors to be considered in
determining the initial public offering price of the shares, in addition to
prevailing market conditions, will be UPC's historical performance, estimates
of UPC's business potential and earnings prospects, an assessment of UPC's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
The ordinary shares will be listed on the Official Market of the Amsterdam
Stock Exchange under the symbol "UPC" and the ADSs will be quoted on the NASDAQ
National Market under the symbol "UPCOY". MeesPierson is acting as listing and
paying agent in connection with the listing of the ordinary shares on the
Amsterdam Stock Exchange.
In connection with the offerings, the underwriters may purchase and sell
ordinary shares or ADSs in the open market. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offerings.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the shares
while the offerings are in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the
representatives have repurchased shares sold by or for the account of such
underwriter in stabilizing or short covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the ordinary shares or ADSs. As a result, the price
of the ordinary shares or ADSs may be higher than the price that otherwise
might exist in the open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. These transactions may be
effected on the Amsterdam Stock Exchange, on NASDAQ, in the over-the-counter
market or otherwise.
UPC and UIH have agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
UPC has also agreed to pay the representatives an amount in reimbursement of
some of their expenses.
This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the underwriters in the offering being made outside the
United States, to persons located in the United States.
The expected payment and closing date is February , 1999. Delivery of the
ADRs evidencing the ADSs will be made in New York, New York, through the book-
entry facilities of The Depository Trust Company, against payment in U.S.
dollars in immediately available funds. Delivery of ordinary shares will be
made in book-entry form through the facilities of NECIGEF, Morgan Guaranty
Trust Company of New York, Brussels office, as operator of the Euroclear
System, and Cedel Bank, societe anonyme, against payment in euros in
immediately available funds.
U-2
<PAGE>
Goldman Sachs Credit Partners, MeesPierson and Paribas have agreed to
become lenders to UTH, UPC's Dutch holding company, under a secured debt
facility. MeesPierson, Paribas, Deutsche Bank, Citibank and another bank have
agreed to become lenders to a subsidiary of UTH pursuant to a revolving debt
facility. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources". Each of the lenders
named above is an underwriter or an affiliate of an underwriter.
At UPC's request, the underwriters have reserved, out of the shares being
offered in the United States, $300 million worth of ordinary shares at the
initial public offering price for sale to Microsoft Corporation, which may be
sold to Microsoft in the form of ordinary shares or ADSs. This would represent
10,157,750 ordinary shares at the midpoint of the offering price range. If
Microsoft purchases all of the reserved shares, it will own approximately 8.1%
of UPC after this offering (without giving effect to the warrants it may
receive in connection with its technical services relationship with UPC). The
number of shares available for sale to the general public will be reduced to
the extent any of these reserved shares are purchased by Microsoft. Microsoft
has agreed that, if it does purchase any of such reserved shares, it will enter
into an agreement subjecting such shares to resale restrictions, similar to
those to which UPC and UIH have agreed, for a period of at least six months
after the date of this prospectus. In addition, Microsoft has agreed that, if
it does purchase any of such reserved shares, it will enter into an agreement
that it will not acquire more than 15% in the aggregate of UPC's outstanding
share capital without the prior approval of the Supervisory Board of UPC. See
"Relationship with Microsoft".
At UPC's request, the underwriters have reserved for sale at the initial
public offering price up to 200,000 ordinary shares that may be sold to
directors, officers or employees of UPC. These shares may also be sold to other
persons associated with UPC's directors, officers or employees. The number of
shares available for sale to the general public will be reduced to the extent
such shares are purchased. Any of these reserved shares not so purchased will
be offered by the underwriters on the same basis as the other shares offered
hereby.
U-3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell or to buy only the shares offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 10
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Exchange Rate Data....................................................... 17
Dilution................................................................. 18
Capitalization........................................................... 19
Selected Consolidated Financial Data..................................... 20
Pro Forma Selected Consolidated Financial Data........................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 27
Business................................................................. 51
Technology............................................................... 86
Glossary of Technical Terms.............................................. 98
Corporate Ownership Structure............................................ 101
Regulation............................................................... 106
Management............................................................... 115
Security Ownership of Certain Beneficial Owners and Management........... 126
Certain Transactions and Relationships................................... 127
Relationship with UIH and Related Transactions........................... 129
Relationship with Microsoft.............................................. 131
Description of Share Capital............................................. 132
Summary of Additional Material Provisions of the Articles of Association
and Other Matters....................................................... 134
Description of American Depositary Shares................................ 136
Taxation................................................................. 147
Shares Eligible for Future Sale.......................................... 154
Experts.................................................................. 155
Legal Matters............................................................ 155
Enforcement of Civil Liabilities......................................... 155
Available Information.................................................... 156
Amsterdam Stock Exchange Listing......................................... 156
Index to Financial Statements............................................ F-1
Index to Financial Statement Schedules................................... S-1
Underwriting............................................................. U-1
</TABLE>
--------------
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in the American Depositary
Shares representing the ordinary shares or the ordinary shares, whether or not
participating in this offering, may be required to deliver a prospectus. This
requirement is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
United Pan-Europe Communications N.V.
40,000,000
Ordinary Shares
in the form of
American Depositary Shares
or Ordinary Shares
--------------
[LOGO OF UNITED PAN-EUROPE COMMUNICATIONS N.V. APPEARS HERE]
--------------
Goldman, Sachs & Co.
Morgan Stanley Dean Witter
Donaldson, Lufkin & Jenrette
Representatives of the Underwriters
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Capitalized terms used but not defined in Part II have the meanings
ascribed to them in the Prospectus contained in this Registration Statement.
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the expenses (other than underwriting
discounts and commissions) expected to be incurred in connection with the
issuance and distribution of the securities registered hereby, all of which
expenses, except for the Commission registration fee, are estimated:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............ $ 387,710
NASD and blue sky fees......................................... 30,500
Legal fees and expenses........................................ 1,600,000
Accounting fees................................................ 1,000,000
Printing and engraving expenses................................ 1,900,000
Miscellaneous.................................................. 331,790
----------
Total.......................................................... $5,250,000
==========
</TABLE>
The above expenses will be borne by UPC.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Agreement between U.S. and International Underwriting
Syndicates
3.1 Form of Amended and Restated Articles of Association of UPC
4.1 Form of Deposit Agreement
4.2 The Articles of Association of UPC are included as Exhibit 3.1.
5.1 Opinion of Loeff Claeys Verbeke as to validity of ordinary shares**
8.1 Opinion of Holme Roberts & Owen LLP as to certain tax matters
8.2 Opinion of Arthur Andersen as to certain tax matters
10.1 Amended and Restated Securities Purchase and Conversion Agreement
dated as of December 1, 1997, by and among Philip Media B.V.
("Philips Media"), Philips Media Network B.V. ("Philips Networks"),
the Company, Joint Venture, Inc. ("JVI") and the Company (1)
10.2 Loan Agreement for NLG1,100,000,000 multi-currency Revolving Credit
Facility dated as of October 8, 1997, between UPC and certain of its
subsidiaries and The Toronto-Dominion Bank as Agent for the
financial institutions identified therein, as amended by a
Supplement Agreement dated December 8, 1997(2)
10.2A Supplemental Agreement dated January 25, 1999, relating to a Loan
Agreement for a NLG1,100,000,000 Multi-currency Revolving Credit
Facility between the Company and certain of its subsidiaries and The
Toronto-Dominion Bank
10.3 Loan Agreement dated December 5, 1997, between Belmarken Holdings
B.V. ("Belmarken") as the Borrower, Cable Network Netherlands
Holding B.V., Binan Investments B.V. and Stipdon Investments B.V. as
Guarantors, The Toronto-Dominion Bank and Toronto-Dominion Capital
as Arrangers, the banks and financial institutions listed therein,
The Toronto-Dominion Bank as Agent and The Toronto-Dominion Bank as
Security Trustee, as amended by Waiver and amendment letter dated
December 11, 1997(2)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.4 Registration Rights Agreement dated as of December 5, 1997, by and
among the Company, Belmarken, and The Toronto-Dominion Bank as the
Security Trustee(1)
10.5 Indenture dated as of February 5, 1998, between UIH and Firstar
Bank of Minnesota, N.A.(2)
10.6 Credit Facility Agreement dated February 20, 1998, between Cable
Network Brabant Holding B.V. ("CNBH") and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A.*
10.7 Second Amendment Agreement to Credit Facility Agreement and to
Project Support Agreement dated September 30, 1998, between CNBH
and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.*
10.7A Third Amendment Agreement to Credit Facility Agreement dated
January 22, 1999, between CNBH and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A.
10.8 Bank Facility Agreement dated January 31, 1996, between
Kabeltelevisie Amsterdam B.V. ("KTA") and ABN AMRO Bank N.V. in the
principal amount of up to NLG 375,000,000*
10.8A Amendment 1 dated July 1, 1997, to the NLG 375,000,000 principal
amount Bank Facility Agreement between KTA and ABN AMRO Bank N.V.
10.8B Amendment No. 2 dated August 28, 1998, to the Bank Facility
Agreement between KTA and ABN AMRO Bank N.V.**
10.9 Loan Agreement dated August 31, 1998, between N.V. TeleKabel
Beheer, as borrower, and N.V. NUON Energie-Onderneming voor
Gelderland, Friesland en Flevoland, as lender*
10.10 Facility Agreement dated July 26, 1998, between Mediareseaux Marne
S.A., Paribas and the Banks and Financial Institutions listed in
Schedule 1 thereto*
10.11 Promissory Note dated November 9, 1998, made by Cable Network Zuid-
Oost Brabant Holding B.V. payable to the order of DIC Loans Ltd. in
the principal amount of $90,000,000*
10.12 Option Agreement dated November 5, 1998, among UPC, DIC and PEC*
10.13 Form of Registration Rights Agreement among UPC, DIC and PEC*
10.14 Form of Shareholders Agreement among UPC, DIC and PEC*
10.15 Sales Agreement dated December 17, 1997, between Stichting
Combivisie Regio, Setelco B.V. and UPC*
10.16 Purchase Agreement dated November 6, 1998, between Binan
Investments B.V., UA-UII, Inc. and UA-UII Management Inc.*
10.17 Shareholders Agreement dated July 6, 1995, between The Municipality
of Amsterdam, A2000 Holding N.V., and Kabeltelevisie Amsterdam
B.V.*
10.18 Consent Agreement dated September 27, 1997, between United and
Philips Communications B.V., US West International, B.V., Philips
Media B.V., UIH and JVI*
10.19 Syndicate Agreement dated June 26, 1995, concluded between the
Osterreichische Philips Industrie Ges.m.b.H. Cable-Networks Austria
Holding B.V. and Kabel-TV-Wien Ges.m.b.H.*
10.19A Articles of Association of Telekabel Wien Gesellschaft m.b.H.*
10.19B Agreement dated November 30, 1993, between Kabel-TV Wien
Gesellschaft m.b.H and Telekabel Wien Gesellschaft m.b.H.*
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.19C Rules of Procedure of Telekabel Wien Gesellschaft m.b.H., as
amended on April 10, 1995*
10.20 Tax Liability Agreement dated October 7, 1997, between UPC, Philips
Media B.V., Philips Coordination Center, Philips Media Networks
B.V., United International Holdings, Inc. ("UIH"), and Joint
Venture, Inc.("JVI")*
10.21 Agreement dated April 2, 1998, for the contribution of the Dutch
Cable Assets of UPC and NUON to UTH*
10.21A Shareholders Agreement dated August 6, 1998, between the Company,
NUON and UTH*
10.22 Joint Venture Agreement dated February 13, 1996, regarding A2000
Holding N.V. between US West International B.V. and UPC*
10.23 United Pan-Europe Communications N.V. Phantom Stock Option Plan,
March 20, 1998*
10.24 Amended Stock Option Plan dated March 18, 1998, between UPC and
Stichting
Administratie Kantoor UPC*
10.25 Form of Master Seconded Employee Services Agreement
10.26 Form of UIH Registration Rights Agreement*
10.27 Form of UIH Management Services Agreement
10.28 Consulting Agreement, dated June 1, 1995, between UIH and Mark L.
Schneider**
10.29 Employment Agreement, dated October 1, 1998, between UIH and J.
Timothy Bryan*
10.30 Form of Agreement between UIH and the Company
10.31 Promissory Note dated January 25, 1999, with the Company as
borrower, and
UIH Europe, Inc. as holder, in the principal amount of
US$100,000,000*
10.32 Promissory Note dated January 25, 1999, with UPC Intermediates B.V.
as borrower, and UIH Europe, Inc. as holder, in the principal
amount of US$20,000,000*
10.33 Share Purchase Agreement dated January 19, 1999, by and between the
Company, Belmarken Holding B.V., NUON, N.V. Kraton and UTH, as
amended
21.1 Subsidiaries of UPC*
23.1 Consent of Arthur Andersen (United Pan-Europe Communications N.V.)
23.2 Consent of PricewaterhouseCoopers N.V. (N.V. TeleKabel Beheer)
23.3 Consent of Arthur Andersen & Co (Norkabelgruppen AS)
23.4 The consent of Holme Roberts & Owen LLP is included in Exhibit 8.1
23.5 The consent of Loeff Claeys Verbeke is included in Exhibit 5.1
24.1 Powers of Attorney*
27.1 Financial Data Schedule*
99.1 Consents of Persons nominated for UPC's Supervisory Board*
</TABLE>
- --------
* Previously filed
** To be filed by amendment.
(1) Incorporated by reference from Form 8-K filed by UIH, dated December 11,
1997 (File No. 0-21974).
(2) Incorporated by reference from Form S-4 filed by UIH, dated March 3, 1998
(File No. 333-47245).
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Amendment No. 6 to Form S-1 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in London, England, on this 4th day of February 1999.
United Pan-Europe Communications N.V. a
Dutch Public limited liability company
/s/ J. Timothy Bryan
By: ____________________________________
J. Timothy Bryan, President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Title/Position Held
Signature With the Registrant Date
--------- ------------------- ----
<S> <C> <C>
* Chairman of the Supervisory Board February 4, 1999
_________________________________
Gene W. Schneider
/s/ Michael T. Fries Supervisory Board Member and February 4, 1999
_________________________________ Authorized U.S. Representative
Michael T. Fries
Supervisory Board Member February 4, 1999
_________________________________
Richard De Lange
* Chairman of Board of Management February 4, 1999
_________________________________ and Chief Executive Officer
Mark L. Schneider
/s/ J. Timothy Bryan Board of Management Member, February 4, 1999
_________________________________ President and Chief Financial
J. Timothy Bryan Officer
* Board of Management Member and February 4, 1999
_________________________________ Vice Chairman
John F. Riordan
* Board of Management Member, February 4, 1999
_________________________________ Senior Vice President and
Anton H.E. v. Voskuijlen Managing Director
* Board of Management Member and February 4, 1999
_________________________________ Managing Director, Eastern
Nimrod J. Kovacs Europe
* Managing Director, Finance and February 4, 1999
_________________________________ Accounting (Principal Accounting
Ray D. Samuelson Officer)
</TABLE>
/s/ J. Timothy Bryan
*By: ____________________________
J. Timothy Bryan
Attorney-in-fact
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Agreement between U.S. and International Underwriting
Syndicates
3.1 Amended and Restated Articles of Association of UPC
4.1 Form of Deposit Agreement
4.2 The Articles of Association of UPC are included as Exhibit 3.1.
5.1 Opinion of Loeff Claeys Verbeke as to validity of ordinary shares**
8.1 Opinion of Holme Roberts & Owen LLP as to certain tax matters
8.2 Opinion of Arthur Andersen as to certain tax matters
10.1 Amended and Restated Securities Purchase and Conversion Agreement
dated as of December 1, 1997, by and among Philip Media B.V.
("Philips Media"), Philips Media Network B.V. ("Philips Networks"),
the Company, Joint Venture, Inc. ("JVI") and the Company (1)
10.2 Loan Agreement for NLG1,100,000,000 multi-currency Revolving Credit
Facility dated as of October 8, 1997, between UPC and certain of its
subsidiaries and The Toronto-Dominion Bank as Agent for the
financial institutions identified therein, as amended by a
Supplement Agreement dated December 8, 1997(2)
10.2A Supplemental Agreement dated January 25, 1999, relating to a Loan
Agreement for a NLG1,100,000,000 Multi-currency Revolving Credit
Facility between the Company and certain of its subsidiaries and The
Toronto-Dominion Bank
10.3 Loan Agreement dated December 5, 1997, between Belmarken Holdings
B.V. ("Belmarken") as the Borrower, Cable Network Netherlands
Holding B.V., Binan Investments B.V. and Stipdon Investments B.V. as
Guarantors, The Toronto-Dominion Bank and Toronto-Dominion Capital
as Arrangers, the banks and financial institutions listed therein,
The Toronto-Dominion Bank as Agent and The Toronto-Dominion Bank as
Security Trustee, as amended by Waiver and amendment letter dated
December 11, 1997(2)
10.4 Registration Rights Agreement dated as of December 5, 1997, by and
among the Company, Belmarken, and The Toronto-Dominion Bank as the
Security Trustee(1)
10.5 Indenture dated as of February 5, 1998, between UIH and Firstar Bank
of Minnesota, N.A. (the "UIH Indenture")(2)
10.6 Credit Facility Agreement dated February 20, 1998, between Cable
Network Brabant Holding B.V. ("CNBH") and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A.*
10.7 Second Amendment Agreement to Credit Facility Agreement and to
Project Support Agreement dated September 30, 1998, between CNBH and
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.*
10.7A Third Amendment Agreement to Credit Facility Agreement dated January
22, 1999, between CNBH and Cooperative Centrale Raiffeisen-
Boerenleenbank B.A.
10.8 Bank Facility Agreement dated January 31, 1996, between
Kabeltelevisie Amsterdam B.V. ("KTA") and ABN AMRO Bank N.V. in the
principal amount of up to NLG 375,000,000*
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.8A Amendment 1 dated July 1, 1997, to the NLG375,000,000 principal
amount Bank Facility Agreement between KTA and ABN AMRO Bank N.V.
10.8B Amendment No. 2 dated August 28, 1998, to the Bank Facility
Agreement between
KTA and ABN AMRO Bank N.V.**
10.9 Loan Agreement dated August 31, 1998, between N.V. TeleKabel
Beheer, as borrower,
and N.V. NUON Energie-Onderneming voor Gelderland, Friesland en
Flevoland, as
lender*
10.10 Facility Agreement dated July 26, 1998, between Mediareseaux Marne
S.A., Paribas
and the Banks and Financial Institutions listed in Schedule 1
thereto*
10.11 Promissory Note dated November 9, 1998, made by Cable Network Zuid-
Oost Brabant
Holding B.V. payable to the order of DIC Loans Ltd. in the
principal amount of
$90,000,000*
10.12 Option Agreement dated November 5, 1998, among UPC, DIC and PEC*
10.13 Form of Registration Rights Agreement among UPC, DIC and PEC*
10.14 Form of Shareholders Agreement among UPC, DIC and PEC*
10.15 Sales Agreement dated December 17, 1997, between Stichting
Combivisie Regio,
Setelco B.V. and UPC*
10.16 Purchase Agreement dated November 6, 1998, between Binan
Investments B.V.,
UA-UII, Inc. and UA-UII Management Inc.*
10.17 Shareholders Agreement dated July 6, 1995, between The Municipality
of Amsterdam,
A2000 Holding N.V., and Kabeltelevisie Amsterdam B.V.*
10.18 Consent Agreement dated September 27, 1997, between United and
Philips
Communications B.V., US West International, B.V., Philips Media
B.V., UIH and JVI*
10.19 Syndicate Agreement dated June 26, 1995, concluded between the
Osterreichische
Philips Industrie Ges.m.b.H. Cable-Networks Austria Holding B.V.
and Kabel-TV-Wien
Ges.m.b.H.*
10.19A Articles of Association of Telekabel Wien Gesellschaft m.b.H.*
10.19B Agreement dated November 30, 1993, between Kabel-TV Wien
Gesellschaft m.b.H.
and Telekabel Wien Gesellschaft m.b.H.*
10.19C Rules of Procedure of Telekabel Wien Gesellschaft m.b.H., as
amended on April 10, 1995*
10.20 Tax Liability Agreement dated October 7, 1997, between the Company,
Philips Media
B.V., Philips Coordination Center, Philips Media Networks B.V.,
United International
Holdings, Inc. ("UIH"), and Joint Venture, Inc.("JVI")*
10.21 Agreement dated April 2, 1998, for the contribution of the Dutch
Cable Assets of the
Company and NUON to UTH*
10.21A Shareholders Agreement dated August 6, 1998, between the Company,
NUON and UTH*
10.22 Joint Venture Agreement dated February 13, 1996, regarding A2000
Holding N.V.
between US West International B.V. and the Company*
10.23 United Pan-Europe Communications N.V. Phantom Stock Option Plan,
March 20, 1998*
10.24 Amended Stock Option Plan dated March 18, 1998, between UPC and
Stichting
Administratie Kantoor UPC*
10.25 Form of Master Seconded Employee Services Agreement
10.26 Form of UIH Registration Rights Agreement*
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.27 Form of UIH Management Services Agreement
10.28 Consulting Agreement, dated June 1, 1995, between UIH and Mark L.
Schneider
10.29 Employment Agreement, dated October 1, 1998, between UIH and J.
Timothy Bryan*
10.30 Form of Agreement between UIH and the Company
10.31 Promissory Note dated January 25, 1999, with the Company as
borrower, and UIH Europe, Inc. as holder, in the principal amount of
US$100,000,000*
10.32 Promissory Note dated January 25, 1999, with UPC Intermediates B.V.
as borrower, and with UIH Europe, Inc. as holder, in the principal
amount of US$20,000,000*
10.33 Share Purchase Agreement dated January 19, 1999, by and between the
Company, Belmarken Holding B.V., NUON, N.V. Kraton and UTH, as
amended
21.1 Subsidiaries of UPC*
23.1 Consent of Arthur Andersen (United Pan-Europe Communications N.V.)
23.2 Consent of PricewaterhouseCoopers N.V. (N.V. TeleKabel Beheer)
23.3 Consent of Arthur Andersen & Co (Norkabelgruppen AS)
23.4 The consent of Holme Roberts & Owen LLP is included in Exhibit 8.1
23.5 The consent of Loeff Claeys Verbeke is included in Exhibit 5.1
24.1 Powers of Attorney*
27.1 Financial Data Schedule*
99.1 Consents of Persons nominated for the Company's Supervisory Board*
</TABLE>
- --------
* Previously filed
** To be filed by amendment.
(1) Incorporated by reference from Form 8-K filed by UIH, dated December 11,
1997 (File No. 0-21974).
(2) Incorporated by reference from Form S-4 filed by UIH, dated March 3, 1998
(File No. 333-47245).
<PAGE>
EXHIBIT 1.1
UNITED PAN-EUROPE COMMUNICATIONS N.V.
ORDINARY SHARES
(NOMINAL VALUE POUNDS 0.30 PER SHARE)
IN THE FORM OF AMERICAN DEPOSITARY SHARES OR
ORDINARY SHARES
UNDERWRITING AGREEMENT
(U.S. VERSION)
February ____, 1999
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
As representatives of the several Underwriters
named in Schedule I hereto
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
U.S.A.
Ladies and Gentlemen:
United Pan-Europe Communications N.V., a Netherlands public corporation
with limited liability having its statutory seat at Amsterdam, The Netherlands
(the "Company"), proposes, subject to the terms and conditions stated herein, to
sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of__________Ordinary Shares (the "Firm Shares"),nominal value
pounds 0.30 each ("Stock"), of the Company and, at the election of the
Underwriters, up to____________additional shares (the "Optional Shares").
the Firm Shares and the Optional Shares that the Underwriters elect to
purchase pursuant to Section 2 hereof are herein collectively called the
"Shares".
The Underwriters may elect to take delivery of the Shares in the form of
shares of Stock or in the form of American Depositary Shares ("ADSs"). The
ADSs are to be issued pursuant to a deposit agreement (the "Deposit Agreement")
dated as of February _____, 1999, among the Company, Citibank N.A., as
depositary (the "Depositary"), and registered holders and beneficial owners from
time to time of the American Depositary Receipts (the "ADRs") issued by the
Depositary and evidencing the ADSs. Each ADS will initially represent the right
to receive one share of Stock deposited pursuant to the Deposit Agreement.
<PAGE>
2
It is understood by all the parties that the Company is concurrently
entering into an agreement (the "International Underwriting Agreement")
providing for the sale by the Company of up to a total of ____________ shares of
Stock, including shares delivered in the form of ADSs (the "International
Shares"), including the overallotment option thereunder, through arrangements
with certain underwriters outside the United States (the "International
Underwriters"), for whom Goldman Sachs International and Morgan Stanley & Co.
International Limited are acting as lead managers outside the United States.
Anything herein or therein to the contrary notwithstanding, the respective
closings under this Agreement and the International Underwriting Agreement are
hereby made expressly conditional on one another.
The Underwriters hereunder and the International Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates"), which provides,
among other things, that Goldman Sachs International and Morgan Stanley & Co.
International Limited shall act as the joint global coordinators for the
offering of shares of Stock and ADSs and for the transfer of shares of Stock and
ADSs between the two syndicates.
Two forms of prospectus are to be used in connection with the offering and
sale of shares of Stock contemplated by the foregoing, one relating to the
Shares hereunder and the other relating to the International Shares. The
international form of prospectus will be identical to the U.S. prospectus except
for certain substitute pages. Except as used in Sections 2, 4, 9 and 11 herein,
and except as the context may otherwise require, references hereinafter to the
Shares shall include all of the shares of Stock, whether in the form of Shares
or ADSs, which may be sold pursuant to either this Agreement or the
International Underwriting Agreement. References herein to any prospectus
whether in preliminary or final form, and whether as amended or supplemented,
shall include the U.S. and the international versions thereof.
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-67895) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, to
you for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became effective upon filing, no other
document with respect to the Initial Registration Statement has heretofore
been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the
Initial Registration Statement or filed with the Commission pursuant to
Rule 424(a) of the rules and regulations of the Act, is hereinafter called
a "Preliminary Prospectus"; the various parts of the Initial
<PAGE>
3
Registration Statement and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto and including the information contained in
the form of final prospectus filed with the Commission pursuant to Rule
424(b) under the Act in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the Initial Registration
Statement at the time it was declared effective, each as amended at the
time such part of the Initial Registration Statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, are hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the form first
filed pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus");
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not 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, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated and Donaldson,
Lufkin & Jenrette Securities Corporation (together, the "Representatives")
expressly for use therein;
(iii) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
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; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through the Representatives expressly for use therein;
(iv) A registration statement on Form F-6 (File No. 333-____) in
respect of the ADSs has been filed with the Commission; such registration
statement in the form heretofore delivered to you and, excluding exhibits,
to you for each of the other Underwriters, has been declared effective by
the Commission in such form; no other document with respect to such
registration statement has heretofore been filed with the Commission; no
stop order suspending the effectiveness of such registration statement has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (the various parts of such registration
statement, including all exhibits thereto, each as amended at the time such
part of the registration statement became
<PAGE>
4
effective, being hereinafter called the "ADS Registration Statement"); and
the ADS Registration Statement when it became effective conformed, and any
further amendments thereto will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not, as of the applicable effective date, 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;
(v) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or other legal or governmental action, order or
decree, having a material adverse effect on the Company and its
subsidiaries taken as a whole, otherwise than as set forth or contemplated
in the Prospectus; and, since the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has not
been any change in the capital stock of the Company or any increase in the
long-term debt of the Company or any of its subsidiaries in excess of
$5,000,000 or its equivalent or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, condition (financial or
otherwise), shareholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(vi) The Company and its subsidiaries have good and marketable title
to all material real property and good and marketable title to all material
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially adversely affect the value of such property and
do not interfere with the use made and proposed to be made of such property
by the Company and its subsidiaries; and any real property and buildings
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as do not
have a material adverse effect on the Company and its subsidiaries taken as
a whole and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries;
(vii) The Company has been duly incorporated and is validly existing
as a public limited liability company under the laws of The Netherlands,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified for the transaction of business outside The Netherlands and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
<PAGE>
5
(viii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and conform to the description of the Stock contained in
the Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying
shares and except as otherwise set forth in the Prospectus) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims; all of the shares of Stock have been
[duly listed and admitted for trading on the Official Market of Amsterdam
Exchanges (the "Amsterdam Stock Exchange"), subject to notice of issuance,]
and all of the ADSs have been duly listed for quotation on the National
Association of Securities Dealers Automated Quotations National Market
System ("NASDAQ"); the holders of outstanding shares of capital stock of
the Company are not entitled to preemptive or other rights to acquire
shares of Stock, except for (A) options granted under the Company's Equity
Stock Option Plan and Phantom Stock Option Plan, (B) shares of Stock
issuable or transferable pursuant to the promissory note of the Company in
the principal amount of $100,000,000 dated January 25, 1999, and the
promissory note of UPC Intermediates B.V. in the principal amount of
$20,000,000 dated January 25, 1999, in each case payable to the order of
UIH Europe, Inc. ("UIH Europe") (together, the "UIH Europe Convertible
Loans"), (C) shares of Stock issuable pursuant to the Option Agreement,
dated November 5, 1998, as amended, among the Company, DIC Communication
and Technology Ltd. ("DIC") and PEC Israel Economic Corporation (the "DIC
Option Agreement"), (D) shares of Stock issuable to N.V. Nuon Energie-
Onderneming Voor Gelderland, Friesland en Flevoland ("Nuon") in connection
with the Share Purchase Agreement, dated January 19, 1999, among the
Company, Belmarken Holding B.V., Nuon, N.V. Kraton and United TeleKabel
Holding N.V. (the "Nuon Share Purchase Agreement"), and (E) warrants
issuable to Microsoft Corporation, in each case as described in the
Prospectus; there are no outstanding securities convertible into or
exchangeable for, or warrants, rights or options to purchase from the
Company, or obligations of the Company to issue, the Stock or any other
class of capital stock of the Company; the Shares may be freely deposited
by the Company with the Depositary against issuance of ADRs evidencing
ADSs; the Shares are freely transferable by the Company to or for the
account of the several Underwriters and (to the extent described in the
Prospectus) the initial purchasers thereof; and there are no restrictions
on subsequent transfers of the Shares under the laws of The Netherlands and
of the United States except as described in the Prospectus under the
captions "Shares Eligible For Future Sale" and "Description of American
Depositary Shares" or except for Shares acquired by affiliates (as defined
in Rule 144 under the Act) of the Company;
(ix) The Shares to be sold by the Company to the Underwriters
hereunder and the International Shares to be sold by the Company to the
International Underwriters under the International Underwriting Agreement
(a) in the case of unissued Shares and International Shares to be issued
and sold hereunder and thereunder, have been duly and validly authorized
and, when issued and delivered against payment therefor as provided herein
and therein, will be duly and validly issued and fully paid and non-
assessable,
<PAGE>
6
will not be subject to any preemptive or similar rights and will conform to
the description of the Stock contained in the Prospectus, and (b) in the
case of previously issued Shares and International Shares held to be sold
hereunder and thereunder, have been duly and validly issued and are fully
paid and non-assessable, are not subject to any preemptive or similar
rights and conform to the description of Stock contained in the Prospectus.
(x) The Deposit Agreement has been duly authorized, executed and
delivered by the Company, and constitutes a valid and legally binding
agreement of the Company, enforceable in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency, reorganization
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles; upon issuance by the
Depositary of ADRs evidencing ADSs against the deposit of Shares in respect
thereof in accordance with the provisions of the Deposit Agreement, such
ADRs will be duly and validly issued and the persons in whose names the
ADRs are registered will be entitled to the rights specified therein and in
the Deposit Agreement; and the Deposit Agreement and the ADRs conform in
all material respects to the descriptions thereof contained in the
Prospectus;
(xi) All consents, approvals, authorizations, orders, registrations,
clearances and qualifications of or with any court or governmental agency
or body (hereinafter referred to as a "Governmental Agency") having
jurisdiction over the Company or any of its subsidiaries or any of their
properties or any stock exchange authorities (hereinafter referred to as
"Governmental Authorizations") required for the deposit of Shares and the
issuance of ADSs in respect thereof in accordance with the provisions of
the Deposit Agreement, and for the execution and delivery by the Company of
this Agreement, the International Underwriting Agreement and the Deposit
Agreement to be duly and validly authorized, have been obtained or made and
are in full force and effect;
(xii) Except to the extent otherwise set forth in the Prospectus, (A)
all dividends and other distributions declared and payable on the shares of
capital stock of the Company deposited with the Depositary in accordance
with the provisions of the Deposit Agreement may, under the current laws
and regulations of The Netherlands, be paid to the Depositary in Dutch
guilders or euros that may be converted into foreign currency that may be
freely transferred out of The Netherlands, and (B) all such dividends and
other distributions will not be subject to withholding or other taxes under
the laws and regulations of The Netherlands and are otherwise free and
clear of any other tax, withholding or deduction in The Netherlands and
without the necessity of obtaining any Governmental Authorization in The
Netherlands;
(xiii) The issue (as applicable) and sale of the Shares to be sold by
the Company hereunder and under the International Underwriting Agreement,
the deposit of the Shares being deposited with the Depositary in accordance
with the provisions of the Deposit Agreement against issuance of the ADRs
evidencing the ADSs in respect thereof and the compliance by the Company
with all of the provisions of this Agreement, the International
Underwriting Agreement and
<PAGE>
7
the Deposit Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such action result in any violation
of the provisions of the Articles of Association of the Company or any
statute or other applicable law or any order, rule or regulation of any
Governmental Agency having jurisdiction over the Company or any of its
subsidiaries or any of their properties except, with respect in any such
case to the subsidiaries of the Company, as would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries taken as a whole; and no Governmental Authorization is
required for the issue and sale of the Shares, for the deposit of the
Shares being deposited with the Depositary in accordance with the
provisions of the Deposit Agreement against issuance of ADRs evidencing the
ADSs in respect thereof to be delivered or the consummation by the Company
of the transactions contemplated by this Agreement and the International
Underwriting Agreement, except (A) the registration under the Act of the
Shares, (B) such Governmental Authorizations as have been duly obtained and
are in full force and effect and copies of which have been furnished to you
and (C) such Governmental Authorizations as may be required under state
securities or Blue Sky laws or any laws of jurisdictions outside The
Netherlands and the United States in connection with the purchase and
distribution of the Shares by or for the account of the International
Underwriters;
(xiv) Neither the Company nor any of its subsidiaries is in violation
of its Articles of Association or other constituent documents or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound, except for
such defaults as would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries taken as a whole;
(xv) Except as otherwise set forth in the Prospectus, no stamp or
other issuance or transfer taxes or duties and no capital gains, income,
withholding or other taxes are payable by or on behalf of the Underwriters
to The Netherlands or any political subdivision or taxing authority
thereof or therein in connection with (A) the deposit with the Depositary
of Shares in accordance with the provisions of the Deposit Agreement by
the Company against the issuance of ADRs evidencing ADSs in respect
thereof, (B) the sale and delivery by the Company of the Shares to or for
the respective accounts of the Underwriters or (C) the sale and delivery
outside The Netherlands by the Underwriters of the Shares to the initial
purchasers thereof;
(xvi) Neither the Company nor any of its subsidiaries has taken,
directly or indirectly, any action which was designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares;
<PAGE>
8
(xvii) The statements set forth in the Prospectus under the captions
"Description of Share Capital" and "Description of American Depositary
Shares", insofar as they purport to constitute a summary of the terms of
the Stock and the ADSs, respectively, under the caption "Taxation", and
under the caption "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, and under the
caption "Relationship with UIH and Related Transactions", insofar as they
purport to describe such relationship and related transactions, and under
the caption "Relationship with Microsoft", insofar as they purport to
describe such relationship, are accurate and complete in all material
respects;
(xviii) The Management Service Agreement, dated ____________________,
1998, between the Company and United International Holdings, Inc.
("Parent"), has been duly authorized, executed and delivered by each of
the Company and Parent and constitutes a valid and legally binding
agreement of each of the Company and Parent, enforceable against the
Company and Parent in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles; and the terms of such agreement are on an
arm's-length basis;
(xix) Except as otherwise set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company, Parent or
any of their respective subsidiaries is a party or of which any property
of the Company, Parent or any of their respective subsidiaries is the
subject which, if determined adversely to the Company, Parent or any of
their respective subsidiaries, would individually or in the aggregate have
a material adverse effect on the current or future consolidated financial
position, shareholders' equity or results of operations of the Company and
its subsidiaries taken as a whole; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by any
Governmental Agency or threatened by others;
(xx) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be, an "investment company", as such term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(xxi) Except as otherwise set forth in the Prospectus, the Company
and each of its subsidiaries have all licenses, franchises, permits,
authorizations, approvals and orders and other concessions of and from all
Governmental Agencies that are necessary to own or lease their properties
and conduct their current businesses as described in the Prospectus, with
such exceptions as would not, individually or in the aggregate, have a
material adverse effect on the current or future consolidated financial
position, shareholders' equity or results of operations of the Company and
its subsidiaries taken as a whole;
<PAGE>
9
(xxii) The Company is not a Passive Foreign Investment Company
("PFIC") within the meaning of Section 1296 of the United States Internal
Revenue Code of 1986, as amended, and is not likely to become a PFIC;
(xxiii) Neither the Company nor any of its subsidiaries does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes;
(xxiv) Arthur Andersen, who have certified certain financial
statements of the Company and its subsidiaries, and PricewaterhouseCoopers
N.V., who have certified certain financial statements of N.V. TeleKabel
Beheer, are, insofar as the Company, Parent and their respective
subsidiaries are concerned, each independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder;
(xxv) The Company is reviewing its operations and those of its
subsidiaries, Parent and any third parties with which the Company or any
of its subsidiaries has a material relationship to evaluate the extent to
which the business or operations of the Company or any of its subsidiaries
will be affected by the Year 2000 Problem. As a result of such ongoing
review to date, the Company currently has no reason to believe, and does
not currently believe, that the Year 2000 Problem will have a material
adverse effect on the general affairs, management, the current or future
consolidated financial position, business prospects, shareholders' equity
or results of operations of the Company and its subsidiaries taken as a
whole, or result in any material loss or interference with the Company's
business or operations. The "Year 2000 Problem" as used herein means any
significant risk that computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval, retransmission
or other utilization of data or in the operation of mechanical or
electrical systems of any kind will not, in the case of dates or time
periods occurring after December 31, 1999, function at least as
effectively as in the case of dates or time periods occurring prior to
January 1, 2000;
(xxvi) The Company and its subsidiaries own, possess, have rights to
or can acquire adequate patents, licenses, know-how, trademarks,
copyrights, trade secrets, mask works, service marks and trade names
necessary to operate the businesses now operated by them, and neither the
Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to
any of the foregoing which the Company reasonably believes, singly or in
the aggregate, is likely to result in any material adverse change in the
condition (financial or otherwise) or in the earnings, business or
operations of the Company and its subsidiaries taken as a whole;
(xxvii) The Company and its subsidiaries (A) are in compliance with
any and all applicable laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants ("Environmental Laws"), (B) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
<PAGE>
10
businesses and (C) are in compliance with all terms and conditions of
any such permit, license or approval, except where such noncompliance
with Environmental Laws, failure to receive required permits, licenses
or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries taken as a whole; and
(xxviii) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company (A) to file, other than in connection with (i) the
DIC Option Agreement, (ii) the Registration Rights Agreement dated
January ____, 1999 between the Company and Parent and (iii) the
agreement to grant Microsoft Corporation certain registration rights
as described in the Prospectus under the caption "Relationship with
Microsoft", a registration statement under the Securities Act with
respect to any securities of the Company or (B) to include any
securities of the Company with the Shares registered pursuant to the
Registration Statement and the ADS Registration Statement.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, on the basis of the representations and warranties
herein contained, to purchase from the Company, at a purchase price per Share of
i_______ and per ADS of $_______ (to the extent that Goldman, Sachs & Co. makes
the election to take delivery of any Shares in the form of ADSs pursuant to
Section 4 hereof), the number of Firm Shares (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying the aggregate number of
Firm Shares to be sold by the Company by a fraction, the numerator of which is
the aggregate number of Firm Shares to be purchased by such Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all of the Underwriters from the Company hereunder and (b) in the event and to
the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, on
the basis of the representations and warranties herein contained, to purchase
from the Company, at the purchase price per Share and per ADS set forth in
clause (a) above, that portion of the number of Optional Shares as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of Optional Shares by a
fraction the numerator of which is the maximum number of Optional Shares which
such Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to _________ Optional Shares, at the purchase price per Share
or ADS set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement and
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery
<PAGE>
11
(as defined in Section 4 hereof) or, unless you and the Company otherwise agree
in writing, earlier than two or later than ten business days after the date of
such notice.
3. Upon the authorization by you of the release for delivery of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
4. (a) With respect to all or a portion of the Shares to be purchased and
sold hereunder at each Time of Delivery (as defined below), Goldman, Sachs &
Co., on behalf of the several Underwriters, may elect to have ADSs delivered and
paid for hereunder in lieu of, and in satisfaction of, the Company's obligation
to sell to the several Underwriters and the several Underwriters' obligations to
purchase, Shares. Notice of such election shall be given by Goldman, Sachs & Co.
to the Company at least forty-eight hours prior to such Time of Delivery (as
defined below) (the "Notification Time"). The number of Shares to be purchased
by the Underwriters as a result of the making of such election shall be adjusted
by so as to eliminate any fractional Shares and the purchase price for any
Shares so delivered as a result of making such election shall be the purchase
price which would have been applicable hereunder to a Share adjusted to reflect
the ratio of Shares to ADSs (whether greater or lesser than one to one).
(b) If the election has been made in accordance with subsection (a) above,
the ADSs to be purchased by each Underwriter hereunder, in definitive form, and
in such authorized denominations and registered in such names as Goldman, Sachs
& Co. may request prior to the Notification Time, shall be delivered by or on
behalf of the Company to Goldman, Sachs & Co. through the facilities of The
Depository Trust Company ("DTC") for the account of such Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of Federal (same-day) funds to the account specified by the
Company to Goldman, Sachs & Co. at least forty-eight hours in advance. The
Company will cause the certificates representing the ADSs to be made available
for checking at least twenty-four hours prior to the Time of Delivery (as
defined below) with respect thereto at the office of Goldman, Sachs & Co., 85
Broad Street, New York, New York 10004 (the "Designated Office").
(c) Delivery of the Shares by the Company will be made by book-entry
transfer in the Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V.
("NECIGEF") to an account or accounts specified by Goldman, Sachs & Co., at Kas
Associatie N.V. ("Kas") prior to the Notification Time. It is understood and
agreed by the parties hereto that no delivery or transfer of ADSs or Shares to
be purchased and sold hereunder at a Time of Delivery shall be effective until
and unless payment therefor has been made pursuant hereto and each of Kas,
Citibank, N.A. and the Company shall have furnished or caused to be furnished to
Goldman, Sachs & Co., on behalf of the Underwriters, at such Time of Delivery
certificates and other evidence reasonably satisfactory to Goldman, Sachs & Co.
of the execution in favor of the Underwriters of the book-entry transfer of
Shares and ADSs to Kas and DTC, respectively.
The time and date of such delivery and payment shall be, with respect to
the Firm Shares, 6.15 a.m., London time, on February _____, 1999 or such other
time and date as Goldman, Sachs & Co. and the Company may agree upon in writing,
and, with respect to the Optional Shares, 6.15 a.m., London time, on the date
specified by Goldman, Sachs & Co. in the written notice given by
<PAGE>
12
Goldman, Sachs & Co. of the Underwriters= election to purchase such Optional
Shares, or such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery", such time and date for delivery of
the Optional Shares, if not the First Time of Delivery, is herein called the
"Second Time of Delivery", and each such time and date for delivery is herein
called a "Time of Delivery".
(d) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Shares and ADSs and any additional documents requested by the
Underwriters pursuant to Section 7(q) hereof, will be delivered at the offices
of Debevoise & Plimpton, International Financial Centre, 25 Old Broad Street,
London EC2N 1HQ, England (the "Closing Location"), and the Shares will be
delivered as specified in subsections (b) and (c) above, all at such Time of
Delivery. A meeting will be held at the Closing Location at 3:00 p.m., London
time, on the New York Business Day next preceding such Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. (a) The Company agrees with each of the Underwriters:
(i) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly
after it receives notice thereof, of the time when any amendment to
the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you copies thereof; to file promptly all reports
required to be filed by the Company with the Commission pursuant to
Section 13(a), 13(c) or 15(d) of the Exchange Act subsequent to the
date of the Prospectus and for so long as the delivery of a prospectus
is required in connection with the offering or sale of the Shares; to
advise you, promptly after it receives notice thereof, of the issuance
by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus, of the
suspension of the qualification of the Shares for offering or sale in
any jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement or Prospectus
or for additional information; and, in the event of the issuance of
any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
<PAGE>
13
(ii) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(iii) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to
time, to furnish the Underwriters with copies of the Prospectus in New
York City in such quantities as you may reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration
of nine months after the time of issue of the Prospectus in connection
with the offering or sale of the Shares and if at such time any events
shall have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and upon your
request to prepare and furnish without charge to each Underwriter and to
any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Shares at any time nine
months or more after the time of issue of the Prospectus, upon your
request but at the expense of such Underwriter, to prepare and deliver to
such Underwriter as many copies as you may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Act;
(iv) To make generally available to its shareholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and
the rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(v) During the period beginning from the date hereof and continuing
to and including the date 360 days following the date of the Prospectus,
not to, directly or indirectly, offer, sell, contract to sell or otherwise
dispose of, except as provided hereunder and under the International
Underwriting Agreement, any securities of the Company that are
substantially similar to the Shares, including but not limited to the
Company's Class A Preference Shares (but excluding the Company's Class B
Preference Shares) and any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any
such substantially similar securities ("Subject Securities") (other than
(A) to employees and directors of the Company pursuant to
<PAGE>
14
stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement; (B) in connection with the DIC Option Agreement; (C) to the
order of UIH Europe in connection with the UIH Europe Convertible Loans;
(D) to Nuon in connection with the Nuon Share Purchase Agreement; or (E)
in the form of warrants to be issued to Microsoft Corporation, as
described in the Prospectus under the caption "Relationship with
Microsoft"; in the cases of (A), (B) and (C) subject to a "lock-up"
agreement, in form and substance satisfactory to Goldman, Sachs & Co. and
Morgan Stanley & Co. Incorporated binding on each such party during the
period beginning from the date hereof and continuing to and including the
date 180 days following the date of the Prospectus (which, for the
avoidance of doubt, may include in the case of DIC the agreement referred
to in Section 7(n) hereof)), or to enter into any derivative transaction
having an economic effect similar to any of the foregoing, without the
prior written consent of Goldman, Sachs & Co. and Morgan Stanley & Co.
Incorporated; provided, however, that the Company may, from the date 180
days following the date of the Prospectus, (a) issue Subject Securities in
-
private placements to one or more institutional investors of national or
international reputation or (b) sell or otherwise dispose of Subject
-
Securities in exchange for equity securities or assets in a strategic
acquisition, in each case set forth in clause (a) or (b) above subject to
execution by each acquiror of Subject Securities of a "lock-up" agreement,
in form and substance satisfactory to Goldman, Sachs & Co. and Morgan
Stanley & Co. Incorporated, binding on such acquiror during the period
beginning with the date of its acquisition of Subject Securities and
continuing to and including the date 360 days following the date of the
Prospectus;
(vi) To furnish to its shareholders as soon as practicable after the
end of each fiscal year an annual report (in English) (including a balance
sheet and statements of income, shareholders' equity and cash flows of the
Company and its consolidated subsidiaries certified by independent public
accountants and prepared in conformity with generally accepted accounting
principles in the U.S. ("U.S. GAAP")) and, as soon as practicable after
the end of each of the first three quarters of each fiscal year prepared
in accordance with U.S. GAAP (beginning with the fiscal quarter ending
after the effective date of the Registration Statement), to make available
to its shareholders consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail;
(vii) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to shareholders, and to
deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or any
securities exchange on which any class of securities of the Company is
listed and (ii) such additional information concerning the business and
financial condition of the Company as you 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 its subsidiaries are consolidated
in reports furnished to its shareholders generally or to the Commission);
<PAGE>
15
(viii) To use the net proceeds received by it from the sale of the
Shares and ADSs pursuant to this Agreement and the International
Underwriting Agreement in the manner specified in the Prospectus under the
caption "Use of Proceeds";
(ix) Prior to each Time of Delivery to deposit the Stock with the
Depositary in accordance with the provisions of the Deposit Agreement and
otherwise to comply with the Deposit Agreement so that ADRs evidencing
ADSs will be executed (and, if applicable, countersigned) and issued by
the Depositary against receipt of such Stock and delivered to the
Underwriters at such Time of Delivery;
(x) Not to (and to cause its subsidiaries not to) take, directly or
indirectly, any action which is designed to or which constitutes or which
might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares;
(xi) To use its best efforts to list, [subject to notice of
issuance], the Shares in the form of shares of Stock on the Amsterdam
Stock Exchange and list for quotation the ADSs on NASDAQ;
(xii) To file with the Commission such information on Form 10-Q and
Form 10-K as may be required by Rule 463 under the Act;
(xiii) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the
date of this Agreement, and the Company shall at the time of filing either
pay to the Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Act;
(xiv) Not to deliver (or agree to deliver) shares of Stock to Nuon
pursuant to the Nuon Share Purchase Agreement before the date six months
after the Listing Date (as defined in the Nuon Share Purchase Agreement);
and
(xv) To enforce the "lock up" agreements with DIC and UIH Europe
referred to in Section 5(a)(v) hereof, the "lock up" agreement with
Microsoft Corporation referred to in Section 7 (n) hereof and any "lock
up" agreement entered into by an acquiror of Subject Securities pursuant
to the proviso to Section 5 (a) (v) hereof.
(b) Parent agrees with each of the Underwriters:
(i) During the period beginning from the date hereof and continuing to and
including the date 360 days following the date of the Prospectus, not to,
directly or indirectly, offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder or under the International Underwriting
Agreement, any Subject Securities (other than pursuant to employee stock
option plans existing on, or upon the conversion or exchange of convertible
<PAGE>
16
or exchangeable securities outstanding as of, the date of this Agreement), or
to enter into any derivative transaction having an economic effect similar to
any of the foregoing, without the prior written consent of Goldman, Sachs &
Co. and Morgan Stanley & Co. Incorporated; provided, however, that Parent
may, from the date 180 days following the date of the Prospectus, (a) sell
Subject Securities in private placements to one or more institutional
investors of national or international reputation or (b) sell or otherwise
dispose of Subject Securities in exchange for equity securities or assets in
a strategic acquisition, in each case set forth in clause (a) or (b) above
subject to execution by each acquiror of Subject Securities of a "lock-up"
agreement, in form and substance satisfactory to Goldman, Sachs & Co. and
Morgan Stanley & Co. Incorporated, binding on such acquiror during the period
beginning with the date of its acquisition of Subject Securities and
continuing to and including the date 360 days following the date of the
Prospectus;
(ii) Not to (and to cause its affiliates not to) take, directly or
indirectly, any action which is designed to or which constitutes or which
might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares; and
(iii) To enforce any "lock up" agreement entered into by an acquiror of
Subject Securities pursuant to the proviso to clause (i) of this Section
5(b).
6 The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement, the ADS
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Deposit Agreement, the Blue Sky
memorandum, closing documents (including compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Shares; (iii) all expenses in connection with the qualification of the Shares
for offering and sale under state securities laws, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey; (iv) all fees and
expenses in connection with listing the Shares and ADSs on the Amsterdam Stock
Exchange and NASDAQ; (v) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; (vi) the reasonable out-of-pocket expenses
(other than fees and disbursements of counsel to the Underwriters and
International Underwriters) incurred by the Underwriters and the International
Underwriters in connection with the transactions contemplated herein and in the
International Underwriting Agreement; (vii) all stamp, transfer, capital
issuance or similar expenses and taxes arising as a result of the deposit by the
Company of the Shares with the Depositary and the issuance and delivery of the
ADRs evidencing ADSs in exchange therefor by the Depositary to the Company as
contemplated by the Deposit Agreement, of the sale and delivery of the Shares
and ADSs by the Company to or for the account of the Underwriters and
<PAGE>
17
the International Underwriters pursuant to this Agreement and the International
Underwriting Agreement, of the sale and delivery outside of the Netherlands of
the Shares and ADSs by the Underwriters and the International Underwriters to
each other pursuant to the Agreement between Syndicates, and the sale and
delivery of the Shares and ADSs by the Underwriters and the International
Underwriters to the initial purchasers thereof in the manner contemplated under
this Agreement or the International Underwriting Agreement, and any Dutch
income, capital gains, withholding or other tax asserted against an Underwriter
or an International Underwriter solely by reason of the purchase and sale of any
Shares or ADSs pursuant to this Agreement or the International Underwriting
Agreement or the Agreement between Syndicates; (viii) the fees and expenses
(including fees and disbursements of counsel), if any, of the Depositary and any
custodian appointed under the Deposit Agreement other than the fees and expenses
to be paid by holders of ADRs (other than the Underwriters or the International
Underwriters, in connection with the initial purchase of the Shares or ADSs);
(ix) fees and expenses of the Authorized Agent (as defined in Section 14
hereof); (x) the cost of preparing stock certificates or a global share
certificate (as applicable) and ADRs; (xi) the costs and charges of any transfer
agent or registrar; and (xii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section, including all reasonable roadshow costs. It is
understood, however, that, except as provided in this Section 6 and Sections 8
and 11 hereof, the Underwriters will pay all of their own costs and expenses.
7 The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company and Parent shall have performed all of their
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5(a)
hereof; if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement, the ADS Registration Statement
or any part of either the Registration Statement or the ADS Registration
Statement shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been complied
with to your reasonable satisfaction;
(b) Debevoise & Plimpton, United States counsel for the Underwriters,
shall have furnished to you such written opinion or opinions (a draft of such
opinion is attached as Annex II(a) hereto), dated such Time of Delivery, with
respect to the matters covered in paragraphs (i), (ii), (iii), (viii), (ix),
(x) and (xi) of subsection (c) below as well as such other related matters as
you may reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass upon
such matters;
<PAGE>
18
(c) Holme Roberts & Owen LLP, United States counsel for the Company and
Parent, shall have furnished to you their written opinion (a draft of such
opinion is attached as Annex II(b) hereto), dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) Parent has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and
each of this Agreement, the International Underwriting Agreement and the
agreement referred to in Section 7(t) of this Agreement has been duly
authorized, executed and delivered by Parent and, insofar as New York law
is concerned, each of this Agreement and the International Underwriting
Agreement has been duly executed and delivered by the Company;
(ii) The Deposit Agreement has been duly executed and delivered by
the Company and, assuming due authorization, execution and delivery of the
Deposit Agreement by the Depositary and that each of the Depositary and
(under Dutch law) the Company has full power, authority and legal right to
enter into and perform its obligations thereunder, constitutes a valid and
legally binding agreement of the Company, enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and similar laws of
general applicability relating to or affecting creditors' rights generally
and to general principles of equity; and the statements set forth under
the caption "Description of American Depositary Shares" in the Prospectus,
insofar as such statements purport to summarize certain provisions of the
Deposit Agreement, fairly summarize, in all material respects, such
provisions;
(iii) Upon due issuance by the Depositary of the Master ADR
evidencing ADSs being delivered at such Time of Delivery against the
deposit of Shares in respect thereof in accordance with the provisions of
the Deposit Agreement, such Master ADR will be duly and validly issued and
the person in whose name the Master ADR is registered will be entitled to
the rights specified therein and in the Deposit Agreement;
(iv) Under the laws of the State of New York relating to personal
jurisdiction, the Company has, pursuant to Section 14 of this Agreement,
validly and irrevocably submitted to the personal jurisdiction of any
state or federal court located in the Borough of Manhattan, The City of
New York, New York (each a "New York Court") in any action arising out of
or relating to this Agreement or the transactions contemplated hereby, has
validly and irrevocably waived any objection to the venue of a proceeding
in any such court, and has validly and irrevocably appointed the
Authorized Agent (as defined herein) as its authorized agent for the
purpose described in Section 14 hereof; and service of process effected on
such agent in the manner set forth in Section 14 hereof will be effective
to confer valid personal jurisdiction over the Company;
(v) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company, Parent or any of their respective
subsidiaries is a party or of which any
<PAGE>
19
property of the Company, Parent or any of their respective subsidiaries is
the subject, and with respect to which there is a reasonable expectation
of an adverse determination that would individually or in the aggregate
have a material adverse effect on the current or future consolidated
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by any
Governmental Agency or threatened by others;
(vi) Neither the Company nor any of its subsidiaries is in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument known to such counsel to
which the Company or such subsidiary is a party or by which it or any of
its properties may be bound, except for such defaults as would not, singly
or in the aggregate, reasonably be expected to have a material adverse
effect on the Company and its subsidiaries taken as a whole;
(vii) The issue and sale of the Shares being delivered at such Time
of Delivery and the deposit of the Shares being deposited by the Company
with the Depositary against issuance of the Master ADR to be delivered at
such Time of Delivery and the compliance by the Company and Parent with
all of the provisions of this Agreement and the International Underwriting
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument known to such counsel to which the Company, Parent
or any of their respective subsidiaries is a party or by which the
Company, Parent or any of their respective subsidiaries is bound or to
which any of the property or assets of the Company, Parent or any of their
respective subsidiaries is subject, except for such breaches, violations
or defaults as would not, singly or in the aggregate, reasonably be
expected to have a material adverse effect on the Company and its
subsidiaries taken as a whole, nor will such action result in any
violation of the certificate of incorporation or bylaws of Parent or any
statute, rule or regulation or, to the knowledge of such counsel, any
order, of any United States Federal or New York Governmental Agency having
jurisdiction over the Company, Parent or any of their respective
subsidiaries or properties;
(viii) No Governmental Authorization of the United States or the State
of New York is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement, except the
registration under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters and the International
Underwriters;
(ix) The statements set forth in the Prospectus under the caption
"Description of American Depositary Shares", insofar as they purport to
constitute a summary of the
<PAGE>
20
terms of the ADSs, under the caption "Taxation" and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate and fairly summarize
such laws and documents in all material respects;
(x) The Company is not an "investment company", as such term is
defined in the Investment Company Act; and
(xi) The Registration Statement, the ADS Registration Statement and
the Prospectus and any further amendments and supplements thereto made by
the Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder; although
they do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement, the
ADS Registration Statement or the Prospectus, except for those referred to
in the opinion in subsection (ix) of this Section 7(c), they have no
reason to believe that, as of its effective date, the Registration
Statement or the ADS Registration Statement or any further amendment
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or
that, as of its date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules therein, as to
which such counsel need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading or that, as of such Time of Delivery, either the
Registration Statement, the ADS Registration Statement or the Prospectus
or any further amendment or supplement thereto made by the Company prior
to such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and they do
not know of any amendment to the Registration Statement or the ADS
Registration Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to the
Registration Statement or the ADS Registration Statement or required to be
described in the Registration Statement, the ADS Registration Statement or
the Prospectus which are not filed or described as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States;
<PAGE>
21
(d) Loeff Claeys Verbeke, Netherlands counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached
as Annex II(c) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a public limited liability company under the laws of The Netherlands,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus;
(ii) The Company has an authorized share capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of Delivery)
have been duly and validly authorized and issued and are fully paid and
non-assessable; all of the shares of Stock (including the Shares) have
been duly listed and admitted for trading on the Amsterdam Stock Exchange,
subject to notice of issuance; the holders of outstanding shares of
capital stock of the Company are not entitled to preemptive or other
rights to acquire the Shares to be purchased from the Company under this
Agreement or the International Underwriting Agreement which have not been
complied with; the Shares may be freely deposited by the Company with the
Depositary against issuance of ADRs evidencing ADSs; the Shares are freely
transferable by the Company to or for the account of the several
Underwriters and the International Underwriters in the manner contemplated
herein and in the International Underwriting Agreement and the initial
purchasers thereof; there are no restrictions on subsequent transfers of
the Shares except as described in the Prospectus under the caption "Shares
Eligible for Future Sale"; and the Shares conform to the description of
the Stock contained in the Prospectus;
(iii) All Governmental Authorizations of and with any Governmental
Agency in The Netherlands required for the Shares to be duly and validly
authorized and issued have been obtained or made and are in full force and
effect;
(iv) The Deposit Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally binding
agreement of the Company, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(v) The Company 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 so as to require such qualification, or is subject to no
material liability or disability by reason of failure to be so qualified
in any such jurisdiction (such counsel being entitled to rely in respect
of the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the Company,
provided that such counsel shall state that they believe that both you and
they are justified in relying upon such opinions and certificates);
<PAGE>
22
(vi) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company;
(vii) The issue and sale of the Shares being delivered at such Time
of Delivery and the deposit of the Shares being deposited by the Company
with the Depositary against issuance of the ADRs evidencing the ADSs to be
delivered at such Time of Delivery and the compliance by the Company with
all of the provisions of this Agreement, the International Underwriting
Agreement and the Deposit Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject,
nor will such action result in any violation of the provisions of the
Articles of Association of the Company or any statute or any order, rule
or regulation known to such counsel of any Governmental Agency having
jurisdiction over the Company or any of its subsidiaries or any of their
properties;
(viii) No Governmental Authorization of or with any Governmental
Agency is required in The Netherlands for the issue and sale of the Shares
by the Company, the deposit of the Shares being deposited by the Company
with the Depositary against issuance of the ADRs evidencing the ADSs to be
delivered at such Time of Delivery or the consummation by the Company of
the transactions contemplated by this Agreement and the International
Underwriting Agreement;
(ix) The statements in the Prospectus under the captions
"Enforcement of Civil Liabilities", "Regulation", "Description of Share
Capital" and "Summary of Additional Material Provisions of the Articles of
Association and Other Matters", to the extent such statements relate to
matters of Dutch law or regulation or to the provisions of documents
therein described, are true and accurate in all material respects, and
nothing has been omitted from such statements which would make the same
misleading in any material respect;
(x) The opinions of such counsel set forth in the Prospectus under
the caption "Enforcement of Civil Liabilities" are confirmed as of such
Time of Delivery;
(xi) Insofar as matters of Dutch law are concerned, the Registration
Statement and the filing of the Registration Statement with the Commission
have been duly authorized by and on behalf of the Company; and the
Registration Statement has been duly executed pursuant to such
authorization by and on behalf of the Company;
(xii) The choice in Section 14 hereof of the laws of the State of New
York as the law governing this Agreement is valid and binding on the
Company under the laws of The Netherlands, except (i) to the extent that
any term of this Agreement or any provision of New York law applicable to
this Agreement is manifestly incompatible
<PAGE>
23
with the public policy of The Netherlands and (ii) a Netherlands court may
give effect to mandatory rules of the laws of another jurisdiction
(including the Netherlands) with which the matter under review has a close
connection, if and insofar as under the laws of such other jurisdiction
those rules must be applied, irrespective of the governing law chosen by
the parties; the Company can sue and be sued in its own name under the
laws of The Netherlands; the consent to the jurisdiction of a New York
Court as provided in this Agreement is valid and binding on the Company
under the laws of The Netherlands, provided, that such consent will not be
given effect with respect to (a) a claim the amount of which does not
exceed NLG 5,000, (b) certain specified labour and tenancy law-related
disputes and (c) claims for provisional measures before the president of a
competent court in The Netherlands; in the absence of an applicable treaty
between the United States and The Netherlands, a judgment rendered by a
New York Court will not be enforced by the court in The Netherlands, and
the claim must be relitigated before a competent Netherlands court; a
judgment rendered by a New York Court pursuant to this Agreement will,
under current practice, be recognized by a Netherlands court if such
judgment (i) results from proceedings compatible with Dutch concepts of
due process and (ii) does not contravene public policy (ordre public) of
The Netherlands; if such judgment by a New York Court is recognized by a
Netherlands court, such Netherlands court will generally grant the same
judgment without relitigation on the merits; and service of process
effected in the manner set forth in Section 14 hereof will be effective,
insofar as the laws of The Netherlands are concerned, to confer valid
personal jurisdiction over the Company; and
(xiii) The indemnification and contribution provisions set forth in
Section 8 hereof do not contravene the public policy or laws of The
Netherlands.
In giving such opinion, such counsel may state that with respect to
all matters of United States federal and New York law they have relied
upon the opinions of United States counsel for the Company delivered
pursuant to paragraph (c) of this Section 7;
(e) Anton H. E. van Voskuijlen, Managing Director, General Counsel and
Senior Vice President, Legal of the Company, shall have furnished to you his
written opinion (a draft of such opinion is attached as Annex II(d) hereto),
dated such Time of Delivery, in form and substance satisfactory to you, to
the effect that:
(i) The Company has been duly incorporated and is validly existing
as a public limited liability company under the laws of The Netherlands,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of Delivery)
have been duly and validly authorized and issued and are fully paid and
non-assessable; all of the shares of Stock (including the Shares) have
been duly listed and admitted for trading on the Amsterdam Stock
Exchange[, subject to notice of issuance]; the holders of outstanding
shares of capital
<PAGE>
24
stock of the Company are not entitled to preemptive or other rights to
acquire the Shares to be purchased from the Company under the Underwriting
Agreements which have not been complied with; the Shares may be freely
deposited by the Company with the Depositary against issuance of ADRs
evidencing ADSs; the Shares are freely transferable by the Company to or
for the account of the several Underwriters in the manner contemplated
herein and in the International Underwriting Agreement and (to the extent
described in the Prospectus) the initial purchasers thereof; there are no
restrictions on subsequent transfers of the Shares except as described in
the Prospectus under the captions "Shares Eligible for Future Sale" and
"Description of American Depositary Shares"; and the Shares conform to the
description of the Stock contained in the Prospectus;
(iii) All Governmental Authorizations of or with any Governmental
Agency in The Netherlands required for the Shares to be duly and validly
authorized and issued have been obtained or made and are in full force and
effect;
(iv) The Deposit Agreement has been duly authorized, executed and
delivered by the Company;
(v) The Company has been duly qualified for the transaction of
business outside The Netherlands and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local counsel and
in respect of matters of fact upon certificates of officers of the
Company, provided that such counsel shall state that he believes that both
you and he are justified in relying upon such opinions and certificates);
(vi) Each subsidiary of the Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation; and all of the issued shares of capital
stock of each such subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable, and (except for
directors' qualifying shares and except as otherwise set forth in the
Prospectus) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims (such counsel being
entitled to rely in respect of the opinion in this clause upon opinions of
local counsel and in respect of matters of fact upon certificates of
officers of the Company or its subsidiaries, provided that such counsel
shall state that he believes that both you and he are justified in relying
upon such opinions and certificates);
(vii) The Company and its subsidiaries have good and marketable title
to all material real property owned by them, in each case free and clear
of all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially adversely affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by the Company and its
<PAGE>
25
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as do not have a material adverse
effect on the Company and its subsidiaries taken as a whole and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries (in giving the opinion in
this clause, such counsel may state that no examination of record titles
for the purpose of such opinion has been made, and that they are relying
upon a general review of the titles of the Company and its subsidiaries,
upon opinions of local counsel and abstracts, reports and policies of
title companies rendered or issued at or subsequent to the time of
acquisition of such property by the Company or its subsidiaries, upon
opinions of counsel to the lessors of such property and, in respect of
matters of fact, upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that he believes that
both you and he are justified in relying upon such opinions, abstracts,
reports, policies and certificates);
(viii) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial position,
shareholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by any Governmental Agency or
threatened by others;
(ix) This Agreement and the International Underwriting Agreement have
been duly authorized, executed and delivered by the Company;
(x) The issue (as applicable) and sale of the Shares to be sold by
the Company at such Time of Delivery and the deposit of the Shares being
deposited with the Depositary in accordance with the provisions of the
Deposit Agreement against issuance of the ADRs evidencing the ADSs in
respect thereof to be delivered at such Time of Delivery and the
compliance by the Company with all of the provisions of this Agreement,
the International Underwriting Agreement and the Deposit Agreement and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
known to such counsel to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of
the provisions of the Articles of Association of the Company or any
statute, other applicable law or any order, rule or regulation known to
such counsel of any Governmental Agency having jurisdiction over the
Company or any of its subsidiaries or any of their properties except, with
respect in any such case to the subsidiaries of the Company, as would not,
singly or in
<PAGE>
26
the aggregate, have a material adverse effect on the Company
and its subsidiaries taken as a whole;
(xi) No Governmental Authorization of or with any Governmental
Agency is required in The Netherlands for the issue and sale of the Shares
by the Company, the deposit of the Shares being deposited with the
Depositary in accordance with the provisions of the Deposit Agreement
against issuance of ADRs evidencing the ADSs in respect thereof to be
delivered at such Time of Delivery by the Company or the consummation by
the Company of the transactions contemplated by this Agreement and the
International Underwriting Agreement;
(xii) Other than as set forth in the Prospectus, the Company and each
of its subsidiaries have all licenses, franchises, permits,
authorizations, approvals and orders and other concessions of and from all
Governmental Agencies that are necessary to own or lease their other
properties and conduct their current businesses as described in the
Prospectus, with such exceptions as would not, materially or in the
aggregate, have a material adverse effect on the current or future
financial consolidated financial position, shareholders' equity or results
of operations of the Company and its subsidiaries taken as a whole;
(xiii) Neither the Company nor any of its subsidiaries is in violation
of its Articles of Association or other constituent documents 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 or other agreement or instrument to
which it is a party or by which it or any of its properties may be bound;
(xiv) The statements set forth in the Prospectus under the captions
"Description of Share Capital" and "Description of American Depositary
Shares", insofar as they purport to constitute a summary of the terms of
the Stock and ADSs, respectively, and under the captions "Taxation" and
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate, complete and fair;
and
(xv) Although he does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to in
the opinion in subsection (xiv) of this Section 7(e), he has no reason to
believe that, as of its effective date, the Registration Statement or any
further amendment thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein,
<PAGE>
27
in the light of the circumstances under which they were made, not
misleading or that, as such Time of Delivery, either the Registration
Statement or the Prospectus or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
In giving such opinion, such counsel may state that with respect to
all matters of United States federal and New York law he has relied upon
the opinions of United States counsel for the Company delivered pursuant
to paragraph (c) of this Section 7;
(f) Counsel for the Depositary shall have furnished to you their written
opinion (a draft of such opinion is attached as Annex II(e) hereto), dated
such Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The Deposit Agreement has been duly authorized, executed and
delivered by the Depositary and constitutes a valid and legally binding
obligation of the Depositary, enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, reorganization and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and
(ii) The ADRs issued under and in accordance with the provisions of
the Deposit Agreement to evidence ADSs will entitle the holders thereof to
the rights specified therein and in the Deposit Agreement, assuming that
(A) the Shares represented by the ADSs which are in turn evidenced by the
Master ADR have been duly authorized and validly issued and are fully paid
and nonassessable and that any preemptive rights with respect to the
Shares have been validly waived or exercised and (B) such Shares have been
duly deposited with [name of depositary] as Custodian, in each case under
and in accordance with all applicable laws and regulations;
(g) Nauta Dutilh, Netherlands counsel for the Underwriters, shall have
furnished to you such written opinion or opinions (a draft of each such
opinion is attached as Annex II(f) hereto), dated such Time of Delivery, with
respect to the matters covered in [paragraphs (i), (vi), (viii), (ix), (xi),
(xii) and (xiii) of subsection (d) above and in paragraphs (iii) and (iv) of
subsection (s) below], as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(h) Houthoff Advocaten & Notarissen, Netherlands counsel for the Company,
shall have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(g) hereto), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) Each Netherlands subsidiary of the Company has been duly
incorporated and is validly existing as a corporation under the laws of
The Netherlands; and all of the
<PAGE>
28
issued shares of capital stock of each such subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and
(except for directors' qualifying shares and except as otherwise set forth
in the Prospectus) are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims (such counsel
being entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company or its subsidiaries, provided that
such counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(ii) The Company and its subsidiaries have good and marketable title
to all real property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to
be made of such property and buildings by the Company and its subsidiaries
(in giving the opinion in this clause, such counsel may state that no
examination of record titles for the purpose of such opinion has been
made, and that they are relying upon a general review of the titles of the
Company and its subsidiaries, upon opinions of local counsel and
abstracts, reports and policies of title companies rendered or issued at
or subsequent to the time of acquisition of such property by the Company
or its subsidiaries, upon opinions of counsel to the lessors of such
property and, in respect of matters of fact, upon certificates of officers
of the Company or its subsidiaries, provided that such counsel shall state
that they believe that both you and they are justified in relying upon
such opinions, abstracts, reports, policies and certificates);
(iii) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial position,
shareholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by any Governmental Agency or
threatened by others;
(iv) The issue and sale of the Shares being delivered at such Time
of Delivery and the deposit of the Shares being deposited by the Company
with the Depositary against issuance of the ADRs evidencing the ADSs to be
delivered at such Time of Delivery and the compliance by the Company with
all of the provisions of this Agreement, the International Underwriting
Agreement and the Deposit Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute
<PAGE>
29
a default under, any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Articles of Association
of the Company or any statute or any order, rule or regulation known to
such counsel of any Governmental Agency having jurisdiction over the
Company or any of its subsidiaries or any of their properties; and
(v) Neither the Company nor any of its subsidiaries is in violation
of its Articles of Association or other constituent documents 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 or other agreement or instrument to
which it is a party or by which it or any of its properties may be bound.
(i) Austrian, Norwegian, Belgian and Israeli counsel for the Company
satisfactory to you shall each have furnished to you their written opinion
(drafts of such opinions are attached as Annexes II(h), (i), (j) and (k),
respectively, hereto), dated such Time of Delivery, in form and substance
satisfactory to you, as to such matters relating to the operations of the
Company and its subsidiaries in their respective jurisdictions and the
descriptions thereof in the Prospectus as you reasonably request;
(j) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 2:30 p.m., London time, on the effective date of any post-
effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Arthur Andersen,
KPMG Accountants N.V., PricewaterhouseCoopers N.V., VB Deloitte & Touche and
Ivar Lytomt shall each have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto (executed copies of the
letters delivered prior to the execution of this Agreement are attached as
Annex I(a) hereto and drafts of the form of letters to be delivered on the
effective date of any post-effective amendment to the Registration Statement
and as of each Time of Delivery are attached as Annex I(b) hereto);
(k) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included
in the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or other legal or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus, and
(ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or long-
term debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general
affairs, management, condition (financial or otherwise), shareholders' equity
or results of operations of the Company and its subsidiaries, otherwise than
as set forth or contemplated in the Prospectus, the effect of which, in any
such case described in clause (i) or (ii), is in the judgment of Goldman,
Sachs & Co. and Morgan Stanley & Co. Incorporated so material and adverse as
to make it impracticable or inadvisable to proceed
<PAGE>
30
with the public offering or the delivery of the Shares being delivered at
such Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(l) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange, the NASDAQ or the Amsterdam Stock
Exchange and/or the London Stock Exchange; (ii) a suspension or material
limitation in trading in the Company=s securities on the NASDAQ or the
Amsterdam Stock Exchange; (iii) a general moratorium on commercial banking
activities in New York, London or Amsterdam declared by the relevant
authorities; (iv) a change or development involving a prospective change in
Dutch taxation affecting the Company, the Shares or the transfer thereof or
the imposition of exchange controls by the United States or The Netherlands;
(v) the outbreak or escalation of hostilities involving the United States,
the United Kingdom or The Netherlands or the declaration by the United
States, the United Kingdom or The Netherlands of a national emergency or war,
if the effect of any such event specified in this clause (v) in the judgment
of Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the terms
and in the manner contemplated in the Prospectus; or (vi) the occurrence of
any material adverse change in the existing financial, political or economic
conditions in the United States, the United Kingdom, The Netherlands or
elsewhere which, in the judgment of Goldman, Sachs & Co. and Morgan Stanley &
Co. Incorporated would materially and adversely affect the financial markets
or the market for the Shares and other equity securities;
(m) The Shares to be sold by the Company at such Time of Delivery shall
have been duly listed, subject to notice of issuance, on the Amsterdam Stock
Exchange and the ADSs to be sold by the Company at such Time of Delivery
shall have been duly listed for quotation on NASDAQ;
(n) The Company shall have obtained and delivered to you executed
copies of an agreement from DIC, UIH Europe and Microsoft Corporation to the
effect set forth in Section 5(b)(i) hereof, in form and substance
satisfactory to you, with respect to any securities of the Company acquired
by such party during the 180-day period following the date of the Prospectus;
(o) The Depositary shall have furnished or caused to be furnished to
you as at such Time of Delivery certificates satisfactory to you evidencing
the deposit with it of the Shares being so deposited against issuance of ADRs
evidencing the ADSs to be delivered by the Company at such Time of Delivery,
and the execution, countersignature (if applicable), issuance and delivery of
ADRs evidencing such ADSs pursuant to the Deposit Agreement;
(p) The Company shall have complied with the provisions of subsection
(a)(iii) of Section 5 hereof with respect to the furnishing of prospectuses
on the New York Business Day next succeeding the date of this Agreement;
<PAGE>
31
(q) The Company and Parent shall have furnished or caused to be furnished
to you at such Time of Delivery certificates of officers of the Company and
of Parent (as applicable), respectively, satisfactory to you, as to the
accuracy of the representations and warranties of the Company herein at and
as of such Time of Delivery, as to the performance by the Company and Parent
of all of their respective obligations hereunder to be performed at or prior
to such Time of Delivery, and as to such other matters as you may reasonably
request, and the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (a) and (k) of this
Section 7, and as to such other matters as you may reasonably request;
(r) The Company shall have received from The Toronto-Dominion Bank: (i) a
waiver, in form and substance satisfactory to you, to the effect that the
lenders under the Company's NLG 1,100,000,000 multi-currency Revolving Credit
Facility under the Loan Agreement, dated as of October 8, 1997, between the
Company and certain of its subsidiaries and The Toronto Dominion Bank as
Agent for the financial institutions identified therein, as amended (the
"Tranche A Facility"), have waived any violation of the terms of the Tranche
A Facility that may be caused by the consummation of the offering and other
transactions contemplated in the Prospectus, including without limitation the
Company's use of proceeds of the offering as described in the Prospectus; and
(ii) an amendment or waiver, in form and substance satisfactory to you, of
the Tranche A Facility's debt coverage covenants (including the covenant
governing the Company's permitted ratio of net debt to EBITDA);
(s) Arthur Andersen shall have furnished you its written opinion, dated
such Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The statements in the Prospectus under "Taxation", to the
extent such statements relate to matters of Dutch law or regulation, are
true and accurate in all material respects, and nothing has been omitted
from such statements that would make the same misleading in any material
respect;
(ii) The opinions of Arthur Andersen set forth in the Prospectus and
in the International Prospectus under "Taxation" are confirmed as of such
Time of Delivery;
(iii) Other than as set forth in the Prospectus, no stamp or other
issuance or transfer taxes or duties and no capital gains, income,
withholding or other taxes are payable by or on behalf of the Underwriters
or the International Underwriters to The Netherlands or to any political
subdivision or taxing authority thereof or therein in connection with (A)
the deposit with the Depositary of Shares by the Company against the
issuance of ADRs evidencing the ADSs, (B) the sale and delivery by the
Company of the Shares to or for the respective accounts of the
Underwriters and the International Underwriters or (C) the sale and
delivery outside The Netherlands by the Underwriters and the International
Underwriters of Shares to the initial purchasers thereof in the manner
contemplated herein and in the International Underwriting Agreement; and
(iv) Other than as set forth in the Prospectus, all dividends and
other distributions declared and payable on the shares of capital stock of
the Company may
<PAGE>
32
under the current laws and regulations of The Netherlands be paid in euros
or Dutch guilders (including any such dividends or distributions to be
paid to the Depositary) that may be converted into foreign currency that
may be freely transferred out of The Netherlands, and all such dividends
and other distributions will not be subject to withholding or other taxes
under the laws and regulations of The Netherlands and are otherwise free
and clear of any other tax, withholding or deduction in The Netherlands
and without the necessity of obtaining any Governmental Authorization in
The Netherlands;
(t) Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated shall have
received from Parent an agreement, satisfactory in form and substance to
Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated certifying as to
the accuracy of certain information supplied by Parent and contained in the
Registration Statement (which agreement shall contain an indemnity from
Parent to the Underwriters in substantially the form of Section 8 hereof with
respect to losses, claims, damages or liabilities arising in connection with
any such information); and
(u) Counsel to the Company or Parent, satisfactory to you, in each such
jurisdiction as the Company may request the Underwriters to allocate Shares
to employees and others as described in the Prospectus under the caption
"Underwriting", shall each have furnished to you their written opinion, dated
such Time of Delivery, in form and substance satisfactory to you, as to such
matters as you reasonably request.
8. (a) The Company and Parent, jointly and severally, will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement, the ADS Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and Parent shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement, the ADS Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. and Morgan Stanley & Co. Incorporated expressly for use therein;
(b) Each Underwriter will indemnify and hold harmless the Company and
Parent against any losses, claims, damages or liabilities to which the Company
and Parent may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement, the ADS
<PAGE>
33
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement, the ADS Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. and Morgan Stanley & Co. Incorporated expressly for use therein; and will
reimburse the Company and Parent for any legal or other expenses reasonably
incurred by the Company and Parent in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and Parent on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in
<PAGE>
34
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and Parent on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and Parent 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 the offering of the Shares purchased under this Agreement (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters with respect to the
Shares purchased under this Agreement, in each case as set forth in the table on
the cover page of the U.S. Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or Parent on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, Parent and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
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 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint. The Company's and
Parent's obligations in this subsection (d) to contribute are joint and several.
(e) Notwithstanding the foregoing, the liability of Parent in connection
with the indemnification and contribution provisions contained in subsections
(a) and (d) of this Section 8 shall not exceed the amount, if any, of proceeds
from the offering of the Shares transferred directly or indirectly to Parent or
any of its affiliates by the Company or any of its affiliates in repayment of
any indebtedness of the Company to Parent outstanding, or otherwise.
(f) The obligations of the Company and Parent under this Section 8 shall be
in addition to any liability which the Company and Parent may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of
<PAGE>
35
the Company (including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company) and to each
person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notify you that they have so arranged
for the purchase of such Shares, you or the Company shall have the right to
postpone such Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
of the Shares to be purchased at such Time of Delivery, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the number
of Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all of the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company or Parent, except for the expenses to
be borne by the Company and the Underwriters as provided in Section 6 hereof and
the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, Parent and the several Underwriters, as set
forth in this Agreement or made by
<PAGE>
36
or on behalf of them, respectively, pursuant to this 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 any Underwriter or any controlling
person of any Underwriter, or the Company, or Parent, or any officer or director
or controlling person of the Company, and shall survive delivery of and payment
for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor Parent shall then be under any liability to any
Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other
reason any Shares are not delivered by or on behalf of the Company as provided
herein, the Company will reimburse the Underwriters through Goldman, Sachs & Co.
and Morgan Stanley & Co. Incorporated for all out-of-pocket expenses approved in
writing by Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of the Shares not so
delivered, but the Company and Parent shall then be under no further liability
to any Underwriter in respect of the Shares not so delivered except as provided
in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives of the Underwriters.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9th Floor, New York, New York 10004, Attention: Registration
Department; and if to the Company or Parent shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: President; provided, however, that any notice
to an Underwriter pursuant to Section 8 (c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company or Parent by you
upon request. Any such statements, requests, notices or agreements shall take
effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and Parent and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Each of the parties hereto irrevocably (i) agrees that any legal suit,
action or proceeding against the Company or Parent brought by any Underwriter or
by any person who controls any Underwriter arising out of or based upon this
Agreement or the transactions contemplated hereby may be instituted in any New
York court, (ii) waives, to the fullest extent it may effectively do
<PAGE>
37
so, any objection which it may now or hereafter have to the laying of venue of
any such proceeding and (iii) submits to the exclusive jurisdiction of such
courts in any such suit, action or proceeding. The Company has appointed
__________________, New York, New York, as its authorized agent (the "Authorized
Agent") upon whom process may be served in any such action arising out of or
based on this Agreement or the transactions contemplated hereby which may be
instituted in any New York Court by any Underwriter or by any person who
controls any Underwriter, expressly consents to the jurisdiction of any such
court in respect of any such action, and waives any other requirements of or
objections to personal jurisdiction with respect thereto. Such appointment shall
be irrevocable. The Company represents and warrants that the Authorized Agent
has agreed to act as such agent for service of process and agrees to take any
and all action, including the filing of any and all documents and instruments,
that may be necessary to continue such appointment in full force and effect as
aforesaid. Service of process upon the Authorized Agent and written notice of
such service to the Company shall be deemed, in every respect, effective service
of process upon the Company.
15. In respect of any judgment or order given or made for any amount due
hereunder that is expressed and paid in a currency (the "judgment currency")
other than United States dollars, the Company and Parent, jointly and severally,
will indemnify each Underwriter against any loss incurred by such Underwriter as
a result of any variation as between (i) the rate of exchange at which the
United States dollar amount is converted into the judgment currency for the
purpose of such judgment or order and (ii) the rate of exchange at which an
Underwriter is able to purchase United States dollars with the amount of the
judgment currency actually received by such Underwriter. The foregoing
indemnity shall constitute a separate and independent obligation of the Company
and Parent and shall continue in full force and effect notwithstanding any such
judgment or order as aforesaid. The term "rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase of or
conversion into United States dollars.
16. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
17. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
18. This 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 counterparts shall together constitute one and the same instrument.
<PAGE>
38
If the foregoing is in accordance with your understanding, please sign and
return to us [five] counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and Parent. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters (U.S. Version), the form of which shall be
submitted to the Company and Parent for examination upon request, but without
warranty on your part as to the authority of the signers thereof.
Very truly yours,
United Pan-Europe Communications N.V.
By:_______________________________________________
Name:
Title:
United International Holdings, Inc.
By:_______________________________________________
Name:
Title:
Accepted as of the date hereof
Goldman, Sachs & Co.
- -----------------------------
(Goldman, Sachs & Co.)
Morgan Stanley & Co. Incorporated
By:__________________________
Name:
Title:
Donaldson, Lufkin & Jenrette Securities Corporation
By:__________________________
Name:
Title:
On behalf of each of the Underwriters
<PAGE>
39
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares to be Maximum Option
Underwriter Purchased Exercised
----------- --------- ---------
<S> <C> <C>
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette Securities
Corporation
[Names of other Underwriters]
Total
</TABLE>
<PAGE>
EXHIBIT 1.2
UNITED PAN-EUROPE COMMUNICATIONS N.V.
ORDINARY SHARES
(NOMINAL VALUE EURO 0.30 PER SHARE)
IN THE FORM OF ORDINARY SHARES OR
AMERICAN DEPOSITARY SHARES
AGREEMENT BETWEEN U.S. AND
INTERNATIONAL UNDERWRITING SYNDICATES
February ____, 1999
This Agreement is made between: (a) Goldman, Sachs & Co., Morgan Stanley &
Co. Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation, as
representatives (the "U.S. Representatives") for the United States underwriters
(the "U.S. Underwriters") listed in Schedule I to the Underwriting Agreement
(U.S. Version) (the "U.S. Underwriting Agreement"), dated the date hereof, among
the U.S. Underwriters, United Pan-Europe Communications N.V. (the "Company") and
United International Holdings, Inc. ("Parent"); and (b) Goldman Sachs
International ("GSI") and Morgan Stanley & Co. International Limited ("MSIL"),
as Lead Managers (the "Lead Managers") for the international underwriters (the
"International Underwriters") listed in Schedule I to the Underwriting Agreement
(International Version) (the "International Underwriting Agreement"), dated the
date hereof, among the International Underwriters, the Company and Parent. The
U.S. Underwriters and the International Underwriters are herein collectively
called the "Underwriters", each such group of Underwriters is sometimes
separately called a "syndicate", and Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation on the one
hand, and GSI and MSIL on the other hand, are sometimes called "syndicate
representatives" of the U.S. Underwriters and the International Underwriters,
respectively. GSI and MSIL shall act as joint global coordinators (the "Joint
Global Coordinators") of the offerings described herein.
The U.S. Underwriters, pursuant to the U.S. Underwriting Agreement, have
agreed to purchase [___________] Firm Shares and, at the option of the U.S.
Underwriters, up to an additional [___________] Optional Shares (collectively,
the "U.S. Shares"), in the form of shares of Stock or ADSs, and the
International Underwriters, pursuant to the International Underwriting
Agreement, have agreed to purchase [______] Firm Shares and, at the option of
the International Underwriters, up to an additional [________] Optional Shares
(collectively, the "International Shares"), in the form of shares of Stock or
ADSs. In respect of these offerings, the U.S. Underwriters have entered into an
Agreement among Underwriters (U.S. Version) (the "U.S. AAU") and the
International Underwriters have entered into an Agreement among Underwriters
(International Version) (the "International AAU") (each separately referred to
as an "AAU"). The U.S. Underwriters and the International Underwriters deem it
necessary and advisable in connection therewith that certain of their respective
activities be coordinated pursuant to this Agreement. The U.S. Shares and the
International Shares are hereinafter referred to collectively as the "Shares".
The "overall underwriting proportion" and the "syndicate underwriting
proportion" of any Underwriter or group of Underwriters shall be that proportion
which is to be underwritten by such Underwriter or Underwriters of either (x)
all of the
<PAGE>
Shares or (y) of all the Shares of the relevant syndicate (in the case of (x) or
(y) exclusive of Optional Shares, except as the Joint Global Coordinators may
decide). Terms not defined herein are used as defined in the underwriting
agreements referred to above.
1. The U.S. Underwriters, acting through the U.S. Representatives, and
the International Underwriters, acting through the Lead Managers, agree that
from time to time until the termination of certain provisions of the U.S. AAU
they will consult with and advise each other as to the availability for sale of
Shares purchased pursuant to the U.S. Underwriting Agreement or the
International Underwriting Agreement and remaining unsold. From time to time,
at (but only at) the direction of or with the consent of the Joint Global
Coordinators, in consultation with Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated [and Donaldson, Lufkin & Jenrette Securities Corporation], the
Underwriters may purchase and sell from one syndicate to the other some or all
of such unsold Shares.
Unless otherwise determined by the Joint Global Coordinators, the price and
currency settlement of any Shares so purchased or sold shall be the original
public offering price, in United States dollars, less an amount not greater than
the selling concession of the U.S. Shares (adjusted, if necessary, in the case
of the purchase of ADSs to reflect the ratio of shares of Stock per ADS).
Settlement with respect to any Shares or ADSs transferred hereunder prior to a
Time of Delivery shall be made on such Time of Delivery if feasible but in no
event later than five business days after the transfer date. The Shares or ADSs
so purchased shall be delivered on the respective settlement dates or other
mutually satisfactory settlement shall be made. The liability for payment to
the Company of the purchase price of the Shares being purchased under the
respective underwriting agreements shall not be affected by the provisions of
this Agreement.
In connection with the purchase or sale of Shares from one syndicate to the
other pursuant to this Section 1, the obligations of each Underwriter, subject
to the availability of unsold Shares or ADSs in the case of a sale by an
Underwriter's syndicate, shall be in accordance with the syndicate underwriting
proportion of each Underwriter; provided, however, that an Underwriter, with the
consent of its syndicate representatives, may agree to purchase or sell more or
fewer Shares or ADSs than would constitute its syndicate underwriting proportion
and the number of Shares to be purchased or sold by the other Underwriters in
the same syndicate shall be computed after giving effect to such variance.
Except as provided in this paragraph, the allocation of rights and obligations
of Underwriters in respect of any purchase of Shares or ADSs from or sale of
Shares or ADSs to the other syndicate shall be governed by the applicable
provisions of the respective syndicate's AAU and the Joint Global Coordinators
are authorized to effect any and all such transactions for the respective
accounts of the Underwriters as provided herein.
2. All stabilization transactions, whether in the United States or
otherwise, shall be conducted at the direction of and subject to the control of
GSI, so that stabilization activities worldwide shall be coordinated and
conducted in compliance with any applicable laws and regulations. If requested
and subject to applicable law, each syndicate representative shall effect such
stabilization transactions in such amounts, at such prices, in such terms and in
such manner as GSI shall direct. All such stabilization transactions shall be
for the respective accounts of the U.S. Underwriters and the International
Underwriters in accordance with their respective overall underwriting
proportions.
<PAGE>
3. GSI in consultation with MSIL shall have sole responsibility with
respect to establishing the amount of Optional Shares to be purchased by the
U.S. Underwriters and the International Underwriters and, subject to the
authority of GSI under Section 2 hereof, with respect to overallotments in
arranging for sales of Shares for the accounts of all such Underwriters.
Neither syndicate shall exercise the overallotment option granted to it by the
Company without the prior approval of GSI, and each syndicate shall exercise
such option if, when and to the extent directed by GSI in consultation with
MSIL. Each syndicate shall be solely responsible for profits and losses arising
from its overallotments; provided, however, that to the extent that one
syndicate may be accorded an overallotment option that is disproportionate to
its aggregate underwriting commitment at the expense of the size of the
overallotment option of the other syndicate, GSI in consultation with MSIL may
reallocate between the syndicates profits and losses arising from
overallotments.
4. The U.S. Underwriters agree for the benefit of the International
Underwriters to comply with the U.S. AAU and the International Underwriters
agree for the benefit of the U.S. Underwriters to comply with the International
AAU, and to reconfirm the geographic selling restrictions applicable to the
offerings, as summarized in Annex A hereto.
5. The U.S. Representatives and the Lead Managers agree that:
(a) If a Time of Delivery is not on the day provided in the U.S.
Underwriting Agreement and in the International Underwriting Agreement, they
will mutually agree on a postponed date within the time permitted by such
underwriting agreements and the settlement dates herein provided shall be
adjusted accordingly;
(b) Changes in the public offering price or in the selling concession and
reallowance to dealers will be made only after consultation among them, but in
accordance with the direction of the Joint Global Coordinators, during the
consultation period specified in the first sentence of Section 1 hereof;
(c) Each syndicate, through the respective syndicate representatives, will
keep the other fully informed of the progress of the offering and distribution
of the Shares; and
(d) The Lead Managers shall not terminate the International Underwriting
Agreement pursuant to the conditions set forth in Section 7 thereof except after
consultation with the U.S. Representatives, and the U.S. Representatives shall
not terminate the U.S. Underwriting Agreement pursuant to the conditions set
forth in Section 7 thereof except after consultation with the International
Underwriters.
6. The obligations of the Underwriters set forth in Sections 1, 2, 3 and
4 hereof shall terminate upon the termination of certain provisions (including
the geographic selling restrictions) of the U.S. AAU pursuant to Section 10
thereof, which termination shall be on the thirtieth full business day after the
Firm Shares are released by the U.S. Representatives for sale to the public,
unless earlier terminated by the U.S. Representatives as provided therein. The
Lead Managers shall cause the termination of the corresponding provisions of the
International AAU simultaneously with such termination of provisions of the U.S.
AAU.
7. Any global or regional advertising with respect to the offering shall
be under the control of the Joint Global Coordinators.
<PAGE>
8. Each Underwriter acknowledges that the Company has agreed to pay or
cause to be paid to GSI, as joint global coordinator and solely for its account,
an amount not to exceed U.S. $[__________________] in lieu of reimbursement of
expenses relating to the underwriting and distribution of the Shares common to
the U.S. Underwriters and the International Underwriters. Each of the U.S.
Underwriters and the International Underwriters agrees that the fees and
disbursements of Debevoise & Plimpton (U.S. counsel to the Underwriters) and
Nauta Dutilh (Netherlands counsel to the Underwriters), reasonable out-of-pocket
expenses of the Joint Global Coordinators, reasonable out-of-pocket expenses of
the U.S. Representatives and the Lead Managers (other than the fees and
disbursements of any local counsel to the International Underwriters) and the
costs of global advertising, if any, shall constitute expenses common to them.
The U.S. Underwriters and the International Underwriters agree that common
expenses in excess of the amount received by GSI described in the first sentence
of this paragraph shall be shared among them in accordance with their respective
overall underwriting proportions. Except with respect to such common expenses,
the International Underwriters will pay the aggregate expenses incurred in
connection with the purchase, carrying or sale of the International Shares, and
the U.S. Underwriters will pay the aggregate expenses incurred in connection
with the purchase, carrying or sale of the U.S. Shares. Notwithstanding the
foregoing, the U.S. Underwriters and the International Underwriters agree that
stabilization transactions and overallotments, purchases and sales of any
securities pursuant to Sections 2 and 3 hereof, and any expenses in respect
thereof, will be for their respective accounts in accordance with Sections 2 and
3 hereof. The ascertainment of all expenses and apportionment thereof by GSI
shall be conclusive.
Each U.S. Underwriter and International Underwriter agrees to pay GSI an
amount equal to U.S. $[__________________] per Share in respect of the overall
underwriting proportion of such Underwriter as compensation for the services of
the Joint Global Coordinators in connection with the offerings described herein,
to be divided as agreed between the Joint Global Coordinators, and authorizes
each of the U.S. Representatives and the Lead Managers, as the case may be, at
their discretion, to charge its account therefor.
9. Neither the U.S. Representatives nor the Lead Managers shall, by
virtue of executing this Agreement, have any liability to any other Underwriter
for the failure of another Underwriter to perform its obligations under either
underwriting agreement or either AAU. The duties of the Joint Global
Coordinators hereunder shall be administrative and not fiduciary in nature.
10. This Agreement may be amended before or after any Time of Delivery by
mutual written agreement of the undersigned U.S. Representatives and Lead
Managers.
11. This Agreement may be signed in any number of counterparts, which
together shall constitute one and the same instrument, and shall be binding upon
and inure to the benefit of all of the Underwriters.
<PAGE>
12. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, United States of America.
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written by the undersigned for themselves and for the
Underwriters as set forth above.
Acting on behalf of themselves and the other
U.S. Underwriters:
Goldman, Sachs & Co.
______________________
(Goldman, Sachs & Co.)
Morgan Stanley & Co. Incorporated
By: ______________________
Name:
Title:
Donaldson, Lufkin & Jenrette Securities Corporation
By: ______________________
Name:
Title:
Acting on behalf of themselves and the other
International Underwriters:
Goldman Sachs International
By: ______________________
Name:
Title:
Morgan Stanley & Co. International Limited
By: ______________________
Name:
Title:
<PAGE>
Annex A
-------
SUMMARY OF GEOGRAPHIC SELLING RESTRICTIONS
U.S. Underwriters (as set forth in Section 4 of the U.S. AAU):
U.S. Underwriters may offer and sell only:
(a) in the United States of America (including the District of Columbia),
its territories, its possessions and other areas subject to its
jurisdiction (the "United States"); and
(b) to "U.S. Persons", meaning
(i) individuals resident in the United States, and
(ii) corporations, partnerships or other entities organized in or
under the laws of the United States or any political subdivision
thereof and whose office most directly involved in the purchase
is located in the United States (including any such entity
constituting an investment adviser acting with discretionary
authority for a non-U.S. Person);
subject to the following exceptions:
(a) sales by offices of (i) Goldman, Sachs & Co. acting as agent for GSI
and (ii) Morgan Stanley & Co. Incorporated acting as agent for MSIL,
and
(b) with the prior written approval of GSI and MSIL, sales by a foreign
branch of a U.S. Underwriter acting on behalf of an affiliated
International Underwriter.
International Underwriters (as set forth in Section 3(d) of the International
AAU):
International Underwriters may offer and sell only outside the United
States to non-U.S. Persons (including any such entity constituting an
investment adviser located outside the United States acting with
discretionary authority for a U.S. Person).
<PAGE>
EXHIBIT 3.1
AMENDMENT OF THE ARTICLES OF ASSOCIATION OF UNITED PAN-EUROPE COMMUNICATIONS
- ----------------------------------------------------------------------------
N.V.
- ----
On this > day of > nineteen hundred ninetynine there appeared before me, Robert
Jan Jozef Lijdsman, civil law notary, officiating in Amsterdam:
>.
The appearer has declared that the general meeting of shareholders of the public
company United Pan-Europe Communications N.V., with seat and principal offices
in Amsterdam, Fred Roeskestraat 123 has resolved on > nineteen hundred
ninetynine to amend and to completely renew the articles of association of the
company as stated hereinafter as well as to authorize the appearer to execute
this deed of which resolutions appear from the shareholder's resolution attached
to this deed.
The appearer has also declared that the articles of association of the above-
mentioned company were amended lastly by deed on the eleventh day of December
nineteenhundred ninety-seven executed before H.B.H. Kraak, civil law notary in
Amsterdam, on the draft of which deed the ministerial statement of no objections
was granted on the eleventh day of December nineteenhundred ninety-seven, under
number B.V. 400.149.
In order to execute said resolution to amend the articles of association, the
appearer has declared to amend and to completely renew the articles of associ-
<PAGE>
2
ation as follows:
CHAPTER I
- ---------
Definitions.
- -----------
Article 1.
- ---------
In these articles of association the following expressions shall have the
following meanings:
a. the general meeting: the body of the company formed by shareholders and
-------------------
other persons entitled to vote;
b. the general meeting of shareholders: the meeting of shareholders and other
-----------------------------------
persons entitled to attend the general meetings;
c. the annual meeting: the general meeting of shareholders held for the purpose
------------------
of dealing with the annual accounts and the annual report;
d. depository receipts: depository receipts in respect of shares issued by the
-------------------
company;
e. subsidiary:
----------
- a legal entity in which the company or one or more of its subsidiaries,
whether or not by virtue of agreement with other persons who can cast
votes, can exercise alone or together more than half of the voting
rights in the general meeting of members or shareholders of that legal
entity;
- a legal entity in respect of which the company or one or more of its
subsidiaries is a member or shareholder and, whether or not by virtue of
agreement with other persons who can cast votes, alone or together, can
appoint or dismiss more than half the Board of Management members or
the supervisory board members, also in the event all the persons who can
cast votes, vote;
a partnership acting in its own name shall be regarded as a subsidiary,
where the company or one or more subsidiaries, as a partner, is fully liable
to creditors for debts;
all this with due observance of all provisions of the paragraphs 3 and 4 of
<PAGE>
3
article 24a, Book 2 of the Civil Code;
f. group company: a legal entity or company together with which the company, in
-------------
accordance with the meaning of article 24b, Book 2 of the Civil Code, forms
a group;
g. the distributable part of the net assets: that part of the company's capital
----------------------------------------
and reserves which exceeds the aggregate of the part of the capital which
has been paid-up and called and the reserves which must be maintained by
virtue of the law or these articles of association;
h. accountant: a "registeraccountant" or other accountant referred to in
----------
article 393, Book 2 of the Civil Code, also the organisation within which
such accountants practice;
i. Priority: the meeting of holders of priority shares.
--------
CHAPTER II
- ----------
Name, seat, objects.
- -------------------
Article 2. Name and seat.
- ------------------------
1. The name of the company is:
UNITED PAN-EUROPE COMMUNICATIONS N.V.
2. It shall have its seat in Amsterdam.
Article 3. Objects.
- ------------------
The objects of the company are:
a. to own, operate, and develop subscription and multi-channel television
systems, to render related consulting, engineering and programming services
and to provide other communications services;
b. to incorporate, manage and finance and to participate in other companies and
enterprises;
c. to take up loans, lend and invest moneys and acquire, transfer and dispose
of claims and assets in general;
d. to provide guarantees, to bind the company and to encumber the assets of the
company for the benefit of both group companies, and third parties;
e. to provide services to companies and undertakings with which it is
<PAGE>
4
associated in a group, and to third parties;
f. to exploit patents, trade mark rights, licences and industrial property
rights;
g. to carry out other financial or industrial activities.
CHAPTER III
- -----------
Capital and shares. Register.
- ----------------------------
Article 4. Authorised capital. Classes of shares.
- ------------------------------------------------
1. The authorised capital amounts to onehundredthirtyfivemillion Euro (EUR
135,000,000).
2. It is divided into:
- twohundredmillion (200,000,000) ordinary shares with a nominal value of
thirty Eurocents (EUR 0,30) each;
- onehundred (100) priority shares with a nominal value of thirty Eurocents
(EUR 0,30) each;
- fortyninemillion ninehundredninetyninethousand ninehundred
(49,999,900) preference shares A with a nominal value of thirty
Eurocents (EUR 0,30) each; and,
- twohundredmillion (200,000,000) preference shares B with a nominal value
of thirty Eurocents (EUR 0,30) each.
3. The ordinary shares may, at the option of the shareholder, be registered
shares or bearer shares. The priority shares and the preference shares A and
the preference shares B shall be registered shares.
4. Wherever the articles of association refer to shares or shareholders, such
terms shall be understood to refer to all classes of shares mentioned in
paragraph 2 and the holders thereof, unless the contrary is apparent from
the context.
5. The company may lend its cooperation to the issuance of depositary receipts
of its shares.
Article 5. Certificate of bearer shares.
- ---------------------------------------
1. On the occassion of a subscription to ordinary shares a subscriber becoming
entitled to an ordinary share may require the company, in writing,
<PAGE>
5
the delivery of a registered ordinary share.
Without such request, the subscriber shall obtain a bearer ordinary share in
conformity with the provisions of this article.
2. All bearer ordinary shares shall be embodied by one single share
certificate.
3. The share certificate shall on behalf of those entitled to the shares
embodied by it, hereinafter referred to as: the "participants", be kept for
the safe custody by the Central Depository within the meaning of the
Securities Depository Act, hereinafter referred to as: "Necigef".
4. The company shall confer on a person or entity a right to a bearer ordinary
share by (i) having Necigef enable the company to add to the shares embodied
by the share certificate another share, and (ii) the designation by the
entitled person or entity of an Associated Institution (within the meaning
of the Securities Depository Act), hereinafter: Associated Institution,
crediting him as participant in this Institution's collective deposit of
ordinary shares in the company.
5. Without prejudice to the provisions of Article 40, paragraph 5 of these
Articles of Association, Necigef shall be irrevocably charged with the
management of the share certificate and be irrevocably authorised on behalf
of the participants to perform all acts in respect of the shares concerned,
including the acceptance and delivery of and the leading of co-operation in
the crediting to and debiting from the share certificate.
6. A participant in a collective deposit of an Associated Institution may at
any time, up to the number of bearer ordinary shares he is entitled to,
require the conversion of one or more bearer ordinary shares into registered
ordinary shares.
Conversion of one or more bearer ordinary shares shall require (i) the
transfer of the shares concerned by Necigef to the participant, (ii) Necigef
enabling the company to have the ordinary shares debited from the share
certificate, (iii) the Associated Institution concerned debiting the
participant
<PAGE>
6
accordingly as participant in its collective deposit of ordinary shares in
the company and (iv) the company effecting the entry of the participant's
name in the company's register of shareholders as holder of the registered
ordinary shares concerned.
7. A holder of registered ordinary shares may at any time, up to the number of
his registered ordinary shares, require the conversion of registered
ordinary shares into bearer ordinary shares.
Conversion of one or more registered ordinary shares shall require (i) the
transfer of the shares concerned by the shareholder to Necigef, (ii) Necigef
enabling the company to have the ordinary shares credited to the share
certificate, (iii) the Associated Institution concerned crediting the share
holder accordingly as participant in its collective deposit of ordinary
shares in the company, and (iv) the company effecting the deletion of the
participant's name as holder of the shares concerned in the company's
register of shareholders.
8. For the purpose of application of the provisions of these articles of associ
ation, shareholders shall be take to include participants in a collective
depository of bearer ordinary shares as defined in the Securities Depository
Act.
Article 6. Registers of shareholders.
- ------------------------------------
1. No certificates shall be issued for registered ordinary shares, priority
shares, preference shares A and for preference shares B.
2. The Board of Management shall keep a register containing the names and
addresses of all holders of registered ordinary shares, priority shares,
preference shares A and preference shares B, with reference to the class of
shares.
3. Every holder of one or more registered shares and any person having a life
interest or a right of pledge over one or more such shares shall be obliged
to provide the company in writing with their address.
4. All entries and notes in a register shall be signed by a member of the Board
<PAGE>
7
of Management.
5. Article 85, Book 2 of the Civil Code also applies to the register.
6. Extracts from a register are not marketable.
CHAPTER IV
- ----------
Issuance of shares.
- ------------------
Article 7. Body competent to issue shares.
- -----------------------------------------
1. Shares shall be issued pursuant to a resolution of the Board of Management.
The resolution shall be subject to the approval of both the Supervisory
Board and the Priority. This authority of the Board of Management shall
relate to all unissued shares of the authorised capital, as applicable now
or at any time in the future. The duration of this authority shall be
established by a resolution of the general meeting and shall be for a period
of maximum five years, without prejudice to the provisions of article 46.
2. Designation of the Board of Management as the corporate body competent to
issue shares may be extended by the articles of association or by a
resolution of the general meeting for a period not exceeding five years in
each case. The resolution of the general meeting shall be subject to the
approval of both the Supervisory Board and the Priority. The number of
shares which may be issued shall be determined at the time of this
designation. Designation by resolution of the general meeting cannot be
revoked unless determined otherwise at the time of designation.
3. Upon termination of the authority of the Board of Management, the issue of
shares shall thenceforth require a resolution of the general meeting, save
where another corporate body has been designated by the general meeting.
The resolution of the general meeting to issue shares or to designate
another corporate body shall be subject to the approval of both the
Supervisory Board and the Priority.
4. The issue of preference shares B pursuant to a resolution of a corporate
body other than the general meeting, as a result of which an amount of
issued preference shares B would be effected which would exceed hundred
<PAGE>
8
per cent (100%) of the amount of issued shares of other classes may only be
effected after the general meeting has for the specific instance granted its
concurrence.
5. In the event of an issue of preference shares B pursuant to a resolution of
a corporate body other than the general meeting as a result of which an
amount of preference shares B would be issued which does not exceed hundred
per cent (100%) of the amount of issued shares of other classes, a general
meeting of shareholders shall be convened and held within four weeks of the
issue in which the reasons for the issue shall be explained.
6. The provisions of paragraph 1 to 5 inclusive shall be equally applicable to
the granting of rights to subscribe for shares but shall not be applicable
to the issue of shares to persons exercising a previously granted right to
subscribe for shares.
7. In the event of an issue of preference shares B a general meeting of share
holders shall be convened, to be held not later than two years after the
date on which preference shares B were issued for the first time. The agenda
for that meeting shall include a resolution relating to the repurchase or
cancellation of the preference shares B. If the resolution to be adopted in
respect of this item on the agenda is not directed to the repurchase or
cancellation of the preference shares B, a general meeting of shareholders
shall be convened and held, in each case within two years of the previous
meeting, the agenda of these meetings shall include a resolution relating to
the repurchase of cancellation of the preference shares B, until such time
as no more preference shares B shall be issued. The foregoing provisions of
this paragraph do not apply to preference shares B issued pursuant to a
resolution or with concurrence of the general meeting.
8. Article 96, Book 2 of the Civil Code also applies to the issuance of shares
and the granting of rights to take up shares.
Article 8. Conditions of issuance. Rights of pre-emption.
- --------------------------------------------------------
1. The price and further conditions of issuance shall be determined in the
<PAGE>
9
resolution to issue shares. The issue price may be no lower than par value,
without prejudice to the provision of article 80 paragraph 2, Book 2 of the
Civil Code.
2. Upon the issuance of ordinary shares, every holder of ordinary shares shall
have a preferential right in accordance with article 96a, Book 2 of the
Civil Code. The same applies to the granting of rights for the taking up of
ordinary shares.
3. The pre-emptive right may be restricted or excluded by a resolution of the
Board of Management. The resolution shall be subject to the approval of both
the Supervisory Board and the Priority. The authority granted to the Board
of Management shall terminate on the date of termination of the authority of
the Board of Management to issue shares. Paragraph 1 to 3 inclusive of
article 7 shall be equally applicable.
4. Articles 96a and 97, Book 2 of the Civil Code also apply to the conditions
of issuance and to the preferential right.
Article 9. Payment for shares.
- -----------------------------
1. Upon the taking up of each ordinary share, preference share A and priority
share, the total par value shall be paid together with, if the share is
taken up at a higher price, the difference between these amounts, without
prejudice to the provisions in article 80 paragraph 2, Book 2 of the Civil
Code.
Upon the taking up of each preference share B, at least one fourth of the
par value shall be paid. Further payments on preference shares B shall be
made, up to the par value as a maximum, at the request, approved by the
Supervisory Board, of the Board of Management.
2. Payment for ordinary shares, preference shares A and priority shares must be
made in cash to the extent that no other manner of payment has been agreed
upon. Payment for preference shares B can only be made in cash.
3. The Board of Management shall be authorised to enter into transactions
concerning non-monetary contributions on ordinary shares, and the other
<PAGE>
10
transactions referred to in article 94 paragraph 1, Book 2 of the Civil
Code, without the prior approval of the general meeting. The resolution to
enter into these transactions shall require the approval of the Supervisory
Board and the Priority.
4. Articles 80, 80a, 80b and 94b, Book 2 of the Civil Code also apply to
payments on shares and non-monetary contributions.
CHAPTER V
- ---------
Own shares and depository receipts thereof.
- ------------------------------------------
Article 10.
- ----------
1. The company shall be entitled to acquire fully paid-up shares in its own
capital or depository receipts in respect thereof, provided either no
valuable consideration is given or provided that:
a. the distributable part of the capital and reserves is at least equal to
the purchase price; and
b. the nominal value of the shares or the depository receipts in respect
thereof which the company acquires, holds or holds in pledge or which are
held by a subsidiary does not exceed one tenth of the issued capital.
2. The Board of Management shall require the authorization of the general
meeting for an acquisition for valuable consideration. This authorization
may be given for a maximum of eighteen months. At the time of granting such
authorization, the general meeting must determine how many shares or
depositary receipts thereof may be acquired and between which limits the
price must be.
3. The company may acquire its own shares or depository receipts thereof in
order to transfer them, pursuant to a regulation to that effect, to staff
employed by the company or by a group company.
4. The acquisition or alienation by the company of its own shares shall take
place pursuant to a decision of the Board of Management. Such a decision
shall be subject to the approval of the Supervisory Board and the Priority,
<PAGE>
11
without prejudice to the provisions of paragraph 2.
5. Articles 89a, 95, 98, 98a, 98b, 98c, 98d and 118, Book 2 of the Civil Code
also apply to own shares or depository receipts thereof.
CHAPTER VI
- ----------
Capital reduction.
- -----------------
Article 11.
- ----------
1. The general meeting may decide to reduce the issued capital, but only at the
proposal of the Board of Management with the approval of the Supervisory
Board:
a. by cancelling shares; or
b. by reducing the amount of the shares by amendment of the articles of
association.
A resolution of the general meeting to reduce the capital must designate the
shares to which the resolution relates and must include provisions for the
implementation of the resolution.
2. A resolution to cancel shares may only involve:
a. shares or depository receipts in respect thereof held by the company
itself; or
b. all preference shares A, all preference shares B, all priority shares or
all ordinary shares, in all cases with the consent of the meeting of
holders of shares of the class concerned and with repayment.
3. In case of cancellation of all preference shares A and/or all preference
shares B, without prejudice to any provision of the law on the subject,
there shall, to the extent possible, be paid in respect of these shares an
amount equal to the nominal amount paid on those shares, increased by any
outstanding dividend referred to in article 31 paragraph 1 respectively
paragraph 2, which dividend shall then be calculated over the period ending
on the date on which the payment shall become payable. In case of
cancellation shall in respect of preference shares A also be paid, to the
extent possible, the amount of share premium paid up on those shares if
<PAGE>
12
it was decided so upon the first issuance of preference shares A.
4. Partial repayment of shares or exemption from the obligation to pay calls on
shares is only possible in order to implement a decision to reduce the
amount of the shares. Such repayment or exemption shall take place:
a. with regard to all shares; or
b. with regard to either the preference shares A, the preference shares B,
the priority shares or the ordinary shares, in all cases with the
consent of the meeting of holders of shares of the class concerned.
5. The provisions of articles 99 and 100, Book 2 of the Civil Code also apply
to capital reduction.
CHAPTER VII
- -----------
Transfer of shares. Limited rights.
- ----------------------------------
Article 12.
- ----------
1. The transfer of a registered share or the transfer of a right-in-rem therein
shall be effected by means of a deed and, except where the company itself is
a party to the transaction, acknowledgement in writing of the transfer by
the company.
Acknowledgement is effected in the deed, or by a dated declaration of
acknowledgement either on the deed or on a copy or extract thereof which is
certified by a civil law notary or by the transferor. Official service of
that deed or that copy or extract on the company shall rank as acknowledge-
ment.
2. A right of pledge may also be created without acknowledgement or official
service of notice to the company. In such case, article 239, Book 3 of the
Civil Code applies accordingly, on the understanding that the communica-
tion referred to in paragraph 3 of that article, shall then be replaced by
acknowledgement by or official service on the company.
3. The acknowledgement shall be signed by a member of the Board of Management.
4. The provisions of paragraphs 1 and 3 apply accordingly to the allocation of
<PAGE>
13
registered shares on the division of jointly held property.
5. The shareholder shall have voting rights in respect of a share in which the
life interest or the right of pledge is created. However, the voting rights
shall accrue to the beneficiary of the life interest or the pledgee in the
event that it was so stipulated at the creation of the life interest or the
right of pledge. The shareholder who holds no voting rights and the
beneficiary of a life interest or pledgee who does hold voting rights shall
have the rights which the law attributes to holders of depository receipts
in respect of shares in a company which are issued with that company's
cooperation. A beneficiary of a life interest or a pledgee who holds no
voting rights shall not have the rights referred to in the preceding
sentence.
6. The rights attached to a share in which a life interest is created, relating
to the acquisition of shares shall accrue to the shareholder. However, the
shareholder shall compensate the beneficiary of the life interest for the
value thereof to the extent that the latter is entitled thereto by virtue of
his life interest.
Article 13. Transfer of priority shares.
- ---------------------------------------
1. A priority share can be transferred to the company.
2. Any transfer other than that to the company can only be effected with the
approval of the Board of Management and the Supervisory Board.
3. The transfer must take place within three months after the approval has been
granted. The approval shall be deemed to have been granted if the Board of
Management and the Supervisory Board, having informed the applicant of the
refusal of the request, do not simultaneously inform the applicant of one
or more prospective buyers who are prepared to purchase the priority
share(s) concerned against payment in cash. The company itself can be
designated as a prospective buyer.
4. The transfer of a priority share to the company or to another prospective
buyer as referred to in paragraph 3 shall take place against a purchase
price that equals the nominal value of the priority share.
<PAGE>
14
5. If a priority share is transferred without the approval of the Board of
Management and the Supervisory Board, the rights adhered to the priority
share can not be exercised.
CHAPTER VIII
- ------------
Management.
- ----------
Article 14. Board of Management.
- -------------------------------
1. The management of the company shall be constituted by a Board of Management
consisting of one or more members.
2. Subject to the above minimum, the number of members of the Board of
Management shall be determined by the Supervisory Board.
3. If the Board of Management is constituted by two or more members the
Supervisory Board may designate one of the members of the Board of
Management as President and one of the members as Chief Executive Officer.
One member of the Board of Management may have both designations.
Article 15. Appointment.
- -----------------------
1. Members of the Board of Management shall be appointed by the general meeting
from a list of candidates to be drawn up by the Priority.
2. The list of candidates shall be binding provided that the list contains the
names of at least two persons. However, the general meeting may at any time,
by resolution passed with a majority of at least two-thirds of the votes
cast representing more than half of the issued capital, resolve that such
list shall not be binding.
3. If the Priority should fail to draw up a list of nominees within three
months after the vacancy has occurred the general meeting may appoint a
member of the Board of Management at its own discretion.
4. In case the Priority has drawn up a non-binding list of candidates, the
general meeting can only appoint a member of the Board of Management in
contravention of the list by resolution taken with a majority of two thirds
of the votes cast representing more than fifty percent of the issued share
<PAGE>
15
capital.
Article 16. Suspension and removal.
- ----------------------------------
1. Each member of the Board of Management may be suspended or removed at any
time by the general meeting.
2. A resolution to suspend or remove other than at the proposal of the Priority
may only be passed by the general meeting with a majority of at least two-
thirds of the votes cast representing more than half of the issued capital.
3. Each member of the Board of Management can, at any time, be suspended by the
Supervisory Board.
The Supervisory Board may only pass a resolution to suspend a member of the
Board of Management with a majority of at least two-thirds of the votes cast
in a meeting in which at least fifty percent of the members of the
Supervisory Board is present or represented.
Such suspension may be discontinued by the general meeting at any time.
4. Any suspension may be extended one or more times, but may not last longer
than three months in the aggregate. If at the end of that period no decision
has been taken on termination of the suspension, or on dismissal, the
suspension shall cease.
Article 17. Remuneration.
- ------------------------
The Supervisory Board shall determine the remuneration and further conditions of
employment for each member of the Board of Management.
Article 18. Duties of the Board of Management. Decision making process.
- -----------------------------------------------------------------------
Allocation of duties.
- --------------------
1. Subject to the restrictions imposed by these articles of association, the
Board of Management shall be entrusted with the management of the company.
2. The Board of Management shall draw up a set of rules governing the passing
of resolutions by the Board of Management. The rules shall require the
approval of the Supervisory Board.
3. The Board of Management may determine the duties with which each
<PAGE>
16
member of the Board of Management will be charged in particular. The
allocation of duties shall require the approval of the Supervisory Board.
4. The Board of Management may appoint Officers and allocate certain of its
duties to such Officers. Such allocation shall not effect the ultimate
responsability of the Board of Management for the duties thus allocated.
Article 19. Representation.
- --------------------------
1. The Board of Management shall be authorised to represent the company. Two
members of the Board of Management acting jointly shall also be authorized
to represent the company.
The Board of Management may grant to one or more of its members a power of
attorney to represent the company alone with due observance of the
restrictions of the power of attorney.
2. In the event of a conflict of interest between the company and a member of
the Board of Management, the company shall be represented by such member of
the Board of Management or of the Supervisory Board as the Supervisory Board
shall designate for this purpose.
Article 20. Approval of decisions of the Board of Management.
- ------------------------------------------------------------
1. Without prejudice to any other appropriate provision
of these articles of association, the Board of Management shall require
approval of the Supervisory Board for managerial decisions with relation to:
a. direct or indirect participation in the capital of another company as
well changing the percentage of the participation;
b. acquiring or alienating fixed assets the value of which exceeds an
amount determined by the Supervisory Board;
c. providing guarantees for an amount exceeding an amount determined by the
Supervisory Board;
d. performing legal acts implying an amount exceeding an amount determined
by the Supervisory Board, on the understanding that more than one act
with respect to a same transaction will be deemed to be one act;
<PAGE>
17
e. other acts of the Board of Management as determined by the Supervisory
Board and communicated to the Board of Management in writing.
2. The Priority is entitled, after consultation of the Supervisory Board, to
require resolutions of the Board of Management to be subject to its
approval. Such resolutions shall be clearly specified and notified to the
Board of Management in writing.
3. The lack of approval of the Supervisory Board or the Priority in respect of
a decision referred to in this article does not affect the authority of the
Board of Management or its members to represent the company.
Article 21. Absence or prevention.
- ---------------------------------
If a member of the Board of Management is absent or is prevented from performing
his duties, the remaining members or member of the Board of Management shall be
temporarily entrusted with the entire management of the company. If all members
or the sole member of the Board of Management are absent or are prevented from
performing their duties, the management of the company shall be temporarily
entrusted to the Supervisory Board which shall then be authorised to entrust the
management temporarily to one or more persons, whether or not from among its
members.
CHAPTER IX
- ----------
Supervisory Board.
- -----------------
Article 22. Number of members.
- -----------------------------
1. The company shall have a Supervisory Board. The Supervisory Board can
consist of individuals only. The Supervisory Board shall consist of at least
three Supervisory Directors.
2. Subject to the above minimum, the number of Supervisory Directors shall be
determined by the Supervisory Board.
3. If there are fewer than three Supervisory Directors in office, the
Supervisory Board shall be competent, but shall proceed without delay to
make up the number or numbers.
<PAGE>
18
Article 23. Appointment.
- -----------------------
1. The Supervisory Directors shall be appointed by the general meeting from a
list of candidates to be drawn up by the Priority.
2. The provisions of paragraphs 2, 3 and 4 of article 15 shall apply
accordingly to the appointment of Supervisory Directors.
In contravention of the provisions of paragraphs 1 and 2, one Supervisory
Director may be appointed by Philips Electronics N.V.
3. When a person is proposed for appointment as a Supervisory Director,
particulars shall be stated in respect of his age, his profession, the
nominal amount of shares in the capital of the company he holds and his
present and past functions, in so far as such functions are of interest in
connection with the performance of the duties of a Supervisory Director.
Legal entities of which he is already a supervisory Director shall also be
mentioned; if there are companies among them which belong to the same group,
it shall be sufficient to name that group. The reason for the proposal shall
be stated.
Article 24. Suspension and removal. Retirement.
- ----------------------------------------------
1. Each Supervisory Director may be suspended or removed by the general meeting
at any time.
2. The provisions of paragraphs 2 and 4 of article 16 shall also be applicable
to the suspension and removal of Supervisory Directors.
In contravention of the provisions of paragraphs 1 and 2, a Supervisory
Director appointed by Philips Electronics N.V. may only be suspended and
removed by Philips Electronics N.V.
4. The Supervisory Directors, other than a Supervisory Director appointed by
Philips Electronics N.V., shall retire periodically in accordance with a
rotation plan to be drawn up by the Supervisory Board. Each resigning
Supervisory Director may be re-appointed as long as he has not reached the
age limit.
Article 25. Remuneration.
- ------------------------
<PAGE>
19
The general meeting shall determine the remuneration for every member of the
Supervisory Board.
Article 26. Duties and powers.
- -----------------------------
1. It shall be the duty of the Supervisory Board to supervise the Board of
Management's management and the general course of affairs in the company and
in the business connected with it.
It shall advise the Board of Management. In performing their duties the
Supervisory Directors shall act in accordance with the interests of the
company and of the business connected with it.
2. The Board of Management shall promptly supply the Supervisory Board with the
information required for the performance of its duties.
3. The Supervisory Board shall have access to the buildings and premises of the
company and shall be authorised to inspect the books and records of the
company. The Supervisory Board may designate one or more persons from among
its members or an expert to exercise these powers. The Supervisory Board may
be assisted by experts in other cases also.
4. The Supervisory Board may appoint from amongst its members a delegate
Supervisory Director who will especially be charged with the day-to-day
contact with and supervision on the Board of Management in all matters
related to the company.
The Supervisory Board may also delegate, under its own responsaibility,
certain of its powers to the delegate Supervisory Director.
The Supervisory Board may as well appoint one or more vice delegate
Supervisory Directors for the purpose of substituting the delegate Supervi-
sory Director in case of his absence or incapability to act.
The Board of Management shall contact and consult to the extent possible the
delegate Supervisory Director in all important matters.
Article 27. Proceedings and decision making process.
- ---------------------------------------------------
1. The Supervisory Board shall elect a Chairman from amongst its members, and a
Vice Chairman who shall take the place of the Chairman in the
<PAGE>
20
latter's absence. It shall appoint a secretary, who need not be a member of
the Supervisory Board, and make arrangements for substitution in case of
absence.
2. In the absence of the Chairman and the Vice Chairman at a meeting, the
meeting shall itself designate a Chairman.
3. The Supervisory Board shall meet whenever the Chairman, or two other
Supervisory Directors, or the Board of Management deems such necessary.
4. The secretary shall keep minutes of the proceedings at meetings of the
Supervisory Board. The minutes shall be adopted in the same meeting or in a
following meeting of the Supervisory Board and shall be signed by the
Chairman and the secretary as evidence thereof.
5. All decisions of the Supervisory Board shall be adopted by an absolute
majority of the votes cast.
6. Decisions of the Supervisory Board shall only be valid if taken at a meeting
at which the majority of the Supervisory Directors are present or repre-
sented.
7. A Supervisory Director may be represented by a co-member of the Supervisory
Board authorised in writing. The expression "in writing" shall include any
message transmitted by current means of communication and received in
writing. A Supervisory Director may not act as representative for more than
one co-member.
8. The Supervisory Board may also take decisions outside a meeting, provided
the proposal concerned is submitted to all Supervisory Directors and none of
them objects to this manner of taking decisions. The secretary shall draw up
a report regarding a decision thus taken and shall attach the replies
received to the report, which shall be signed by the president and the
secretary.
9. The Supervisory Board shall meet together with the Board of Management as
often as the Supervisory Board or Board of Management deems such
<PAGE>
21
necessary.
Article 28. Indemnification. Limited liability.
- ----------------------------------------------
1. The company shall indemnify any person who is or was a Supervisory Director
or a member of the Board of Management and who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the company) by
reason of the fact that he is or was a Supervisory Director, member of the
Board of Management, Officer, employee or agent of the company, or is or was
serving at the request of the company as a supervisory director, member of
the Board of Management, officer, director, employee, trustee or agent of
another company, a partnership, joint venture, trust or other enterprise or
entity, including with respect to employee benefit plans maintained or
sponsored by the company or for the benefit of its or any of its group
companies' employees or consultants against all expenses (including
attorneys' fees), judgements, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the company, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful or outside of his mandate. The termination
of any action, suit or proceeding by a judgement, order, settlement,
conviction, or upon a plea of nolo contendee or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith
and not in a manner which he reasonably could believe to be in or not
opposed to the best interest of the company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
2. The company shall indemnify any person who is or was a Supervisory Director
or a member of the Board of Management and who was or is a
<PAGE>
22
party or is threatened to be made a party to any threatened, pending or
completed action or proceeding by or in the right of the company to procure
a judgement in its favour, by reason of the fact that he is or was a
Supervisory Director, member of the Board of Management, Officer, employee
or agent of the company, or is or was serving at the request of the company
as a supervisory director, member of the Board of Management, officer,
director, employee, trustee or agent of another company, a partnership,
joint venture, trust or other enterprise or entity, including with respect
to employee benefit plans maintained or sponsored by the company or for the
benefit of its or any of its group companies' employees or consultants
against all expenses (including attorneys' fees) judgements, fines and
amounts paid in settlement, actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for gross negligence or wilful misconduct in the
performance of his duty to the company, unless and only to the extent that
the court in which such action or proceeding was brought or any other court
having appropriate jurisdiction shall determine upon application that,
despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnification against such expenses which the court in which such action
or proceeding was brought or such other court having appropriate
jurisdiction shall deem proper.
3. To the extent that a Supervisory Director or member of the Board of
Management, Officer, employee or agent of the company has been successful on
the merits or otherwise in defense of any action, suits of proceeding,
referred to in paragraphs 1 and 2, or in defense of any claim, issue or
matter therein, he shall be indemnified against all expenses
<PAGE>
23
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
4. Any indemnification by the company referred to in paragraphs 1 and 2 shall
(unless ordered by a court) only be made by the Company upon a determination
that indemnification of the Supervisory Director or member of the Board of
Management is proper under the circumstances because he had met the
applicable standard of conduct set forth in paragraph 1 and 2 of this
article 28. Article 27 notwithstanding such determination shall be made:
a. by a decision of the Supervisory Board adopted by a majority of the
votes cast by Supervisory Directors who are not parties to such action,
suit or proceeding, even though such decision is taken at a meeting at
which such Supervisory Directors present or represented are less than a
majority of all the Supervisory Directors, or;
b. if there are no Supervisory Directors who are not named as parties to
such action, suit or proceeding or if the Supervisory Directors who are
not named as parties to such action, suit or proceeding so direct, by
independent legal counsel in a written opinion; or
c. by the general meeting of shareholders.
5. Expenses (including attorney's fees) incurred by a Supervisory Director or a
member of the Board of Management in defending a civil or criminal action,
suit or proceeding may be paid by the company in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the Supervisory Director or member of the
Board of Management to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the company as
authorized in this article. Such expenses incurred by Officers, employees or
agents may be so paid upon such terms and conditions as the Supervisory
Board decides.
6. The indemnification provided for by this article shall not be deemed
<PAGE>
24
exclusive of any other right to which a person seeking indemnification or
advancement of expenses may be entitled under the laws of the Netherlands as
from time to time amended or under any by-laws, agreement, resolution of the
general meeting of shareholders or of the disinterested members of the
Supervisory Board or otherwise, both as to actions in his official capacity
and as to actions in another capacity while holding such position, and shall
continue as to a person who has ceased to be a Supervisory Director, member
of the Board of Management, Officer, director, employee, trustee or agent
and shall also inure to the benefit of the heirs, executors, administrators
and the estate of such a person. The company may, to the extent authorized
from time to time by the Supervisory Board, grant rights to indemnification
and to the advancement of expenses to any officer, employee or agent of the
company to the fullest extent of the provisions of this article 28 with
respect to the indemnification and advancement of expenses of Supervisory
Directors and members of the Board of Management of the company.
7. The company may, to the extent authorized from time to time by the
Supervisory Board, purchase and maintain insurance on behalf of any person
who is or was a Supervisory Director, member of the Board of Management,
Officer, employee or agent of the company, or is or was serving at the
request of the company as a supervisory director, member of the Board of
Management, officer, director, employee, trustee or agent of another
company, a partnership, joint venture, trust or other enterprise, or entity,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his capacity as such, whether or not the company
would have the power to indemnify him against such liability under the
provisions of this article.
8. Whenever in this article reference is made to the company, this shall
include, in addition to the resulting or surviving company also any
constituent company (including any constituent company of a constituent
company)
<PAGE>
25
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had the power to indemnify its supervisory directors,
members of the Board of Management, officers, employees and agents, so that
any person who is or was a supervisory director, member of the Board of
Management, officer, employee or agent of such constituent company, or is or
was serving at the request of such constituent company as a supervisory
director, member of the Board of Management, officer, director, employee,
trustee or agent of another company, a partnership, joint venture, trust or
other enterprise or entity, shall stand in the same position under the
provisions of this article with respect to the resulting or surviving
company as he would have with respect to such constituent company if its
separate existence had continued.
9. No person shall be personally liable to the company or its shareholders for
monetary damages for breach of fiduciary duty as a Supervisory Director or
member of the Board of Management; provided, however, that the foregoing
shall not eliminate or limit the liability of a Supervisory Director or
member of the Board of Management (1) for any breach of such individual's
duty of loyalty to the company or its shareholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) for any transaction from which the director
derived an improper personal benefit or (4) for personal liability which is
imposed by Dutch law, as from time to time amended. No amendment, repeal or
modification of this article 28 shall adversely affect any right or
protection of any person entitled to indemnification or advancement of
expenses under this article 28 prior to such amendment, repeal or
modification.
CHAPTER X
- ---------
Annual accounts and annual report. Profits.
- ------------------------------------------
Article 29. Financial year. Annual accounts and annual report.
- -------------------------------------------------------------
1. The financial year of the company shall be the calendar year.
2. Annually, the Board of Management shall draw up annual accounts and
<PAGE>
26
shall deposit these at the company's office for inspection by shareholders,
not later than five months after the end of the financial year, unless under
special circumstances this term is extended by the general meeting by not
more than six months. Within this period, the Board of Management shall also
submit the annual report.
3. Within the period referred to in paragraph 2, the Board of Management shall
also submit the annual accounts and the annual report to the Supervisory
Board.
4. The Supervisory Board shall present its report on the annual accounts to the
general meeting.
5. Articles 101, 102 and 103 and Title 9, Book 2 of the Civil Code also apply
to the annual accounts and to the annual report.
Article 30. Adoption.
- --------------------
1. The annual accounts shall be adopted by the general meeting.
2. A discharge granted to the members of the Board of Management for their
management and to the Supervisory Directors for their supervision thereof,
relates only to the management insofar as such management is apparent from
the financial statements.
Article 31. Profits. Dividend.
- -----------------------------
1. Out of the profit - the positive balance of the profit- and loss account -
an amount of dividend shall be paid on the preference shares B of which the
percentage - to be calculated over the paid up part of the nominal value -
is equal to the average deposit rate of the European Central Bank, decreased
or increased by a discount or upcount, with a maximum of three percent (3%),
to be determined by the Board of Management under the approval of the
Supervisory Board, averaged over the number of days over which the payment
is made.
If for any financial year the distribution referred to above cannot or
cannot entirely be made because the profit does not so allow, payment of
deficit shall be made from the profit of the following financial years.
<PAGE>
27
2. Out of the remainder a dividend shall be paid on the preference shares A the
amount or method of computation of which shall be determined by the
corporate body authorized to issue shares upon the first issuance of
preference shares A. In this determination the corporate body may take into
account the amount of share premium, if any, paid up on the preference
shares A.
3. Out of the remainder an amount of dividend equal to five per cent (5%) of
their nominal value shall be paid on the priority shares.
4. Subsequently, the Board of Management shall, subject to the approval of the
Supervisory Board, determine which part of the profit remaining after
application of paragraphs 1, 2 and 3 shall be allocated to the reserves.
5. Any part of the profits remaining thereafter shall be paid as a dividend on
the ordinary shares.
6. If a loss is sustained in any year, no dividend shall be distributed for
that year. No dividend may be paid in subsequent years until the loss has
been compensated by profits. The general meeting may, however, resolve on a
proposal of the Board of Management, which has received the approval of the
Supervisory Board, to compensate the loss out of the distributable part of
the net assets.
7. The Board of Management, with the approval of the Supervisory Board, may
resolve to pay an interim dividend.
8. In addition, payments to shareholders are subject to articles 103, 104 and
105, Book 2 of the Civil Code.
Article 32. Distribution in shares and to the debit of the reserves.
- -------------------------------------------------------------------
1. The general meeting may, at the proposal of the Board of Management which
has been approved by the Supervisory Board, resolve that a payment of
dividend on ordinary shares be wholly or partly paid by a distribution of
shares in the company.
2. The Board of Management may, subject to the approval of the Supervisory
Board, decide that a distribution on ordinary shares shall not take place in
<PAGE>
28
cash but in shares in the company.
3. The general meeting may, at the proposal of the Board of Management which
has been approved by the Supervisory Board, resolve that distributions to
holders of ordinary shares be made out of the distributable part of the net
assets. Paragraph 1 shall accordingly apply. Distributions referred to in
this paragraph 3 shall be made only if all amounts due in accordance with
article 31 paragraphs 1, 2 and 3 are paid.
4. The Board of Management, subject to approval of the Supervisory Board, may
decide to effect payment of the amounts payable to holders of preference
shares A and preference shares B in accordance with article 31 paragraph 1
respectively paragraph 2 by such payment being charged to the distributable
part of the net assets.
Article 33. Date for payment.
- ----------------------------
Dividends and other distributions shall be made payable no later than fourteen
days after being decided. The making payable shall be announced in accordance
with article 43.
CHAPTER XI
- ----------
General meetings of shareholders.
- --------------------------------
Article 34. Annual meeting.
- --------------------------
1. The annual meeting shall be held annually, within six months of the end of
the financial year.
2. The agenda for such meeting shall contain, inter alia, the following
matters:
a. the annual report;
b. adoption of the annual accounts;
c. discharge of the members of the Board of Management and the members of
the Supervisory Board;
d. appointments to any vacancies;
e. any other proposals put forward for discussion by the Supervisory Board
or the Board of Management, such as proposals concerning the designation
of a body competent to issue shares and to grant
<PAGE>
29
rights to subscribe for shares and the authorization of the Board of
Management to cause the acquisition of own shares or depository receipts
thereof by the company.
Article 35. Other meetings.
- --------------------------
Other general meetings of shareholders shall be held as often as the Board of
Management or the Supervisory Board deems such necessary, without prejudice to
the provisions of the articles 110, 111 and 112, Book 2 of the Civil Code.
Article 36. Convocation. Agenda.
- -------------------------------
1. General meetings of shareholders shall be convened by the Supervisory Board,
the Board of Management or the Priority.
2. The convocation shall take place no later than on the fifteenth day prior to
the date of the meeting.
3. The notice of the meeting shall state the subjects to be dealt with or it
shall state that the shareholders may find details thereof at the company's
office, without prejudice to the provisions of article 44 paragraph 2 of the
articles of association and of article 99 paragraph 7, Book 2 of the Civil
Code.
4. The notice of the meeting shall state the requirement for admission to the
meeting as described in article 40.
5. Convocation shall be made in the manner stated in article 43.
6. Matters not stated in the notice of the meeting may be further announced,
subject to the time limit pertaining to the convocation of meetings, in the
manner stated in article 43.
7. Unless the notice of the meeting includes the contents of all documents
which, according to the law or the articles of association, are to be
available to shareholders for inspection in connection with the meeting to
be held, these documents are to be made available free of charge to
shareholders in Amsterdam at the office of a broker admitted to the trade on
the AEX-Effectenbeurs N.V. to be designated in the notice of the meeting or
another payment office as referred to in the Rules relating to Securities.
8. The expression "shareholders" in this article shall include beneficiaries of
<PAGE>
30
a life interest and pledgees to which the voting rights on shares accrue.
Article 37. Place of meetings.
- -----------------------------
The general meetings of shareholders shall be held in Amsterdam, Rotterdam or
The Hague.
Article 38. Chairmanship.
- ------------------------
1. The general meetings of shareholders shall be chaired by the Chairman of the
Supervisory Board or, in his absence, by the Vice Chairman of that board; in
the event that the latter is also absent, the Supervisory Directors present
shall elect a chairman from their midst.
The Supervisory Board may designate another person to act as chairman of a
general meeting of shareholders.
2. If the chairman has not been appointed in accordance with paragraph 1, the
meeting shall itself choose a chairman. Until that moment a member of the
Board of Management designated thereto by the Board of Management shall act
as chairman.
Article 39. Minutes.
- -------------------
1. Minutes shall be kept of the proceedings at every general meeting of
shareholders by a secretary to be designated by the chairman. The minutes
shall be adopted by the chairman and the secretary and shall be signed by
them as evidence thereof.
2. The Supervisory Board or the chairman may determine that notarial minutes
shall be drawn up of the proceedings of the meeting. The notarial minutes
shall be co-signed by the chairman.
Article 40. Rights at meetings. Admittance.
- ------------------------------------------
1. Each shareholder entitled to vote and each beneficiary of a life interest or
pledgee to whom the voting rights accrue shall be entitled to attend the
general meeting of shareholders, to address the meeting and to exercise his
voting rights. Where it concerns registered shares, the Board of Management
must be notified in writing of the intention to attend the meeting. Such
notice must be received by the Board of Management not
<PAGE>
31
later than on the date mentioned in the notice of the meeting.
2. The right to take part in the meeting in accordance with paragraph 1 may be
exercised by a proxy authorised in writing, provided that the power of
attorney has been received by the Board of Management not later than on the
date mentioned in the notice of the meeting.
3. The date mentioned in the notice of the meeting, referred to in paragraphs 1
and 2, cannot be prior than the seventh day prior to the date of the
meeting.
4. If the voting rights on a share accrue to the beneficiary of a life interest
or to a pledgee, instead of to the shareholder, the shareholder is also
authorised to attend the general meeting of shareholders and to address the
meeting, provided that, where it concerns registered shares, the Board of
Management has been notified of the intention to attend the meeting in
accordance with paragraph 1.
Paragraph 2 applies accordingly.
5. With respect to the voting rights and/or the right to participate in
meetings the company shall on the basis of the provisions of articles 88 and
89 of Book 2 of the Civil Code also recognize as shareholder the person or
entity mentioned in a written statement of an Associated Institution as
being entitled to a given number of bearer ordinary shares belonging to its
collective depository of ordinary shares in the company provided that in the
statement it is also confirmed that the person or entity shall remain thus
entitled until the close of the meeting and the statement has been filed
with the offices of the company.
In the convocation to the meeting shall be mentioned the date on which the
filing of the statement must have been effected at the latest.
This date can not be prior to the seventh day preceeding the date of the
meeting.
6. Each share confers the right to cast one vote.
7. Each person entitled to vote or his proxy shall sign the attendance list.
<PAGE>
32
8. The Supervisory Directors and the members of the Board of Management shall,
as such, have the right to advise the general meeting of shareholders.
9. The chairman shall decide whether persons other than those who shall be
admitted in accordance with the above provisions of this article shall be
admitted to the meeting.
Article 41. Votes.
- -----------------
1. Except where the law or the articles of association require a qualified
majority, all resolutions shall be adopted by absolute majority of the votes
cast.
2. If in an election of persons a majority is not obtained, a second free vote
shall be taken.
If again a majority is not obtained, further votes shall be taken until
either one person obtains a majority or the election is between two persons
only, both of whom receive an equal number of votes.
In the event of such further elections (not including the second free vote),
each election shall be between the persons who participated in the preceding
election, but with the exclusion of the person who received the smallest
number of votes in that preceding election. If in a preceding election more
than one person received the smallest number of votes, it shall be decided
by lot which of these persons should not participate in the new election.
If there is a tie of votes in an election between two persons, it shall be
decided by lot who is elected, without prejudice to the provision of the
following paragraph.
3. In the event of a tie of votes in an election from a binding list of
candidates, the candidate whose name appears first on the list shall be
elected.
4. If there is a tie of votes in a vote other than a vote for the election of
persons, the proposal is thus rejected.
5. All votes may be cast orally. The chairman is, however, entitled to decide a
vote by a secret ballot. If it concerns an election of persons, also a
person
<PAGE>
33
present at the meeting and entitled to vote can demand a vote by a secret
ballot. Voting by secret ballot shall take place by means of secret,
unsigned ballot papers.
6. Abstentions and invalid votes shall not be counted as votes.
7. Voting by acclamation shall be possible if none of the persons present and
entitled to vote objects against it.
8. The provisions of the articles 13 paragraphs 3 and 4, and 117, Book 2 of the
Civil Code also apply to the general meeting of shareholders.
Article 42. Meeting of holders of shares of one class.
- -----------------------------------------------------
1. Meetings of holders of shares of one class shall be convened by the Board of
Management, the Supervisory Board or the Priority. The meetings shall be
held as often as the Board of Management, the Supervisory Board or the
Priority deems necessary, and also whenever such is required in accordance
with the law or the articles of association.
2. With regard to these meetings, the provisions regarding the general meetings
of shareholders shall, to the extent possible, apply.
CHAPTER XII
- -----------
Convocations and notifications.
- ------------------------------
Article 43.
- ----------
1. All announcements for the general meetings of shareholders, all
notifications concerning dividend and other payments and all other
communications to shareholders shall be effected by means of a notice in a
national daily paper and in the Official Price List, without prejudice to
the provisions of article 96a paragraph 4, Book 2 of the Civil Code.
2. The expression "shareholders" in paragraph 1 shall include the beneficiaries
of a life interest and pledgees to which the voting rights on shares accrue.
CHAPTER XIII
- ------------
Amendment of the articles of association and dissolution.
- --------------------------------------------------------
Article 44. Amendment of the articles of association. Dissolution. Merger.
- --------------------------------------------------------------------------
Split-
- ------
<PAGE>
34
up.
- --
1. A resolution of the general meeting to amend the articles of association, to
dissolve the company or to merge or split the company within the meaning of
Title 7 of Book 2 of the Civil Code, shall only be adopted on a proposal of
the Priority.
2. When a proposal to amend the articles of association or to dissolve the
company is to be submitted to the general meeting, such must be mentioned in
the notice of the general meeting of shareholders and, if an amendment to
the articles of association is to be discussed, a copy of the proposal,
setting forth the text of the proposed amendment verbatim, shall at the same
time be deposited at the company's office and at the office of an
institution associated with the Amsterdam Exchanges N.V. to be designated in
the notice of the meeting or another payment office as referred to in the
Rules relating to Securities for inspection and shall be held available for
shareholders as well as for beneficiaries of a life interest and pledgees to
which the voting rights on share accrue, free of charge until the end of the
meeting.
Article 45. Liquidation.
- -----------------------
1. In the event of dissolution of the company by virtue of a resolution of the
general meeting, the Board of Management shall be charged with the
liquidation of the business of the company and the Supervisory Board with
the supervision thereof.
2. During liquidation, the provisions of these articles of association shall
remain in force as far as possible.
3. From the balance remaining after payment of debts there shall first, as far
as possible, be transferred to the holders of preference shares B, in
proportion to the total amount of the preference shares B held by each of
them:
a. an amount equal to any dividend arrears as referred to in article 31
paragraph 1, which shall then be calculated over the period ending on
<PAGE>
35
the day on which the liquidation payment shall become payable; and
b. the nominal amount paid on the preference shares B.
4. Out of the remainder shall be transferred to the holders of preference
shares A, in proportion to the total amount of the preference shares A held
by each of them:
a. an amount equal to any dividend arrears as referred to in article 31
paragraph 2, which shall then be calculated over the period ending on
the day on which the liquidation payment shall become payable; and
b. the nominal amount paid on the preference shares A as well as, to the
extent possible, the amount of share premium paid up on those shares if
it was decided so upon the first issuance of preference shares A.
5. Out of the remainder shall be transferred to the holders of priority shares,
in proportion to the total amount of the priority shares held by each of
them, the nominal amount of these shares.
6. The balance then remaining shall be transferred to the holders of ordinary
shares in proportion to the total amount of the ordinary shares held by each
of them.
7. The liquidation shall otherwise be subject to the provisions of Title 1,
Book 2 of the Civil Code.
CHAPTER XIV
- -----------
Final and transitional statements.
- ---------------------------------
Article 46. Authority to issue shares.
- -------------------------------------
The duration of the authority of the Board of Management to issue shares and to
grant rights to subscribe for shares as provided for in article 7, shall be
fixed on five years, effective as of the day this amendment of the company's
articles of association takes effect. The authorization concerns all non-issued
shares of the authorised capital as it reads now or shall read at some point in
time. The same applies to the authorization of the Board of Management to limit
or exclude the right of pre-emption, as provided for in article 8.
<PAGE>
36
Transitional provision.
- ----------------------
The [_________] ordinary shares with a nominal value of one Dutch Guilder (NLG
1,--) each issued and outstanding before this amendment takes effect, are as of
the moment this amendment takes effect converted into [_________] ordinary
shares with a nominal value of more than thirty Eurocents (EUR 0,30) each.
The appearer is known to me, notary.
THIS DEED
drawn up to be kept in the notary's custody was executed in Amsterdam on the
date first above written.
Before reading out, a concise summary of the contents of this instrument was
given to the appearer. He then declared that he had noted the contents and did
not want a full reading thereof. Thereupon, after limited reading, this
instrument was signed by the appearer and by me, notary.
<PAGE>
EXHIBIT 4.1
DEPOSIT AGREEMENT
DEPOSIT AGREEMENT, dated as of February ___, 1999, by and among (i) UNITED PAN-
EUROPE COMMUNICATIONS N.V., a company incorporated under the laws of The
Netherlands, and its successors (the "Company"), (ii) CITIBANK, N.A., a national
banking association organized under the laws of the United States of America
acting in its capacity as depositary, and any successor depositary hereunder
(the "Depositary"), and (iii) all Holders and Beneficial Owners of American
Depositary Shares evidenced by American Depositary Receipts issued hereunder
(all such capitalized terms as hereinafter defined).
W I T N E S S E T H T H A T:
WHEREAS, the Company has duly authorized and has outstanding Ordinary Shares,
nominal value of Euro 0.30 each (the "Shares"), which are deposited with
NECIGEF (as defined below) and listed for trading on the Amsterdam Stock
Exchange; and
WHEREAS, the Company desires to establish with the Depositary an ADR facility to
provide for the deposit of the Shares and the creation of American Depositary
Shares representing the Shares so deposited and for the execution and delivery
of American Depositary Receipts evidencing such American Depositary Shares; and
WHEREAS, the Depositary is willing to act as the depositary for such facility
and the Company is willing to engage the Depository upon the terms set forth in
this Deposit Agreement; and
WHEREAS, the American Depositary Receipts evidencing the American Depositary
Shares issued pursuant to the terms of this Deposit Agreement are to be
substantially in the form of Exhibit A attached hereto, with appropriate
insertions, modifications and omissions, as hereinafter provided in this Deposit
Agreement; and
WHEREAS, the American Depositary Shares to be issued pursuant to the terms of
this Deposit Agreement are to be quoted on the NASDAQ National Market System
under the symbol "UPCOY"; and
WHEREAS, the Board of Management of the Company (or an authorized committee
thereof) has duly approved the establishment of an ADR facility upon the terms
set forth in this Deposit Agreement, the execution and delivery of this Deposit
Agreement on behalf of the Company, and the actions of the Company and the
transactions contemplated herein.
NOW, THEREFORE, in consideration of the premises, the parties hereto agree as
follows:
1
<PAGE>
ARTICLE I
DEFINITIONS
All capitalized terms used, but not otherwise defined, herein shall have the
meanings set forth below, unless otherwise clearly indicated:
SECTION 1.1. "Affiliate" shall have the meaning assigned to such term by the
---------
Commission (as hereinafter defined) under Regulation C promulgated under the
Securities Act (as hereinafter defined).
SECTION 1.2. "American Depositary Share(s)" and "ADS(s)" American Depositary
-----------------------------------------
Shares(s) shall mean with respect to any American Depositary Receipt, the rights
and interests in the Deposited Securities granted to the Holders and Beneficial
Owners pursuant to the terms and conditions of this Deposit Agreement and the
American Depositary Receipts issued hereunder. Each American Depositary Share
shall represent one Share, until there shall occur a distribution upon Deposited
Securities referred to in Section 4.2 or a change in Deposited Securities
referred to in Section 4.11 with respect to which additional American Depositary
Shares are not issued, and thereafter each American Depositary Share shall
represent the Shares or Deposited Securities specified in such Sections.
SECTION 1.3. "ADS Record Date" shall have the meaning given to such term in
---------------
Section 4.9.
SECTION 1.4. "Beneficial Owner" shall mean as to any ADS, any person or entity
----------------
having a beneficial interest deriving from the ownership of such ADS. A
Beneficial Owner may or may not be the Holder of the ADR(s) evidencing such
ADSs. A Beneficial Owner shall be able to exercise any right or receive any
benefit hereunder solely through the person who is the Holder of the ADR(s)
evidencing the ADSs owned by such Beneficial Owner.
SECTION 1.5. "Business Day" shall mean any day on which both the banks in
------------
Amsterdam, The Netherlands and the banks in New York are open for business.
SECTION 1.6. "Commission" shall mean the Securities and Exchange Commission of
----------
the United States or any successor governmental agency in the United States.
SECTION 1.7. "Company" shall mean United Pan-Europe Communications N.V., a
-------
company incorporated and existing under the laws of The Netherlands, and its
successors.
SECTION 1.8. "Custodian" shall mean, as of the date hereof, Citibank N.A.,
---------
Amsterdam, having its principal office at Europlaza, Hoogoordreef 54B, 1101
B.E., Amsterdam Z.O., The Netherlands, as the custodian for the purposes of this
Deposit Agreement, and any other entity that may be appointed by the Depositary
pursuant to the terms of Section 5.5 as successor, substitute or additional
custodian hereunder, as the context shall require. The term "Custodians" shall
mean all custodians, collectively.
2
<PAGE>
SECTION 1.9. "Deliver" and "Delivery" shall mean, when used in respect of
------- --------
American Depositary Shares, Receipts, Deposited Securities and Shares, the
physical delivery of the certificate representing such security, or the
electronic delivery of such security by means of book-entry transfer, if
available.
SECTION 1.10. "Deposit Agreement" shall mean this Deposit Agreement and all
-----------------
exhibits hereto, as the same may from time to time be amended and supplemented
in accordance with the terms hereof.
SECTION 1.11. "Depositary" shall mean Citibank, N.A., a national banking
----------
association organized under the laws of the United States of America, in its
capacity as depositary under the terms of this Deposit Agreement, and any
successor depositary hereunder.
SECTION 1.12. "Deposited Securities" shall mean Shares at any time deposited
--------------------
under this Deposit Agreement and any and all other securities, property and cash
held by the Depositary or the Custodian in respect thereof, subject, in the case
of cash, to the provisions of Section 4.8. The collateral delivered in
connection with Pre-Release Transactions described in Section 5.10 hereof shall
not constitute Deposited Securities.
SECTION 1.13. "Dollars" and "$" shall refer to the lawful currency of the
------- -
United States.
SECTION 1.14. "DTC" shall mean The Depository Trust Company, a national
---
clearinghouse and the central book-entry settlement system for securities traded
in the United States and, as such, the custodian for the securities of DTC
Participants (as hereinafter defined) maintained in DTC, and any successor
thereto.
SECTION 1.15. "DTC Participant" shall mean any financial institution (or any
---------------
nominee of such institution) having one or more participant accounts with DTC
for receiving, holding and delivering the securities and cash held in DTC.
SECTION 1.16. "Exchange Act" shall mean the United States Securities Exchange
------------
Act of 1934, as from time to time amended.
SECTION 1.17. "Foreign Currency" shall mean currency other than Dollars.
----------------
"Holder" shall mean the person in whose name a Receipt is
------
registered on the books of the Depositary (or the Registrar, if any) maintained
for such purpose. A Holder may or may not be a Beneficial Owner. If a Holder
is not the Beneficial Owner of the ADSs evidenced by the Receipt registered in
its name, such person shall be deemed to have all requisite authority to act on
behalf of the Beneficial Owners of such ADSs.
"NECIGEF" shall mean The Netherlands Central Institute for Giro
-------
Securities (Nederlands Centraal Instituut voor Giraal ffectenverkeer B.V.),
the central depository for equity securities in The Netherlands, or any
successor entity thereto.
SECTION 1.20 "NECIGEF Participant" shall mean any financial institution which
is a participant having an account at NECIGEF.
3
<PAGE>
SECTION 1.21. "Pre-Release Transaction" shall have the meaning set forth in
-----------------------
Section 5.10 hereof.
SECTION 1.22. "Principal Office" when used with respect to the Depositary,
----------------
shall mean the principal office of the Depositary at which at any particular
time its depositary receipts business shall be administered, which, at the date
of this Deposit Agreement, is located at 111 Wall Street, New York, New York
10043, U.S.A.
SECTION 1.23. "Receipt(s)"; "American Depositary Receipt(s)" and "ADR(s)" shall
---------------------------------------------------------
mean the certificate(s) issued by the Depositary to evidence the American
Depositary Shares issued under the terms of this Deposit Agreement, as such
Receipts may be amended from time to time in accordance with the provisions of
this Deposit Agreement. A Receipt may evidence any number of American Depositary
Shares and may, in the case of American Depositary Shares held through a central
depository such as DTC, be in the form of a "Balance Certificate."
SECTION 1.24. "Registrar" shall mean the Depositary or any bank or trust
---------
company having an office in the Borough of Manhattan, The City of New York,
which shall be appointed by the Depositary to register issuances and transfers
of Receipts as herein provided, and shall include any co-registrar appointed by
the Depositary for such purposes. Registrars (other than the Depositary) may be
removed and substitutes appointed by the Depositary. Each Registrar (other than
the Depositary) appointed pursuant to this Deposit Agreement shall be required
to give notice in writing to the Depositary accepting such appointment and
agreeing to be bound by the applicable terms of this Deposit Agreement.
SECTION 1.25. "Restricted Securities" shall mean Shares, or American Depositary
---------------------
Shares representing such Shares, which (i) have been acquired directly or
indirectly from the Company or any of its Affiliates in a transaction or chain
of transactions not involving any public offering and subject to resale
limitations under the Securities Act or the rules issued thereunder, or (ii) are
held by an officer or director (or persons performing similar functions) or
other Affiliate of the Company, or (iii) are subject to other restrictions on
sale or deposit under the laws of the United States, The Netherlands, or under a
shareholder agreement or the Articles of Association of the Company or under the
regulations of an applicable securities exchange unless, in each case, such
Shares are being sold to persons other than an Affiliate of the Company in a
transaction (i) covered by an effective resale registration statement or (ii)
exempt from the registration requirements of the Securities Act (as hereinafter
defined), and the Shares are not, when held by such person, Restricted
Securities.
SECTION 1.26. "Securities Act" shall mean the United States Securities Act of
--------------
1933, as from time to time amended.
SECTION 1.27. "Share Registrar" shall mean the Company or a depository
---------------
institution organized under the laws of the Netherlands, which carries out the
duties of registrar for the Shares or any successor as Share Registrar for such
Shares appointed by the Company.
4
<PAGE>
SECTION 1.28. "Shares" shall mean the Company's Ordinary Shares, nominal value
------
Euro 0.30 per share, validly issued and outstanding and fully paid
and may, if the Depositary so agrees after consultation with the Company,
include evidence of the right to receive Shares; provided that in no event shall
Shares include evidence of the right to receive Shares with respect to which the
full purchase price has not been paid or Shares as to which preemptive rights
have theretofore not been validly waived or exercised; provided further,
however, that, if there shall occur any change in nominal value, split-up,
consolidation, reclassification, conversion or any other event described in
Section 4.11 in respect of the Shares of the Company, the term "Shares" shall
thereafter, to the extent permitted by law, represent the successor securities
resulting from such change in nominal value, split-up, consolidation, exchange,
conversion, reclassification or event.
SECTION 1.29. "United States" shall have the meaning assigned to it in
-------------
Regulation S as promulgated by the Commission under the Securities Act.
ARTICLE II
APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS;
DEPOSIT OF SHARES; EXECUTION
AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS
SECTION 2.1. Appointment of Depositary. The Company hereby appoints the
-------------------------
Depositary as depositary for the Deposited Securities and hereby authorizes and
directs the Depositary to act in accordance with the terms set forth in this
Deposit Agreement. Each Holder and each Beneficial Owner, upon acceptance of
any ADSs (or any interest therein) issued in accordance with the terms of this
Deposit Agreement, shall be deemed for all purposes to (a) be a party to and
bound by the terms of this Deposit Agreement and (b) appoint the Depositary its
attorney-in-fact, with full power to delegate, to act on its behalf and to take
any and all actions contemplated in this Deposit Agreement, to adopt any and all
procedures necessary to comply with applicable law and to take such action as
the Depositary in its sole discretion may deem necessary or appropriate to carry
out the purposes of this Deposit Agreement (the taking of such actions to be the
conclusive determinant of the necessity and appropriateness thereof).
SECTION 2.2. Form and Transferability of Receipts.
------------------------------------
(a) Form. American Depositary Shares shall be evidenced by definitive Receipts
----
which shall be engraved, printed, lithographed or produced in such other
manner as may be agreed upon by the Company and the Depositary. The
Receipts shall be substantially in the form set forth in Exhibit A to this
---------
Deposit Agreement, with any appropriate insertions, modifications and
omissions, in each case, as otherwise contemplated in the Deposit
Agreement. Receipts shall be (i) dated, (ii) signed by the manual or
facsimile signature of a duly authorized signatory of the Depositary, (iii)
countersigned by the manual or facsimile signature of a duly authorized
signatory of the Registrar, and (iv) registered in the books maintained by
the Registrar for the registration of the issuance and transfer of
Receipts. No Receipt and no American Depositary Share evidenced thereby
shall be entitled to any benefits under this Deposit Agreement or be
5
<PAGE>
valid or enforceable for any purpose against the Depositary or the Company,
unless such Receipt shall have been so dated, signed, countersigned and
registered. Receipts bearing the facsimile signature of a duly-authorized
signatory of the Depositary or the Registrar, who at the time of signature
was a duly authorized signatory of the Depositary or the Registrar, as the
case may be, shall bind the Depositary, notwithstanding the fact that such
signatory has ceased to be so authorized prior to the delivery of such
Receipt by the Depositary. The Receipts shall bear a CUSIP number that is
different from any CUSIP number that was, is or may be assigned to any
depositary receipts previously or subsequently issued pursuant to any other
arrangement between the Depositary (or any other depositary) and the
Company which are not Receipts issued hereunder.
(b) Legends. The Receipts may be endorsed with or have incorporated in the
-------
text thereof such legends or recitals or changes not inconsistent with the
provisions of this Deposit Agreement (i) as may be necessary to enable the
Depositary to perform its obligations hereunder, (ii) as may be required to
comply with any applicable law or regulations, or with the rules and
regulations of any securities exchange or market upon which American
Depositary Shares may be traded, listed or quoted or to conform with any
usage with respect thereto, (iii) as may be necessary to indicate any
special limitations or restrictions to which any particular Receipts or
ADSs are subject by reason of the date of issuance of the Deposited
Securities or otherwise, or (iv) as may be required by any book-entry
system in which the ADSs are held.
(c) Title. Subject to the limitations contained herein and in the Receipt,
-----
title to a Receipt (and to each ADS evidenced thereby) shall be
transferable by delivery of the Receipt with the same effect as a
certificated security under the laws of the State of New York, provided
that such Receipt has been properly endorsed or is accompanied by proper
instruments of transfer. Notwithstanding any notice to the contrary, the
Depositary may deem and treat the Holder of a Receipt (that is, the person
in whose name a Receipt is registered on the books of the Depositary) as
the absolute owner thereof for all purposes. The Depositary shall have no
obligation nor be subject to any liability under this Deposit Agreement or
any Receipt to any holder of a Receipt or any Beneficial Owner unless such
holder is the Holder of such Receipt registered on the books of the
Depositary or, in the case of a Beneficial Owner, such Beneficial Owner or
the Beneficial Owner's representative is the Holder registered on the books
of the Depositary.
(d) Book-Entry Systems. The Depositary shall make arrangements for the
-------------------
acceptance of the American Depositary Shares into DTC. A single ADR in the
form of a "Balance Certificate" will evidence all ADSs held through DTC and
will be registered in the name of the nominee for DTC (currently "Cede &
Co."). As such, the nominee for DTC will be the only "Holder" of the ADR
evidencing all ADSs held through DTC. Each Beneficial Owner of ADSs held
through DTC must rely upon the procedures of DTC and the DTC Participants
to exercise or be entitled to any rights attributable to such ADSs. The
DTC Participants shall for all purposes be deemed to have all requisite
power and authority to act on behalf of the Beneficial Owners of the ADSs
held in the DTC Participants' respective accounts in DTC and the Depositary
shall for all purposes be authorized to rely upon any instructions and
information given to it by DTC Participants on behalf of Beneficial Owners
of ADSs. So long as ADSs are held through DTC or unless otherwise required
by law, ownership of beneficial interests in the ADR registered in the
6
<PAGE>
name of the nominee for DTC will be shown on, and transfers of such ownership
will be effected only through, records maintained by (i) DTC (or its nominee),
or (ii) DTC Participants (or their nominees).
SECTION 2.3. Deposit with Custodian. Subject to the terms and conditions of
----------------------
this Deposit Agreement and applicable law, Shares or evidence of rights to
receive Shares (other than Restricted Securities) may be deposited by a NECIGEF
Participant (including the Depositary in its individual capacity but subject,
however, in the case of the Company or any Affiliate of the Company, to Section
5.7 hereof) at any time, whether or not the transfer books of NECIGEF or the
Share Registrar, if any, are closed, by electronic Delivery of the Shares to the
Custodian, and (A) appropriate instruments of transfer or endorsement, in a form
satisfactory to the Custodian (B) such certifications and payments (including,
without limitation, the Depositary's fees and related charges) and evidence of
such payments (including, without limitation, stamping or otherwise marking such
Shares by way of receipt) as may be required by the Depositary or the Custodian
in accordance with the provisions of this Deposit Agreement and applicable law,
(C) if the Depositary so requires, a written order directing the Depositary to
execute and deliver to, or upon the written order of, the person(s) stated in
such order a Receipt or Receipts for the number of American Depositary Shares
representing the Shares so deposited, (D) evidence satisfactory to the
Depositary (which may be an opinion of counsel) that all necessary approvals
have been granted by, or there has been compliance with the rules and
regulations of, any applicable governmental agency in The Netherlands, and (E)
if the Depositary so requires, (i) an agreement, assignment or instrument
satisfactory to the Depositary or the Custodian which provides for the prompt
transfer by any person who delivers to the Custodian of any distribution, or
right to subscribe for additional Shares or to receive other property in respect
of any such deposited Shares or, in lieu thereof, such indemnity or other
agreement as shall be satisfactory to the Depositary or the Custodian and (ii)
if the Shares are registered in the name of the person on whose behalf they are
presented for deposit, a proxy or proxies entitling the Custodian to exercise
voting rights in respect of the Shares for any and all purposes until the Shares
so deposited are registered in the name of the Depositary, the Custodian or any
nominee. Without limiting any other provision of this Deposit Agreement, the
Depositary shall instruct the Custodian not to, and the Depositary shall not
knowingly, accept for deposit (a) any Restricted Securities nor (b) any
fractional Shares or fractional Deposited Securities nor (c) a number of Shares
or Deposited Securities which upon application of the ADS to Shares ratio would
give rise to fractional ADSs. No Share shall be accepted for deposit unless
accompanied by evidence, if any is required by the Depositary, that is
reasonably satisfactory to the Depositary or the Custodian that all conditions
to such deposit have been satisfied by the person depositing such Shares under
the laws and regulations of The Netherlands and any necessary approval has been
granted by any governmental body in The Netherlands, if any, which is then
performing the function of the regulator of currency exchange. The Depositary
may issue Receipts against evidence of rights to receive Shares from the
Company, any agent of the Company or any custodian, registrar, transfer agent,
clearing agency or other entity involved in ownership or transaction records in
respect of the Shares. Such evidence of rights shall consist of written blanket
or specific guarantees of ownership of Shares furnished by the Company or any
such
7
<PAGE>
custodian, registrar, transfer agent, clearing agency or other entity involved
in ownership or transaction records in respect of the Shares.
SECTION 2.4. Registration of Shares. The Depositary shall instruct the
----------------------
Custodian upon each delivery of certificates representing registered Shares
being deposited hereunder with the Custodian (or other Deposited Securities
pursuant to Article IV hereof), together with the other documents above
specified, to present such certificate or certificates, together with the
appropriate instrument or instruments of transfer or endorsement, duly stamped,
to the Share Registrar for transfer and registration of the Shares (as soon as
transfer and registration can be accomplished and at the expense of the person
for whom the deposit is made) in the name of the Depositary, the Custodian or a
nominee of either. Deposited Securities shall be held by the Depositary or by a
Custodian for the account and to the order of the Depositary or a nominee in
each case on behalf of the Holders and Beneficial Owners, at such place or
places as the Depositary or the Custodian shall determine.
Without limitation of the foregoing, the Depositary shall not knowingly accept
for deposit under this Deposit Agreement any Shares or other Deposited
Securities required to be registered under the provisions of the Securities Act,
unless a registration statement is in effect as to such Shares or other
Deposited Securities, or any Shares or Deposited Securities the deposit of which
would violate any provisions of the Articles of Association of the Company.
SECTION 2.5. Execution and Delivery of Receipts. The Depositary has made
----------------------------------
arrangements with the Custodian to confirm to the Depositary (i) that a deposit
of Shares has been made pursuant to Section 2.3 hereof, (ii) that any such
Deposited Securities have been recorded in the name of the Depositary, Custodian
or a nominee of either in the books of NECIGEF, (iii) that all required
documents have been received, and (iv) the person or persons to whom or upon
whose order American Depositary Shares are deliverable in respect thereof and
the number of American Depositary Shares to be so delivered thereby. Such
notification may be made by letter, cable, telex, SWIFT message or, at the risk
and expense of the person making the deposit, by facsimile or other means of
electronic transmission. Upon receiving such notice from the custodian and
subject to the terms and conditions of this Deposit Agreement the Depositary
shall issue the American Depositary Shares representing the Shares so deposited
to or upon the order of the person(s) named in the notice delivered to the
Depositary and shall execute and deliver at its Principal Office Receipt(s)
registered in the name or names requested by such person(s) and evidencing the
aggregate number of American Depositary Shares to which such person(s) are
entitled, but only upon payment to the Depositary of the charges of the
Depositary for accepting a deposit, issuing American Depositary Shares and
executing and delivering such Receipt(s) (as set forth in section 5.9 and
Exhibit B hereto) and all taxes and governmental charges and fees payable in
connection with such deposit and the transfer of the Shares and the issuance of
the Receipt(s). The Depositary shall only issue American Depositary Shares in
whole numbers and deliver American Depositary Receipts evidencing whole numbers
of American Depositary Shares. Nothing herein shall prohibit any Pre-Release
Transaction upon the terms set forth in this Deposit Agreement.
8
<PAGE>
SECTION 2.6. Transfer of Receipts; Combination and Split-up of Receipts.
----------------------------------------------------------
(a) Transfer. Subject to the terms and conditions of the applicable Receipts,
--------
this Deposit Agreement and the U.S. securities laws, the Depositary shall
register as promptly as practicable transfers of Receipts on its books, upon
surrender at the Principal Office of the Depositary of a Receipt by the Holder
thereof in person or by duly authorized attorney, properly endorsed or
accompanied by proper instruments of transfer (including signature guarantees in
accordance with standard industry practice) and duly stamped as may be required
by the laws of the State of New York and of the United States of America.
Subject to the terms and conditions of this Deposit Agreement, including payment
of the applicable fees and charges of the Depositary set forth in Section 5.9
and Exhibit B hereto, the Depositary shall execute and, if the Depositary's
signature is by facsimile, the Registrar shall manually countersign, new
Receipt(s) and deliver the same to or upon the order of the person entitled
thereto evidencing the same aggregate number of American Depositary Shares as
those evidenced by the Receipt(s) surrendered.
(b) Combination & Split Up. Subject to the terms and conditions of the
----------------------
applicable Receipt, this Deposit Agreement and the U.S. securities laws, the
Depositary shall, upon surrender of a Receipt or Receipts for the purpose of
effecting a split-up or combination of such Receipt or Receipts and upon payment
to the Depositary of the applicable fees and charges set forth in Section 5.9
and Exhibit B hereto, (i) execute and, if the Depositary's signature is by
facsimile, the Registrar shall manually countersign, a new Receipt or Receipts
for any number of American Depositary Shares requested, but evidencing the same
aggregate number of American Depositary Shares as the Receipt or Receipts
surrendered, and (ii) deliver the same to or upon the order of the person
entitled thereto as promptly as practicable.
(c) Co-Transfer Agents. The Depositary, after consultation with the Company,
------------------
may appoint one or more co-transfer agents for the purpose of effecting
transfers, combinations and split-ups of Receipts at designated transfer offices
on behalf of the Depositary. In carrying out its functions, a co-transfer agent
may require evidence of authority and compliance with applicable laws and other
requirements by Holders or persons entitled to such Receipts and will be
entitled to protection and indemnity to the same extent as the Depositary. Such
co-transfer agents may be removed and substitutes appointed by the Depositary.
Each co-transfer agent appointed under this Section 2.6 (other than the
Depositary) shall give notice in writing to the Depositary accepting such
appointment and agreeing to be bound by the applicable terms of this Deposit
Agreement.
SECTION 2.7. Surrender of ADSs and Withdrawal of Deposited Securities. Upon
--------------------------------------------------------
surrender, at the Principal Office of the Depositary, of ADSs for the purpose of
withdrawal of the Deposited Securities represented thereby, and upon payment of
(i) the fees and charges of the Depositary for the making of withdrawals of
Deposited Securities and cancellation of Receipts (as set forth in Section 5.9
and Exhibit B hereof) and (ii) all applicable taxes and governmental charges
payable in connection with such surrender and withdrawal, and subject to the
terms and conditions of this Deposit Agreement, the Receipt(s) evidencing such
ADSs, the Company's Articles of Association, Section 7.8 hereof and any other
provisions of or governing the Deposited Securities, other applicable laws now
or hereafter in effect and the rules of NECIGEF,
9
<PAGE>
the Holder of such ADSs shall be entitled to Delivery, by electronic transfer
recorded on the transfer books of NECIGEF to the NECIGEF Participant designated
in such Holder's order, of the Deposited Securities at the time represented by
the ADSs so surrendered and delivery of any other securities, property and cash
to which such Holder is then entitled in respect of such ADSs. ADSs may be
surrendered for the purpose of withdrawing Deposited Securities by delivery of a
Receipt evidencing such ADSs (if held in registered form) or by book-entry
delivery of such ADSs to the Depositary.
A Receipt surrendered for such purposes shall, if so required by the Depositary,
be properly endorsed in blank or accompanied by proper instruments of transfer
in blank. If the Depositary so requires, the Holder of any ADSs surrendered for
the purpose of withdrawing the Deposited Securities represented thereby shall
execute and deliver to the Depositary a written order directing the Depositary
to cause the Deposited Securities being withdrawn to be Delivered to the NECIGEF
Participant designated in such order.
Upon receipt by the Depositary of ADSs surrendered for the purpose of withdrawal
of Deposited Securities, the Depositary shall direct the Custodian to Deliver as
promptly as practicable by electronic transfer recorded in the books of NECIGEF
subject to Sections 2.8, 3.1, 3.2, 5.9, and to the other terms and conditions of
this Deposit Agreement, the Receipt(s) evidencing such ADSs, the Articles of
Association of the Company, and the provisions of or governing the Deposited
Securities, applicable laws and the rules of NECIGEF, now or hereafter in
effect, the NECIGEF Participant designated in the written order delivered to
the Depositary for such purpose, the Deposited Securities represented by such
American Depositary Shares together with any proper documents of or relating to
title of the Deposited Security. The Depositary may make delivery at the
Principal Office of the Depositary of any dividends or cash distributions with
respect to the Deposited Securities represented by such American Depositary
Shares, or of any proceeds of sale of any dividends, distributions or rights,
which may at the time be held by the Depositary.
The Depositary shall not accept for surrender ADSs representing less than one
Share. In the case of the surrender of ADSs representing a number other than a
whole number of Shares, the Depositary shall cause ownership of the appropriate
whole number of Shares to be Delivered in accordance with the terms hereof, and
shall, at the discretion of the Depositary, either (i) return to the person
surrendering such ADSs the number of ADSs representing any remaining fractional
Share, or (ii) sell or cause to be sold the fractional Shares represented by the
ADSs surrendered and remit the proceeds of such sale (net of (a) applicable fees
and charges of, and expenses incurred by, the Depositary and (b) taxes withheld)
to the person surrendering the ADSs.
At the request, risk and expense of any Holder so surrendering ADSs, and for the
account of such Holder, the Depositary shall direct the Custodian to forward (to
the extent permitted by law) any cash or other property (other than securities)
held in respect of the Deposited Securities and forward any document of or
relating to title to the Deposited Securities represented by such ADSs to the
Depositary for delivery at the Principal Office of the Depositary. Such
direction shall be given by letter or, at the request, risk and expense of such
Holder, by cable, telex or facsimile transmission.
10
<PAGE>
SECTION 2.8. Limitations on Execution and Delivery, Transfer, etc. of Receipts;
------------------------------------------------------------------
Suspension of Delivery, Transfer, etc.
- -------------------------------------
(a) Additional Requirements. As a condition precedent to the execution and
-----------------------
delivery, registration, registration of transfer, split-up, combination or
surrender of any Receipt, the delivery of any distribution thereon or withdrawal
of any Deposited Securities, the Depositary or the Custodian may require (i)
payment from the depositor of Shares or presenter of ADSs or of a Receipt of a
sum sufficient to reimburse it for any tax or other governmental charge and any
stock transfer or registration fee with respect thereto (including any such tax
or charge and fee with respect to Shares being deposited or withdrawn) and
payment of any applicable fees and charges of the Depositary as provided in
Section 5.9 and Exhibit B hereof, (ii) the production of proof satisfactory to
it as to the identity and genuineness of any signature or any other matter
contemplated by Section 3.1 hereof and (iii) compliance with (A) any laws or
governmental regulations relating to the execution and delivery of Receipts or
American Depositary Shares or to the withdrawal of Deposited Securities and (B)
such reasonable regulations as the Depositary and the Company may establish
consistent with the provisions of this Deposit Agreement and applicable law.
(b) Additional Limitations. The issuance of ADSs against deposits of Shares
----------------------
generally or against deposits of particular Shares may be suspended, or the
issuance of ADSs against the deposit of particular Shares may be withheld, or
the registration of transfer of Receipts in particular instances may be refused,
or the registration of transfers of Receipts generally may be suspended, during
any period when the transfer books of the Company, the Depositary, a Registrar
or the Share Registrar are closed or if any such action is deemed necessary or
advisable by the Depositary or the Company, in good faith, at any time or from
time to time because of any requirement of law, any government or governmental
body or commission or any securities exchange on which the ADSs or Shares are
listed, or under any provision of this Deposit Agreement or provisions of, or
governing, the Deposited Securities, or any meeting of shareholders of the
Company or for any other reason, subject, in all cases, to Section 7.8 hereof.
(c) Regulatory Restrictions. Notwithstanding any provision of this Deposit
-----------------------
Agreement or any Receipt to the contrary, Holders are entitled to surrender
outstanding ADSs to withdraw the Deposited Securities at any time subject only
to (i) temporary delays caused by closing the transfer books of the Depositary
or the Company or the deposit of Shares in connection with voting at a
shareholders' meeting or the payment of dividends, (ii) the payment of fees,
taxes and similar charges, (iii) compliance with any U.S. or foreign laws or
governmental regulations relating to the Receipts or to the withdrawal of the
Deposited Securities, and (iv) other circumstances specifically contemplated by
Section I.A.(l) of the General Instructions to Form F-6 (as such General
Instructions may be amended from time to time).
SECTION 2.9. Lost Receipts, etc. In case any Receipt shall be mutilated,
------------------
destroyed, lost, or stolen, the Depositary shall execute and deliver a new
Receipt of like tenor at the expense of the Holder (a) in the case of a
mutilated Receipt, in exchange of and substitution for such mutilated Receipt
upon cancellation thereof, or (b) in lieu of and in substitution for such
destroyed, lost, or
11
<PAGE>
stolen Receipt, after the Holder thereof (i) has submitted to the Depositary a
written request for such exchange and substitution before the Depositary has
notice that the Receipt has been acquired by a bona fide purchaser, (ii) has
provided such security or indemnity (including an indemnity bond) as may be
required by the Depositary to save it and any of its agents harmless, and (iii)
has satisfied any other reasonable requirements imposed by the Depositary,
including, without limitation, evidence satisfactory to the Depositary of such
destruction, loss or theft of such Receipt, the authenticity thereof and the
Holder's ownership thereof.
SECTION 2.10. Cancellation and Destruction of Surrendered Receipts; Maintenance
-----------------------------------------------------------------
of Records. All Receipts surrendered to the Depositary shall be canceled by the
- ----------
Depositary. Cancelled Receipts shall not be entitled to any benefits under this
Deposit Agreement or be valid or enforceable against the Depositary for any
purpose. The Depositary is authorized to destroy Receipts so canceled, provided
the Depositary maintains a record of all destroyed Receipts.
SECTION 2.11. Partial Entitlement ADSs. In the event any Shares are deposited
------------------------
which entitle the holders thereof to receive a per-share distribution or other
entitlement in an amount different from the Shares then on deposit (the Shares
then on deposit collectively, "Full Entitlement Shares" and the Shares with
different entitlement, "Partial Entitlement Shares"), the Depositary shall (i)
cause the Custodian to hold Partial Entitlement Shares separate and distinct
from Full Entitlement Shares, and (ii) subject to the terms of this Agreement,
issue ADSs and deliver ADRs representing Partial Entitlement Shares which are
separate and distinct from the ADSs and ADRs representing Full Entitlement
Shares, by means of separate CUSIP numbering and legending (if necessary)
("Partial Entitlement ADSs/ADRs" and "Full Entitlement ADSs/ADRs",
respectively). If and when Partial Entitlement Shares become Full Entitlement
Shares, the Depositary shall (a) give notice thereof to Holders of Partial
Entitlement ADSs and give Holders of Partial Entitlement ADRs the opportunity to
exchange such Partial Entitlement ADRs for Full Entitlement ADRs, (b) cause the
Custodian to transfer the Partial Entitlement Shares into the account of the
Full Entitlement Shares, and (c) take such actions as are necessary to remove
the distinctions between (i) the Partial Entitlement ADRs and ADSs, on the one
hand, and (ii) the Full Entitlement ADRs and ADSs on the other. Holders and
Beneficial Owners of Partial Entitlement ADSs shall only be entitled to the
entitlements of Partial Entitlement Shares. Holders and Beneficial Owners of
Full Entitlement ADSs shall be entitled only to the entitlements of Full
Entitlement Shares. All provisions and conditions of this Agreement shall apply
to Partial Entitlement ADRs and ADSs to the same extent as Full Entitlement ADRs
and ADSs, except as contemplated by this Section 2.11. The Depositary is
authorized to take any and all other actions as may be necessary (including,
without limitation, making the necessary notations on Receipts) to give effect
to the terms of this Section 2.11. The Company agrees to give timely written
notice to the Depositary if any Shares issued or to be issued are Partial
Entitlement Shares and shall assist the Depositary with the establishment of
procedures enabling the identification of Partial Entitlement Shares upon
Delivery to the Custodian.
12
<PAGE>
ARTICLE III
CERTAIN OBLIGATIONS OF HOLDERS AND BENEFICIAL OWNERS OF
RECEIPTS
SECTION 3.1. Proofs, Certificates and Other Information. Any person presenting
------------------------------------------
Shares for deposit, any Holder and any Beneficial Owner may be required, and
every Holder and Beneficial Owner agrees, from time to time to provide to the
Depositary and the Custodian such proof of citizenship or residence, taxpayer
status, payment of all applicable taxes or other governmental charges, exchange
control approval, legal or beneficial ownership of ADSs and Deposited
Securities, compliance with applicable laws and the terms of this Deposit
Agreement and the provisions of, or governing, the Deposited Securities, to
execute such certifications and to make such representations and warranties, and
to provide such other information and documentation (or, in the case of Shares
in registered form presented for deposit, such information relating to the
registration on the books of the Company or of the appointed agent of the
Company for the registration and transfer of Shares) as the Depositary or the
Custodian may deem reasonably necessary or proper or as the Company may
reasonably require by written request to the Depositary consistent with its
obligations hereunder. The Depositary and the Registrar, as applicable, may
withhold the execution or delivery or registration of transfer of any Receipt or
the distribution or sale of any dividend or distribution of rights or of the
proceeds thereof or, to the extent not limited by the terms of Section 7.8
hereof, the delivery of any Deposited Securities until such proof or other
information is filed or such certifications are executed, or such
representations are made, or such other documentation or information provided,
in each case to the Depositary's, the Registrar's and the Company's
satisfaction. The Depositary shall provide the Company, in a timely manner, with
copies or originals if necessary and appropriate of (i) any such proofs of
citizenship or residence, taxpayer status, or exchange control approval which it
receives from Holders and Beneficial Owners, and (ii) any other information or
documents which the Company may reasonably request and which the Depositary
shall request and receive from any Holder or Beneficial Owner or any person
presenting Shares for deposit or ADSs for cancellation and withdrawal. Nothing
herein shall obligate the Depositary to (i) obtain any information for the
Company if not provided by the Holders or Beneficial Owners or (ii) verify or
vouch for the accuracy of the information so provided by the Holders or
Beneficial Owners.
SECTION 3.2. Liability for Taxes and Other Charges. If any tax or other
-------------------------------------
governmental charge shall become payable with respect to any ADR or any
Deposited Securities or American Depositary Shares, such tax or other
governmental charge shall be payable by the Holders and Beneficial Owners to the
Depositary. The Company, the Custodian and/or the Depositary may withhold or
deduct from any distributions made in respect of Deposited Securities and may
sell for the account of a Holder and/or Beneficial Owner any or all of the
Deposited Securities and apply such distributions and sale proceeds in payment
of such taxes (including applicable interest and penalties) or charges, the
Holder and the Beneficial Owner remaining liable for any deficiency. The
Custodian may refuse the deposit of Shares and the Depositary may refuse to
issue ADSs, to deliver ADRs, register the transfer, split-up or combination of
ADRs and (subject to Section 7.8) the withdrawal of Deposited Securities until
payment in full of such tax, charge, penalty or interest is received. Every
Holder and Beneficial Owner agrees to indemnify the
13
<PAGE>
Depositary, the Company, the Custodian, and any of their agents, officers,
employees and Affiliates for, and to hold each of them harmless from, any claims
with respect to taxes (including applicable interest and penalties thereon)
arising from any tax benefit obtained for such Holder and/or Beneficial Owner.
SECTION 3.3. Representations and Warranties on Deposit of Shares. Each person
---------------------------------------------------
depositing Shares under the Deposit Agreement shall be deemed thereby to
represent and warrant that (i) such Shares are duly authorized, validly issued,
fully paid, non-assessable and legally obtained by such person, (ii) all
preemptive (and similar) rights, if any, with respect to such Shares have been
validly waived or exercised, (iii) the person making such deposit is duly
authorized so to do and (iv) the Shares presented for deposit are free and clear
of any lien, encumbrance, security interest, charge, mortgage or adverse claim,
and are not, and the American Depositary Shares issuable upon such deposit will
not be, Restricted Securities and the Shares presented for deposit have not been
stripped of any rights or entitlements. Such representations and warranties
shall survive the deposit and withdrawal of Shares, the issuance and
cancellation of American Depositary Shares in respect thereof and the transfer
of such American Depositary Shares. If any such representations or warranties
are false in any way, the Company and the Depositary shall be authorized, at the
cost and expense of the person depositing Shares, to take any and all actions
necessary to correct the consequences thereof.
SECTION 3.4. Compliance with Information Requests. Notwithstanding any other
------------------------------------
provision of this Deposit Agreement, each Holder and Beneficial Owner agrees to
comply with requests from the Company pursuant to Dutch law (including, without
limitation, the Dutch Act of Disclosure of Holdings 1996), the rules and
requirements of the Amsterdam Stock Exchange, and any other stock exchange or
automated quotation system on which the Shares are, or will be, registered,
traded or listed or the Articles of Association of the Company, which are made
to provide information, inter alia, as to the capacity in which such Holder or
Beneficial Owner owns American Depositary Shares (and Shares as the case may be)
and regarding the identity of any other person(s) interested in such American
Depositary Shares and the nature of such interest and various other matters,
whether or not they are Holders and/or Beneficial Owners at the time of such
request. The Depositary agrees to use its reasonable efforts to forward, upon
the request of the Company, and at the Company's expense, any such request from
the Company to the Holders and to forward to the Company any such responses to
such requests received by the Depositary.
SECTION 3.5. Ownership Restrictions. Notwithstanding any other provision in
----------------------
this Deposit Agreement, the Company may restrict transfers of the Shares where
such transfer might result in ownership of Shares exceeding limits imposed by
applicable law or the Articles of Association of the Company. The Company may
also restrict, in such manner as it deems appropriate, transfers of the American
Depositary Shares where such transfer may result in the total number of Shares
represented by the American Depositary Shares owned by a single Holder or
Beneficial Owner to exceed any such limits. The Company may, in its sole
discretion but subject to applicable law, instruct the Depositary to take action
with respect to the ownership interest of any Holder or Beneficial Owner in
excess of the limits set forth in the preceding sentence, including, but not
limited to, the imposition of restrictions on the transfer of American
Depositary Shares, the
14
<PAGE>
removal or limitation of voting rights, the mandatory sale or disposition on
behalf of a Holder or Beneficial Owner of the Shares represented by the American
Depositary Shares held by such Holder or Beneficial Owner in excess of such
limitations and the cancellation of such American Depositary Shares, in each
case, if and to the extent permitted by applicable law and the Articles of
Association of the Company.
ARTICLE IV
THE DEPOSITED SECURITIES
SECTION 4.1. Cash Distributions. Whenever the Depositary receives confirmation
------------------
from the Custodian of receipt of any cash dividend or other cash distribution on
any Deposited Securities, or receives proceeds from the sale of any Shares,
rights, securities or other entitlements under the terms hereof, the Depositary
will, if at the time of receipt thereof any amounts received in a Foreign
Currency can in the judgment of the Depositary (pursuant to Section 4.8 hereof)
be converted on a practicable basis into Dollars transferable to the United
States, convert or cause to be converted such cash dividend, distribution or
proceeds into Dollars (on the terms described in Section 4.8) and will
distribute as promptly as practicable the amount thus received (net of (a) the
applicable fees and charges of, and expenses incurred by, the Depositary and (b)
taxes withheld) to the Holders entitled thereto as of the ADS Record Date in
proportion to the number of American Depositary Shares held as of the ADS Record
Date. The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any Holder a fraction of one cent, and any
balance not so distributed shall be held by the Depositary (without liability
for interest thereon) and shall be added to and become part of the next sum
received by the Depositary for distribution to Holders of ADSs outstanding at
the time of the next distribution. If the Company, the Custodian or the
Depositary is required to withhold and does withhold from any cash dividend or
other cash distribution in respect of any Deposited Securities an amount on
account of taxes, duties or other governmental charges, the amount distributed
to Holders on the American Depositary Shares representing such Deposited
Securities shall be reduced accordingly. Such withheld amounts shall be
forwarded by the Company, the Custodian or the Depositary to the relevant
governmental authority. Evidence of payment thereof by the Company shall be
forwarded by the Company to the Depositary upon request.
SECTION 4.2. Distribution in Shares. If any distribution upon any Deposited
----------------------
Securities consists of a dividend in, or free distribution of, Shares, the
Company shall cause such Shares to be deposited with the Custodian and
registered, as the case may be, in the name of the Depositary, the Custodian or
any of their nominees. The Depositary shall establish the ADS Record Date and
shall, subject to Section 5.9 hereof, and upon receipt of confirmation of such
deposit from the Custodian either (i) distribute to the Holders as of the ADS
Record Date in proportion to the number of American Depositary Shares held as of
the ADS Record Date, additional American Depositary Shares, which represent in
the aggregate the number of Shares received as such dividend, or free
distribution, subject to the other terms of this Deposit Agreement (including,
without limitation, (a) the applicable fees and charges of, and expenses
incurred by, the Depositary and (b) taxes), or (ii) if additional American
Depositary Shares are not so distributed, each American Depositary Share issued
and outstanding after the ADS Record
15
<PAGE>
Date shall, to the extent permissible by law, thenceforth also represent rights
and interests in the additional integral number of Shares distributed upon the
Deposited Securities represented thereby (net of (a) the applicable fees and
charges of, and expenses incurred by, the Depositary and (b) taxes). In lieu of
delivering fractional American Depositary Shares, the Depositary shall sell the
number of Shares or American Depositary Shares, as the case may be, represented
by the aggregate of such fractions and distribute the net proceeds upon the
terms described in Section 4.1. In the event that the Depositary determines that
any distribution in property (including Shares) is subject to any tax or other
governmental charges which the Depositary is obligated to withhold, or, if the
Company, in the fulfillment of its obligation under Section 5.7 hereof, has
furnished an opinion of U.S. counsel determining that Shares must be registered
under the Securities Act or other laws in order to be distributed to Holders
(and no such registration statement has been declared effective) or that no
exemption from registration exists, the Depositary may dispose of all or a
portion of such property (including Shares and rights to subscribe therefor) in
such amounts and in such manner, including by public or private sale, as the
Depositary deems necessary and practicable, and the Depositary shall distribute
the net proceeds of any such sale (after deduction of such (a) taxes and (b)
fees and charges of, and expenses incurred by, the Depositary) to Holders
entitled thereto upon the terms described in Section 4.1. The Depositary shall
hold and/or distribute any unsold balance of such property in accordance with
the provisions of this Deposit Agreement.
SECTION 4.3. Elective Distributions in Cash or Shares. Whenever the Company
----------------------------------------
intends to distribute a dividend payable at the election of the holders of
Shares in cash or in additional Shares, the Company shall give notice thereof to
the Depositary at least 60 days prior to the proposed distribution stating
whether or not it wishes such elective distribution to be made available to
Holders of ADSs. Upon receipt of notice indicating that the Company wishes such
elective distribution to be made available to Holders of ADSs, the Depositary
shall consult with the Company to determine, and the Company shall assist the
Depositary in its determination, whether it is lawful and reasonably practicable
to make such elective distribution available to the Holders of ADSs. The
Depositary shall make such elective distribution available to Holders only if
(i) the Depositary shall have determined that such distribution is reasonably
practicable and (ii) the Depositary shall have received satisfactory
documentation within the terms of Section 5.7. If the above conditions are not
satisfied, the Depositary shall, to the extent permitted by law, distribute to
the Holders, on the basis of the same determination as is made in the local
market in respect of the Shares for which no election is made, either (X) cash
upon the terms described in Section 4.1 or (Y) additional ADSs representing such
additional Shares upon the terms described in Section 4.2. If the above
conditions are satisfied, the Depositary shall establish an ADS Record Date and
establish procedures to enable Holders to elect the receipt of the proposed
dividend in cash or in additional ADSs. The Company shall assist the Depositary
in establishing such procedures to the extent necessary. If a Holder elects to
receive the proposed dividend (X) in cash, the dividend shall be distributed
upon the terms described in Section 4.1, or (Y) in ADSs, the dividend shall be
distributed upon the terms described in Section 4.2. Nothing herein shall
obligate the Depositary to make available to Holders a method to receive the
elective dividend in Shares (rather than ADSs). There can be no assurance that
Holders generally, or any Holder in particular, will be given the opportunity to
receive elective distributions on the same terms and conditions as the holders
of Shares.
16
<PAGE>
SECTION 4.4. Distribution of Rights to Purchase Shares.
-----------------------------------------
(a) Distribution to ADS Holders. Whenever the Company intends to distribute to
---------------------------
the holders of the Deposited Securities rights to subscribe for additional
Shares, the Company shall give notice thereof to the Depositary at least 60 days
prior to the proposed distribution stating whether or not it wishes such rights
to be made available to Holders of ADSs. Upon receipt of a notice indicating
that the Company wishes such rights to be made available to Holders of ADSs, the
Depositary shall consult with the Company to determine, and the Company shall
assist the Depositary in its determination, whether it is lawful and reasonably
practicable to make such rights available to the Holders. The Depositary shall
make such rights available to Holders only if (i) the Company shall have
requested that such rights be made available to Holders, (ii) the Depositary
shall have received satisfactory documentation within the terms of Section 5.7,
and (iii) the Depositary shall have determined that such distribution of rights
is reasonably practicable. In the event any of the conditions set forth above
are not satisfied, the Depositary shall proceed with the sale of the rights as
contemplated in Section 4.4(b) below. In the event all conditions set forth
above are satisfied, the Depositary shall establish an ADS Record Date and
establish procedures to distribute rights to purchase additional ADSs (by means
of warrants or otherwise) and to enable the Holders to exercise such rights
(upon payment of applicable (a) fees and charges of, and expenses incurred by,
the Depositary and (b) taxes). The Company shall assist the Depositary to the
extent necessary in establishing such procedures. Nothing herein shall obligate
the Depositary to make available to the Holders a method to exercise rights to
subscribe for Shares (rather than ADSs).
(b) Sale of Rights. If (i) the Company does not request the Depositary to make
--------------
the rights available to Holders or requests that the rights not be made
available to Holders, (ii) the Depositary fails to receive satisfactory
documentation within the terms of Section 5.7 or determines it is not reasonably
practicable to make the rights available to Holders, or (iii) any rights made
available are not exercised and appear to be about to lapse, the Depositary
shall, determine whether it is lawful and reasonably practicable to sell such
rights, in a riskless principal capacity, at such place and upon such terms
(including public or private sale) as it may deem proper. The Company shall
assist the Depositary to the extent necessary to determine such legality and
practicability. The Depositary shall, upon such sale, convert into Dollars and
distribute proceeds of such sale (net of applicable (a) fees and charges of, and
expenses incurred by, the Depositary and (b) taxes) upon the terms set forth in
Section 4.1.
(c) Lapse of Rights. If the Depositary is unable to make any rights available
---------------
to Holders upon the terms described in Section 4.4(a) or to arrange for the sale
of the rights upon the terms described in Section 4.4(b), the Depositary shall
allow such rights to lapse.
The Depositary shall not be responsible for (i) any failure to determine that it
may be lawful or practicable to make such rights available to Holders in general
or any Holders in particular, (ii) any foreign exchange exposure or loss
incurred in connection with such sale, or exercise, or (iii) the content of any
materials forwarded to the Holders on behalf of the Company in connection with
the rights distribution.
17
<PAGE>
Notwithstanding anything to the contrary in this Section 4.4, if registration
(under the Securities Act or any other applicable law) of the rights or the
securities to which any rights relate may be required in order for the Company
to offer such rights or such securities to Holders and to sell the securities
represented by such rights, the Depositary will not distribute such rights to
the Holders unless and until a registration statement under the Securities Act
(or other applicable law) covering such offering is in effect. In the event
that the Company, the Depositary or the Custodian shall be required to withhold
and does withhold from any distribution of property (including rights) an
amount on account of taxes or other governmental charges, the amount distributed
to the Holders of American Depositary Shares representing such Deposited
Securities shall be reduced accordingly. In the event that the Depositary
determines that any distribution in property (including Shares and rights to
subscribe therefor) is subject to any tax or other governmental charges which
the Depositary is obligated to withhold, the Depositary may dispose of all or a
portion of such property (including Shares and rights to subscribe therefor) in
such amounts and in such manner, including by public or private sale, as the
Depositary deems necessary and practicable to pay any such taxes or charges.
There can be no assurance that Holders generally, or any Holder in particular,
will be given the opportunity to receive or exercise rights on the same terms
and conditions as the holders of Shares or be able to exercise such rights.
Nothing herein shall obligate the Company to file any registration statement in
respect of any rights or Shares or other securities to be acquired upon the
exercise of such rights.
SECTION 4.5. Distributions Other Than Cash, Shares or Rights to Purchase
-----------------------------------------------------------
Shares.
- ------
(a) Whenever the Company intends to distribute to the holders of Deposited
Securities property other than cash, Shares or rights to purchase additional
Shares and such distribution is permissible under Dutch law, the Company shall
give timely notice thereof to the Depositary and shall indicate whether or not
it wishes such distribution to be made to Holders of ADSs. Upon receipt of a
notice indicating that the Company wishes such distribution be made to Holders
of ADSs, the Depositary shall consult with the Company, and the Company shall
assist the Depositary, to determine whether such distribution to Holders is
lawful and reasonably equitable and practicable. The Depositary shall not make
such distribution unless such distribution is permissible under Dutch law and
(i) the Company shall have requested the Depositary to make such distribution to
Holders, (ii) the Depositary shall have received satisfactory documentation
within the terms of Section 5.7, and (iii) the Depositary shall have determined
that such distribution is reasonably practicable.
(b) Upon receipt of satisfactory documentation and the request of the Company
to distribute property to Holders of ADSs and after making the requisite
determinations set forth in (a) above, the Depositary shall distribute the
property so received to the Holders of record, as of the ADS Record Date, in
proportion to the number of ADSs held by them respectively and in such manner as
the Depositary may deem practicable for accomplishing such distribution (i) upon
receipt of payment or net of the applicable fees and charges of, and expenses
incurred by, the Depositary, and (ii) net of any taxes withheld. The Depositary
may dispose of all or a portion of the property so distributed and deposited, in
such amounts and in such manner (including public or private
18
<PAGE>
sale) as the Depositary may deem practicable or necessary to satisfy any taxes
(including applicable interest and penalties) or other governmental charges
applicable to the distribution.
(c) If (i) the Company does not request the Depositary to make such
distribution to Holders or requests not to make such distribution to Holders,
(ii) the Depositary does not receive satisfactory documentation within the terms
of Section 5.7, or (iii) the Depositary determines that all or a portion of such
distribution is not reasonably practicable, the Depositary shall sell or cause
such property to be sold in a public or private sale, at such place or places
and upon such terms as it may deem proper and shall (i) cause the proceeds of
such sale, if any, to be converted into Dollars and (ii) distribute the proceeds
of such conversion received by the Depositary (net of applicable (a) fees and
charges of, and expenses incurred by, the Depositary and (b) taxes) to the
Holders as of the ADS Record Date upon the terms of Section 4.1. If the
Depositary is unable to sell such property, the Depositary may dispose of such
property in any way it deems reasonably practicable under the circumstances.
SECTION 4.6. [Intentionally deleted]
SECTION 4.7. Redemption. If the Company intends to exercise any right of
----------
redemption in respect of any of the Deposited Securities, the Company shall give
notice thereof to the Depositary at least 60 days prior to the intended date of
redemption which notice shall set forth the particulars of the proposed
redemption. Upon receipt of such notice and satisfactory documentation given by
the Company to the Depositary within the terms of Section 5.7, and only if the
Depositary shall have determined that such proposed redemption is reasonably
practicable, after consultation with the Company, the Depositary shall mail to
each Holder a notice setting forth the intended exercise by the Company of the
redemption rights and any other particulars set forth in the Company's notice to
the Depositary. The Depositary shall instruct the Custodian to present to the
Company the Deposited Securities in respect of which redemption rights are being
exercised against payment of the applicable redemption price. Upon receipt of
confirmation from the Custodian that the redemption has taken place and that
funds representing the redemption price have been received, the Depositary shall
convert, transfer, and distribute the proceeds (net of applicable (a) fees and
charges of, and the expenses incurred by, the Depositary, and (b) taxes), retire
ADSs and cancel ADRs upon delivery of such ADSs by Holders thereof and the terms
set forth in Sections 4.1 and 6.2 hereof. If less than all outstanding
Deposited Securities are redeemed, the ADSs to be retired will be selected by
lot or on a pro rata basis, as may be determined by the Depositary. The
redemption price per ADS shall be the per share amount received by the
Depositary upon the redemption of the Deposited Securities represented by
American Depositary Shares (subject to the terms of Section 4.8 hereof and the
applicable
19
<PAGE>
fees and charges of, and expenses incurred by, the Depositary, and taxes)
multiplied by the number of Deposited Securities represented by each ADS
redeemed.
SECTION 4.8. Conversion of Foreign Currency. Whenever the Depositary or the
------------------------------
Custodian shall receive Foreign Currency, by way of dividends or other
distributions or the net proceeds from the sale of securities, property or
rights, which in the reasonable judgment of the Depositary can at such time be
converted on a practicable basis, by sale or in any other manner that it may
determine in accordance with applicable law, into Dollars transferable to the
United States and distributable to the Holders entitled thereto, the Depositary
shall convert or cause to be converted, by sale or in any other manner that it
may determine, such Foreign Currency into Dollars, and shall distribute as
promptly as practicable such Dollars (net of any applicable fees, any reasonable
and customary expenses incurred in such conversion and any expenses incurred on
behalf of the Holders in complying with currency exchange control or other
governmental requirements) in accordance with the terms of the applicable
sections of this Deposit Agreement. If the Depositary shall have distributed
warrants or other instruments that entitle the holders thereof to such Dollars,
the Depositary shall distribute such Dollars to the holders of such warrants
and/or instruments upon surrender thereof for cancellation, in either case
without liability for interest thereon. Such distribution may be made upon an
averaged or other practicable basis without regard to any distinctions among
Holders on account of any application of exchange restrictions or otherwise.
If such conversion or distribution generally or with regard to a particular
Holder can be effected only with the approval or license of any government or
agency thereof, the Depositary shall have authority to file such application for
approval or license, if any, as it may deem desirable. In no event, however,
shall the Depositary be obligated to make such a filing.
If at any time the Depositary shall determine that in its judgment the
conversion of any Foreign Currency and the transfer and distribution of proceeds
of such conversion received by the Depositary is not practical or lawful, or if
any approval or license of any governmental authority or agency thereof that is
required for such conversion, transfer and distribution is denied or, in the
opinion of the Depositary, not obtainable at a reasonable cost or within a
reasonable period, the Depositary may, in its discretion, (i) make such
conversion and distribution in Dollars to the Holders for whom such conversion,
transfer and distribution is lawful and practicable, (ii) distribute the Foreign
Currency (or an appropriate document evidencing the right to receive such
Foreign Currency) to Holders for whom this is lawful and practicable or (iii)
hold (or cause the Custodian to hold) such Foreign Currency (without liability
for interest thereon) for the respective accounts of the Holders entitled to
receive the same.
SECTION 4.9. Fixing of ADS Record Date. Whenever the Depositary shall receive
-------------------------
notice of the fixing of a record date by the Company for the determination of
holders of Deposited Securities entitled to receive any distribution (whether in
cash, Shares, rights, or other distribution), or whenever for any reason the
Depositary causes a change in the number of Shares that are represented by each
American Depositary Share, or whenever the Depositary shall receive notice of
any meeting of, or solicitation of consents or of proxies, of holders of Shares
or other Deposited Securities, or whenever the Depositary shall find it
necessary or convenient in
20
<PAGE>
connection with the giving of any notice, solicitation of any consent or any
other matter, the Depositary shall fix a record date (the "ADS Record Date") for
the determination of the Holders of Receipts who shall be entitled to receive
such distribution, to give instructions for the exercise of voting rights at any
such meeting, to give or withhold such consent, to receive such notice or
solicitation or to otherwise take action, or to exercise the rights of Holders
with respect to such changed number of Shares represented by each American
Depositary Share. The Depositary shall make reasonable efforts to establish the
ADS Record Date as closely as possible to the applicable record date for the
Deposited Securities (if any). Subject to applicable law and the provisions of
Section 4.1 through 4.8 and to the other terms and conditions of this Deposit
Agreement, only the Holders of Receipts at the close of business in New York on
such ADS Record Date shall be entitled to receive such distribution, to give
such voting instructions, to receive such notice or solicitation, or otherwise
take action.
SECTION 4.10. Voting of Deposited Securities. As soon as practicable after
------------------------------
receipt of notice of any meeting at which the holders of Shares are entitled to
vote, or of solicitation of consents or proxies from holders of Shares or other
Deposited Securities, the Depositary shall fix the ADS Record Date in respect of
such meeting or solicitation of consent or proxy. The Depositary shall, if
requested by the Company in writing in a timely manner (the Depositary having no
obligation to take any further action if the request shall not have been
received by the Depositary at least 30 days prior to the date of such vote or
meeting) mail to registered Holders: (a) such notice of meeting or solicitation
of consent or proxy, (b) a statement that the Holders at the close of business
on the ADS Record Date will be entitled, subject to any applicable law, the
Articles of Association of the Company and the provisions of or governing the
Deposited Securities (which provisions, if any, shall be summarized in pertinent
part by the Company), to instruct the Depositary as to the exercise of the
voting rights, if any, pertaining to the Shares or other Deposited Securities
represented by such Holder's American Depositary Shares, and (c) a brief
statement as to the manner in which such instructions may be given. Voting
instructions may be given only in respect of a number of American Depositary
Shares representing a whole number of Shares or other Deposited Securities.
Upon the timely receipt of written instructions of a Holder of American
Depositary Shares on the ADS Record Date, the Depositary shall endeavor, insofar
as practicable and permitted under applicable law and the provisions of the
Articles of Association of the Company and the provisions of the Deposited
Securities, to vote or cause the Custodian to vote the Shares and/or other
Deposited Securities (in person or by proxy) represented by such Holder's
American Depositary Shares in accordance with such instructions.
Neither the Depositary, the Custodian nor their respective nominees, if any,
shall, under any circumstances, exercise any discretion as to voting and neither
the Depositary nor the Custodian shall vote, attempt to exercise the right to
vote, or in any way make use of the Shares or other Deposited Securities
represented by American Depositary Shares except pursuant to and in accordance
with such written instructions from Holders. If voting instructions are
received by the Depositary from any Holder on or before the date established by
the Depositary for the receipt of such instructions, which are signed but
without further indication as to specific instructions, the Depositary will deem
such Holder to have instructed the Depositary to vote in favor of the items set
forth in such instructions. Shares or other Deposited Securities represented
21
<PAGE>
by American Depositary Shares for which no specific voting instructions are
received by the Depositary from the Holder shall not be voted.
There can be no assurance that Holders generally or any Holder in particular
will receive the notice described above with sufficient time to enable the
Holder to return voting instructions to the Depositary in a timely manner.
SECTION 4.11. Changes Affecting Deposited Securities. Upon any change in
--------------------------------------
nominal or par value, split-up, cancellation, consolidation or any other
reclassification of, Deposited Securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting the Company
or to which it is a party, any securities which shall be received by the
Depositary or the Custodian in exchange for, or in conversion of or replacement
of or otherwise in respect of, such Deposited Securities shall, to the extent
permitted by law, be treated as new Deposited Securities under this Deposit
Agreement, and the Receipts shall, subject to the provisions of this Deposit
Agreement and applicable law, evidence American Depositary Shares representing
the right to receive such new securities. The Depositary may, with the
Company's approval, and shall, if the Company shall so request, subject to the
terms of the Deposit Agreement and receipt of an opinion of counsel to the
Company satisfactory to the Depositary that such distributions are not in
violation of any applicable laws or regulations, execute and deliver additional
Receipts as in the case of a stock dividend on the Shares, or call for the
surrender of outstanding Receipts to be exchanged for new Receipts, in either
case, as well as in the event of newly deposited Shares, with necessary
modifications to the form of Receipt contained in Exhibit A hereto, specifically
describing such new Deposited Securities or corporate change. The Company agrees
to, jointly with the Depositary, amend the Registration Statement on Form F-6 as
filed with the Commission to permit the issuance of such new form of Receipts.
Notwithstanding the foregoing, in the event that any security so received may
not be lawfully distributed to some or all Holders, the Depositary may, with the
Company's approval, and shall, if the Company requests, subject to receipt of an
opinion of Company's counsel satisfactory to the Depositary that such action is
not in violation of any applicable laws or regulations, sell such securities at
public or private sale, at such place or places and upon such terms as it may
deem proper and may allocate the net proceeds of such sales (net of (a) fees and
charges of, and expenses incurred by, the Depositary and (b) taxes) for the
account of the Holders otherwise entitled to such securities upon an averaged or
other practicable basis without regard to any distinctions among such Holders
and distribute the net proceeds so allocated to the extent practicable as in the
case of a distribution received in cash pursuant to Section 4.1. The Depositary
shall not be responsible for (i) any failure to determine that it may be lawful
or feasible to make such securities available to Holders in general or to any
Holder in particular, (ii) any foreign exchange exposure or loss incurred in
connection with such sale, or (iii) any liability to the purchaser of such
securities.
SECTION 4.12. Available Information. The Company is subject to the periodic
---------------------
reporting requirements of the Exchange Act and accordingly files certain
information with the Commission. These reports and documents can be inspected
and copied at the public reference facilities maintained by the Commission
located at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and
at the Commission's New York City office located at Seven World Trade Center,
13th Floor, New York, New York 10048.
22
<PAGE>
SECTION 4.13. Reports. The Depositary shall make available for inspection by
-------
Holders at its Principal Office any reports and communications, including any
proxy soliciting materials, received from the Company which are both (a)
received by the Depositary, the Custodian, or the nominee of either of them as
the holder of the Deposited Securities and (b) made generally available to the
holders of such Deposited Securities by the Company. The Depositary shall also
mail to Holders copies of such reports when furnished by the Company pursuant to
Section 5.6.
SECTION 4.14. List of Holders. Promptly upon written request by the Company,
---------------
the Depositary shall furnish to it a list, as of a recent date, of the names,
addresses and holdings of American Depositary Shares of all Holders.
SECTION 4.15. Taxation. The Depositary will, and will instruct the Custodian
--------
to, forward to the Company or its agents such information from its records as
the Company may reasonably request to enable the Company or its agents to file
the necessary tax reports with governmental authorities or agencies. The
Depositary, the Custodian or the Company and its agents may file such reports as
are necessary to reduce or eliminate applicable taxes on dividends and on other
distributions in respect of Deposited Securities under applicable tax treaties
or laws for the Holders and Beneficial Owners. In accordance with instructions
from the Company and to the extent practicable, the Depositary or the Custodian
will take reasonable administrative actions to obtain tax refunds, reduced
withholding of tax at source on dividends and other benefits under applicable
tax treaties or laws with respect to dividends and other distributions on the
Deposited Securities. Holders and Beneficial Owners of American Depositary
Shares may be required from time to time, and in a timely manner, to file such
proof of taxpayer status, residence and beneficial ownership (as applicable), to
execute such certificates and to make such representations and warranties, or to
provide any other information or documents, as the Depositary or the Custodian
may deem necessary or proper to fulfill the Depositary's or the Custodian's
obligations under applicable law. The Holders and Beneficial Owners shall
indemnify the Depositary, the Company, the Custodian and any of their respective
directors, employees, agents and Affiliates against, and hold each of them
harmless from, any claims by any governmental authority with respect to taxes,
additions to tax, penalties or interest arising out of any refund of taxes,
reduced rate of withholding at source or other tax benefit obtained.
If the Company (or any of its agents) withholds from any distribution any amount
on account of taxes or governmental charges, or pays any other tax in respect of
such distribution (i.e. stamp duty tax, capital gains or other similar tax), the
Company shall (and shall cause such agent to) remit as promptly as practicable
to the Depositary information about such taxes or governmental charges withheld
or paid in a form satisfactory to the Depositary and, if so requested, the tax
receipt (or other proof of payment to the applicable governmental authority)
therefor. The Depositary shall, to the extent required by U.S. law, report to
Holders any taxes withheld by it or the Custodian, and, if such information is
provided to it by the Company, any taxes withheld by the Company. The Depositary
and the Custodian shall not be required to provide the Holders with any evidence
of the remittance by the Company (or its agents) of any taxes withheld, or of
the payment of taxes by the Company, except to the extent the evidence is
provided by the Company to the Depositary. Neither the Depositary nor the
Custodian shall be liable for the
23
<PAGE>
failure by any Holder or Beneficial Owner to obtain the benefits of credits on
the basis of non-U.S. tax paid against such Holder's or Beneficial Owner's
income tax liability.
The Depositary is under no obligation to provide the Holders and Beneficial
Owners with any information about the tax status of the Company. The Depositary
shall not incur any liability for any tax consequences that may be incurred by
Holders and Beneficial Owners on account of their ownership of the American
Depositary Shares, including without limitation, tax consequences resulting from
the Company (or any of its subsidiaries) being treated as a "Foreign Personal
Holding Company," or as a "Passive Foreign Investment Company" (in each case as
defined in the U.S. Internal Revenue Code and the regulations issued thereunder)
or otherwise.
ARTICLE V
THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY
SECTION 5.1. Maintenance of Office and Transfer Books by the Registrar. Until
---------------------------------------------------------
termination of this Deposit Agreement in accordance with its terms, the
Registrar shall maintain in the Borough of Manhattan, the City of New York, an
office and facilities for the execution and delivery, registration, registration
of transfers, combination and split-up of Receipts, the surrender of Receipts
for the purpose of withdrawal of Deposited Securities in accordance with the
provisions of this Deposit Agreement.
The Registrar shall keep books for the registration of issuances and transfers
of Receipts which at all reasonable times shall be open for inspection by the
Company and by the Holders of such Receipts, provided that such inspection shall
not be, to the Registrar's knowledge, for the purpose of communicating with
Holders of such Receipts in the interest of a business or object other than the
business of the Company or other than a matter related to this Deposit Agreement
or the Receipts.
The Registrar may close the transfer books with respect to the Receipts, at any
time or from time to time, when deemed necessary or advisable by it in good
faith in connection with the performance of its duties hereunder, or at the
reasonable written request of the Company subject, in all cases, to Section 7.8
hereof.
If any Receipts or the American Depositary Shares evidenced thereby are listed
on one or more stock exchanges or automated quotation systems in the United
States, the Depositary shall act as Registrar or appoint a Registrar or one or
more co-registrars for registration of Receipts and transfers, combinations and
split-ups, and to countersign such Receipts in accordance with any requirements
of such exchanges or systems. Such Registrar or co-registrars may be removed and
a substitute or substitutes appointed by the Depositary.
SECTION 5.2. Exoneration. Neither the Depositary nor the Company shall be
-----------
obligated to do or perform any act which is inconsistent with the provisions of
this Deposit Agreement or incur any liability (i) if the Depositary or the
Company shall be prevented or forbidden from, or delayed in, doing or performing
any act or thing required by the terms of this Deposit
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Agreement, by reason of any provision of any present or future law or regulation
of the United States, The Netherlands or any other country, or of any other
governmental authority or regulatory authority or stock exchange, or on account
of the possible criminal or civil penalties or restraint, or by reason of any
provision, present or future of the Articles of Association of the Company or
any provision of or governing any Deposited Securities, or by reason of any act
of God or war or other circumstances beyond its control (including, without
limitation, nationalization, expropriation, currency restrictions, work
stoppage, strikes, civil unrest, revolutions, rebellions, explosions and
computer failure), (ii) by reason of any exercise of, or failure to exercise,
any discretion provided for in this Deposit Agreement or in the Articles of
Association of the Company or provisions of or governing Deposited Securities,
(iii) for any action or inaction in reliance upon the advice of or information
from legal counsel, accountants, any person presenting Shares for deposit, any
Holder, any Beneficial Owner or authorized representative thereof, or any other
person believed by it in good faith to be competent to give such advice or
information, (iv) for the inability by a Holder or Beneficial Owner to benefit
from any distribution, offering, right or other benefit which is made available
to holders of Deposited Securities but is not, under the terms of this Deposit
Agreement, made available to Holders of American Depositary Shares or (v) for
any consequential or punitive damages for any breach of the terms of this
Deposit Agreement.
The Depositary, its controlling persons, its agents, any Custodian and the
Company, its controlling persons and its agents may rely and shall be protected
in acting upon any written notice, request or other document believed by it to
be genuine and to have been signed or presented by the proper party or parties.
No disclaimer of liability under the Securities Act is intended by any provision
of this Deposit Agreement.
SECTION 5.3. Standard of Care. The Company and its agents assume no obligation
----------------
and shall not be subject to any liability under this Deposit Agreement or the
Receipts to Holders or Beneficial Owners or other persons, except that the
Company and its agents agree to perform their obligations specifically set forth
in this Deposit Agreement without negligence or bad faith.
The Depositary and its agents assume no obligation and shall not be subject to
any liability under this Deposit Agreement or the Receipts to Holders or
Beneficial Owners or other persons, except that the Depositary and its agents
agree to perform their obligations specifically set forth in this Deposit
Agreement without negligence or bad faith.
Without limitation of the foregoing, neither the Depositary, nor the Company,
nor any of their respective controlling persons, or agents, shall be under any
obligation to appear in, prosecute or defend any action, suit or other
proceeding in respect of any Deposited Securities or in respect of the Receipts,
which in its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense (including fees and disbursements of
counsel) and liability be furnished as often as may be required (and no
Custodian shall be under any obligation whatsoever with respect to such
proceedings, the responsibility of the Custodian being solely to the
Depositary).
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The Depositary and its agents shall not be liable for any failure to carry out
any instructions to vote any of the Deposited Securities, or for the manner in
which any vote is cast or the effect of any vote, provided that any such action
or omission is in good faith and in accordance with the terms of this Deposit
Agreement. The Depositary shall not incur any liability for any failure to
determine that any distribution or action may be lawful or reasonably
practicable, for the content of any information submitted to it by the Company
for distribution to the Holders or for any inaccuracy of any translation
thereof, for any investment risk associated with acquiring an interest in the
Deposited Securities, for the validity or worth of the Deposited Securities or
for any tax consequences that may result from the ownership of ADSs, Shares or
Deposited Securities, for the credit-worthiness of any third party, for allowing
any rights to lapse upon the terms of this Deposit Agreement or for the failure
or timeliness of any notice from the Company.
SECTION 5.4. Resignation and Removal of the Depositary; Appointment of
---------------------------------------------------------
Successor Depositary. The Depositary may at any time resign as Depositary
- --------------------
hereunder by written notice of resignation delivered to the Company, such
resignation to be effective on the earlier of (i) the 60th day after delivery
thereof to the Company (whereupon the Depositary shall be entitled to take the
actions contemplated in Section 6.2 hereof), or (ii) upon the appointment by the
Company of a successor depositary and its acceptance of such appointment as
hereinafter provided.
The Depositary may at any time be removed by the Company by written notice of
such removal, which removal shall be effective on the earlier of (i) the 60th
day after delivery thereof to the Depositary (whereupon the Depositary shall be
entitled to take the actions contemplated in Section 6.2 hereof), or (ii) upon
the appointment by the Company of a successor depositary and its acceptance of
such appointment as hereinafter provided.
In case at any time the Depositary acting hereunder shall resign or be removed,
the Company shall use its best efforts to appoint a successor depositary, which
shall be a bank or trust company having an office in the Borough of Manhattan,
the City of New York. Every successor depositary shall be required by the
Company to execute and deliver to its predecessor and to the Company an
instrument in writing accepting its appointment hereunder, and thereupon such
successor depositary, without any further act or deed (except as required by
applicable law), shall become fully vested with all the rights, powers, duties
and obligations of its predecessor. The predecessor depositary, upon payment of
all sums due it and on the written request of the Company shall, (i) execute and
deliver an instrument transferring to such successor all rights and powers of
such predecessor hereunder (other than as contemplated in Sections 5.08 and
5.09), (ii) duly assign, transfer and deliver all right, title and interest to
the Deposited Securities to such successor, and (iii) deliver to such successor
a list of the Holders of all outstanding Receipts and such other information
relating to Receipts and Holders thereof as the successor may reasonably
request. Any such successor depositary shall promptly mail notice of its
appointment to such Holders.
Any corporation into or with which the Depositary may be merged or consolidated
shall be the successor of the Depositary without the execution or filing of any
document or any further act.
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SECTION 5.5. The Custodian. The Depositary has initially appointed Citibank
-------------
N.A., Amsterdam as Custodian for the purpose of this Deposit Agreement. The
Custodian or its successors in acting hereunder shall be subject at all times
and in all respects to the direction of the Depositary for the Deposited
Securities for which the Custodian acts as custodian and shall be responsible
solely to it. If any Custodian resigns or is discharged from its duties
hereunder with respect to any Deposited Securities and no other Custodian has
previously been appointed hereunder, the Depositary shall promptly appoint a
substitute custodian that is organized under the laws of The Netherlands. The
Depositary shall require such resigning or discharged Custodian to deliver the
Deposited Securities held by it, together with all such records maintained by it
as Custodian with respect to such Deposited Securities as the Depositary may
request, to the Custodian designated by the Depositary. Whenever the Depositary
determines, in its discretion, that it is appropriate to do so, it may appoint
an additional custodian with respect to any Deposited Securities, or discharge
the Custodian with respect to any Deposited Securities and appoint a substitute
custodian, which shall thereafter be Custodian hereunder with respect to the
Deposited Securities. Immediately upon any such change, the Depositary shall
give notice thereof in writing to all Holders of Receipts, each other Custodian
and the Company.
Upon the appointment of any successor depositary, any Custodian then acting
hereunder shall, unless otherwise instructed by the Depositary, continue to be
the Custodian of the Deposited Securities without any further act or writing,
and shall be subject to the direction of the successor depositary. The successor
depositary so appointed shall, nevertheless, on the written request of any
Custodian, execute and deliver to such Custodian all such instruments as may be
proper to give to such Custodian full and complete power and authority to act on
the direction of such successor depositary.
SECTION 5.6. Notices and Reports. On or before the first date on which the
-------------------
Company gives notice, by publication or otherwise, of any meeting of holders of
Shares or other Deposited Securities, or of any adjourned meeting of such
holders, or of the taking of any action by such holders other than at a meeting,
or of the taking of any action in respect of any cash or other distributions or
the offering of any rights in respect of Deposited Securities, the Company shall
transmit to the Depositary and the Custodian a copy of the notice thereof in the
English language but otherwise in the form given or to be given to holders of
Shares or other Deposited Securities. The Company shall also furnish to the
Custodian and the Depositary a summary, in English, of any applicable provisions
or proposed provisions of the Articles of Association of the Company that may be
relevant or pertain to such notice of meeting or be the subject of a vote
thereat.
The Company will also transmit to the Depositary (a) an English language version
of the other notices, reports and communications which are made generally
available by the Company to holders of its Shares or other Deposited Securities
and (b) the English language versions of the Company's annual and semi-annual
reports prepared in accordance with the applicable requirements of the
Commission. The Depositary shall arrange, at the request of the Company, for
the mailing of copies thereof to all registered Holders or make such notices,
reports and other communications available to all registered Holders on a basis
similar to that for holders of Shares or other Deposited Securities or on such
other basis as the Company may advise the Depositary
27
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or as may be required by any applicable law, regulation or stock exchange
requirement. The Company has delivered to the Depositary and the Custodian a
copy of the Company's Articles of Association along with the provisions of or
governing the Shares and any other Deposited Securities issued by the Company or
any Affiliate of the Company in connection with such Shares, and promptly upon
any amendment thereto or change therein, the Company shall deliver to the
Depositary and the Custodian a copy of such amendment thereto or change therein.
The Depositary may rely upon such copy for all purposes of this Deposit
Agreement.
The Depositary will make available a copy of any such notices, reports or
communications issued by the Company and delivered to the Depositary for
inspection by the registered Holders of the Receipts evidencing the American
Depositary Shares representing such Shares governed by such provisions at the
Depositary's Principal Office, at the office of the Custodian and at any other
designated transfer office.
SECTION 5.7. Issuance of Additional Shares, ADSs etc. The Company agrees that
---------------------------------------
in the event it or any of its Affiliates proposes (i) an issuance, sale or
distribution of additional Shares, (ii) an offering of rights to subscribe for
Shares or other Deposited Securities, (iii) an issuance of securities
convertible into or exchangeable for Shares, (iv) an issuance of rights to
subscribe for securities convertible into or exchangeable for Shares, (v) an
elective dividend of cash or Shares, (vi) a redemption of Deposited Securities,
(vii) a meeting of holders of Deposited Securities, or solicitation of consents
or proxies, relating to any reclassification of securities, merger or
consolidation or transfer of assets, or (viii) any reclassification,
recapitalization, reorganization, merger, consolidation or sale of assets which
affects the Deposited Securities, it will obtain U.S. legal advice and take all
steps necessary to ensure that the application of the proposed transaction to
Holders and Beneficial Owners does not violate the registration provisions of
the Securities Act, or any other applicable laws (including, without limitation,
the Investment Company Act of 1940, as amended, the Exchange Act or the
securities laws of the states of the United States). In support of the
foregoing, the Company will furnish to the Depositary (a) a written opinion of
U.S. counsel (reasonably satisfactory to the Depositary) stating whether or not
application of such transaction to Holders and Beneficial Owners (1) requires a
registration statement under the Securities Act to be in effect or (2) is exempt
from the registration requirements of the Securities Act and (b) an opinion of
Dutch counsel stating that (1) making the transaction available to Holders and
Beneficial Owners does not violate the laws or regulations of The Netherlands
and (2) all requisite regulatory consents and approvals have been obtained in
The Netherlands. If the filing of a registration statement is required, the
Depositary shall not have any obligation to proceed with the transaction unless
it shall have received evidence reasonably satisfactory to it that such
registration statement has been declared effective. If, being advised by
counsel, the Company determines that a transaction is required to be registered
under the Securities Act, the Company will either (i) register such transaction
to the extent necessary, (ii) alter the terms of the transaction to avoid the
registration requirements of the Securities Act or (iii) direct the Depositary
to take specific measures, in each case as contemplated in this Deposit
Agreement, to prevent such transaction from violating the registration
requirements of the Securities Act.
The Company agrees with the Depositary that neither the Company nor any of its
Affiliates will at any time (i) deposit any Shares or other Deposited
Securities, either upon original issuance or
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upon a sale of Shares or other Deposited Securities previously issued and
reacquired by the Company or by any such Affiliate, or (ii) issue additional
Shares, rights to subscribe for such Shares, securities convertible into or
exchangeable for Shares or rights to subscribe for such securities, unless such
transaction and the securities issuable in such transaction are exempt from
registration under the Securities Act or have been registered under the
Securities Act (and such registration statement has been declared effective).
Notwithstanding anything else contained in this Deposit Agreement, nothing in
this Deposit Agreement shall be deemed to obligate the Company to file any
registration statement in respect of any proposed transaction.
SECTION 5.8. Indemnification. The Depositary agrees to indemnify the Company
---------------
and its directors, officers, employees, agents and Affiliates against, and hold
each of them harmless from, any direct loss, liability, tax, charge or expense
of any kind whatsoever (including, but not limited to, the reasonable fees and
expenses of counsel) which may arise out of acts performed or omitted by the
Depositary under the terms hereof due to the negligence or bad faith of the
Depositary.
The Company agrees to indemnify the Depositary, the Custodian and any of their
respective directors, officers, employees, agents and Affiliates against, and
hold each of them harmless from, any direct loss, liability, tax, charge or
expense of any kind whatsoever (including, but not limited to, the reasonable
fees and expenses of counsel) that may arise (a) out of or in connection with
any offer, issuance, sale, resale, transfer, deposit or withdrawal of Receipts,
American Depositary Shares, the Shares, or other Deposited Securities, as the
case may be, (b) out of or as a result of any offering documents in respect
thereof or (c) out of acts performed or omitted, including, but not limited to,
any delivery by the Depositary on behalf of the Company of information regarding
the Company in connection with this Deposit Agreement, the Receipts, the
American Depositary Shares, the Shares, or any Deposited Securities, in any such
case (i) by the Depositary, the Custodian or any of their respective directors,
officers, employees, agents and Affiliates, except to the extent such loss,
liability, tax, charge or expense is due to the negligence or bad faith of any
of them, or (ii) by the Company or any of its directors, officers, employees,
agents and Affiliates.
The obligations set forth in this Section shall survive the termination of this
Deposit Agreement and the succession or substitution of any party hereto.
Any person seeking indemnification hereunder (an "indemnified person") shall
notify the person from whom it is seeking indemnification (the "indemnifying
person") of the commencement of any indemnifiable action or claim promptly after
such indemnified person becomes aware of such commencement (provided that the
failure to make such notification shall not affect such indemnified person's
rights to indemnification hereunder except to the extent the indemnifying person
is materially prejudiced by such failure) and shall consult in good faith with
the indemnifying person as to the conduct of the defense of such action or claim
that may give rise to an indemnity hereunder, which defense shall be reasonable
in the circumstances. No indemnified person shall compromise or settle any
action or claim that may give rise to an indemnity
29
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hereunder without the consent of the indemnifying person, which consent shall
not be unreasonably withheld.
SECTION 5.9. Fees and Charges of Depositary. The Company, the Holders, the
------------------------------
Beneficial Owners, and persons depositing Shares or surrendering ADSs for
cancellation and withdrawal of Deposited Securities shall be required to pay to
the Depositary the Depositary's fees and related charges identified as payable
by them respectively in the Fee Schedule attached hereto as Exhibit B. All fees
and charges so payable may, at any time and from time to time, be changed by
agreement between the Depositary and the Company, but, in the case of fees and
charges payable by Holders and Beneficial Owners, only in the manner
contemplated in Section 6.1. The Depositary shall provide, without charge, a
copy of its latest fee schedule to anyone upon request.
The Company agrees to pay to the Depositary as promptly as practicable such
other fees and charges and to reimburse the Depositary for such out-of-pocket
expenses as the Depositary and the Company may agree to in writing from time to
time. Responsibility for payment of such charges may at any time and from time
to time be changed by agreement between the Company and the Depositary. Unless
otherwise agreed, the Depositary shall present its statement for such expenses
and fees or charges to the Company once every three months. The charges and
expenses of the Custodian are for the sole account of the Depositary.
The right of the Depositary to receive payment of fees, charges and expenses as
provided above shall survive the termination of this Deposit Agreement. As to
any Depositary, upon the resignation or removal of such Depositary as described
in Section 5.4 hereof, such right shall extend for those fees, charges and
expenses incurred prior to the effectiveness of such resignation or removal.
SECTION 5.10. Pre-Release. Subject to the further terms and provisions of
-----------
this Section 5.10, the Depositary, its Affiliates and their agents, on their own
behalf, may own and deal in any class of securities of the Company and its
Affiliates and in ADSs. In its capacity as Depositary, the Depositary shall not
lend Shares or ADSs; provided, however, that the Depositary may (i) issue ADSs
prior to the receipt of Shares pursuant to Section 2.3 and (ii) deliver Shares
prior to the receipt of ADSs for withdrawal of Deposited Securities pursuant to
Section 2.7, including ADSs which were issued under (i) above but for which
Shares may not have been received (each such transaction a "Pre-Release
Transaction"). The Depositary may receive ADSs in lieu of Shares under (i) above
and receive Shares in lieu of ADSs under (ii) above. Each such Pre-Release
Transaction will be (a) subject to a written agreement whereby the person or
entity (the "Applicant") to whom ADSs or Shares are to be delivered (w)
represents that at the time of the Pre-Release Transaction the Applicant or its
customer owns the Shares or ADSs that are to be delivered by the Applicant under
such Pre-Release Transaction, (x) agrees to indicate the Depositary as owner of
such Shares or ADSs in its records and to hold such Shares or ADSs in trust for
the Depositary until such Shares or ADSs are delivered to the Depositary or the
Custodian, (y) unconditionally guarantees to deliver to the Depositary or the
Custodian, as applicable, such Shares or ADSs, and (z) agrees to any additional
restrictions or requirements that the Depositary deems reasonably appropriate,
(b) at all times fully collateralized with cash,
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United States government securities or such other collateral as the Depositary
deems appropriate, (c) terminable by the Depositary on not more than five (5)
business days' notice and (d) subject to such further indemnities and credit
regulations as the Depositary deems appropriate. The Depositary will normally
limit the number of ADSs and Shares involved in such Pre-Release Transactions at
any one time to thirty percent (30%) of the ADSs outstanding (without giving
effect to ADSs outstanding under (i) above), provided, however, that the
Depositary reserves the right to change or disregard such limit from time to
time as it deems appropriate. The Depositary may also set limits with respect to
the number of ADSs and Shares involved in Pre-Release Transactions with any one
person on a case by case basis as it deems reasonably appropriate.
The Depositary may retain for its own account any compensation received by it in
conjunction with the foregoing. Collateral provided pursuant to (b) above, but
not the earnings thereon, shall be held for the benefit of the Holders (other
than the Applicant).
ARTICLE VI
AMENDMENT AND TERMINATION
SECTION 6.1. Amendment/Supplement. The Receipts outstanding at any time, the
--------------------
provisions of this Deposit Agreement and the form of Receipt attached thereto
and to be issued under the terms thereof may at any time and from time to time
be amended or supplemented by written agreement between the Company and the
Depositary in any respect which they may deem necessary or desirable without the
prior written consent of the Holders or Beneficial Owners. Any amendment or
supplement which shall impose or increase any fees or charges (other than
charges in connection with foreign exchange control regulations, and taxes and
other governmental charges, delivery and other such expenses), or which shall
otherwise materially prejudice any substantial existing right of Holders or
Beneficial Owners, shall not, however, become effective as to outstanding
Receipts until the expiration of 30 days after notice of such amendment or
supplement shall have been given to the Holders of outstanding Receipts. The
parties hereto agree that any amendments or supplements which (i) are reasonably
necessary (as agreed by the Company and the Depositary) in order for (a) the
American Depositary Shares to be registered on Form F-6 under the Securities Act
or (b) the American Depositary Share(s) to be traded solely in electronic book-
entry form and (ii) do not in either such case impose or increase any fees or
charges to be borne by Holders, shall be deemed not to materially prejudice any
substantial rights of Holders or Beneficial Owners. Every Holder and Beneficial
Owner at the time any amendment or supplement so becomes effective shall be
deemed, by continuing to hold such American Depositary Share(s), to consent and
agree to such amendment or supplement and to be bound by the Deposit Agreement
as amended and supplemented thereby. In no event shall any amendment or
supplement impair the right of the Holder to surrender such Receipt and receive
therefor the Deposited Securities represented thereby, except in order to comply
with mandatory provisions of applicable law. Notwithstanding the foregoing, if
any governmental body should adopt new laws, rules or regulations which would
require amendment or supplement of the Deposit Agreement to ensure compliance
therewith, the Company and the Depositary may amend or supplement the Deposit
Agreement and the Receipt at any time in accordance with such changed laws,
rules or regulations. Such amendment or supplement to the Deposit
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Agreement in such circumstances may become effective before a notice of such
amendment or supplement is given to Holders or within any other period of time
as required for compliance with such laws, rules or regulations.
SECTION 6.2. Termination. The Depositary shall, at any time at the written
-----------
direction of the Company, terminate this Deposit Agreement by mailing notice of
such termination to the Holders of all Receipts then outstanding at least 30
days prior to the date fixed in such notice for such termination. This Deposit
Agreement shall also terminate at any time upon the mandatory conversion,
exchange or redemption of Deposited Securities for which this Deposit Agreement
is not amended by agreement between the Company and the Depositary (the date of
termination in such case being the effective date of such conversion, exchange
or redemption), in which case the Depositary shall provide written notice
thereof to the Holders as soon as reasonably practicable. If 60 days shall have
expired after (i) the Depositary shall have delivered to the Company a written
notice of its election to resign, or (ii) the Company shall have delivered to
the Depositary a written notice of the removal of the Depositary, and in either
case a successor depositary shall not have been appointed and accepted its
appointment as provided in Section 5.4, the Depositary may terminate this
Deposit Agreement by mailing notice of such termination to the Holders of all
Receipts then outstanding at least 30 days prior to the date fixed for such
termination. On and after the date of termination of this Deposit Agreement, the
Holder will, upon surrender of such Receipt at the Principal Office of the
Depositary, upon the payment of the charges of the Depositary for the surrender
of Receipts referred to in Section 2.7 and subject to the conditions and
restrictions therein set forth, and upon payment of any applicable taxes or
governmental charges, be entitled to delivery by electronic delivery to the
NIECIGEF Participant designated in such Holder's order, of the amount of
Deposited Securities represented by such Receipt. If any Receipts shall remain
outstanding after the date of termination of this Deposit Agreement, the
Registrar thereafter shall discontinue the registration of transfers of
Receipts, and the Depositary shall suspend the distribution of dividends to the
Holders thereof, and shall not give any further notices or perform any further
acts under this Deposit Agreement, except that the Depositary shall continue to
collect dividends and other distributions pertaining to Deposited Securities,
shall sell rights as provided in this Deposit Agreement, and shall continue to
deliver Deposited Securities, subject to the conditions and restrictions set
forth in Section 2.7, together with any dividends or other distributions
received with respect thereto and the net proceeds of the sale of any rights or
other property, in exchange for Receipts surrendered to the Depositary (after
deducting, or charging, as the case may be, in each case, the charges of the
Depositary for the surrender of a Receipt, any expenses for the account of the
Holder in accordance with the terms and conditions of this Deposit Agreement and
any applicable taxes or governmental charges or assessments). At any time after
the expiration of six months from the date of termination of this Deposit
Agreement, the Depositary may sell the Deposited Securities then held hereunder
and may thereafter hold uninvested the net proceeds of any such sale, together
with any other cash then held by it hereunder, in an unsegregated account,
without liability for interest for the pro rata benefit of the Holders of
Receipts whose Receipts have not theretofore been surrendered. After making such
sale, the Depositary shall be discharged from all obligations under this Deposit
Agreement with respect to the Receipts, the Deposited Securities and the
American Depositary Shares, except to account for such net proceeds and other
cash (after deducting, or charging, as the case may be, in each case, the
charges of the Depositary for the surrender of a Receipt, any expenses for the
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account of the Holder in accordance with the terms and conditions of this
Deposit Agreement and any applicable taxes or governmental charges or
assessments). Upon the termination of this Deposit Agreement, the Company shall
be discharged from all obligations under this Deposit Agreement except for its
obligations to the Depositary under Sections 5.8, 5.9 and 7.6 hereof.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Counterparts. This Deposit Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed an original and all of
such counterparts together shall constitute one and the same agreement. Copies
of this Deposit Agreement shall be maintained with the Depositary and shall be
open to inspection by any Holder during business hours.
SECTION 7.2. No Third-Party Beneficiaries. This Deposit Agreement is for the
----------------------------
exclusive benefit of the parties hereto (and their successors) and shall not be
deemed to give any legal or equitable right, remedy or claim whatsoever to any
other person, except to the extent specifically set forth in this Deposit
Agreement. Nothing in this Deposit Agreement shall be deemed to give rise to a
partnership or joint venture among the parties nor establish a fiduciary or
similar relationship among the parties. The parties hereto acknowledge and
agree that (i) the Depositary and its Affiliates may at any time have multiple
banking relationships with the Company and its Affiliates, (ii) the Depositary
and its Affiliates may be engaged at any time in transactions in which parties
adverse to the Company or the Holders or Beneficial Owners may have interests
and (iii) nothing contained in this Agreement shall (a) preclude the Depositary
or any of its Affiliates from engaging in such transactions or establishing or
maintaining such relationships, (b) obligate the Depositary or any of its
Affiliates to disclose such transactions or relationships or to account for any
profit made or payment received in such transactions or relationships.
SECTION 7.3. Severability. In case any one or more of the provisions contained
------------
in this Deposit Agreement or in the Receipts should be or become invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall in
no way be affected, prejudiced or disturbed thereby.
SECTION 7.4. Holders and Beneficial Owners as Parties; Binding Effect. The
--------------------------------------------------------
Holders and Beneficial Owners from time to time of American Depositary Shares
shall be parties to the Deposit Agreement and shall be deemed to have knowledge
of and be bound by all of the terms and conditions thereof and of any Receipt by
acceptance thereof or any beneficial interest therein.
SECTION 7.5. Notices. Any and all notices to be given to the Company shall be
-------
deemed to have been duly given if personally delivered or sent by mail, air
courier or cable, telex or facsimile transmission, confirmed by letter,
addressed to Fred. Roeskestraat 123, P.O. Box 74763, 1070 B.T., Amsterdam, The
Netherlands, Attention: General Counsel, with a copy to Holme, Roberts & Owen
LLP, 1700 Lincoln Street, Suite 4100, Denver, CO 80203-4541,
33
<PAGE>
Attention: W. Dean Salter, Esq. or to any other address which the Company may
specify in writing to the Depositary.
Any and all notices to be given to the Depositary shall be deemed to have been
duly given if personally delivered or sent by mail, air courier or cable, telex
or facsimile transmission, confirmed by letter, addressed to Citibank, N.A., 111
Wall Street, New York, New York 10043, U.S.A. Attention: ADR Department, or to
any other address which the Depositary may specify in writing to the Company.
Any and all notices to be given to the Custodian shall be deemed to have been
duly given if personally delivered or sent by mail, air courier or cable, telex
or facsimile transmission, confirmed by letter, addressed to Europlaza,
Hoogoordeef 54B, 1101 B.E., Amsterdam, The Netherlands or to any other address
which the Custodian may specify in writing to the Company.
Any and all notices to be given to any Holder shall be deemed to have been duly
given if personally delivered or sent by mail or cable, telex or facsimile
transmission, confirmed by letter, addressed to such Holder at the address of
such Holder as it appears on the transfer books for Receipts of the Depositary,
or, if such Holder shall have filed with the Depositary a written request that
notices intended for such Holder be mailed to some other address, at the address
specified in such request. Notice to Holders shall be deemed to be notice to
Beneficial Owners for all purposes of this Deposit Agreement.
Delivery of a notice sent by mail, air courier or cable, telex or facsimile
transmission shall be deemed to be effective at the time when a duly addressed
letter containing the same (or a confirmation thereof in the case of a cable,
telex or facsimile transmission) is deposited, postage prepaid, in a post-office
letter box or delivered to an air courier service. The Depositary or the Company
may, however, act upon any cable, telex or facsimile transmission received by it
from the other or from any Holder, notwithstanding that such cable, telex or
facsimile transmission shall not subsequently be confirmed by letter as
aforesaid.
SECTION 7.6. Governing Law and Jurisdiction. This Deposit Agreement and the
------------------------------
Receipts shall be interpreted in accordance with, and all rights hereunder and
thereunder and provisions hereof and thereof shall be governed by, the laws of
the State of New York without reference to the principles of choice of law
thereof. Notwithstanding anything contained in this Deposit Agreement, any
Receipt or any present or future provisions of the laws of the State of New
York, the rights of holders of Shares and of any other Deposited Securities and
the obligations and duties of the Company in respect of the holders of Shares
and other Deposited Securities, as such, shall be governed by the laws of The
Netherlands (or, if applicable, such other laws as may govern the Deposited
Securities). Except as set forth in the following paragraph of this Section
7.6, the Company and the Depositary agree that the federal or state courts in
the City of New York shall have jurisdiction to hear and determine any suit,
action or proceeding and to settle any dispute between them that may arise out
of or in connection with this Deposit Agreement and, for such purposes, each
irrevocably submits to the non-exclusive jurisdiction of such courts. The
Company hereby irrevocably designates, appoints and empowers Michael T. Fries,
Supervisory Board Member of United International Holdings, Inc. (the "Agent")
now at 4643 South Ulster
34
<PAGE>
Street, Suite 1300, Denver, Colorado, 80237 as its authorized agent to receive
and accept for and on its behalf, and on behalf of its properties, assets and
revenues, service by mail of any and all legal process, summons, notices and
documents that may be served in any suit, action or proceeding brought against
the Company in any federal or state court as described in the preceding sentence
or in the next paragraph of this Section 7.6. If for any reason the Agent shall
cease to be available to act as such, the Company agrees to designate a new
agent in New York or Colorado on the terms and for the purposes of this Section
7.6 reasonably satisfactory to the Depositary. The Company further hereby
irrevocably consents and agrees to the service of any and all legal process,
summons, notices and documents in any suit, action or proceeding against the
Company, by service by registered or certified airmail, postage prepaid a copy
thereof upon the Agent (whether or not the appointment of such Agent shall for
any reason prove to be ineffective or such Agent shall fail to accept or
acknowledge such service), with a copy mailed to the Company by registered or
certified air mail, postage prepaid, to its address provided in Section 7.5
hereof. The Company agrees that the failure of the Agent to give any notice of
such service to it shall not impair or affect in any way the validity of such
service or any judgment rendered in any action or proceeding based thereon.
Notwithstanding the foregoing, the Depositary and the Company unconditionally
agree that in the event that a Holder or Beneficial Owner brings a suit, action
or proceeding against (a) the Company, (b) the Depositary in its capacity as
Depositary under this Deposit Agreement or (c) against both the Company and the
Depositary, in any such case, in any state or federal court of the United
States, and the Depositary or the Company have any claim, for indemnification or
otherwise, against each other arising out of the subject matter of such suit,
action or proceeding, then the Company and the Depositary may pursue such claim
against each other in the state or federal court in the United States in which
such suit, action, or proceeding is pending and, for such purposes, the Company
and the Depositary irrevocably submit to the non-exclusive jurisdiction of such
courts. The Company agrees that service of process upon the Agent in the manner
set forth in the preceding paragraph shall be effective service upon it for any
suit, action or proceeding brought against it as described in this paragraph.
The Company irrevocably and unconditionally waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying
of venue of any actions, suits or proceedings brought in any court as provided
in this Section 7.6, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
No disclaimer of liability under the Securities Act is intended by any provision
of the Deposit Agreement.
The provisions of this Section 7.6 shall survive any termination of this Deposit
Agreement, in whole or in part.
SECTION 7.7. Assignment. Subject to the provisions of Section 5.4 hereof, this
----------
Deposit Agreement may not be assigned by either the Company or the Depositary
without the prior written consent of the non-assigning party.
35
<PAGE>
SECTION 7.8. Compliance with U.S. Securities Laws. Notwithstanding anything in
------------------------------------
this Deposit Agreement to the contrary, the withdrawal or delivery of Deposited
Securities will not be suspended by the Company or the Depositary except as
would be permitted by Instruction I.A.(1) of the General Instructions to Form F-
6 Registration Statement, as amended from time to time, under the Securities
Act.
SECTION 7.9. Titles. All references in this Deposit Agreement to exhibits,
------
articles, sections, subsections, and other subdivisions refer to the exhibits,
articles, sections, subsections and other subdivisions of this Deposit Agreement
unless expressly provided otherwise. The words "this Deposit Agreement",
"herein", "hereof", "hereby", "hereunder", and words of similar import refer to
the Deposit Agreement as a whole as in effect between the Company, the
Depositary and the Holders and Beneficial Owners of ADSs and not to any
particular subdivision unless expressly so limited. Pronouns in masculine,
feminine and neuter gender shall be construed to include any other gender, and
words in the singular form shall be construed to include the plural and vice
versa unless the context otherwise requires. Titles to sections of this Deposit
Agreement are included for convenience only and shall be disregarded in
construing the language contained in this Deposit Agreement.
IN WITNESS WHEREOF, UNITED PAN-EUROPE COMMUNICATIONS N.V. and CITIBANK, N.A.
have duly executed this Deposit Agreement as of the day and year first above set
forth and all Holders and Beneficial Owners shall become parties hereto upon
acceptance by them of American Depositary Shares evidenced by Receipts issued in
accordance with the terms hereof, or upon acquisition of any beneficial interest
therein.
UNITED PAN-EUROPE COMMUNICATIONS N.V
By: _______________________________
Name:
Title:
CITIBANK, N.A.
By: _______________________________
Name:
Title:
36
<PAGE>
Number __________ CUSIP
American Depositary
Shares (Each American
Depositary Share representing
one fully paid ordinary share,
each nominal value Euro 0.30 each
EXHIBIT A
[FORM OF FACE OF RECEIPT]
AMERICAN DEPOSITARY RECEIPT
FOR
AMERICAN DEPOSITARY SHARES
representing
DEPOSITED ORDINARY SHARES
of
UNITED PAN-EUROPE COMMUNICATIONS N.V.
(Incorporated under the laws of The Netherlands)
CITIBANK, N.A., a national banking association organized and existing under the
laws of the United States of America, as depositary (herein called the
"Depositary"), hereby certifies that _____________is the owner of ______________
American Depositary Shares (hereinafter "ADS"), representing deposited ordinary
shares, each of nominal value Euro 0.30 each, including evidence of rights
to receive such ordinary shares (the "Shares") of United Pan-Europe
Communications N.V, a corporation incorporated under the laws of The Netherlands
(the "Company"). As of the date of the Deposit Agreement (as hereinafter
defined), each ADS represents one Share deposited under the Deposit Agreement
with the Custodian which at the date of execution of the Deposit Agreement is
Citibank N.A., Amsterdam (the "Custodian"). The ratio of American Depositary
Shares to shares of stock is subject to subsequent amendment as provided in
Article IV of the Deposit Agreement. The Depositary's Principal Office is
located at 111 Wall Street, New York, New York 10043, U.S.A.
(1) The Deposit Agreement. This American Depositary Receipt is one of an issue
---------------------
of American Depositary Receipts ("Receipts"), all issued and to be issued upon
the terms and conditions set forth in the Deposit Agreement, dated as of
February __, 1999 (as amended from time to time, the "Deposit Agreement"), by
and among the Company, the Depositary, and all Holders and Beneficial Owners
from time to time of American Depositary Shares ("ADSs") evidenced by Receipts
issued thereunder, each of whom by accepting an ADS (or an interest therein)
agrees to become a party thereto and will be deemed to have knowledge thereof
and becomes bound by all the terms and conditions thereof. The Deposit Agreement
sets forth the rights and obligations of Holders and Beneficial Owners of
Receipts and the rights and duties of the Depositary in respect of the Shares
deposited thereunder and any and all other securities, property and cash from
time to time, received in respect of such Shares and held thereunder (such
A-1
<PAGE>
Shares, securities, property and cash are herein called "Deposited Securities").
Copies of the Deposit Agreement are on file at the Principal Office of the
Depositary and the Custodian.
The statements made on the face and reverse of this Receipt are summaries of
certain provisions of the Deposit Agreement and the Articles of Association of
the Company (as in effect on the date of the Deposit Agreement) and are
qualified by and subject to the detailed provisions of the Deposit Agreement, to
which reference is hereby made. All capitalized terms used herein which are not
otherwise defined herein shall have the meanings ascribed thereto in the Deposit
Agreement. The Depositary makes no representation or warranty as to the validity
or worth of the Deposited Securities. The Depositary has made arrangements for
the acceptance of the American Depositary Shares into DTC. Each Beneficial
Owner of American Depositary Shares held through DTC must rely on the procedures
of DTC and the DTC Participants to exercise and be entitled to any rights
attributable to such American Depositary Shares.
(2) Surrender of Receipts and Withdrawal of Deposited Securities. Upon
------------------------------------------------------------
surrender, at the Principal Office of the Depositary, of ADS evidenced by this
Receipt for the purpose of withdrawal of the Deposited Securities represented
thereby, and upon payment of (i) the charges of the Depositary for the making of
withdrawals and cancellation of Receipts (as set forth in Article (10) hereof
and in Section 5.9 and Exhibit B of the Deposit Agreement) and (ii) all fees,
taxes and governmental charges payable in connection with such surrender and
withdrawal, and, subject to the terms and conditions of this Receipt, the
Deposit Agreement, the Company's Articles of Association, and the provisions of
or governing the Deposited Securities and other applicable laws, the Holder of
the American Depositary Shares evidenced hereby is entitled to Delivery,
by electronic transfer recorded on the transfer books of NECIGEF such Holder's
order, of the Deposited Securities represented by the ADS so surrendered and
delivery of any other securities, property and cash to which such Holder is then
entitled in respect to such ADS.
A Receipt surrendered for such purposes shall, if so required by the Depositary,
be properly endorsed in blank or accompanied by proper instruments of transfer
in blank. If the Depositary so requires, the Holder hereof shall execute and
deliver to the Depositary a written order directing the Depositary to cause the
Deposited Securities being withdrawn to be Delivered to the NECIGEF Participant
designated in such order. Thereupon, the Depositary shall direct the Custodian
to Deliver (as promptly as practicable) by electronic transfer recorded on the
transfer books of NECIGEF subject to the terms and conditions of the Receipts,
the Deposit Agreement, the Articles of Association of the Company, and the
provisions of or governing the Deposited Securities, applicable laws and the
rules of NECIGEF, now or hereafter in effect, to the NECIGEF participant
designated in the written order of the person or persons designated in the order
delivered to the Depositary as provided above, the Deposited Securities
represented by such ADSs together with any proper documents of or relating to
title for the Deposited Securities. The Depositary may make delivery to such
person or persons at the Principal Office of the Depositary of any dividends or
distributions with respect to the Deposited Securities represented by the ADSs
evidenced by this Receipt, or of any proceeds of sale of any dividends,
distributions or rights, which may at the time be held by the Depositary.
A-2
<PAGE>
The Depositary shall not accept for surrender a Receipt evidencing ADSs
representing less than one Share. In the case of surrender of a Receipt
evidencing a number of ADS representing other than a whole number of Shares, the
Depositary shall cause ownership of the appropriate whole number of Shares to be
Delivered in accordance with the terms hereof, and shall, at the discretion of
the Depositary, either (i) return to the person surrendering such ADSs the
number of ADSs representing any remaining fractional Share, or (ii) sell or
cause to be sold the fractional Shares represented by the ADSs so surrendered
and remit the proceeds thereof (net of (a) applicable fees and charges of, and
expenses incurred by, the Depositary and (b) taxes withheld) to the person
surrendering the ADSs. At the request, risk and expense of any Holder so
surrendering ADSs, and for the account of such Holder, the Depositary shall
direct the Custodian to forward (to the extent permitted by law) any cash or
other property (other than securities) held in respect of the Deposited
Securities represented by such ADSs to the Depositary for delivery at the
Principal Office of the Depositary. Such direction shall be given by letter or,
at the request, risk and expense of such Holder, by cable, telex or facsimile
transmission.
(3) Transfers, Split-Ups and Combinations of Receipts. Subject to the terms
-------------------------------------------------
and conditions of the applicable Receipt(s), the Deposit Agreement and the U.S.
securities laws, the Registrar shall register transfers of Receipts on its book
upon surrender at the Principal Office of the Depositary of a Receipt by the
Holder thereof in person or by duly authorized attorney, properly endorsed or
accompanied by proper instruments of transfer (including signature guarantees in
accordance with standard industry practice) and duly stamped as may be required
by the laws of the State of New York and of the United States of America.
Subject to the terms and conditions of the Deposit Agreement including payment
of the applicable fees and charges of the Depositary, the Depositary shall
execute and deliver a new Receipt(s) (and if necessary cause the Registrar to
countersign such Receipt(s)) and deliver the same to or upon the order of the
person entitled thereto evidencing the same aggregate number of ADSs as those
evidenced by the Receipt(s) surrendered. Upon surrender of a Receipt or Receipts
for the purpose of effecting a split-up or combination of such Receipt or
Receipts and upon payment of the applicable fees and charges of the Depositary
and subject to the terms and conditions of the applicable Receipt(s), the
Deposit Agreement and the U.S. securities laws, the Depositary shall execute and
deliver new Receipt(s) evidencing the same aggregate number of ADSs as the
Receipt(s) surrendered.
(4) Pre-Conditions to Registration, Transfer, Etc. As a condition precedent to
---------------------------------------------
the execution and delivery, registration of transfer, split-up, combination or
surrender of any Receipt or withdrawal of any Deposited Securities, the
Depositary or the Custodian may require (i) payment from the depositor of Shares
or presenter of ADSs or of a Receipt of a sum sufficient to reimburse it for any
tax or other governmental charge and any stock transfer or registration fee with
respect thereto (including any such tax or charge and fee with respect to Shares
being deposited or withdrawn) and payment of any applicable fees and charges of
the Depositary as provided in the Deposit Agreement and in this Receipt, (ii)
the production of proof satisfactory to it as to the identity and genuineness of
any signature or any other matters and (iii) compliance with (A) any laws or
governmental regulations relating to the execution and delivery of Receipts and
ADSs or to the withdrawal of Deposited Securities and (B) such reasonable
regulations of the Depositary or the Company consistent with the Deposit
Agreement and applicable law.
A-3
<PAGE>
The issuance of ADSs against deposits of Shares generally or against deposits of
particular Shares may be suspended, or the delivery of ADSs against the deposit
of particular Shares may be withheld, or the registration of transfer of
Receipts in particular instances may be refused, or the registration of transfer
of outstanding Receipts generally may be suspended, during any period when the
transfer books of the Company, Depositary, a Registrar or the Share Registrar
are closed or if any such action is deemed necessary or advisable by the
Depositary or the Company, in good faith, at any time or from time to time
because of any requirement of law, any government or governmental body or
commission or any securities exchange upon which the Receipts or Share are
listed, or under any provision of the Deposit Agreement or provisions of, or
governing, the Deposited Securities or any meeting of shareholders of the
Company or for any other reason, subject in all cases to Article (24) hereof.
Notwithstanding any provision of the Deposit Agreement or this Receipt to the
contrary, Holders are entitled to surrender outstanding ADSs to withdraw the
Deposited Securities at any time subject only to (i) temporary delays caused by
closing the transfer books of the Depositary or the Company or the deposit of
Shares in connection with voting at a shareholders' meeting or the payment of
dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance
with any U.S. or foreign laws or governmental regulations relating to the
Receipts or to the withdrawal of the Deposited Securities, and (iv) other
circumstances specifically contemplated by Section I.A.(l) of the General
Instructions to Form F-6 (as such General Instructions may be amended from time
to time).
(5) Compliance With Information Requests. Notwithstanding any other provision
------------------------------------
of the Deposit Agreement or this Receipt, each Holder and Beneficial Owner of
the ADSs represented hereby agrees to comply with requests from the Company
pursuant to Dutch law, the rules and requirements of the Amsterdam Stock
Exchange, and of any stock exchange or automated quotation system on which
Shares or ADSs are or will be registered, traded or listed, the Articles of
Association of the Company, which are made to provide information as to the
capacity in which such Holder or Beneficial Owner owns ADSs (and Shares, as the
case may be) and regarding the identity of any other persons then or previously
interested in such ADSs and the nature of such interest and various other
matters, whether or not they are Holders and/or Beneficial Owners at the time of
such request. The Depositary agrees to use reasonable efforts to forward, upon
the request of the Company and at the Company's expense, any such requests to
the Holders and to forward to the Company any such responses to such requests
received by the Depositary.
(6) Ownership Restrictions. The Company may restrict transfers of the Shares
----------------------
where such transfer might result in ownership of Shares exceeding limits under
applicable law or the Articles of Association of the Company. The Company may
also restrict, in such manner as it deems appropriate, transfers of ADSs where
such transfer may result in the total number of Shares represented by the ADSs
owned by a single Holder or Beneficial Owner to exceed any such limits. The
Company may, in its sole discretion but subject to applicable law, instruct the
Depositary to take action with respect to the ownership interest of any Holder
or Beneficial Owner in excess of the limits set forth in the preceding sentence,
including but not limited to the imposition of restrictions on the transfer of
ADSs, the removal or limitation of voting rights or a
A-4
<PAGE>
mandatory sale or disposition on behalf of a Holder or Beneficial Owner of the
Shares represented by the ADSs held by such Holder or Beneficial Owner in excess
of such limitations, if and to the extent such disposition is permitted by
applicable law and the Articles of Association of the Company.
(7) Liability of Holder for Taxes, Duties and Other Charges. If any tax or
-------------------------------------------------------
other governmental charge shall become payable with respect to any Receipt or
any Deposited Securities or ADSs, such tax, or other governmental charge shall
be payable by the Holders and Beneficial Owners to the Depositary. The Company,
the Custodian and/or Depositary may withhold or deduct from any distributions
made in respect of Deposited Securities and may sell for the account of the
Holder and/or Beneficial Owner any or all of the Deposited Securities and apply
such distributions and sale proceeds in payment of such taxes (including
applicable interest and penalties) or charges, the Holder and the Beneficial
Owner hereof remaining liable for any deficiency. The Custodian may refuse the
deposit of Shares and the Depositary may refuse to issue ADSs, to deliver
Receipts, register the transfer, split-up or combination of ADRs and (subject to
Article (24) hereof) the withdrawal of Deposited Securities until payment in
full of such tax, charge, penalty or interest is received. Every Holder and
Beneficial Owner agrees to indemnify the Depositary, the Company, the Custodian
and any of their agents, employees and Affiliates for, and hold each of then
harmless from, any claims with respect to taxes (including applicable interest
and penalties thereon) arising from any tax benefit obtained for such Holder
and/or Beneficial Owner.
(8) Representations and Warranties of Depositors. Each person depositing
--------------------------------------------
Shares under the Deposit Agreement shall be deemed thereby to represent and
warrant that (i) such Shares (and the certificates therefor) are duly
authorized, validly issued, fully paid, non-assessable and legally obtained by
such person, (ii) all preemptive (and similar) rights, if any, with respect to
such Shares, have been validly waived or exercised, (iii) the person making such
deposit is duly authorized so to do and (iv) the Shares presented for deposit
are free and clear of any lien, encumbrance, security interest, charge, mortgage
or adverse claim and are not, and the ADSs issuable upon such deposit will not
be, Restricted Securities and the Share presented for deposit have not been
stripped of any rights or entitlements. Such representations and warranties
shall survive the deposit and withdrawal of Shares, the issuance and
cancellation of ADSs in respect thereof and the transfer of such ADSs. If any
such representations or warranties are false in any way, the Company and
Depositary shall be authorized, at the cost and expense of the person depositing
Shares, to take any and all actions necessary to correct the consequences
thereof.
(9) Filing Proofs, Certificates and Other Information. Any person presenting
-------------------------------------------------
Shares for deposit, any Holder and any Beneficial Owner may be required, and
every Holder and Beneficial Owner agrees, from time to time to provide to the
Depositary and the Custodian such proof of citizenship or residence, taxpayer
status, payment of all applicable taxes or other governmental charges, exchange
control approval, legal or beneficial ownership of ADSs and Deposited
Securities, compliance with applicable laws and the terms of the Deposit
Agreement and the provisions of, or governing, the Deposited Securities, to
execute such certifications and to make such representations and warranties and
to provide such other information or documentation (or, in the case of Shares in
registered form presented for deposit, such information relating to the
A-5
<PAGE>
registration of Shares on the books of NECIGEF or a NECIGEF Participant as the
Depositary or the Custodian may deem necessary or proper or as the Company may
reasonably require by written request to the Depositary consistent with its
obligations under the Deposit Agreement. Subject to Article (24) hereof and the
terms of the Deposit Agreement, the Depositary and the Registrar, as applicable,
may withhold the delivery or registration of transfer of any Receipt or the
distribution or sale of any dividend or other distribution of rights or of the
proceeds thereof or the delivery of any Deposited Securities until such proof or
other information is filed or such certificates are executed, or such
representations and warranties made or such information and documentation are
provided, in each case to the Depositary's, the Registrar's and the Company's
satisfaction.
(10) Charges of Depositary. The Depositary shall charge the following fees for
---------------------
the services performed under the terms of the Deposit Agreement:
(i) to any person to whom ADSs are issued upon the deposit of Shares, a
fee not in excess of U.S. $ 5.00 per 100 ADSs (or portion thereof) so
issued under the terms of the Deposit Agreement (excluding issuances
pursuant to paragraph (iii) and (iv) below);
(ii) to any person surrendering ADSs for cancellation and withdrawal of
Deposited Securities, a fee not in excess of U.S. $ 5.00 per 100 ADSs
(or portion thereof) so surrendered;
(iii) to any Holder of ADRs, a fee not in excess of U.S. $ 2.00 per 100
ADSs (or portion thereof) held for the distribution of cash proceeds
(i.e. upon the sale of rights and other entitlements); no fee shall
be payable for the distribution of cash dividends or the distribution
of ADSs pursuant to stock dividends.
(iv) to any Holder of ADRs, a fee not in the excess of U.S. $ 5.00 per 100
ADSs (or portion thereof) for the distribution of ADSs pursuant to
free share distributions or the exercise of rights.
In addition, Holders, Beneficial Owners, any person depositing Shares for
deposit and any person surrendering ADSs for cancellation and withdrawal of
Deposited Securities will be required to pay the following charges:
(i) taxes (including applicable interest and penalties) and other
governmental charges;
(ii) such registration fees as may from time to time be in effect for the
registration of Shares or other Deposited Securities on the share
register and applicable to transfers of Shares or other Deposited
Securities to or from the name of the Custodian, the Depositary or
any nominees upon the making of deposits and withdrawals,
respectively;
A-6
<PAGE>
(iii) such cable, telex and facsimile transmission and delivery expenses
as are expressly provided in the Deposit Agreement to be at the
expense of the person depositing or withdrawing Shares or Holders
and Beneficial Owners of ADSs;
(iv) the expenses and charges incurred by the Depositary in the
conversion of foreign currency;
(v) such fees and expenses as are incurred by the Depositary in
connection with compliance with exchange control regulations and
other regulatory requirements applicable to Shares, Deposited
Securities, ADSs and ADRs; and
(vi) the fees and expenses incurred by the Depositary in connection with
the delivery of Deposited Securities.
The Company agrees to pay to the Depositary, as promptly as practicable, such
other charges and expenses of the Depositary as the Depositary and the Company
may agree to from time to time. Fees and charges may, at any time and from time
to time, be changed by agreement between the Depositary and Company but, in the
case of fees and charges payable by Holders or Beneficial Owners, only in the
manner contemplated by Article (22) of this Receipt. The Depositary will
provide, without charge, a copy of its latest fee schedule to anyone upon
request. The charges and expenses of the Custodian are for the sole account of
the Depositary.
(11) Title to Receipts. Subject to the limitations contained herein and in the
-----------------
Deposit Agreement, title to this Receipt (and to each ADS evidenced hereby) is
transferable by delivery of this Receipt with the same effect as a certificated
security under the laws of the State of New York, provided this Receipt has been
properly endorsed or is accompanied by proper instruments of transfer.
Notwithstanding any notice to the contrary, the Depositary may deem and treat
the person in whose name this Receipt is registered on the books of the
Depositary as the absolute owner hereof for all purposes. The Depositary shall
have no obligation nor be subject to any liability hereunder or under the
Deposit Agreement to any holder of a Receipt unless such holder is the Holder of
such Receipt registered on the books of the Depositary, or, in the case of a
Beneficial Owner, such Beneficial Owner or the Beneficial Owner's representative
is the Holder registered on the books of the Depositary.
(12) Validity of Receipt. This Receipt (and the American Depositary Shares
-------------------
represented hereby) shall not be entitled to any benefits under the Deposit
Agreement or be valid or enforceable for any purpose against the Depositary or
the Company unless this Receipt has been (i) dated, (ii) signed by the manual or
facsimile signature of a duly authorized signatory of the Depositary, (iii)
countersigned by the manual or facsimile signature of a duly authorized
signatory of the Registrar, and (iv) registered by the Registrar in the books
maintained by the Registrar for the purpose of registration of the issuance and
transfer of Receipts.
(13) Available Information; Reports; Inspection of Transfer Books. The Company
------------------------------------------------------------
is subject to the periodic reporting requirements of the Exchange Act and
accordingly files certain information with the Commission. These reports and
documents can be inspected and copied at
A-7
<PAGE>
the public reference facilities maintained by the Commission located at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at the
Commission's New York City office located at Seven World Trade Center, 13th
Floor, New York, New York 10048. The Depositary shall make available for
inspection by Holders at its Principal Office any reports and communications,
including any proxy soliciting materials, received from the Company which are
both (a) received by the Depositary, the Custodian, or the nominee of either of
them as the holder of the Deposited Securities and (b) made generally available
to the holders of such Deposited Securities by the Company.
The Registrar shall keep books for the registration of issuances and transfers
of Receipts which at all reasonable times shall be open for inspection by the
Company and by the Holders of such Receipts, provided that such inspection shall
not be, to the Registrar's knowledge, for the purpose of communicating with
Holders of such Receipts in the interest of a business or object other than the
business of the Company or other than a matter related to the Deposit Agreement
or the Receipts.
The Registrar may close the transfer books with respect to the Receipts, at any
time or from time to time, when deemed necessary or advisable by it in good
faith in connection with the performance of its duties hereunder, or at the
reasonable written request of the Company subject, in all cases, to Article (24)
hereof.
Dated: CITIBANK, N.A.,
as Depositary
Countersigned
By:______________________ By:______________________________
Authorized Representative Vice President
The address of the Principal Office of the Depositary is 111 Wall Street, New
York, New York 10043, U.S.A.
A-8
<PAGE>
[FORM OF REVERSE OF RECEIPT]
SUMMARY OF CERTAIN ADDITIONAL PROVISIONS
OF THE DEPOSIT AGREEMENT
(14) Dividends and Distributions in Cash, Shares, etc. Whenever the Depositary
------------------------------------------------
receives confirmation from the Custodian of receipt of any cash dividend or
other cash distribution on any Deposited Securities, or receives proceeds from
the sale of any Shares, rights securities or other entitlements under the
Deposit Agreement, the Depositary will, if at the time of receipt thereof any
amounts received in a Foreign Currency can, in the judgment of the Depositary
(upon the terms of the Deposit Agreement), be converted on a practicable basis
into Dollars transferable to the United States, convert or cause to be converted
such dividend, distribution or proceeds into Dollars (upon the terms of the
Deposit Agreement) and will distribute as promptly as practicable the amount
thus received (net of (a) applicable fees and charges of, and expenses incurred
by, the Depositary and (b) taxes withheld) to the Holders entitled thereto as of
the ADS Record Date in proportion to the number of ADS held as of the ADS Record
Date. The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any Holder a fraction of one cent, and any
balance not so distributed shall be held by the Depositary (without liability
for interest thereon) and shall be added to and become part of the next sum
received by the Depositary for distribution to Holders of ADSs then outstanding.
If the Company, the Custodian or the Depositary is required to withhold and does
withhold from any cash dividend or other cash distribution in respect of any
Deposited Securities an amount on account of taxes, duties or other governmental
charges, the amount distributed to Holders on the ADSs representing such
Deposited Securities shall be reduced accordingly. Such withheld amounts shall
be forwarded by the Company to the relevant governmental authority.
If any distribution upon any Deposited Securities consists of a dividend in, or
free distribution of, Shares, the Company shall or cause such Shares to be
deposited with the Custodian and registered, as the case may be, in the name of
the Depositary, the Custodian or their nominees. The Depositary shall, subject
to and in accordance with the Deposit Agreement, and upon receipt of
confirmation and upon receipt of such deposit from the custodian (i) distribute
to the Holders as of the ADS Record Date previously established by the
depository in proportion to the number of ADSs held as of the ADS Record Date,
additional ADSs, which represent in aggregate the number of Shares received as
such dividend, or free distribution, subject to the terms of the Deposit
Agreement (including, without limitation, (a) the applicable fees and charges
of, and expenses incurred by, the Depositary and (b) taxes), or (ii) if
additional ADSs are not so distributed, each ADS issued and outstanding after
the ADS Record Date shall, to the extent permissible by law, thenceforth also
represent rights and interest in the additional integral number of Shares
distributed upon the Deposited Securities represented thereby (net (a) of the
applicable fees and charges of, and the expenses incurred by, the Depositary,
and (b) taxes). In lieu of delivering fractional ADSs, the Depositary shall sell
the number of Shares or ADSs, as the case may be, represented by the aggregate
of such fractions and distribute the net proceeds upon the terms set forth in
the Deposit Agreement.
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<PAGE>
In the event that the Depositary determines that any distribution in property
(including Shares) is subject to any tax or other governmental charges which the
Depositary is obligated to withhold, or, if the Company, in the fulfillment of
its obligations under the Deposit Agreement, has furnished an opinion of U.S.
counsel determining that Shares must be registered under the Securities Act or
other laws in order to be distributed to Holders (and no such registration
statement has been declared effective), the Depositary may dispose of all or a
portion of such property (including Shares and rights to subscribe therefor) in
such amounts and in such manner, including by public or private sale, as the
Depositary deems necessary and practicable and the Depositary shall distribute
the net proceeds of any such sale (after deduction of (a) taxes and fees and (b)
charges of, and expenses incurred by, the Depositary) to Holders entitled
thereto upon the terms of the Deposit Agreement. The Depositary shall hold
and/or distribute any unsold balance of such property in accordance with the
provisions of the Deposit Agreement.
Upon timely receipt of a notice indicating that the Company wishes an elective
distribution to be made available to Holders upon the terms described in the
Deposit Agreement, the Company and the Depositary shall determine whether such
distribution is lawful and reasonably practicable. If so, the Depositary shall,
to the extent permitted by law and subject to the terms and conditions of the
Deposit Agreement, distribute either (x) cash as in the case of a cash
distribution or (y) additional ADSs representing such additional Shares as in
the case of a distribution of Shares. In either case, the Depositary shall,
subject to the terms and conditions of the Deposit Agreement, establish and ADS
Record Date and establish procedures to enable the Holder hereof to elect to
receive the proposed distribution in cash or in additional ADSs. If a Holder
elects to receive the distribution in cash, the dividend shall be distributed as
in the case of a distribution in cash. If the Holder hereof elects to receive
the distribution in additional ADSs, the distribution shall be distributed as in
the case of a distribution in Shares. Nothing herein or in the Deposit
Agreement shall obligate the Depositary to make available to the Holder hereof a
method to receive the elective distribution in Shares (rather than ADSs). There
can be no assurance that the Holder hereof will be given the opportunity to
receive elective distributions on the same terms and conditions as the holders
of Shares.
Upon timely receipt by the Depositary of a notice indicating that the Company
wishes rights to subscribe for additional Shares (or any rights of any other
nature) to be made available to Holders of ADSs, the Company and the Depositary
shall determine whether it is lawful and reasonably practicable to make such
rights available to the Holders. The Depositary shall make such rights available
to any Holders only if (i) the Company shall have requested that such rights be
made available to Holders, (ii) the Depositary shall have received the
documentation contemplated in the Deposit Agreement, and (iii) the Depositary
shall have determined that such distribution of rights is reasonably
practicable. If such conditions are not satisfied, the Depositary shall sell
the rights as described below. In the event all conditions set forth above are
satisfied, the Depositary shall establish an ADS Record Date (upon the terms
described in the Deposit Agreement) and establish procedures to distribute
rights to purchase additional ADSs (by means of warrants or otherwise) and to
enable the Holders to exercise the rights (upon payment of applicable (a) fees
and charges of, and expenses incurred by, the Depositary and (b) taxes).
Nothing herein or in the Deposit Agreement shall obligate the Depositary to make
available to the Holders a method to exercise rights to subscribe for Shares
(rather than ADSs).
A-10
<PAGE>
If (i) the Company does not request the Depositary to make the rights available
to Holders or if the Company requests that the rights not be made available to
Holders, (ii) the Depositary fails to receive the documentation required by the
Deposit Agreement or determines it is not reasonably practicable to make the
rights available to Holders, or (iii) any rights made available are not
exercised and appear to be about to lapse, the Depositary shall, upon
consultation with the Company, determine whether it is lawful and reasonably
practicable to sell such rights, in a riskless principal capacity, at such place
and upon such terms (including public and private sale) as it may deem proper.
The Depositary shall, upon such sale, convert and distribute proceeds of such
sale (net of applicable fees and charges of, and expenses incurred by, the
Depositary and taxes) upon the terms hereof and of the Deposit Agreement. If the
Depositary is unable to make any rights available to Holders or to arrange for
the sale of the rights upon the terms described above, the Depositary shall
allow such rights to lapse. The Depositary shall not be responsible for (i) any
failure to determine that it may be lawful or feasible to make such rights
available to Holders in general or any Holders in particular, (ii) any foreign
exchange exposure or loss incurred in connection with such sale or exercise, or
(iii) the content of any materials forwarded to the ADR Holders on behalf of the
Company in connection with the rights distribution.
Notwithstanding anything herein or in the Deposit Agreement to the contrary, if
registration (under the Securities Act or any other applicable law) of the
rights or the securities to which any rights relate may be required in order for
the Company to offer such rights or such securities to Holders and to sell the
securities represented by such rights, the Depositary will not distribute such
rights to the Holders unless and until a registration statement under the
Securities Act (or other applicable law) covering such offering is in effect.
In the event that the Company, the Depositary or the Custodian shall be required
to withhold and does withhold from any distribution of property (including
rights) an amount on account of taxes or other governmental charges, the amount
distributed to the Holders of ADSs representing such Deposited Securities shall
be reduced accordingly. In the event that the Depositary determines that any
distribution in property (including Shares and rights to subscribe therefor) is
subject to any tax or other governmental charges which the Depositary is
obligated to withhold, the Depositary may dispose of all or a portion of such
property (including Shares and rights to subscribe therefor) in such amounts and
in such manner, including by public or private sale, as the Depositary deems
necessary and practicable to pay any such taxes or charges.
There can be no assurance that Holders generally, or any Holder in particular,
will be given the opportunity to exercise rights on the same terms and
conditions as the holders of Shares or to exercise such rights. Nothing herein
or in the Deposit Agreement shall obligate the Company to file any registration
statement in respect of any rights or Shares or other securities to be acquired
upon the exercise of such rights.
Upon receipt of a notice indicating that the Company wishes property other than
cash, Shares or rights to purchase additional Shares, to be made to Holders of
ADSs, the Depositary and the Company shall determine whether such distribution
to Holders is lawful and reasonably practicable. The Depositary shall not make
such distribution unless such distribution is permission under Dutch law and (i)
the Company shall have requested the Depositary to make such distribution to
Holders, (ii) the Depositary shall have received the documentation
A-11
<PAGE>
contemplated in the Deposit Agreement, and (iii) the Depositary shall have
determined that such distribution is reasonably practicable. Upon satisfaction
of such conditions, the Depositary shall distribute the property so received to
the Holders of record, as of the ADS Record Date, in proportion to the number of
ADSs held by them respectively and in such manner as the Depositary may deem
practicable for accomplishing such distribution (i) upon receipt of payment or
net of the applicable fees and charges of, and expenses incurred by, the
Depositary, and (ii) net of any taxes withheld. The Depositary may dispose of
all or a portion of the property so distributed and deposited, in such amounts
and in such manner (including public or private sale) as the Depositary may deem
practicable or necessary to satisfy any taxes (including applicable interest and
penalties) or other governmental charges applicable to the distribution.
If the conditions above are not satisfied, the Depositary shall sell or cause
such property to be sold in a public or private sale, at such place or places
and upon such terms as it may deem proper and shall (i) cause the proceeds of
such sale, if any, to be converted into Dollars and (ii) distribute the proceeds
of such conversion received by the Depositary (net of (a) applicable fees and
charges of, and expenses incurred by, the Depositary and (b) taxes) to the
Holders upon the terms hereof and of the Deposit Agreement. If the Depositary
is unable to sell such property, the Depositary may dispose of such property in
any way it deems reasonably practicable under the circumstances.
(15) Redemption. Upon timely receipt of notice from the Company that it intends
----------
to exercise its right of redemption in respect of any of the Deposited
Securities, and a satisfactory opinion of counsel, and upon determining that
such proposed redemption is practicable, the Depositary shall (to the extent
practicable) mail to each Holder a notice setting forth the Company's intention
to exercise the redemption rights and any other particulars set forth in the
Company's notice to the Depositary. Upon receipt of confirmation that the
redemption has taken place and that funds representing the redemption price have
been received, the Depositary shall convert, transfer, distribute the proceeds
(net of applicable (a) fees and charges of, and expenses incurred by, the
Depositary, and (b) taxes), retire ADSs and cancel ADRs upon delivery of such
ADSs by Holders thereof upon the terms of the Deposit Agreement. If less than
all outstanding Deposited Securities are redeemed, the ADSs to be retired will
be selected by lot or on a pro rata basis, as may be determined by the
Depositary. The redemption price per ADS shall be the dollar equivalent of per
share amount received by the Depositary upon the redemption of the Deposited
Securities represented by American Depositary Shares (subject to the terms of
the Deposit Agreement and the applicable fees and charges of, and expenses
incurred by, the Depositary, and taxes) multiplied by the number of Units or
Deposited Securities represented by each ADS redeemed.
(16) Fixing of Record Date. Whenever the Depositary shall receive notice of the
---------------------
fixing of a record date by the Company for the determination of holders of
Deposited Securities entitled to receive any distribution (whether in cash,
Shares, rights or other distribution), or whenever for any reason the Depositary
causes a change in the number of Shares that are represented by each ADS, or
whenever the Depositary shall receive notice of any meeting of, or solicitation
of consents or proxies of, holders of Shares or other Deposited Securities, or
whenever the Depositary shall find it necessary or convenient in connection with
the giving of any notice, or
A-12
<PAGE>
any other matter, the Depositary shall fix a record date ("ADS Record Date") for
the determination of the Holders of Receipts who shall be entitled to receive
such distribution, to give instructions for the exercise of voting rights at any
such meeting, or to give or withhold such consent, or to receive such notice or
solicitation or to otherwise take action, or to exercise the rights of Holders
with respect to such changed number of Shares represented by each ADS. Subject
to applicable law and the terms and conditions of this Receipt and the Deposit
Agreement, only the Holders of Receipts at the close of business in New York on
such ADS Record Date shall be entitled to receive such distributions, to give
such instructions, to receive such notice or solicitation, or otherwise take
action.
(17) Voting of Deposited Securities. As soon as practicable after receipt of
------------------------------
notice of any meeting at which the holders of Shares are entitled to vote, or of
solicitation of consents or proxies from holders of Shares or other Deposited
Securities, the Depositary shall fix the ADS Record Date in respect of such
meeting or solicitation of such consent or proxy. The Depositary shall (if
requested in writing in a timely manner by the Company) mail to Holders: (a)
such notice of meeting or solicitation of consent or proxies, (b) a statement
that the Holders as of the ADS Record Date will be entitled, subject to any
applicable law, the Company's Articles of Association and the provisions of or
governing Deposited Securities (which provisions, if any, shall be summarized in
pertinent part by the Company), to instruct the Depositary as to the exercise of
the voting rights, if any, pertaining to the Shares or other Deposited
Securities represented by such Holder's ADS and (c) a brief statement as to the
manner in which such instructions may be given. Upon the timely receipt of
written instructions of a Holder of ADSs on the ADS Record Date, the Depositary
shall endeavor, insofar as practicable and permitted under applicable law and
the provisions of the Articles of Association of the Company and the provisions
of the Deposited Securities, to vote or cause the Custodian to vote the Shares
and/or other Deposited Securities represented by ADSs held by such Holder in
accordance with such instructions.
Neither the Depositary nor the Custodian nor their respective nominees, if any,
shall under any circumstances exercise any discretion as to voting and neither
the Depositary nor the Custodian shall vote, attempt to exercise the right to
vote, or in any way make use of, for the purposes of establishing a quorum or
otherwise, the Shares or other Deposited Securities represented by ADS except
pursuant to and in accordance with such written instructions from Holders. If
voting instructions are received by the Depositary from any Holder on or before
the date established by the Depositary for the receipt of such instructions,
which are signed but without further indication as to specific instructions, the
Depositary will deem such Holder to have instructed the Depositary to vote in
favor of the items set forth in such instructions. Shares or other Deposited
Securities represented by ADS for which no specific voting instructions are
received by the Depositary from the Holder shall not be voted. There can be no
assurance that Holders generally or any Holder in particular will receive the
notice described above with sufficient time to enable the Holder to return
voting instructions to the Depositary in a timely manner.
(18) Changes Affecting Deposited Securities. Upon any change in nominal or par
--------------------------------------
value, split-up, cancellation, consolidation or any other reclassification of
Deposited Securities, or upon any recapitalization, reorganization, merger or
consolidation or sale of assets affecting the Company
A-13
<PAGE>
or to which it is a party, any securities which shall be received by the
Depositary or the Custodian in exchange for, or in conversion of or replacement
of or otherwise in respect of, such Deposited Securities shall, to the extent
permitted by law, be treated as new Deposited Securities under the Deposit
Agreement, and the Receipts shall, subject to the provisions of the Deposit
Agreement and applicable law, evidence ADSs representing the right to receive
such new securities. The Depositary may, with the Company's approval, and shall,
if the Company shall so request, subject to the terms of the Deposit Agreement
and receipt of satisfactory documentation contemplated by the Deposit Agreement,
execute and deliver additional Receipts as in the case of a stock dividend on
the Shares, or call for the surrender of outstanding Receipts to be exchanged
for new Receipts, in either case, as well as in the event of newly deposited
Shares, with necessary modifications to the form of Receipt contained in this
Exhibit A to the Deposit Agreement, specifically describing such new Deposited
Securities or corporate change. Notwithstanding the foregoing, in the event that
any security so received may not be lawfully distributed to some or all Holders,
the Depositary may, with the Company's approval, and shall if the Company
requests, subject to receipt of satisfactory legal documentation contemplated in
the Deposit Agreement, sell such securities at public or private sale, at such
place or places and upon such terms as it may deem proper and may allocate the
net proceeds of such sales (net of (a) fees and charges of, and expenses
incurred by, the Depositary and (b) taxes) for the account of the Holders
otherwise entitled to such securities and distribute the net proceeds so
allocated to the extent practicable as in the case of a distribution received in
cash pursuant to the Deposit Agreement. The Depositary shall not be responsible
for (i) any failure to determine that it may be lawful or feasible to make such
securities available to Holders in general or any Holder in particular, (ii) any
foreign exchange exposure or loss incurred in connection with such sale, or
(iii) any liability to the purchaser of such securities.
(19) Exoneration. Neither the Depositary nor the Company shall be obligated to
-----------
do or perform any act which is inconsistent with the provisions of the Deposit
Agreement or incur any liability (i) if the Depositary or the Company shall be
prevented or forbidden from, or subjected to any civil or criminal penalty or
restraint on account of, or delayed in, doing or performing any act or thing
required by the terms of the Deposit Agreement and this Receipt, by reason of
any provision of any present or future law or regulation of the United States,
The Netherlands or any other country, or of any other governmental authority or
regulatory authority or stock exchange, or by reason of any provision, present
or future of the Articles of Association of the Company or any provision of or
governing any Deposited Securities, or by reason of any act of God or war or
other circumstances beyond its control (including, without limitation,
nationalization, expropriation, currency restrictions, work stoppage, strikes,
civil unrest, revolutions, rebellions, explosions and computer failure), (ii) by
reason of any exercise of, or failure to exercise, any discretion provided for
in this Deposit Agreement or in the Articles of Association of the Company or
provisions of or governing Deposited Securities, (iii) for any action or
inaction in reliance upon the advice of or information from legal counsel,
accountants, any person presenting Shares for deposit, any Holder, any
Beneficial Owner or authorized representative thereof, or any other person
believed by it in good faith to be competent to give such advice or information,
(iv) for any inability by a Holder or Beneficial Owner to benefit from any
distribution, offering, right or other benefit which is made available to
holders of Deposited Securities but is not, under the terms of this Deposit
Agreement, made available to Holders of ADS or (v) for any consequential
A-14
<PAGE>
or punitive damages for any breach of the terms of this Deposit Agreement. The
Depositary, its controlling persons, its agents, any Custodian and the Company,
its controlling persons and its agents may rely and shall be protected in acting
upon any written notice, request or other document believed by it to be genuine
and to have been signed or presented by the proper party or parties. No
disclaimer of liability under the Securities Act is intended by any provision of
the Deposit Agreement.
(20) Standard of Care. The Company and its agents assume no obligation and
----------------
shall not be subject to any liability under this Deposit Agreement or the
Receipts to Holders or Beneficial Owners or other persons, except that the
Company and its agents agree to perform their obligations specifically set forth
in this Deposit Agreement without negligence or bad faith. The Depositary and
its agents assume no obligation and shall not be subject to any liability under
this Deposit Agreement or the Receipts to Holders or Beneficial Owners or other
persons, except that the Depositary and its agents agree to perform their
obligations specifically set forth in this Deposit Agreement without negligence
or bad faith. The Depositary and its agents shall not be liable for any failure
to carry out any instructions to vote any of the Deposited Securities, or for
the manner in which any vote is cast or the effect of any vote, provided that
any such action or omission is in good faith and in accordance with the terms of
this Deposit Agreement. The Depositary shall not incur any liability for any
failure to determine that any distribution or action may be lawful or reasonably
practicable, for the content of any information submitted to it by the Company
for distribution to the Holders or for any inaccuracy of any translation
thereof, for any investment risk associated with acquiring an interest in the
Deposited Securities, for the validity or worth of the Deposited Securities or
for any tax consequences that may result from the ownership of ADSs, Shares or
Deposited Securities, for the credit-worthiness of any third party, for allowing
any rights to lapse upon the terms of this Deposit Agreement or for the failure
or timeliness of any notice from the Company.
(21) Resignation and Removal of the Depositary; Appointment of Successor
-------------------------------------------------------------------
Depositary. The Depositary may at any time resign as Depositary under the
- ----------
Deposit Agreement by written notice of resignation delivered to the Company,
such resignation to be effective on the earlier of (i) the 60th day after
delivery thereof to the Company, or (ii) upon the appointment of a successor
depositary by the Company and its acceptance of such appointment as provided in
the Deposit Agreement. The Depositary may at any time be removed by the Company
by written notice of such removal which notice shall be effective on the earlier
of (i) the 60th day after delivery thereof to the Depositary, or (ii) upon the
appointment of a successor depositary by the Company and its acceptance of such
appointment as provided in the Deposit Agreement. In case at any time the
Depositary acting hereunder shall resign or be removed, the Company shall use
its best efforts to appoint a successor depositary which shall be a bank or
trust company having an office in the Borough of Manhattan, the City of New
York. Every successor depositary shall execute and deliver to its predecessor
and to the Company an instrument in writing accepting its appointment hereunder,
and thereupon such successor depositary, without any further act or deed, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor. The predecessor depositary, upon payment of all sums due it and on
the written request of the Company, shall (i) execute and deliver an instrument
transferring to such successor all rights and powers of such predecessor
hereunder (other than as contemplated in the Deposit
A-15
<PAGE>
Agreement), (ii) duly assign, transfer and deliver all right, title and interest
to the Deposited Securities to such successor, and (iii) deliver to such
successor a list of the Holders of all outstanding Receipts and such other
information relating to Receipts and Holders thereof as the successor may
reasonably request. Any such successor depositary shall promptly mail notice of
its appointment to such Holders. Any corporation into or with which the
Depositary may be merged or consolidated shall be the successor of the
Depositary without the execution or filing of any document or any further act.
(22) Amendment/Supplement. This Receipt and any provisions of the Deposit
--------------------
Agreement may at any time and from time to time be amended or supplemented by
written agreement between the Company and the Depositary in any respect which
they may deem necessary or desirable without the prior written consent of the
Holders or Beneficial Owners. Any amendment or supplement which shall impose or
increase any fees or charges (other than the charges in connection with foreign
exchange control regulations, and taxes and other governmental charges, delivery
and other such expenses), or which shall otherwise prejudice any substantial
existing right of Holders or Beneficial Owners, shall not, however, become
effective as to outstanding Receipts until the expiration of 30 days after
notice of such amendment or supplement shall have been given to the Holders of
outstanding Receipts. The parties hereto agree that any amendments or
supplements which (i) are reasonably necessary (as agreed by the Company and the
Depositary) in order for (a) the ADSs to be registered on Form F-6 under the
Securities Act or (b) the ADSs to be traded solely in electronic book-entry form
and (ii) do not in either such case impose or increase any fees or charges to be
borne by Holders, shall be deemed not to materially prejudice any substantial
rights of Holders or Beneficial Owners. Every Holder and Beneficial Owner at the
time any amendment or supplement so becomes effective shall be deemed, by
continuing to hold such ADS(s), to consent and agree to such amendment or
supplement and to be bound by the Deposit Agreement as amended or supplemented
thereby. In no event shall any amendment or supplement impair the right of the
Holder to surrender such Receipt and receive therefor the Deposited Securities
represented thereby, except in order to comply with mandatory provisions of
applicable law. Notwithstanding the foregoing, if any governmental body should
adopt new laws, rules or regulations which would require amendment or supplement
of the Deposit Agreement to ensure compliance therewith, the Company and the
Depositary may amend or supplement the Deposit Agreement and the Receipt at any
time in accordance with such changed laws, rules or regulations. Such amendment
or supplement to the Deposit Agreement in such circumstances may become
effective before a notice of such amendment or supplement is given to Holders or
within any other period of time as required for compliance with such laws, or
rules or regulations.
(23) Termination. The Depositary shall, at any time at the written direction of
-----------
the Company, terminate the Deposit Agreement by mailing notice of such
termination to the Holders of all Receipts then outstanding at least 30 days
prior to the date fixed in such notice for such termination. If 60 days shall
have expired after (i) the Depositary shall have delivered to the Company a
written notice of its election to resign, or (ii) the Company shall have
delivered to the Depositary a written notice of the removal of the Depositary,
and in either case a successor depositary shall not have been appointed and
accepted its appointment as provided in herein and in the Deposit Agreement, the
Depositary may terminate the Deposit Agreement by mailing
A-16
<PAGE>
notice of such termination to the Holders of all Receipts then outstanding at
least 30 days prior to the date fixed for such termination. On and after the
date of termination of the Deposit Agreement, the Holder will, upon surrender of
such Holders' Receipt(s) at the Principal Office of the Depositary, upon the
payment of the charges of the Depositary for the surrender of ADSs referred to
in Article (2) hereof and in the Deposit Agreement and subject to the conditions
and restrictions therein set forth, and upon payment of any applicable taxes or
governmental charges, be entitled to delivery, by electronic delivery to the
NECIGEF Participant such Holder's order, of the amount of Deposited Securities
represented by such Receipt. If any Receipts shall remain outstanding after the
date of termination of the Deposit Agreement, the Registrar thereafter shall
discontinue the registration of transfers of Receipts, and the Depositary shall
suspend the distribution of dividends to the Holders thereof, and shall not give
any further notices or perform any further acts under the Deposit Agreement,
except that the Depositary shall continue to collect dividends and other
distributions pertaining to Deposited Securities, shall sell rights as provided
in the Deposit Agreement, and shall continue to deliver Deposited Securities,
subject to the conditions and restrictions set forth in the Deposit Agreement,
together with any dividends or other distributions received with respect thereto
and the net proceeds of the sale of any rights or other property, in exchange
for Receipts surrendered to the Depositary (after deducting, or charging, as the
case may be, in each case the charges of the Depositary for the surrender of a
Receipt, any expenses for the account of the Holder in accordance with the terms
and conditions of the Deposit Agreement and any applicable taxes or governmental
charges or assessments). At any time after the expiration of six months from the
date of termination of the Deposit Agreement, the Depositary may sell the
Deposited Securities then held hereunder and may thereafter hold uninvested the
net proceeds of any such sale, together with any other cash then held by it
hereunder, in an unsegregated account, without liability for interest for the
pro rata benefit of the Holders of Receipts whose Receipts have not theretofore
been surrendered. After making such sale, the Depositary shall be discharged
from all obligations under the Deposit Agreement with respect to the Receipts
and the Shares, the Deposited Securities and the ADSs, except to account for
such net proceeds and other cash (after deducting, or charging, as the case may
be, in each case the charges of the Depositary for the surrender of a Receipt,
any expenses for the account of the Holder in accordance with the terms and
conditions of the Deposit Agreement and any applicable taxes or governmental
charges or assessments). Upon the termination of the Deposit Agreement, the
Company shall be discharged from all obligations under the Deposit Agreement
except as set forth in the Deposit Agreement.
(24) Compliance with U.S. Securities Laws. Notwithstanding any provisions in
------------------------------------
this Receipt or the Deposit Agreement to the contrary, the withdrawal or
delivery of Deposited Securities will not be suspended by the Company or the
Depositary except as would be permitted by Section I.A.(1) of the General
Instructions to the Form F-6 Registration Statement, as amended from time to
time, under the Securities Act of 1933.
(25) Certain Rights of the Depositary; Limitations. Subject to the further
---------------------------------------------
terms and provisions of this Article (25), the Depositary, its Affiliates and
their agents, on their own behalf, may own and deal in any class of securities
of the Company and its Affiliates and in ADSs. The Depositary may issue ADSs
against evidence of rights to receive Shares from the Company, any agent of the
Company or any custodian, registrar, transfer agent, clearing agency or other
entity involved in
A-17
<PAGE>
ownership or transaction records in respect of the Shares. Such evidence of
rights shall consist of written blanket or specific guarantees of ownership of
Shares. In its capacity as Depositary, the Depositary shall not lend Shares or
ADSs; provided, however, that the Depositary may (i) issue ADSs prior to the
receipt of Shares pursuant to Section 2.3 of the Deposit Agreement and (ii)
deliver Shares prior to the receipt of ADSs for withdrawal of Deposited
Securities pursuant to Section 2.7 of the Deposit Agreement, including ADSs
which were issued under (i) above but for which Shares may not have been
received (each such transaction a "Pre-Release Transaction"). The Depositary may
receive ADSs in lieu of Shares under (i) above and receive Shares in lieu of
ADSs under (ii) above. Each such Pre-Release Transaction will be (a) accompanied
by or subject to a written agreement whereby the person or entity (the
"Applicant") to whom ADSs or Shares are to be delivered (w) represents that at
the time of the Pre-Release Transaction the Applicant or its customer owns the
Shares or ADSs that are to be delivered by the Applicant under such Pre-Release
Transaction, (x) agrees to indicate the Depositary as owner of such Shares or
ADSs in its records and to hold such Shares or ADSs in trust for the Depositary
until such Shares or ADSs are delivered to the Depositary or the Custodian, (y)
unconditionally guarantees to deliver to the Depositary or the Custodian, as
applicable, such Shares or ADSs and (z) agrees to any additional restrictions or
requirements that the Depositary deems appropriate, (b) at all times fully
collateralized with cash, U.S. government securities or such other collateral as
the Depositary deems appropriate, (c) terminable by the Depositary on not more
than five (5) business days notice and (d) subject to such further indemnities
and credit regulations as the Depositary deems appropriate. The Depositary will
normally limit the number of ADSs and Shares involved in such Pre-Release
Transactions at any one time to thirty percent (30%) of the ADSs outstanding
(without giving effect to ADSs outstanding under (i) above), provided, however,
that the Depositary reserves the right to change or disregard such limit from
time to time as it deems appropriate. The Depositary may also set limits with
respect to the number of ADSs and Shares involved in Pre-Release Transactions
with any one person on a case by case basis as it deems appropriate. The
Depositary may retain for its own account any compensation received by it in
conjunction with the foregoing. Collateral provided pursuant to (b) above, but
not earnings thereon, shall be held for the benefit of the Holders (other than
the Applicant).
A-18
<PAGE>
(ASSIGNMENT AND TRANSFER SIGNATURE LINES)
FOR VALUE RECEIVED, the undersigned Holder hereby sell(s), assign(s) and
transfer(s) unto ______________________________ whose taxpayer identification
number is _______________________ and whose address including postal zip code is
____________________________, the within Receipt and all rights thereunder,
hereby irrevocably constituting and appointing ________________________
attorney-in-fact to transfer said Receipt on the books of the Depositary with
full power of substitution in the premises.
Dated: Name:________________________________
By:
Title:
NOTICE: The signature of the Holder to this
assignment must correspond with the name as
written upon the face of the within instrument in
every particular, without alteration or
enlargement or any change whatsoever.
If the endorsement be executed by an attorney,
executor, administrator, trustee or guardian, the
person executing the endorsement must give his/her
full title in such capacity and proper evidence of
authority to act in such capacity, if not on file
with the Depositary, must be forwarded with this
Receipt.
All endorsements or assignments of Receipts must
be guaranteed by a member of a Medallion Signature
Program approved by the Securities Transfer
Association, Inc.
SIGNATURE GUARANTEED
____________________________
A-19
<PAGE>
EXHIBIT B
FEE SCHEDULE
DEPOSITARY FEES AND RELATED CHARGES
All capitalized terms used but not otherwise defined herein shall have the
meaning given to such terms in the DEPOSIT AGREEMENT.
I. DEPOSITARY FEES
The Holders, the Beneficial Owners and the persons depositing Shares or
surrendering ADSs for cancellation agree to pay the following fees of the
Depositary:
<TABLE>
<CAPTION>
SERVICE RATE BY WHOM PAID
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
(1) Issuance of ADSs upon Up to $5.00 per 100 ADSs (or Person for whom deposits are
deposit of Shares (excluding fraction thereof) issued made or party receiving ADSs
issuances contemplated by
paragraphs (3)(b) and (5)
below).
- ------------------------------------------------------------------------------------------------
(2) Delivery of Deposited Up to $5.00 per 100 ADSs (or Person surrendering ADSs or
Securities, property and fraction thereof) surrendered. making withdrawal.
cash against surrender of
ADSs.
- ------------------------------------------------------------------------------------------------
(3) Distribution of (a) cash No fee Person to whom distribution is
dividend or (b) ADSs made.
pursuant to stock dividends.
- ------------------------------------------------------------------------------------------------
(4) Distribution of cash Up to $2.00 per 100 ADSs held. Person to whom distribution is
proceeds (i.e. upon sale of made.
rights and other
entitlements).
- ------------------------------------------------------------------------------------------------
(5) Distribution of ADSs Up to $5.00 per 100 ADSs Person to whom distribution is
pursuant to free share issued. made.
distributions or exercise
of rights.
- ------------------------------------------------------------------------------------------------
</TABLE>
II. CHARGES Holders, Beneficial Owners, persons depositing Shares for
-------
deposit and persons surrendering ADSs for cancellation and for the purpose of
withdrawing Deposited Securities shall be responsible for the following charges:
(i) taxes (including applicable interest and penalties) and other governmental
charges;
(ii) such registration fees as may from time to time be in effect for the
registration of Shares or other Deposited Securities on the share register and
applicable to transfers of Shares or other Deposited Securities to or from the
name of the Custodian, the Depositary or any nominees upon the making of
deposits and withdrawals, respectively;
(iii) such cable, telex and facsimile transmission and delivery expenses as are
expressly provided in the Deposit Agreement to be at the expense of the person
depositing Shares or Holders and Beneficial Owners of ADSs;
B-1
<PAGE>
(iv) the expenses and charges incurred by the Depositary in the conversion of
foreign currency;
(v) such fees and expenses as are incurred by the Depositary in connection with
compliance with exchange control regulations and other regulatory requirements
applicable to Shares, Deposited Securities, ADSs and ADRs; and
(vi) the fees and expenses incurred by the Depositary in connection with the
deliver of Deposited Securities.
B-2
<PAGE>
R&W LLP Draft
1/22/99
- --------------------------------------------------------------------------------
DEPOSIT AGREEMENT
by and among
- --------------------------------------------------------------------------------
UNITED PAN-EUROPE COMMUNICATIONS N.V.
AND
CITIBANK, N.A.,
as Depositary,
AND
THE HOLDERS AND BENEFICIAL OWNERS
OF AMERICAN DEPOSITARY SHARES EVIDENCED BY
AMERICAN DEPOSITARY RECEIPTS ISSUED HEREUNDER
- --------------------------------------------------------------------------------
Dated as of February __, 1999
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I DEFINITIONS.................................................................................................. 2
SECTION 1.1 "Affiliate"....................................................................................... 2
SECTION 1.2 "American Depositary Share(s)" and "ADS(s)"....................................................... 2
SECTION 1.3 "ADS Record Date"................................................................................. 2
SECTION 1.4 "Beneficial Owner"................................................................................ 2
SECTION 1.5 "Business Day".................................................................................... 2
SECTION 1.6 "Commission"...................................................................................... 2
SECTION 1.7 "Company"......................................................................................... 2
SECTION 1.8 "Custodian"....................................................................................... 2
SECTION 1.9 "Deliver" and "Delivery".......................................................................... 3
SECTION 1.10 "Deposit Agreement"............................................................................... 3
SECTION 1.11 "Depositary"...................................................................................... 3
SECTION 1.12 "Deposited Securities"............................................................................ 3
SECTION 1.13 "Dollars" and "................................................................................... 3
SECTION 1.14 "DTC"............................................................................................. 3
SECTION 1.15 "DTC Participant"................................................................................. 3
SECTION 1.16 "Exchange Act".................................................................................... 3
SECTION 1.17 "Foreign Currency"................................................................................ 3
SECTION 1.18 "Guilders" and "NLG".............................................................................. 3
SECTION 1.19 "Holder".......................................................................................... 3
SECTION 1.20 "NECIGEF"......................................................................................... 3
SECTION 1.21 "Pre-Release Transaction"......................................................................... 4
SECTION 1.22 "Principal Office"................................................................................ 4
SECTION 1.23 "Receipt(s)"; "American Depositary Receipt(s)" and "ADR(s)" ...................................... 4
SECTION 1.24 "Registrar"....................................................................................... 4
SECTION 1.25 "Restricted Securities"........................................................................... 4
SECTION 1.26 "Securities Act".................................................................................. 4
SECTION 1.27 "Share Registrar"................................................................................. 4
SECTION 1.28 "Shares".......................................................................................... 5
SECTION 1.29 "United States"................................................................................... 5
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE II APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS; DEPOSIT OF SHARES; EXECUTION AND DELIVERY, TRANSFER
AND SURRENDER OF RECEIPTS................................................................................ 5
<S> <C> <C>
SECTION 2.1 Appointment of Depositary......................................................................... 5
SECTION 2.2 Form and Transferability of Receipts.............................................................. 5
SECTION 2.3 Deposit with Custodian............................................................................ 7
SECTION 2.4 Registration of Shares............................................................................ 8
SECTION 2.5 Execution and Delivery of Receipts................................................................ 8
SECTION 2.6 Transfer of Receipts; Combination and Split-up of Receipts........................................ 9
SECTION 2.7 Surrender of ADSs and Withdrawal of Deposited Securities.......................................... 9
SECTION 2.8 Limitations on Execution and Delivery, Transfer, etc. of Receipts; Suspension of Delivery,
Transfer, etc..................................................................................... 11
SECTION 2.9 Lost Receipts, etc................................................................................ 11
SECTION 2.10 Cancellation and Destruction of Surrendered Receipts; Maintenance of Records...................... 12
SECTION 2.11 Partial Entitlement ADSs.......................................................................... 12
</TABLE>
<TABLE>
<CAPTION>
ARTICLE III CERTAIN OBLIGATIONS OF HOLDERS AND BENEFICIAL OWNERS OF RECEIPTS......................................... 13
<S> <C> <C>
SECTION 3.1 Proofs, Certificates and Other Information........................................................ 13
SECTION 3.2 Liability for Taxes and Other Charges............................................................. 13
SECTION 3.3 Representations and Warranties on Deposit of Shares............................................... 14
SECTION 3.4 Compliance with Information Requests.............................................................. 14
SECTION 3.5 Ownership Restrictions............................................................................ 14
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IV THE DEPOSITED SECURITIES................................................................................. 15
<S> <C> <C>
SECTION 4.1 Cash Distributions................................................................................ 15
SECTION 4.2 Distribution in Shares............................................................................ 15
SECTION 4.3 Elective Distributions in Cash or Shares.......................................................... 16
SECTION 4.4 Distribution of Rights to Purchase Shares......................................................... 17
SECTION 4.5 Distributions Other Than Cash, Shares or Rights to Purchase Shares................................ 18
SECTION 4.6 Distributions with Respect to Deposited Securities in Bearer Form................................. 19
SECTION 4.7 Redemption........................................................................................ 19
SECTION 4.8 Conversion of Foreign Currency.................................................................... 20
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 4.9 Fixing of ADS Record Date......................................................................... 20
SECTION 4.10 Voting of Deposited Securities.................................................................... 21
SECTION 4.11 Changes Affecting Deposited Securities............................................................ 22
SECTION 4.12 Available Information............................................................................. 22
SECTION 4.13 Reports........................................................................................... 23
SECTION 4.14 List of Holders................................................................................... 23
SECTION 4.15 Taxation.......................................................................................... 23
</TABLE>
<TABLE>
<CAPTION>
ARTICLE V THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY........................................................... 24
<S> <C> <C>
SECTION 5.1 Maintenance of Office and Transfer Books by the Registrar......................................... 24
SECTION 5.2 Exoneration....................................................................................... 24
SECTION 5.3 Standard of Care.................................................................................. 25
SECTION 5.4 Resignation and Removal of the Depositary; Appointment of Successor Depositary.................... 26
SECTION 5.5 The Custodian..................................................................................... 27
SECTION 5.6 Notices and Reports............................................................................... 27
SECTION 5.7 Issuance of Additional Shares, ADSs etc........................................................... 28
SECTION 5.8 Indemnification................................................................................... 29
SECTION 5.9 Fees and Charges of Depositary.................................................................... 30
SECTION 5.10 Pre-Release....................................................................................... 30
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VI AMENDMENT AND TERMINATION............................................................................... 31
<S> <C> <C>
SECTION 6.1 Amendment/Supplement.............................................................................. 31
SECTION 6.2 Termination....................................................................................... 32
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VII MISCELLANEOUS........................................................................................... 33
<S> <C> <C>
SECTION 7.1 Counterparts...................................................................................... 33
SECTION 7.2 No Third-Party Beneficiaries...................................................................... 33
SECTION 7.3 Severability...................................................................................... 33
SECTION 7.4 Holders and Beneficial Owners as Parties; Binding Effect.......................................... 33
SECTION 7.5 Notices........................................................................................... 33
SECTION 7.6 Governing Law and Jurisdiction.................................................................... 34
SECTION 7.7 Assignment........................................................................................ 35
SECTION 7.8 Compliance with U.S. Securities Laws.............................................................. 36
SECTION 7.9 Titles............................................................................................ 36
</TABLE>
-iii-
<PAGE>
Form of Receipt ......................................................... A-1
Fees Schedule ............................................................ B-1
-iv-
<PAGE>
EXHIBIT 8.1
February 3, 1999
United Pan-Europe Communications N.V.
4643 South Ulster Street, Suite 1300
Denver, Colorado 80237
Re: United Pan-Europe Communications N.V. Offering of Ordinary Shares and
American Depositary Shares
Ladies and Gentlemen:
This opinion is given in connection with the offering by United Pan-Europe
Communications N.V., a company organized under the laws of the Netherlands, of
its ordinary shares and ADSs, as described in its registration statement dated
February 3, 1999 (Registration Number 333-67895).
Our opinion is based upon the current provisions of the Internal Revenue Code of
1986, as amended, the applicable Treasury regulations, and public administrative
and judicial interpretations of the code and regulations, all of which are
subject to change, which changes could be applied retroactively. Our opinion is
also based upon the facts set forth in: (1) the registration statement; (2) the
offering documents which consist of
. the prospectus of the company issued in connection with the offering,
. the form of deposit agreement between the company, Citibank, N.A., as
depositary, and the owners of ordinary shares and ADSs,
. the form of underwriting agreements between the company and Goldman,
Sachs & Co., the company and Goldman Sachs International, and the
company and Morgan Stanley Dean Witter;
and, (3) on certain representations from you in a representation letter dated
February 3, 1999, with respect to factual matters, which representations we have
not independently verified. We assume that all offering documents have been or
will be properly executed and will be valid and binding when executed.
<PAGE>
United Pan-Europe Communications N.V.
February 3, 1999
Page 2
We prepared the discussion included in the registration statement under the
caption "Certain United States Federal Income Tax Considerations." The
discussion under that caption is our opinion with respect to the material United
States federal income tax consequences of the acquisition, ownership and
disposition of the ordinary shares expected to result to the U.S. shareholders
subject to the conditions, limitations, and assumptions described therein.
The discussion does not purport to cover all aspects of federal taxation that
may be relevant to, or the actual tax effect that any of the matters described
therein will have on, any particular U.S. shareholders, and it does not address
foreign, state, or local tax consequences. The discussion does not cover the tax
consequences that might be applicable to U.S. shareholders who are subject to
special rules under the code (including insurance companies, tax-exempt
organizations, mutual funds, retirement plans, financial institutions, dealers
in securities or foreign currency, persons who hold the ADSs and ordinary shares
as part of a "straddle" or as a "hedge" against currency risk or in connection
with a conversion transaction, persons who have a functional currency other than
the United States dollar, investors in pass-through entities, U.S. persons
owning 10 percent or more of the company through ownership of ordinary shares or
ADSs or a combination of ordinary shares and ADSs, and non-U.S. Shareholders).
The discussion does not address the federal income tax consequences that may
result from a modification of the ordinary shares or ADSs.
Our opinion may change if the applicable law changes, if any of the facts with
respect to the ordinary shares or ADSs, as included in the registration
statement or the offering documents, change, or if the representations made by
you are inaccurate, incomplete, or change, or if the conduct of the parties is
materially inconsistent with the facts reflected in the registration statement,
offering documents, or representations.
Our opinion represents only our legal judgment based upon current law and the
facts as described above. Our opinion has no binding effect on the Internal
Revenue Service or the courts. The Service may take a position contrary to our
opinion, and if the matter is litigated, a court may reach a decision contrary
to the opinion.
<PAGE>
United Pan-Europe Communications N.V.
February 3, 1999
Page 3
We consent to this opinion being filed as an exhibit to the registration
statement and we consent to being named in the prospectus.
Very truly yours,
HOLME ROBERTS & OWEN LLP
By: /s/ Mark M. Hrenya
--------------------------------
Mark M. Hrenya, Partner
<PAGE>
Exhibit 8.2
February 4, 1999
United Pan-Europe Communications NV
Fred Roeskestraat 123
P.O. Box 74763
1070 BT Amsterdam
The Netherlands
Re: United Pan-European Communications N.V. Offering of
Ordinary Shares and American Depositary Shares
Ladies and Gentlemen:
This opinion is given in connection with the offering by United Pan-Europe
Communications N.V., a company organized under the laws of The Netherlands, of
its ordinary shares and ADSs, as described in its registration statement dated
February 3, 1999 (Registration Number 333-67895).
GENERAL REMARKS
---------------
This opinion addresses only statements in the registration statement under the
captions "Taxation" and "Dutch Taxes". We express no opinion as to any law other
than the tax laws of The Netherlands in force at the date hereof as applied and
interpreted according to present case law of the Netherlands courts,
administrative rulings and authoritative tax law scholars. We have no obligation
to update this opinion.
OPINION
-------
Introduction
- ------------
Headings in this opinion are for ease of reference only and shall not affect the
information hereof. In connection with this opinion, we have examined and rely
upon the following document in their English language version:
. the prospectus of the company issued in connection with the offering.
Opinion
- -------
The discussion in the registration statement under the captions "Taxation" and
"Dutch Taxes," insofar as such statements constitute a summary of matter of law
or documents referenced therein, is our opinion with respect to the material
Dutch tax laws, rules and regulations concerning the acquisition, ownership, and
disposition of ordinary shares and ADSs expected to result to holders of the
ordinary shares or ADSs.
<PAGE>
FINAL REMARKS
-------------
We consent to the inclusion of our opinion as an exhibit to the registration
statement and we consent to being named in the offering memorandum.
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the United States
Securities Act of 1933, as amended.
Very truly yours,
ARTHUR ANDERSEN
Belastingadviseurs
/s/ Frits Barnard /s/ Arthur Goedkoop /s/ Bas Castelijn
- ------------------ -------------------- ------------------
<PAGE>
EXHIBIT 10.2A
SUPPLEMENTAL AGREEMENT
relating to a
Loan Agreement for a
NLG 1,100,000,000 Multi-currency Revolving Credit Facility
to
UNITED PAN-EUROPE COMMUNICATIONS N.V.
AND CERTAIN OF ITS SUBSIDIARIES
Guaranteed by
UNITED PAN-EUROPE COMMUNICATIONS N.V.
AND CERTAIN OF ITS SUBSIDIARIES
Arranged by
THE TORONTO-DOMINION BANK
Agent
THE TORONTO-DOMINION BANK
Security Trustee
THE TORONTO-DOMINION BANK
Norton Rose
London
<PAGE>
CONTENTS
--------
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
<S> <C>
1 Interpretation.................................................... 1
2 Amendments to Principal Agreement................................. 2
3 Representations and warranties.................................... 4
4 Temporary amendments to certain financial covenants............... 6
5 Fees and expenses................................................. 6
6 Conditions........................................................ 7
7 Miscellaneous..................................................... 8
8 Governing law and jurisdiction.................................... 8
SCHEDULES
1 Part A - The Banks................................................ 10
Part B - Restricted Subsidiaries and Original Guarantors.......... 14
Part C - Borrowers................................................ 15
2 Documents and evidence required as conditions precedent........... 16
</TABLE>
<PAGE>
THIS SUPPLEMENTAL AGREEMENT is dated 25th January, 1999 and made BETWEEN:
(1) UNITED PAN-EUROPE COMMUNICATIONS N.V. as Parent and a Borrower;
(2) THE ENTITIES listed in part C of schedule 1 hereto as Borrowers;
(3) THE ENTITIES listed in part B of schedule 1 hereto as Guarantors;
(4) UIH EUROPE, INC., whose principal place of business is at 4643 South Ulster
Street, Suite 1300, Denver, Colorado 80237, United States of America as a
subordinated creditor ("UIHE");
(5) THE TORONTO-DOMINION BANK as Arranger;
(6) THE BANKS AND FINANCIAL INSTITUTIONS whose names and addresses are set out
in part A of schedule 1 hereto;
(7) THE TORONTO-DOMINION BANK as Agent; and
(8) THE TORONTO-DOMINION BANK as Security Trustee.
WHEREAS:
(A) This Supplemental Agreement is supplemental to (i) an agreement dated 8th
October 1997 (as subsequently amended, the "PRINCIPAL AGREEMENT") and made
between the Parent (1), the Borrowers (2), the Guarantors (3), the Arranger
(4), the Banks (5), the Agent (6) and the Security Trustee (7), whereby the
Banks agreed to make available to the Borrowers a multi-currency revolving
credit facility of up to NLG 1,100,000,000 upon the terms and subject to
the conditions therein contained and (ii) a deed of subordination dated
16th March 1998 (the "UIHE DEED OF SUBORDINATION") and made between UIHE
(1) and the Security Trustee (2).
(B) The Parent has requested the Banks to amend the Principal Agreement, the
Telekabel Notes and the UIHE Deed of Subordination to the extent set out in
this Supplemental Agreement.
NOW IT IS AGREED as follows:
1 INTERPRETATION
--------------
1.1 Definitions in Principal Agreement
----------------------------------
Unless the context otherwise requires and save as mentioned below, words
and expressions defined in the Principal Agreement, or to be defined in the
Principal Agreement with effect from the Effective Date, shall have the
same meanings when used in this Supplemental Agreement.
1
<PAGE>
1.2 Definitions
-----------
In this Supplemental Agreement the expression the "SUPPLEMENTAL AGREEMENT"
shall mean this Supplemental Agreement and, unless the context otherwise
requires:
"EFFECTIVE DATE" means the date on which the Agent notifies the Parent and
the Banks that the Agent has received the documents and evidence listed in
Schedule 2 hereto in form and substance satisfactory to it and the Parent
has paid the fee referred to in the first sentence of clause 5.1;
"INITIAL EQUITY RAISE END DATE" means the earliest to occur of:
(a) 31st May 1999;
(b) the abandonment of the Initial Equity Raise by the Parent; and
(c) the Completion of the Initial Equity Raise; and
"EQUITY RAISE EFFECTIVE DATE" means the date of Completion of the Initial
Equity Raise.
1.3 Interpretation of Principal Agreement
-------------------------------------
References in the Principal Agreement to "THIS AGREEMENT" shall, with
effect from the Effective Date and unless the context otherwise requires,
be references to the Principal Agreement as amended by this Supplemental
Agreement and words such as "HEREIN", "HEREOF", "HEREUNDER", "HEREAFTER",
"HEREBY" and "HERETO", where they appear in the Principal Agreement, shall
be construed accordingly.
1.4 Incorporation of certain references
-----------------------------------
Clauses 1.3 to 1.6 (inclusive) of the Principal Agreement shall be deemed
to be incorporated in this Supplemental Agreement in full, mutatis
mutandis.
2 AMENDMENTS TO PRINCIPAL AGREEMENT
---------------------------------
2.1 Amendments
----------
(A) With effect from the Equity Raise Effective Date the parties hereto agree
that the Principal Agreement and all Telekabel Notes then outstanding shall
for all purposes be amended so as to incorporate all the amendments
reflected in Appendix 1 so that, with effect from the Equity Raise
Effective Date, the Principal Agreement and all Telekabel Notes then
outstanding shall be read and construed as so amended.
(B) With effect from the Equity Raise Effective Date the parties hereto agree
that the UIHE Deed of Subordination shall be amended by adding the
following proviso at the end of clause 2.1 thereto:
2
<PAGE>
"Provided that notwithstanding the foregoing provisions of this clause 2.1,
(A) the Parent shall be permitted to repay Indebtedness owed by the Parent
to the Subordinated Creditor up to a maximum of 40 per cent. of the gross
cash proceeds of the Initial Equity Raise to the extent that the same
exceed NLG 700,000,000 and are equal to or less than NLG 1,000,000,000 by
transferring the Belmarken UIH Shares to the Subordinated Creditor at fair
market value (if and to the extent that the Belmarken Funding Arrangements
are effected by the Parent acquiring the Belmarken UIH Shares from the
Bridge Borrower) and/or utilising the cash proceeds of the Initial Equity
Raise, and (B) the Parent and the Subordinated Creditor may amend the terms
of the Parent Promissory Note so that the Parent Promissory Note is (1)
repayable on demand at any time on or after 31st March, 2001 rather than on
demand and (2) is convertible into shares of the Parent at the price per
share offered to the public pursuant to the Initial Equity Raise rather
than NLG 18".
2.2 Conditions
----------
The amendments to the Principal Agreement, any Telekabel Notes and the UIHE
Deed of Subordination set out in clause 2.1 are subject to the following
conditions and if such conditions are not satisfied on or before the Equity
Raise Effective Date such amendments will not take effect:
(a) the Effective Date having occurred;
(b) the gross proceeds received by the Parent in respect of the Initial
Equity Raise not being less than NLG 550,000,000;
(c) where the Initial Equity Raise is effected in whole or in part by way
of an initial public offering of ordinary shares fully paid of the
Parent and American Depositary Shares representing a number of the
ordinary shares in the Parent or rights thereto a copy, certified as a
true copy by an Authorised Officer of the Parent, of an irrevocable
instruction to Goldman Sachs, duly acknowledged by Goldman Sachs,
instructing it to transfer 100% of the net proceeds of the whole or
such part of the Initial Equity Raise to the account of the Parent
with the Agent;
(d) original irrevocable instructions from the Parent and the Bridge
Borrower instructing the Agent to apply the net proceeds of the
Initial Equity Raise, in the case of UPC, first, to effect the
Belmarken Funding Arrangements and secondly, to prepay voluntarily the
Facility; and
(e) where the Initial Equity Raise is effected in whole or in part by way
of private placement of new ordinary shares fully paid of the Parent
confirmation from the private investors that they have been
irrevocably instructed by the Parent to transfer 100% of the net
proceeds of their subscription for the new ordinary shares in the
Parent to the account of the Parent with the Agent.
3
<PAGE>
2.3 Further amendment
-----------------
With effect from the Effective Date the parties hereto agree that the
Principal Agreement and all Telekabel Notes then outstanding shall for all
purposes be amended so as to incorporate the amendment to the definition of
"Borrowed Money" reflected in Appendix 1 so that, with effect from the
Effective Date, the Principal Agreement and all Telekabel Notes then
outstanding shall be read and construed as so amended. With effect from
the Effective Date the Agent, the Arranger, the Security Trustee and the
Banks agree that any breach which has then occurred and is continuing of
the Principal Agreement or the Telekabel Notes then outstanding which would
not have occurred had the definition of "Borrowed Money" reflected that in
Appendix 1 shall be waived.
3 REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Each of the Obligors (in the case of Telekabel Wien, in respect of itself
only) and UIHE (in the case of UIHE, in respect of itself only and UIHE
does not make any representation or warranty in respect of clause 3.1(a))
represents and warrants to each of the Banks, the Arranger, the Security
Trustee and the Agent that:
(a) Representations and warranties in Principal Agreement
-----------------------------------------------------
the representations and warranties set out in clause 10.1 of the
Principal Agreement which are to be repeated in accordance with clause
10.3 of the Principal Agreement are true and correct as if made at the
date of this Supplemental Agreement with reference to the facts and
circumstances existing at such date;
(b) Corporate power
---------------
each of the Obligors and UIHE has power to execute, deliver and
perform its obligations under this Supplemental Agreement; all
necessary corporate, shareholder and other action has been taken to
authorise the execution, delivery and performance of this Supplemental
Agreement;
(c) Binding obligations
-------------------
this Supplemental Agreement constitutes valid and legally binding
obligations of each of the Obligors and UIHE enforceable in accordance
with its terms, subject to the qualifications contained in the legal
opinions referred to in schedule 3 part A of the Principal Agreement
and mandatory provisions of law affecting creditors rights generally;
(d) No conflict with other obligations
----------------------------------
the execution and delivery of, the performance of its obligations
under, and compliance with the provisions of, this Supplemental
Agreement by the Obligors or UIHE will not (i) contravene any existing
applicable law,
4
<PAGE>
statute, rule or regulation or any judgment, decree or permit to which
any of the Obligors or UIHE is subject, (ii) conflict with, or result
in any breach of any of the terms of, or constitute a default under,
any agreement or other instrument to which any of the Obligors or UIHE
is a party or is subject or by which it or any of its property is
bound, (iii) contravene or conflict with any provision of any
Obligor's or UIHE's constitutive documents (iv) breach in any material
respect any term of the Licences or Necessary Authorisations or (v)
save for the Encumbrances granted to the Security Trustee pursuant to
the Security Documents, result in the creation or imposition of or
oblige any Obligor or UIHE to create any Encumbrance (other than a
Permitted Encumbrance) on any member of the Restricted Group's
undertakings, assets, rights or revenues;
(e) Consents obtained
-----------------
every consent, authorisation, licence or approval of, or registration
with or declaration to, governmental or public bodies or authorities
or courts (other than the Licences and the Necessary Authorisations)
required by each of the Obligors or UIHE to authorise, or required by
the Obligors or UIHE in connection with, the execution, delivery,
validity, enforceability or admissibility in evidence of this
Supplemental Agreement or the performance by each of the Obligors and
UIHE of their respective obligations under this Supplemental Agreement
has been obtained or made and is in full force and effect and there
has been no material default in the observance of the conditions or
restrictions (if any) imposed in, or in connection with, any of the
same; and
(f) No filings required
-------------------
save for the filings, registrations and notarisations referred to in
schedule 2 hereto, is not necessary to ensure the legality, validity,
enforceability or admissibility in evidence of this Supplemental
Agreement that it or any other instrument be notarised, filed,
recorded, registered or enrolled in any court, public office or
elsewhere in any Relevant Jurisdiction or that any stamp, registration
or similar tax or charge be paid in any Relevant Jurisdiction on or in
relation to this Supplemental Agreement and this Supplemental
Agreement is in proper form for its enforcement in the courts of each
Relevant Jurisdiction.
3.2 Repetition
----------
The representations and warranties in clause 3.1 (other than (a) and (e))
shall be deemed to be repeated by each of the Obligors and UIHE on and as
of each Drawdown Date and each Maturity Date as if made with reference to
the facts and circumstances existing on each such day.
5
<PAGE>
4 TEMPORARY AMENDMENTS TO CERTAIN FINANCIAL COVENANTS
---------------------------------------------------
4.1 Amendments
----------
With effect from the Effective Date the Agent, the Arranger, the Security
Trustee and the Banks agree that any breach which has then occurred and is
continuing of the clauses of the Principal Agreement set out below (and any
corresponding provisions in any Telekabel Notes then outstanding) shall be
waived and shall not be an Event of Default either permanently, if the
conditions set out in clause 2.2 are satisfied on or before the Initial
Equity Raise End Date, or, if such conditions are not so satisfied,
temporarily for the period ending on the Initial Equity Raise End Date and
that in respect of the period commencing on (and including) the Effective
Date and ending on (but excluding) the Initial Equity Raise End Date the
clauses of the Principal Agreement set out below (and any corresponding
provisions in any Telekabel Notes then outstanding) shall be amended
temporarily as set out below:
(a) clause 4.1(b): by inserting in column (II) the figure 7 and changing
the figure 6.75 in column (III) to the figure 8.25 against the period
1st January, 1999 to 30th June, 1999 and changing the date of 30th
June, 1999 to the Initial Equity Raise End Date;
(b) clause 12.2(a): by changing the figure 6.75 in column (2) to the
figure 8.25 against the period 1st January, 1999 to 30th June, 1999;
and
(c) clause 12.2(b): by changing the date 31st December, 1998 to 30th June,
1999.
4.2 Conditions
----------
The agreement of the Banks set out in clause 4.1 above is subject to the
following conditions:
(a) the Parent continues to pursue actively the Initial Equity Raise for
gross proceeds of not less than NLG 550,000,000; and
(b) no Advance may be made or requested under the Principal Agreement if,
following the making of such Advance, the Loan will exceed the Loan
immediately prior to the making of such Advance (taking into account
any other Advances scheduled to be made or repaid on the date of such
Advance).
5 FEES AND EXPENSES
-----------------
5.1 Amendment fees
--------------
The Parent shall pay to the Agent, whether or not the Effective Date
occurs, an amendment fee of NLG 3,300,000 for the account of the Banks pro
rata to their Commitments on or before the day falling three days after the
date of this
6
<PAGE>
Supplemental Agreement. If all amounts outstanding under the Principal
Agreement and the Telekabel Notes have not been irrevocably repaid or paid
in full and the Commitments of all the Banks have not been irrevocably
cancelled in full by 30th June, 1999 the Parent shall pay to the Agent on
such date a further fee of NLG 5,000,000 for the account of the Banks pro
rata to their Commitments. The amount of or date of payment of either of
the fees referred to in this clause 5.1 may only be changed with the prior
written agreement of all the Banks.
5.2 Expenses
--------
The Parent shall pay to the Agent on demand all reasonable costs and
expenses (including, without limitation, reasonable legal fees and
disbursements) and any value added or similar tax upon such costs and
expenses reasonably incurred by the Agent, the Security Trustee and the
Arranger in connection with the negotiation, preparation and execution of
this Supplemental Agreement and all related documents whether or not the
Effective Date occurs.
5.3 Stamp and other duties
----------------------
The Parent shall pay all stamp, documentary, registration or other like
duties or Taxes (including any duties or Taxes payable by, or assessed on,
the Banks, the Arranger, the Agent or the Security Trustee) imposed on or
in connection with this Supplemental Agreement or any related documents and
shall indemnify the Banks, the Arranger, the Agent and the Security Trustee
against any liability arising by reason of any delay or omission by the
Parent to pay such duties or Taxes.
6 CONDITIONS
----------
6.1 Further conditions precedent
----------------------------
The Agent shall not give notice of the occurrence of the Effective Date
(unless expressly instructed in writing by the Majority Banks to do so) if,
on the date on which it would otherwise have done so, the Agent has
received actual knowledge that an Event of Default has occurred and is
continuing or that any of the representations and warranties in clause 3.1
or repeated by virtue of clause 3.2 are untrue or incorrect as at such date
as if made on such date with respect to the facts and circumstances
existing at such date.
6.2 Condition subsequent
--------------------
The Parent undertakes to procure that, within 60 days of the Completion of
the Initial Equity Raise, the rights of all members of the Restricted Group
in respect of outstanding loans made by members of the Restricted Group to
members of the Unrestricted Group and subject to receipt of approvals from
the lender or lenders to MediaReseaux Marne S.A. the interest of the
members of the Restricted Group in the share capital of MediaReseaux S.A.
are pledged in favour of, or for the benefit of, the Banks on terms
reasonably satisfactory to the
7
<PAGE>
Agent and that such documents and evidence as the Agent shall reasonably
require as to the power and authority of the relevant member of the
Restricted Group to enter into such pledge and that the same constitutes
valid and legally binding obligations of such member of the Restricted
Group enforceable in accordance with its terms are delivered to the Agent.
The Parent further undertakes to use all reasonable endeavours to obtain
the approval of the lender or lenders to Mediareseaux Marne S.A. as soon as
possible.
7 MISCELLANEOUS
-------------
7.1 Continuation of Principal Agreement
-----------------------------------
Save as amended by this Supplemental Agreement, the provisions of the
Principal Agreement and the UIHE Deed of Subordination shall continue in
full force and effect and the Principal Agreement and this Supplemental
Agreement and UIHE Deed of Subordination and this Supplemental Agreement
shall each be read and construed as one instrument.
7.2 Security Documents
------------------
Each Obligor and UIHE confirms that the Security Documents to which it is a
party shall continue in full force and effect notwithstanding the
amendments to or waivers of the terms of the Principal Agreement and the
UIHE Deed of Subordination contained in this Supplemental Agreement.
7.3 Counterparts
------------
This Supplemental Agreement may be executed in any number of counterparts
and by the different parties on separate counterparts, each of which when
so executed and delivered shall be an original but all counterparts shall
together constitute one and the same instrument.
8 GOVERNING LAW AND JURISDICTION
------------------------------
8.1 Law
---
This Supplemental Agreement shall be governed by English law.
8.2 Submission to jurisdiction
--------------------------
The parties to this Supplemental Agreement agree for the benefit of the
Agent, the Arranger, the Security Trustee and the Banks that:
(a) if any party has any claim against any other arising out of or in
connection with this Supplemental Agreement such claim shall (subject
to clause 8.2(c)) be referred to the High Court of Justice in England,
to the jurisdiction of which each of the parties irrevocably submits;
(b) the jurisdiction of the High Court of Justice in England over any such
claim against the Agent, the Arranger, the Security Trustee or any
Bank
8
<PAGE>
shall be an exclusive jurisdiction and no courts outside England
shall have jurisdiction to hear or determine any such claim; and
(c) nothing in this clause 8.2 shall limit the right of the Agent, the
Security Trustee, the Arranger or the Banks to refer any such claim
against any Obligor to any other court of competent jurisdiction
outside England, to the jurisdiction of which each Obligor hereby
irrevocably agrees to submit, nor shall the taking of proceedings by
the Agent, the Security Trustee, the Arranger or any Bank before the
courts in one or more jurisdictions preclude the taking of proceedings
in any other jurisdiction whether concurrently or not.
IN WITNESS whereof the parties hereto have caused this Supplemental Agreement to
be duly executed the day and year first above written.
9
<PAGE>
Schedule 1
----------
Part A - The Banks
------------------
Name Address and telefax number
_____ ______________
The Toronto-Dominion Triton Court
Bank 14/18 Finsbury Square
London EC2A 1DB
Fax: 0171 638 0006
Attention: Sean Macdonald
Communications Finance
Fax: 0171 638 2551
Attention: Loans Administration
Barclays Bank plc Structured Finance
5 The North Colonnade
Canary Wharf
London E14 4BB
Fax: 0171 773 1832
Attention: Claire Appleby
CIBC Wood Gundy Plc Cottons Centre
Cottons Lane
London SE1 2QL
Fax: 0171 234 6085
Attention: Louise Moat
Director, Media &
Communications
HSBC Investment Bank plc Thames Exchange
2nd Floor
10 Queen Street Place
London EC4R 1BL
Fax: 0171 336 9609
Attention: Tim Pennington
Bank of America N.T. & S.A. New Broad Street House
35 New Broad Street
10
<PAGE>
London EC2M 1NH
Fax: 0171 282 6810
Attention: Kevin Harber
Vice President
The Royal Bank of Scotland plc Waterhouse Square
138-142 Holborn
London EC1N 2TH
Fax: 0171 427 9920
Attention: David Lucas
BankBoston, N.A. 39 Victoria Street
P.O. Box 155
London SW1H 0ED
Fax: 0171 932 9110/
0171 222 5649
Attention: Stuart Paterson/
Mark Evans (Credit matters)
Richard Nel (Administration)
Citibank, N.A. 8th Floor
Zone 5
399 Park Avenue
New York
NY10043 USA
Fax: 001 212 793 6873/
001 302 894 6144
Attention: Julio Ojea Quintana
(Credit matters)
Leonard Mudlock/
Jacquelyn Wells
(Operational matters)
Export Development 151 O'Connor Street
Corporation Ottawa, Ontario
Canada K1A 1K3
Fax: 001 613 598 6858/
001 613 598 2514
Attention: Joe Morin
(Credit matters)
Viola Wedge Moores
(Operational matters)
11
<PAGE>
Riggs Bank N.A. 21 Great Winchester Street
London EC2N 2HH
Fax: 0171 522 0962
0171 920 9457
Attention: Nazz Hiller
Gema Cassidy
(Operational matters)
Deutsche Bank AG London 6 Bishopsgate
London EC2N 4DA
Fax: 0171 545 7130
Attention: Martin Flaherty
MeesPierson Coolsingel 93
Postbus 749
3000 AS Rotterdam
Fax: 00 31 10 401 5906
Attention: Jan-Evert Post/
Oskar Nooij
Banque Paribas 37 Place du Marche
Saint Honore
75031 Paris
Cedex 01
Fax: 00 331 429 80779
Attention: Denis de Paillerets
Gisele Sadorge, Ref: 378D
Bank Austria AG Bank Austria House
32/36 City Road
London EC1Y 2BD
Fax: 0171 417 4803
Attention: Stephen Dodd
Bank of Nova Scotia Scotia House
33 Finsbury Square
London EC2A 1BB
Fax: 0171 454 9019
Attention: John Leftley
Bankers Trust Company 1 Appold Street
Broadgate
12
<PAGE>
London EC2A 2HE
Fax: 0171 982 5591
Attention: Ted Steube
British Linen Bank 4 Melville Street
Edinburgh EH3 7NZ
Fax: 0131 243 8391
Attention: Stuart Gibson
De Nationale 4 Carnegieplein
Investeringsbank N.V. P.O. Box 380
2501 BH The Hague
The Netherlands
Fax: 00 31 70 342 5543
Attention: Annemiek Hulleman
Banque Artesia Nederland N.V. Harengracht 539-543
P.O. Box 274
1000 AG Amsterdam
The Netherlands
Fax: 00 31 20 5204 590
Attention: H.D.R. Fledderus
Bank of Scotland International Division
Orchard Brae House
30 Queensferry Road
Edinburgh EH4 2UG
Fax: 0131 343 7080
Attention: Tim Dickie
13
<PAGE>
SCHEDULE 1
----------
Part B - Restricted Subsidiaries and Original Guarantors
--------------------------------------------------------
<TABLE>
<CAPTION>
================================================================================
Company Country of Address
------- ---------- -------
Incorporation
-------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Cable Networks Austria The Netherlands Fred. Roeskestraat 123
Holding B.V. P.O. Box 74763
1070 BT
Amsterdam
- --------------------------------------------------------------------------------
Telekabel Wien G.m.b.H. Austria Erlachgasse 116
1100, Wien, Austria
- --------------------------------------------------------------------------------
Telekabel Klagenfurt G.m.b.H. Austria Villacherstrasse 161
9020, Klagenfurt, Austria
- --------------------------------------------------------------------------------
Telekabel Graz G.m.b.H. Austria Lazarettgurtel 81, 8020,
Graz, Austria
- --------------------------------------------------------------------------------
Telekabel-Fernsehnetz Wiener Austria Neunkirchnerstrasse 24,
Neustadt 2700, Wiener Neustadt,
Neunkirchen Betriebs-G.m.b.H. Austria
- --------------------------------------------------------------------------------
Telekabel-Fernsehnetz Region Austria Hauptplatz 13, 2514
Baden Betriebs- G.m.b.H. Traiskirchen, Austria
- --------------------------------------------------------------------------------
Radio Public S.A. Belgium Chazallaan 140, 1030
Brussels, Belgium
- --------------------------------------------------------------------------------
Janco Multicom A/S Norway Ensjveien 7,
0655 Oslo,
Norway
================================================================================
</TABLE>
14
<PAGE>
SCHEDULE 1
----------
Part C - Borrowers
------------------
<TABLE>
<CAPTION>
================================================================================
Company Country of Incorporation Address
------- ------------------------ -------
- --------------------------------------------------------------------------------
<S> <C> <C>
United Pan-Europe The Netherlands Fred. Roeskestraat 123
Communications N.V. P.O. Box 74763
1076 EE Amsterdam
- --------------------------------------------------------------------------------
Telekabel Wien G.m.b.H. Austria Erlachgasse 116, 1100
Wien, Austria
- --------------------------------------------------------------------------------
Janco Multicom A/S Norway Ensjveien 7,
0655 Oslo,
Norway
================================================================================
</TABLE>
15
<PAGE>
Schedule 2
----------
Documents and evidence required as conditions precedent
-------------------------------------------------------
1 A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of the Parent, of the constitutive documents of the Parent and each
member of the Restricted Group (or a certificate from an Authorised Officer
of the Parent confirming that there has been no change to the constitutive
documents previously provided to the Agent in connection with the amendment
of the Principal Agreement on 8th December, 1997).
2 A copy, certified as a true copy by an Authorised Officer of the Parent, of
resolutions of the Supervisory Board of Directors of the Parent evidencing
approval of this Supplemental Agreement and authorising its appropriate
officers to execute and deliver this Supplemental Agreement and to give all
notices and take all other action required by the Parent under this
Supplemental Agreement.
3 A copy, certified as a true copy by an Authorised Officer of the Parent of
resolutions of the Board of Directors of each of the members of the
Restricted Group (except for the Austrian members of the Restricted Group)
evidencing approval of this Supplemental Agreement and authorising their
respective appropriate officers to execute and deliver this Supplemental
Agreement and to give all notices and take all other action required by
such member of the Restricted Group thereunder.
4 Specimen signatures, authenticated by an Authorised Officer of the Parent,
of the persons authorised in the resolutions referred to in paragraphs 2
and 3 above, together with originals of the powers of attorney granted by
the Parent and any member of the Restricted Group in connection with this
Supplemental Agreement.
5 A copy, certified as a true copy by an Authorised Officer of the Parent, of
all consents, authorisations, licences and approvals required by the
members of the Restricted Group to authorise, or required by the members of
the Restricted Group in connection with, the execution, delivery, validity,
enforceability and admissibility in evidence of this Supplemental Agreement
and the performance by the members of the Restricted Group of their
respective obligations under this Supplemental Agreement.
6 The Parent having given notice to the Agent cancelling the Commitments by
NLG 100,000,000 to NLG 1,000,000,000.
Additional documents and evidence required as conditions precedent in Austria
- -----------------------------------------------------------------------------
1 A resolution of CNA as 95 per cent. shareholder in the supervisory board of
Telekabel Wien, inter alia, approving the entry into by Telekabel Wien of
this Supplemental Agreement, in a form acceptable to the Agent.
16
<PAGE>
2 A power of attorney for each other Telekabel Entity (other than Telekabel
Wien), appointing Mr Steven Butler and Mr A.H.E. van Voskuijlen to approve
and execute this Supplemental Agreement on behalf of such Telekabel Entity.
Additional documents and evidence required as conditions precedent in the
- -------------------------------------------------------------------------
Netherlands
- -----------
1 An extract from the trade register of the Chamber of Commerce of the Parent
and each member of the Restricted Group incorporated in The Netherlands.
2 A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of the Parent, of the shareholders' register of (i) the Parent and
(ii) each member of the Restricted Group incorporated in The Netherlands.
3 A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of the Parent, of a shareholders' resolution from the shareholders
of each member of the Restricted Group incorporated in The Netherlands
evidencing approval of the shareholders to the terms of this Supplemental
Agreement and the obligations of the Dutch companies hereunder.
Additional documents and evidence required as conditions precedent in Norway
- ----------------------------------------------------------------------------
1 A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of the Parent of a shareholders' resolution of the shareholders of
New Janco evidencing approval of the shareholders of New Janco to the terms
of this Supplemental Agreement and the obligations of New Janco hereunder.
2 A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of the Parent of a letter from the Norwegian Bankruptcy Register
confirming that as of the Effective Date, none of the members of the
Restricted Group incorporated in Norway have been reported from the local
probate courts to the said register bankrupt.
3 Copies, certified as true copies by an Authorised Officer of the Parent, of
shareholders' registers ("aksjonaerprotokoll") of New Janco.
4 A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of the Parent of the articles of association and certificate of
registration of New Janco.
Additional documents and evidence required as conditions precedent in the United
- --------------------------------------------------------------------------------
States of America
- -----------------
1 A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of the Parent of the certificate of incorporation and bylaws of
UIHE together with a certificate of good standing of the Delaware Secretary
of State concerning UIHE.
2 Copies, certified as true, complete and up-to-date copies by an Authorised
Officer of the Parent evidencing approval of the board of directors of UIHE
to
17
<PAGE>
the terms of this Supplemental Agreement and the obligations of
UIHE hereunder.
18
<PAGE>
THE PARENT (AS A BORROWER AND A GUARANTOR)
- ----------
SIGNED for and on behalf of )
UNITED PAN-EUROPE COMMUNICATIONS N.V. )
by: )
NEW JANCO (AS A BORROWER AND A GUARANTOR)
- -----------------------------------------
SIGNED for and on behalf of )
JANCO MULTICOM A/S )
by: )
THE GUARANTORS
- --------------
SIGNED for and on behalf of )
CABLE NETWORKS AUSTRIA HOLDING B.V. )
by: )
SIGNED for and on behalf of )
TELEKABEL KLAGENFURT G.M.B.H. )
by: )
SIGNED for and on behalf of )
TELEKABEL WIEN G.M.B.H. )
by: )
SIGNED for and on behalf of )
TELEKABEL-FERNSEHNETZ WIENER )
NEUSTADT/NEUNKIRCHEN )
BETRIEBS-G.M.B.H. )
by: )
SIGNED for and on behalf of )
TELEKABEL GRAZ G.M.B.H. )
by: )
19
<PAGE>
SIGNED for and on behalf of )
TELEKABEL-FERNSEHNETZ REGION )
BADEN BETRIEBS-G.M.B.H. )
by: )
SIGNED for and on behalf of )
RADIO PUBLIC S.A. )
by: )
THE SUBORDINATED CREDITOR
- -------------------------
SIGNED for and on behalf of )
UIH EUROPE, INC. )
by: )
THE ARRANGER
- ------------
SIGNED for and on behalf of )
THE TORONTO-DOMINION BANK )
by: )
THE BANKS
- ---------
SIGNED for and on behalf of )
THE TORONTO-DOMINION BANK )
by: )
SIGNED for and on behalf of )
BARCLAYS BANK PLC )
by: )
20
<PAGE>
SIGNED for and on behalf of )
CIBC WOOD GUNDY PLC )
by: )
SIGNED for and on behalf of )
HSBC INVESTMENT BANK PLC )
by: )
SIGNED for and on behalf of )
BANK OF AMERICA N.T. & S.A. )
by: )
SIGNED for and on behalf of )
THE ROYAL BANK OF SCOTLAND PLC )
by: )
SIGNED for and on behalf of )
BANKBOSTON, N.A. )
by: )
SIGNED for and on behalf of )
CITIBANK, N.A. )
by: )
SIGNED for and on behalf of )
EXPORT DEVELOPMENT CORPORATION )
by: )
SIGNED for and on behalf of )
RIGGS BANK N.A. )
by: )
21
<PAGE>
SIGNED for and on behalf of )
DEUTSCHE BANK AG LONDON )
by: )
SIGNED for and on behalf of )
MEESPIERSON )
by: )
SIGNED for and on behalf of )
BANQUE PARIBAS )
by: )
SIGNED for and on behalf of )
BANK AUSTRIA AG )
by: )
SIGNED for and on behalf of )
BANK OF NOVA SCOTIA )
by: )
SIGNED for and on behalf of )
BANKERS TRUST COMPANY )
by: )
SIGNED for and on behalf of )
BRITISH LINEN BANK )
by: )
SIGNED for and on behalf of )
DE NATIONALE INVESTERINGSBANK N.V. )
by: )
22
<PAGE>
SIGNED for and on behalf of )
BANQUE ARTESIA NEDERLAND N.V. )
by: )
SIGNED for and on behalf of )
BANK OF SCOTLAND )
by: )
THE AGENT
- ---------
SIGNED for and on behalf of )
THE TORONTO-DOMINION BANK )
by: )
THE SECURITY TRUSTEE
- --------------------
SIGNED for and on behalf of )
THE TORONTO-DOMINION BANK )
by: )
23
<PAGE>
Appendix 1
----------
Amended and Restated Principal Agreement
----------------------------------------
LOAN AGREEMENT
for a
NLG 1,100,000,000 MULTI-CURRENCY REVOLVING CREDIT FACILITY
to
UNITED PAN-EUROPE COMMUNICATIONS N.V.
AND CERTAIN OF ITS SUBSIDIARIES
Guaranteed by
CERTAIN SUBSIDIARIES OF
UNITED PAN-EUROPE COMMUNICATIONS N.V.
Arranged by
THE TORONTO-DOMINION BANK
Agent
THE TORONTO-DOMINION BANK
Security Trustee
THE TORONTO-DOMINION BANK
Norton Rose
London
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
<S> <C>
1 Purpose and definitions................................................... 1
1.1 Purpose.......................................................... 1
1.2 Definitions...................................................... 2
1.3 Headings......................................................... 24
1.4 Construction of certain terms.................................... 24
1.5 Majority Banks................................................... 25
1.6 Agent's opinion.................................................. 26
2 The Facility.............................................................. 27
2.1 Amount........................................................... 27
2.2 Obligations several.............................................. 27
2.3 Interests several................................................ 27
2.4 Telekabel Wien's interests several............................... 27
3 Conditions................................................................ 28
3.1 Documents and evidence........................................... 28
3.2 General conditions precedent..................................... 28
3.3 Waiver of conditions precedent................................... 29
3.4 Notification..................................................... 29
3.5 New Janco........................................................ 29
3.6 Conditions subsequent............................................ 30
4 Advances; Currencies...................................................... 32
4.1 Maximum Outstandings............................................. 32
4.2 Drawdown......................................................... 33
4.3 Amount and Term.................................................. 33
4.4 Selection of currencies.......................................... 33
4.5 Limit on currencies; non-availability............................ 33
4.6 Currency Amounts................................................. 34
4.7 Notification to Banks............................................ 34
4.8 Application of proceeds.......................................... 34
4.9 Initial Advances................................................. 34
4.10 Philips Advance.................................................. 36
4.11 Telekabel Bond................................................... 36
4.12 Subsidiary Drawings.............................................. 37
4.13 Refinancing the Janco Loan Agreement............................. 37
4.14 Telekabel Notes.................................................. 38
5 Interest; alternative interest rates...................................... 38
5.1 Normal interest rate............................................. 38
5.2 Applicable Margin................................................ 39
5.3 Interest for late payment........................................ 39
5.4 Notification of interest rate.................................... 40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
5.5 Reference Bank quotations.......................................... 40
5.6 Market disruption; non-availability................................ 40
6 Repayment, prepayment and cancellation...................................... 42
6.1 Repayment.......................................................... 42
6.2 Voluntary prepayment............................................... 42
6.3 Additional voluntary prepayment.................................... 42
6.4 Amounts payable on prepayment...................................... 42
6.5 Mandatory prepayment, Excess Cash Flow recapture and cancellation.. 43
6.6 Notice of prepayment............................................... 46
6.7 Cancellation of Commitments........................................ 46
6.8 Reduction of Total Commitments..................................... 46
6.9 Termination of Commitments......................................... 47
7 Fees and expenses........................................................... 48
7.1 Fees............................................................... 48
7.2 Expenses........................................................... 48
7.3 Value Added Tax.................................................... 49
7.4 Stamp and other duties............................................. 49
8 Payments and Taxes; accounts and calculations............................... 50
8.1 No set-off or counterclaim; distribution to the Banks.............. 50
8.2 Payments by the Banks.............................................. 50
8.3 Non-Banking Days................................................... 50
8.4 Agent may assume receipt........................................... 50
8.5 Grossing-up for Taxes.............................................. 51
8.6 Qualifying Banks................................................... 51
8.7 Claw-back of Tax benefit........................................... 51
8.8 Certification to secure a Tax benefit.............................. 52
8.9 Bank accounts...................................................... 53
8.10 Partial payments................................................... 53
8.11 Calculations....................................................... 54
8.12 Certificates conclusive............................................ 54
8.13 Effect of monetary union........................................... 54
9 Guarantee................................................................... 56
9.1 Limits of Guarantee................................................ 56
9.2 Covenant to pay.................................................... 57
9.3 Guarantors as principal debtors; indemnity......................... 57
9.4 No security taken by Guarantors.................................... 57
9.5 Interest........................................................... 58
9.6 Continuing security and other matters.............................. 58
9.7 New accounts....................................................... 58
9.8 Liability unconditional............................................ 58
9.9 Collateral Instruments............................................. 59
9.10 Waiver of Guarantors' rights....................................... 59
9.11 Suspense accounts.................................................. 60
9.12 Settlements conditional............................................ 60
9.13 Guarantors to deliver up certain property.......................... 60
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
9.14 Retention of this guarantee........................................ 60
9.15 Changes in constitution or reorganisations of Banks................ 61
9.16 Other Guarantors................................................... 61
9.17 Acceding Guarantors and New Janco.................................. 61
10 Representations and warranties.............................................. 63
10.1 Repeated representations and warranties............................ 63
10.2 Further representations and warranties............................. 66
10.3 Repetition......................................................... 68
11 Undertakings................................................................ 70
11.1 Positive Covenants................................................. 70
11.2 Negative Covenants................................................. 82
12 Financial covenants......................................................... 92
12.1 Pre Philips Advance Covenants...................................... 92
12.2 Post Philips Advance Covenants..................................... 92
12.3 Auditors certificate............................................... 94
13 Events of Default........................................................... 96
13.1 Events of default.................................................. 96
13.2 Acceleration....................................................... 103
13.3 Demand basis....................................................... 103
14 Indemnities................................................................. 104
14.1 Miscellaneous indemnities.......................................... 104
14.2 Currency of account; currency indemnity............................ 104
14.3 Environmental indemnity............................................ 105
15 Unlawfulness and increased costs; mitigation................................ 106
15.1 Unlawfulness....................................................... 106
15.2 Increased costs.................................................... 106
15.3 Exceptions......................................................... 107
15.4 Mitigation......................................................... 108
16 Set-off and pro rata payments............................................... 109
16.1 Set-off............................................................ 109
16.2 Pro rata payments.................................................. 109
16.3 No release......................................................... 110
16.4 No charge.......................................................... 110
17 Assignment, substitution and lending offices................................ 111
17.1 Benefit and burden................................................. 111
17.2 No assignment by Obligors.......................................... 111
17.3 Substitution....................................................... 111
17.4 Reliance on Substitution Certificate............................... 112
17.5 Authorisation of Agent............................................. 112
17.6 Construction of certain references................................. 112
17.7 Lending offices.................................................... 112
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
17.8 Disclosure of information.......................................... 112
18 Arranger, Agent, Security Trustee and Reference Banks....................... 114
18.1 Appointment of Agent............................................... 114
18.2 Agent's actions.................................................... 114
18.3 Agent's duties..................................................... 114
18.4 Agent's rights..................................................... 115
18.5 No liability of Arranger, Security Trustee and Agent............... 116
18.6 Non-reliance on Arranger, Security Trustee or Agent................ 117
18.7 No Responsibility on Arranger, Security Trustee or Agent for
any Obligor's performance.......................................... 117
18.8 Reliance on documents and professional advice...................... 118
18.9 Other dealings..................................................... 118
18.10 Rights of Agent as Bank; no partnership............................ 118
18.11 Amendments; waivers................................................ 118
18.12 Reimbursement and indemnity by Banks............................... 119
18.13 Retirement of Agent................................................ 120
18.14 Change of Reference Banks.......................................... 120
18.15 Prompt distribution of proceeds.................................... 121
19 Notices and other matters................................................... 122
19.1 Notices............................................................ 122
19.2 Notices through the Agent.......................................... 123
19.3 No implied waivers, remedies cumulative............................ 123
19.4 English translations............................................... 123
19.5 Counterparts....................................................... 123
19.6 No breach of Austrian Agreements................................... 123
20 Governing law and jurisdiction.............................................. 125
20.1 Law................................................................ 125
20.2 Submission to jurisdiction......................................... 125
20.3 Agent for service of process....................................... 125
Schedule
1 Part A - The Banks and their Commitments.................................... 126
Part B - Restricted Subsidiaries and Original Guarantors.................... 130
Part C - Borrowers.......................................................... 131
2 Form of Drawdown Notice..................................................... 132
3 Part A - documents and evidence required as conditions
precedent to first Advance.................................................. 134
Part B - Documents and evidence required as conditions
precedent to Philips Advance................................................ 138
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Part C - Documents and evidence required as conditions precedent to the first
Advance made to the Norwegian Borrowers if at that time the Norwegian
Merger has occurred......................................................... 139
Part D - Documents and evidence required as conditions precedent to the
first Advance made to the Norwegian Borrowers if at that time the Norwegian
Merger has not occurred..................................................... 141
4 Calculation of Additional Cost.............................................. 143
5 Form of Substitution Certificate............................................ 145
6 Part A - Compliance Certificate to be delivered by an Authorised
Officer of the Parent...................................................... 148
Part B - Compliance Certificate to be delivered by the auditors
of the Restricted Group.................................................... 150
7 Licences.................................................................... 152
8 Form of Deed of Subordination............................................... 155
9 Principal Agreements........................................................ 171
10 Part A - Deed of Guarantor Accession........................................ 172
Part B - Documents and Evidence to be delivered by an Acceding Guarantor.... 174
11 Part A - Deed of Borrower Accession......................................... 176
Part B - Documents and Evidence to be delivered by New Janco................ 177
12 [Intentionally left blank].................................................. 179
13 Part A - Norwegian Security Documents....................................... 180
Part B - Norwegian Security Documents (if at the relevant time the
Norwegian Merger has occurred)............................................. 187
14 Form of Telekabel Note...................................................... 188
</TABLE>
<PAGE>
THIS AGREEMENT is dated 8th October 1997 (as subsequently amended) and is made
BETWEEN:
(1) UNITED PAN-EUROPE COMMUNICATIONS N.V. as Parent and a Borrower;
(2) THE ENTITIES listed in part C of schedule 1 as Borrowers;
(3) THE ENTITIES listed in part B of schedule 1 as Guarantors;
(4) THE TORONTO-DOMINION BANK as Arranger;
(5) THE BANKS AND FINANCIAL INSTITUTIONS whose names and addresses are set out
in part A of schedule 1;
(6) THE TORONTO-DOMINION BANK as Agent; and
(7) THE TORONTO-DOMINION BANK as Security Trustee.
IT IS AGREED as follows:
1 PURPOSE AND DEFINITIONS
-----------------------
1.1 Purpose
-------
(a) This Agreement sets out the terms and conditions upon and subject to
which the Banks agree, according to their several obligations, to make
available to the Borrowers a revolving credit facility of up to NLG
1,100,000,000 or its equivalent in Optional Currencies to be used for
the purpose of (i) general corporate purposes of the Restricted Group,
(ii) refinancing and cancellation of the Existing UPC Facility (iii)
refinancing in part the ASLK Facility, (iv) refinancing and
cancellation of the Existing Norkabel Facility, (v) payments to be
made at the closing of the Philips Transaction in accordance with and
as contemplated by the Securities Purchase and Conversion Agreement in
an amount equal to (A) the principal and accrued but unpaid interest
of the UPC PIK Notes and (B) certain fees in connection with the
Philips Transaction, (vi) financing future investments and working
capital needs of the Restricted Group (subject to the provisions of
this Agreement), (vii) refinancing certain Indebtedness owed by
members of the Restricted Group to the Parent and (viii) financing
expenses incurred in connection with the Facility. For the avoidance
of doubt the Facility may not be used to make any payments of
principal, interest or other charges under the Bridge Facility.
Furthermore, the aggregate amount to be made available by the Banks to
the Norwegian Borrowers shall not exceed the Norwegian Loan Amount;
and
(b) For the purposes of this Agreement the revolving credit facility shall
only be made available to Telekabel Wien by way of loans against the
issue by Telekabel Wien of Telekabel Notes within the overall limit of
the
1
<PAGE>
Facility and, without prejudice to the foregoing, Telekabel Wien
shall, subject to the approval of the managing board of Telekabel Wien
of the amount of such borrowing, be permitted to borrow by way of
loans against the issue of Telekabel Notes upon and subject to the
terms of this Agreement, a sum of up to Austrian Schillings
1,700,000,000 or such greater amount as shall be agreed upon by the
supervisory board of Telekabel Wien from time to time. Except (i) in
the possible case of loans to CNA and (ii) loans to other members of
the Restricted Group incorporated in Austria in amounts not exceeding
its Distributable Profits at the time thereof, Telekabel Wien shall
not use such borrowings for the purpose of providing loans to any
member of the Restricted Group or any other person.: The possibility
to grant loans does not constitute an obligation to that extent and
any loans may be granted by Telekabel Wien in accordance with Austrian
law.
1.2 Definitions
-----------
In this Agreement, unless the context otherwise requires:
"1997 BUDGET" means the budget for the Restricted Group for the period
commencing on 1st January, 1997 and ending on 31st December, 1997 contained
within the Management Base Case;
"ACCEDING GUARANTORS" means those entities which have become a party to
this Agreement as Guarantors pursuant to clause 9.17;
"ADDITIONAL COST" means in relation to any period a percentage calculated
for such period at an annual rate determined in accordance with schedule 4;
"ADVANCE" means (i) (in the case of each Borrower other than Telekabel
Wien) each borrowing of a portion of the Commitments by a Borrower by way
of advance or (as the context may require) the principal amount of such
borrowing for the time being and/or (ii)(in the case of Telekabel Wien)
each borrowing of a portion of the Commitments by Telekabel Wien against
the issue by Telekabel Wien of a Telekabel Note or (as the context may
require) the principal amount of such Telekabel Note for the time being
outstanding;
"AGENT" means The Toronto-Dominion Bank of Triton Court, 14-18 Finsbury
Square, London EC2A 1DB or such other person as may be appointed agent for
the Banks pursuant to clause 18.13;
"ANNUAL BUDGET" means a budget in respect of the Restricted Group for each
financial year containing information of a substantially similar type and
to a substantially similar level of detail as the 1997 Budget or containing
such other information or to such other level of detail as has, at the
relevant time, been approved in writing by the Agent acting on the
instructions of the Majority Banks;
2
<PAGE>
"ARRANGER" means The Toronto-Dominion Bank of Triton Court, 14-18 Finsbury
Square, London EC2A 1DB;
"ASLK FACILITY" means the secured overdraft facility made available to
Radio Public by ASLK Bank N.V. pursuant to an agreement between Radio
Public and ASLK Bank N.V. dated 13th February 1997;
"ASSOCIATED COMPANY" of a person means (i) any other person which is
directly or indirectly controlled by, under common control with or
controlling such person or (ii) any other person owning beneficially and/or
legally directly or indirectly 10 per cent. or more of the equity interest
in such person or 10 per cent. of whose equity interest is owned
beneficially and/or legally directly or indirectly by such person. For the
purposes of this definition the term "control" means possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of a person whether through the ownership of
interests or voting securities, by contract or otherwise;
"AUSTRIAN AGREEMENTS" means the following documents and agreements which
have been entered into by the Telekabel Entities:
(a) Vereinbarung (agreement on mutual relations) dated 30th November 1977
between Telekabel Wien and Kabel-TV-Wien GmbH;
(b) Entgeltvereinbarung (agreement on details of payment), dated 23rd
November 1987 between Telekabel Wien and Stadt Wien;
(c) Programmnutzungsvereinbarung (agreement on use of television and radio
programmes) dated 10th December 1987 between Telekabel Wien and Kabel-
TV-Wien GmbH;
(d) Treuhand-und Geschaftsbesorgungsvertrag (trust and agency agreement)
dated 29th November 1988 between Telekabel Wien, Telekabel-Fernsehnetz
Wiener Neustadt/Neunkirchen Betriebsgesellschaft mbh and Philips Data
Systems GmbH;
(e) Kostenvergutung (reimbursement of costs agreement) dated 27th July
1994 by Telekabel Wien in favour of Kabel-TV Wiener
Neustadt/Neunkirchen GmbH;
(f) Syndikatsvereinbarung (shareholders agreement) dated 28th June 1995
between Osterreichische Philips Industrie GmbH, CNA and Kabel-TV-Wien
GmbH;
(g) Geschaftsordnung (internal organisational rules) Telekabel Wien GmbH
dated 28th June 1995 between Osterreichische Philips Industrie GmbH,
CNA and Kabel-TV-Wien GmbH;
(h) Entgeltvereinbarung (agreement on details of payment) dated 9th
February 1988 between Telekabel Graz GmbH and Grazer Kabel-TV GmbH;
3
<PAGE>
(i) Grundsatzvereinbarung (basic agreement on mutual relations) dated 30th
November 1977 entered into between Osterreichische Philips Industrie
GmbH and Kabel-TV-Wien GmbH;
(j) Dividendengarantie (guarantee of dividends) dated 30th November 1987
entered into by Osterreichische Philips Industrie GmbH in favour of
Kabel-TV-Wien GmbH;
(k) Grundsatzvereinbarung (basic agreement on mutual relations and
operations of project company (Telekabel Graz GmbH)) dated 5th May
1983 entered into between Osterreichische Philips Industrie GmbH and
Grazer Kabel-TV GmbH;
(l) Dividendengarantie (guarantee of dividends) dated 14th November 1988
entered into by Osterreichische Philips Industrie GmbH in favour of
Grazer Kabel-TV GmbH;
(m) Grundsatzvereinbarung (basic agreement on mutual relations and
operation of Telekabel Klagenfurt GmbH) dated 6th August 1979 entered
into between Osterreichische Philips Industrie GmbH and
Landeshauptstadt Klagenfurt;
(n) Dividendengarantie (guarantee of dividends) dated 18th December 1990
entered into by Osterreichische Philips Industrie GmbH in favour of
Landeshauptstadt Klagenfurt;
(o) Grundsatzvereinbarung (basic agreement on mutual relations and
operation of Telekabel-Fernsehnetz Region Buden Betriebsgesellschaft
mbH) dated 18th February 1980 entered into between Osterreichische
Philips Industrie GmbH and Kabel-TV Sud GmbH;
(p) Grundsatzvereinbarung (basic agreement on mutual relations and
operation of Telekabel-Fernsehnetz Wiener Neustadt/Neunkirchen
Gesellschaft mbH) dated 23rd May 1979 entered into between
Osterreichische Philips Industrie GmbH and Kabel-TV Wiener Neustadt
GmbH; and
(q) Vereinbarung (agreement relating to remunerating Dr. Alfreda Bergmann-
Fiala) dated 30th November 1993 entered into between Telekabel Wien
and Kabel-TV-Wien GmbH;
"AUSTRIAN LICENCES" means those licences specified as Austrian Licences in
schedule 7;
"AUSTRIAN SECURITY DOCUMENT" means the pledge over receivables given to the
Security Trustee by Telekabel Wien in the agreed form and, for the
avoidance of doubt, includes any documents supplemental to such pledge;
4
<PAGE>
"AUTHORISED OFFICER" means that officer or officers of the Parent
authorised to sign Compliance Certificates, Drawdown Notices and other
notices, requests, or confirmations referred to in this Agreement or
relating to the Facility;
"AVAILABILITY PERIOD" means the period from the date of this Agreement and
ending on whichever is the earlier of (i) the Termination Date or (ii) the
date on which (a) the Parent cancels the whole of the undrawn Commitments
under clause 6 or (b) the Total Commitments are reduced to zero pursuant to
clause 6, 13.2 or 15.1;
"AVAILABLE FACILITY AMOUNT" means at any time the amount by which the Total
Commitments exceed the aggregate Guilder Amount of all Advances outstanding
at such time;
"BANKING DAY" means a day (other than Saturday or Sunday) on which dealings
in deposits in Guilders or the relevant Optional Currency are carried on in
the London Interbank Market and (if any calculations in respect of, or
transfer of funds in, Guilders and/or an Optional Currency is required to
be made on such day) on which banks and foreign exchange markets are open
for business in the City of London and Amsterdam or the principal financial
centre in the jurisdiction of the Optional Currency concerned;
"BANKS" means the banks and financial institutions listed in part A of
schedule 1 and includes their successors in title and Substitutes;
"BELGIAN FRANCS" and "BEF" means the lawful currency for the time being of
Belgium;
"BELGIAN LICENCES" means those licences specified as Belgian Licences in
schedule 7;
"BELMARKEN FUNDING ARRANGEMENTS" means (i) the loan of part of the net
proceeds of the Initial Equity Raise made or to be made by the Parent to
the Bridge Borrower and/or the purchase by the Parent of all or any of the
Belmarken UIH Shares from the Bridge Borrower at fair market value, to the
extent that the aggregate of the principal amount of such loan and/or the
consideration paid for the Belmarken UIH Shares does not exceed all
amounts, including principal and interest, outstanding under the Bridge
Facility and (ii) the acquisition by the Parent of all or any of the
Belmarken UIH Shares from the Bridge Borrower at fair market value in
satisfaction pro tanto of the Bridge Borrower's obligations under the
Bridge Borrower Loan Agreement in its original terms;
"BELMARKEN UIH SHARES" means 2784620 fully paid and non-assessable shares
of the Class A Common Stock par value $0.01 per share in UIH owned by the
Bridge Borrower;
"BORROWED MONEY" means Indebtedness in respect of (i) money borrowed or
raised and debit balances at banks, (ii) any bond, note, loan stock,
debenture or
5
<PAGE>
similar debt instrument, (iii) acceptance or documentary credit facilities,
(iv) receivables sold or discounted (otherwise than on a non-recourse
basis), (v) payments for assets acquired or services supplied deferred for
a period of over 90 days after the relevant assets were or are to be
acquired or the relevant services were or are to be supplied, (vi) finance
leases and hire purchase contracts, (vii) any other transaction (including
without limitation forward sale or purchase agreements) having the
commercial effect of a borrowing or raising of money or of any of (ii) to
(vi) above and (viii) guarantees in respect of Indebtedness of any person
falling within any of (i) to (vii) above (for the avoidance of doubt
without double counting guarantees given by the member of the Restricted
Group for the Indebtedness of another member of the Restricted Group)
provided that Indebtedness which has been cash collateralised shall not be
included in any calculation of Borrowed Money to the extent so cash
collateralised and any item properly taken into account in determining
compliance with the limits set out in clause 11.2(h) shall not also be
considered to be Borrowed Money of the relevant member of the Restricted
Group for the purposes of this Agreement;
"BORROWERS" means the Parent and the other entities whose names are set out
in part C of schedule 1 together with, after its accession pursuant to
clause 3.5, New Janco and reference to a "Borrower" means any one of them,
as the context may require provided that Telekabel Wien shall not be a
Borrower for the purposes of this Agreement until the provisions of clause
3.6(b) have been complied with and provided further that, for the purposes
of this Agreement, the term "BORROWER", when used in connection with
Telekabel Wien, shall mean Telekabel Wien as an issuer of Telekabel Notes
in accordance with the terms and conditions of this Agreement;
"BRIDGE AGENT" means The Toronto-Dominion Bank of Triton Court, 14/18
Finsbury Square, London EC2A 1BD or such successor bank or financial
institution as is appointed agent for the banks pursuant to the terms of
the Bridge Facility;
"BRIDGE BORROWER" means Belmarken Holding B.V. a limited liability company
incorporated under the laws of The Netherlands with its registered office
at Amsterdam and its business office at (1076EE) Amsterdam, Frederik
Roeskestraat 123, The Netherlands;
"BRIDGE BORROWER LOAN AGREEMENT" means the loan agreement dated 16th March
1998 between, inter alios, the Parent and the Bridge Borrower whereby the
Parent agreed to lend up to $100,000,000 to the Bridge Borrower;
"BRIDGE FACILITY" means the senior bridge facility made available to the
Bridge Borrower pursuant to the Bridge Facility Agreement the proceeds of
which (other than those to be used to fund the interest reserve) are to be
used by the Bridge Borrower in satisfaction of the consideration payable to
the Parent for the purchase of the interests in the Unrestricted Group
pursuant to the Restructuring such proceeds to be used by the Parent for
the purpose of making certain
6
<PAGE>
payments in connection with the Securities Purchase and Conversion
Agreement;
"BRIDGE FACILITY AGREEMENT" means the agreement entered or to be entered
into between inter alios the Bridge Borrower and the Bridge Agent in
relation to the Bridge Facility provided that none of the lenders under the
Bridge Facility shall in any circumstances have recourse to any member of
the Restricted Group or any of their respective assets unless such lenders
have entered into inter-creditor arrangements with the Banks, satisfactory
to all the Banks;
"BRIDGE TERMINATION DATE" means the date upon which the Bridge Facility has
been repaid in full and the commitments of the banks thereunder have been
irrevocably cancelled in full, as notified by the Bridge Agent to the Agent
and the Parent;
"CABLE SYSTEMS" means the telecommunications and/or television systems
constructed or to be constructed in the areas covered by the Licences and
includes any part of such system and all modifications, substitutions,
replacements, renewals and extensions made to such systems;
"CABLE TV ANNUALISED NET OPERATING CASH FLOW" means, for the Restricted
Group, twice the aggregate of the Cable TV Net Operating Cash Flow in
respect of the most recently ended Six Month Period for the Restricted
Group in respect of which Monthly Management Accounts have been delivered
to the Agent under this Agreement;
"CABLE TV NET OPERATING CASH FLOW" means in respect of each Six Month
Period or financial year of the Restricted Group, the aggregate of (i) the
aggregate of the Net Operating Cash Flow of each of the Restricted
Subsidiaries referable solely to their respective cable television
businesses and (ii) the unconsolidated Net Operating Cash Flow of the
Parent adjusted by adding back 50 per cent. of the overhead costs incurred
by the Parent, as determined in accordance with GAAP and as shown in the
financial statements for such Six Month Period or financial year prepared
and delivered to the Agent under this Agreement;
"CALL OPTION AGREEMENT" means the call option agreement dated 8th January
1997 and made between the Parent and HMC;
"CNA" means Cable Networks Austria Holding b.v., a limited liability
company incorporated under the laws of the Netherlands with its registered
office at Amsterdam and its business office at (1076EE) Amsterdam, Fredrik
Roeskestraat 123, The Netherlands;
"CNA SHARE SECURITY" means the share pledge to be given to the Security
Trustee by the Parent in respect of its shareholding in CNA in the agreed
form;
"COLLATERAL INSTRUMENTS" means notes, bills of exchange, certificates of
deposit and other negotiable and non-negotiable instruments, guarantees and
any other
7
<PAGE>
documents or instruments which contain or evidence an obligation (with or
without security) to pay, discharge or be responsible directly or
indirectly for, any Indebtedness or liabilities under this Agreement and
includes Encumbrances;
"COMMITMENT" means, in relation to a Bank, at any relevant time the amount
set opposite its name in part A of schedule 1 and/or, in the case of a
Substitute, the amount novated as specified in the relevant Substitution
Certificate, as reduced, in each case, by any relevant term of this
Agreement and so that, if at such time the Total Commitments have been
reduced to zero, references to a Bank's Commitment shall be construed as a
reference to that Bank's Commitment immediately prior to such reduction to
zero;
"COMPLETION OF THE INITIAL EQUITY RAISE" means:
(i) the listing of ordinary shares of the Parent on the Amsterdam Stock
Exchange and/or the registration of American Depositary Shares
representing a number of ordinary shares of the Parent or rights
thereto on the NASDAQ National Market Systems; and
(ii) the receipt by the Parent in cash of the net proceeds of the private
placement of ordinary shares fully paid of the Parent (other than
pursuant to the transaction described in clause 6.5 (D)(vii),
provided that (i) shall not apply if there is not an initial public
offering of shares in the Parent and (ii) shall not apply if there is not a
private placement of shares in the Parent;
"COMPLIANCE CERTIFICATE" means either (i) a certificate substantially in
the form set out in schedule 6A in relation to the compliance (or
otherwise) with the undertakings in clause 12 issued by the Authorised
Officer of the Parent in relation to quarterly financial statements or (ii)
a certificate substantially in the form of schedule 6B in relation to the
compliance (or otherwise) with the undertakings in clause 12 issued by the
auditors of the Parent in relation to annual financial statements;
"CONTRIBUTION" means, in relation to a Bank, the principal amount of the
Advances owing to such Bank at any relevant time;
"DEED OF BORROWER ACCESSION" means the deed to be executed and delivered by
each entity which is to accede to this Agreement as a Borrower, each
substantially in the form of schedule 11 part A, mutatis mutandis (or such
other document as the Banks may require which has the same, or
substantially the same, effect);
"DEED OF GUARANTOR ACCESSION" means a deed to be executed and delivered by
any Acceding Guarantor pursuant to clause 9.17 substantially in the form of
schedule 10 part A;
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"DEED OF SUBORDINATION" means a deed of subordination to be entered into
between the Security Trustee and any Relevant Person pursuant to the terms
of this Agreement substantially in the form of schedule 8 with such changes
as are satisfactory to the Banks;
"DEFAULT" means any Event of Default or any event or circumstance which
would, upon the giving of a notice by the Agent and/or the expiry of the
relevant period and/or the fulfilment of any other condition (in each case
as specified in clause 13.1), constitute an Event of Default;
"DERIVATIVES CONTRACT" means a contract, agreement or transaction which is:
(i) a rate swap, basis swap, commodity swap, forward rate transaction,
commodity option, equity (or equity or other index) swap or option,
bond option, interest rate option, foreign exchange transaction,
collar or floor, currency swap, currency option or any other similar
transaction; and/or
(ii) any combination of such transactions,
in each case, whether on-exchange or otherwise;
"DIC" means DIC Loans Ltd. a company organised and existing under the laws
of the State of Israel and having its principal place of business at 14
Beth Hashoeva Lane, Tel-Aviv, Israel;
"DISTRIBUTABLE PROFITS" means, in relation to any entity incorporated in
Austria, the distributable profits of such entity as calculated in
accordance with generally accepted accounting provisions prevailing in
Austria which may be disbursed as dividends and for which a shareholder's
resolution authorising such distribution has been passed save that, in the
case of any member of the Restricted Group incorporated in Austria only,
the Relevant Reserves may not be included in the calculation of
distributable profits of such entity apart from by way of charges made to
the profit and loss account of such entity in respect of the amortisation
of the good-will represented by such Relevant Reserves and to extinguish
existing negative balances on the profit and loss account of such entity;
"DOLLARS" and "$" means the lawful currency for the time being of the
United States of America;
"DISCLOSURE LETTER" means the letter from the Parent to the Agent of even
date herewith, the form and content of which have previously been approved
by the Agent;
"DRAWDOWN DATE" means the date, being a Banking Day falling with the
Availability Period, on which an Advance is or is to be drawn down;
"DRAWDOWN NOTICE" means a notice in the form or substantially in the form
of schedule 2, duly completed with particulars of the relevant Advance;
9
<PAGE>
"ENCUMBRANCE" means any mortgage, charge (whether fixed or floating),
pledge, lien, hypothecation, assignment by way of security, trust
arrangement for the purpose of providing security or other security
interest of any kind securing any obligation of any person or any other
arrangement having the effect of conferring rights of retention or other
disposal rights over an asset (including without limitation title transfer
and/or retention arrangements having a similar effect or a deposit of money
with the primary intention of affording a right of set-off) and includes
any agreement to create any of the foregoing but does not include liens
arising in the ordinary course of trading by operation of law and not by
way of contract;
"ENVIRONMENTAL CLAIM" means any claim, notice prosecution, demand, action,
official warning, abatement or other order (conditional or otherwise)
relating to Environmental Matters or any notification or order requiring
compliance with the terms of any Environmental Licence or Environmental
Law;
"ENVIRONMENTAL LAW" includes all or any law, statute, rule, regulation,
treaty, by-law, code of practice, order, notice, demand, decision of the
courts or of any governmental authority or agency or any other regulatory
or other body in any jurisdiction relating to Environmental Matters;
"ENVIRONMENTAL LICENCE" includes any permit, licence, authorisation,
consent or other approval required at any time by any Environmental Law;
"ENVIRONMENTAL MATTERS" includes (a) the generation, deposit, disposal,
keeping, treatment, transportation, transmission, handling, importation,
exportation, processing, collection, sorting, presence or manufacture of
any waste or any Relevant Substance; (b) nuisance, noise, defective
premises, health and safety at work or elsewhere; and (c) the pollution,
conservation or protection of the environment (both natural and built) or
of man or any living organisms supported by the environment or any other
matter whatsoever affecting the environment or any part of it;
"EVENT OF DEFAULT" means any of the events or circumstances described in
clause 13.1;
"EXCESS CASH FLOW" means the aggregate of the Net Operating Cash Flow of
the Restricted Group calculated for the most recently ended financial year
(beginning with the financial year ending on 31st December 2001), as shown
in the relevant Compliance Certificate less (i) any interest and other
charges in respect of Borrowed Money of the Restricted Group, (ii)
repayments and/or prepayments of any Borrowed Money of the Restricted Group
and (iii) capital expenditure of the Restricted Group, whether or not
incurred, to the extent that the same is included in the Annual Budget for
such period as delivered to the Agent under this Agreement, in the case of
(i) and (ii) as were paid during such Six Month Periods;
"EXISTING UPC FACILITY" means the US$150,000,000 revolving credit facility
dated 29th January 1996 and the US$150,000,000 syndicated acquisition
facility
10
<PAGE>
dated 15th April 1996, in each case made available to the Parent by ABN-
AMRO Bank N.V.;
"EXISTING NORKABEL FACILITY" means the NOK 540,000,000 bridge facility made
available to Norkabel and its Subsidiaries by ING Bank N.V. pursuant to an
agreement dated 5th March 1997 between, inter alios, ING Bank N.V. and
Norkabel;
"FACILITY" means the revolving credit facility (including in the case of
Telekabel Wien, the facility permitting Telekabel Wien to borrow the
Commitments against the issue of Telekabel Notes) granted by the Banks to
the Borrowers under this Agreement;
"FINANCE DOCUMENTS" means this Agreement and the Security Documents and the
Interest Rate Hedging Arrangements (as defined in the Security Trust Deed);
"GAAP" means generally accepted accounting principles and practices in the
Netherlands;
"GUARANTEE" means the guarantee of the Guarantors contained in clause 9 and
includes each separate or independent stipulation or agreement by the
Guarantors contained in clause 9;
"GUARANTEED LIABILITIES" means all moneys, obligations and liabilities
expressed to be guaranteed by the Guarantors in clause 9.2;
"GUARANTORS" means (i) the Original Guarantors and (ii) the Acceding
Guarantors Provided always that Radio Public shall not be a Guarantor for
the purposes of this Agreement until such time as it shall have amended its
Articles of Association to a form acceptable to the Agent in accordance
with clause 11.1(aa) which form permits Radio Public to give the Guarantee
(subject to the limits set out in clause 9.1);
"GUILDER AMOUNT" means (a) in relation to an Advance to be drawn down in
Guilders, the amount in Guilders so drawn down and (b) in relation to an
Advance to be drawn down in an Optional Currency, the amount in Guilders
which would be required to purchase the principal amount of that Advance as
determined in accordance with clause 4.6, in each case as reduced by any
repayment or prepayment under this Agreement;
"GUILDERS" and "NLG" mean the lawful currency for the time being of the
Netherlands and in respect of all payments to be made under this Agreement
in Guilders mean immediately available, freely transferable cleared funds;
"HMC" means Helsinki Media Company Oy;
"HOLDING COMPANY" in relation to a person, means an entity of which that
person is a Subsidiary;
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<PAGE>
"INCAPACITY" means, in relation to a person, the insolvency, liquidation,
dissolution, winding-up, administration, receivership or other incapacity
of that person whatsoever (and in the case of a partnership, includes the
termination or change in composition of the partnership);
"INDEBTEDNESS" means any obligation for the payment or repayment of money,
whether as principal or as surety and whether present or future, actual or
contingent;
"INFORMATION MEMORANDUM" means the Information Memorandum dated 9th
September, 1997 and any subsequent update approved by the Parent
distributed by the Arranger at the request of the Parent in connection with
this Agreement;
"INITIAL EQUITY RAISE" means (i) the initial public offering of ordinary
shares fully paid of the Parent and/or American Depositary Shares
representing a number of the ordinary shares of the Parent or rights
thereto and/or (ii) the private placement of new ordinary shares fully paid
of the Parent (other than pursuant to the transaction described in clause
6.5(D)(vii));
"INTELLECTUAL PROPERTY RIGHTS" means any patent, trademark, service mark,
registered design, trade name or copyright required to carry on the
business of any member of the Restricted Group;
"JANCO" means Janco Kabel-TV A/S (now known as Janco Multicom A/S), a
corporation incorporated in Norway (organisation no. 919 394 056) having
its corporate seat at Ensjoveien 7, 0655 Oslo, Norway or, following the
Norwegian Merger, the successor entity of Janco Kabel-TV A/S;
"JANCO LOAN AGREEMENT" means the loan agreement dated 18th June 1997 made
between the Parent and Janco in the amount of NOK 571,000,000;
"LIBOR" means, in relation to a particular period, the arithmetic mean
(rounded upwards, if necessary, to five decimal places) of the London
interbank offered rates for deposits of the currency in question for a
period equal to such period at or about 11 a.m. on the Quotation Date for
such period as displayed on the relevant page of the Reuter Monitor Money
Rates Service (or such other page as may replace such page on such service
for the purpose of displaying London interbank offered rates of leading
banks for deposits of that currency) or, if on such date the offered rates
for the relevant period of fewer than two leading banks are so displayed,
the arithmetic mean (rounded upwards, if necessary, to five decimal places)
of such rates quoted to the Agent by each of the Reference Banks at the
request of the Agent;
"LICENCES" means the Belgian Licences, the Austrian Licences and the
Norwegian Licences and, if applicable, any other licences, franchises and
permits issued to any member of the Restricted Group under any
Telecommunications and Cable Laws;
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<PAGE>
"LOAN" means the aggregate principal amount owing to the Banks under this
Agreement at any relevant time (including, for the avoidance of doubt, the
aggregate principal amount of all Telekabel Notes which are then issued and
outstanding);
"MAJORITY BANKS" means at any relevant time Banks (a) the aggregate of
whose Contributions exceeds 662/3 per cent of the Advances or (b) (if no
principal amounts are outstanding under this Agreement) the aggregate of
whose Commitments exceeds 662/3 per cent of the Total Commitments;
"MANAGEMENT BASE CASE" means the management base case financial and
operational projections for the Restricted Group produced by the Parent in
the form approved by the Agent prior to the date of this Agreement;
"MARGIN" means the rate per annum calculated in accordance with clause 5;
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the ability of
the members of the Restricted Group (taken as a whole) or the Parent to
perform all or any of their or its respective material obligations under or
otherwise comply with the terms of this Agreement or any Security Document;
"MONTH" or "MONTHS" means a period beginning in one calendar month and
ending in the relevant later calendar month on the day numerically
corresponding to the day of the calendar month in which it started,
provided that (i) if the period started on the last Banking Day in a
calendar month or if there is no such numerically corresponding day, it
shall end on the last Banking Day in such later calendar month and (ii) if
such numerically corresponding day is not a Banking Day, the period shall
end on the next following Banking Day in such later calendar month but if
there is no such Banking Day it shall end on the preceding Banking Day and
"MONTHLY" shall be construed accordingly;
"MATURITY DATE" means, subject to clause 8.3, in relation to an Advance,
the last day of its Term;
"MONTHLY MANAGEMENT ACCOUNTS" means the monthly management accounts of the
Restricted Group to be delivered (or which may be delivered) to the Agent
pursuant to clause 11.1 in a form and to accounting policies consistent
with the Management Base Case and containing information of a substantially
similar type as is required by such form;
"NECESSARY AUTHORISATIONS" means all approvals, authorisations and licences
(other than the Licences) from, all rights granted by and all filings,
registrations and agreements with any person including, without limitation,
any government or other regulatory authority necessary in order to enable
each member of the Restricted Group to carry on such business as may be
permitted by the terms of this Agreement and which is carried on at the
relevant time;
"NET DERIVATIVES LIABILITY" means, at any time, the net liability (if any)
at such time of the Parent and its Subsidiaries taken as a whole in respect
of Derivatives
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<PAGE>
Contracts determined by reference to the amounts (as determined by the
Agent), which would be payable or receivable by the Parent and its
Subsidiaries if all Derivatives Contracts to which the Parent and its
Subsidiaries were party at such time were terminated at such time and
replaced by the obligation to make a payment reflecting the economic burden
or value to the Parent or the relevant Subsidiary of the payment flows
under those Derivatives Contracts remaining at the time of termination;
"NET INCOME" means, in relation to any member of the Restricted Group for
any Six Month Period or any financial year, the net profit after Taxes of
such member of the Restricted Group arising out of the use and operation of
its Cable System for such Six Month Period or financial year, as determined
in accordance with GAAP and as shown in the financial statements for such
Six Month Period or financial year prepared and delivered to the Agent
pursuant to clause 11.1;
"NET OPERATING CASH FLOW" means in respect of each Six Month Period or
financial year of any member of the Restricted Group, the Net Income of
such member of the Restricted Group (plus any depreciation, amortisation,
other non-cash charges (such as deferred taxes) and interest and other
charges in respect of Borrowed Money) for such Six Month Period adjusted as
follows:
(a) minus extraordinary income of such member of the Restricted Group for
such Six Months Period;
(b) minus any interest income of such member of the Restricted Group for
such Six Months Period;
(c) minus all sums constituting management fees accrued but not received
in cash in respect of such Six Month Period to such member of the
Restricted Group by any member of the Unrestricted Group or by any
Relevant Person; and
(d) minus any profits or losses attributable to the interest of such
member of the Restricted Group in any member of the Unrestricted Group
as determined in accordance with GAAP and as shown in the financial
statements for such Six Month Period or such financial year prepared and
delivered to the Agent pursuant to clause 11.1;
"NEW JANCO" shall have the meaning ascribed to such term in clause 11.2(b);
"NEW NORKABEL" shall have the meaning ascribed to such term in clause
11.2(b);
"NORKABEL" means Norkabelgruppen A/S, a corporation incorporated in Norway
(organisation no. 947 029 150) and having its corporate seat at
Soerkedalsveien 6, N-0305 Oslo, Norway, whose rights and obligations under
this Agreement are to be assumed by New Janco after the Norwegian Merger;
"NORWEGIAN BORROWERS" means Norkabel and New Janco;
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<PAGE>
"NORWEGIAN KRONE" and "NOK" means the lawful currency for the time being of
Norway;
"NORWEGIAN I/C INDEBTEDNESS" means the indebtedness of Norkabel under the
unsecured promissory note in the principal amount of $70,780,401.40 issued
by Norkabel on 26 October 1995 as amended pursuant to an amendment
agreement dated 5th March 1997;
"NORWEGIAN LICENCES" means any licence required from Norwegian public
authorities in order for Norkabel, Janco or New Janco (or any of their
Subsidiaries) to operate their Cable Systems;
"NORWEGIAN LOAN AMOUNT" means the maximum of NLG 350,000,000 or the
equivalent in Optional Currencies to be lent by the Banks to the Norwegian
Borrowers for the purpose of (i) refinancing and cancellation of the
Existing Norkabel Facility, (ii) refinancing the Janco Loan Agreement in
accordance with the terms of this Agreement and (iii) general corporate
purposes and working capital of the Norwegian Borrowers;
"NORWEGIAN MERGER" means:
(a) the merger of Norkabelgruppen A/S, Norkabel A/S and Oslo Kabelanlegg
A/S to form New Norkabel; and
(b) the merger of New Norkabel with Janco Kabel-TV A/S to form New Janco;
"NORWEGIAN SECURITY DOCUMENTS" means the documents listed in schedule 13;
"NORWEGIAN SHARE SECURITY" means the share pledge given to the Security
Trustee by the Parent in respect of its shareholding in Janco (and, after
the Norwegian Merger, New Janco) and, if any Advances are made to any
Norwegian Borrower or if the Philips Advance is made prior to the Norwegian
Merger, the share pledge given to the Security Trustee (i) by Janco in
respect of its shareholding in Norkabel and (ii) by Norkabel in respect of
its shareholding in Norkabel A/S, Kanal 2 A/S and Oslo Kabelanlegg A/S in
the agreed form;
"OBLIGOR" means each Borrower and each Guarantor Provided that Radio Public
shall not be an Obligor for the purposes of this Agreement until such time
as it shall have amended its Articles of Association to a form acceptable
to the Agent in accordance with clause 11.1(aa) which form permits Radio
Public to give the Guarantee (subject to the limits set out in clause 9.1)
and Provided that Telekabel Wien shall not be an Original Guarantor for the
purposes of this Agreement until the provisions of clause 3.6(b) have been
complied with;
"OPTION AGREEMENTS" means the Put Option Agreement and the Call Option
Agreement;
"OPTION DATE" means either (i) the date (falling on or prior to 29th June,
2001) upon which the Parent exercises its rights to purchase all of the
shares in Janco
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<PAGE>
that are owned by HMC pursuant to the Call Option Agreement or (ii) the
date (falling on or prior to 15th August, 2001) upon which HMC exercises
its rights to sell all of its shares in Janco to the Parent pursuant to the
Put Option Agreement, whichever is the earlier;
"OPTIONAL CURRENCY" means any currency, other than Guilders, which is
freely transferable, freely convertible into Guilders and dealt in on the
London Interbank Market;
"ORIGINAL GUARANTORS" means the Parent and those Subsidiaries of the Parent
whose names, country of incorporation and principal place of business are
set out in part B of schedule 1 Provided that Radio Public shall not be an
Original Guarantor for the purposes of this Agreement until such time as it
shall have amended its Articles of Association to a form acceptable to the
Agent in accordance with clause 11.1(aa) which form permits Radio Public to
give the Guarantee (subject to the limits set out in clause 9.1) and
Provided that Telekabel Wien shall not be an Original Guarantor for the
purposes of this Agreement until the provisions of clause 3.6(b) have been
complied with;
"PARENT" means United Pan-Europe Communications N.V. a public limited
liability company incorporated under the laws of The Netherlands with its
registered office at Amsterdam and its business office at (1076EE)
Amsterdam, Fredrik Roeskestraat 123, The Netherlands;
"PARENT PROMISSORY NOTE" means the promissory note dated 16th March 1998
pursuant to which UIH Europe, Inc. agreed to lend up to $100,000,000 to the
Parent;
"PERMITTED BORROWINGS" means:
(a) any Borrowed Money arising hereunder or under the Security Documents;
(b) until the date of the first Advance hereunder, any Borrowed Money
under the Existing UPC Facility and until the date of the first
Advance to any Norwegian Borrower, any Borrowed Money under the
Existing Norkabel Facility;
(c) any Borrowed Money approved in writing by the Agent (acting on the
instructions of the Majority Banks);
(d) any Subordinated Debt;
(e) the unsecured loan of 100,000,000 Austrian Schillings made by Bank
Austria to Telekabel Wien;
(f) the letter of credit issued to ING Bank N.V. in relation to the Option
Agreements;
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<PAGE>
(g) any Borrowed Money arising under deferred payment agreements provided
that such Borrowed Money is deferred for no longer than 180 days and
is in an aggregate amount of not more than NLG 60,000,000 outstanding
at any time;
(h) any Borrowed Money where the debtor and creditor are both members of
the Restricted Group provided that if the creditor is the Parent, such
arrangements as may be satisfactory to the Agent are entered into so
as to ensure that all of the Parent's right, title, benefit and
interest in respect of such Borrowed Money is assigned to the Security
Trustee;
(i) any Borrowed Money not exceeding NLG 500,000 in aggregate owed to UIH
in relation to the secondment of UIH employees to the Parent;
(j) any deposits or prepayments constituting Borrowed Money received by a
member of the Restricted Group from a subscriber for its services;
(k) any Borrowed Money of any Unrestricted Subsidiary which becomes a
Restricted Subsidiary which is existing on the date that such
Unrestricted Subsidiary becomes a Restricted Subsidiary;
(l) any Borrowed Money not falling within paragraphs (a) to (k) above
(apart from (e)) and not exceeding at any time more than NLG
30,000,000 in aggregate (or its equivalent in other currencies); and
(m) any Borrowed Money arising under the Parent Promissory Note (in its
original form or as amended in accordance with proviso (y) to clause
11.2(k)(i));
"PERMITTED DISPOSAL" means the sale by any member of the Restricted Group
of any ownership interest in any member of the Unrestricted Group on bona
fide arm's length commercial terms and any other disposal made by any
member of the Restricted Group of interests that it has in, or of Borrowed
Money it is owed by members it is owed by of the Unrestricted Group as part
of the Restructuring;
"PERMITTED ENCUMBRANCES" means:
(a) any Encumbrance arising hereunder or under any Security Document;
(b) until the date of the first Advance hereunder, any Encumbrance
securing the Existing UPC Facility and until the date of the first
Advance to any Norwegian Borrower any Encumbrance securing the
Existing Norkabel Facility;
(c) until the date of the first Advance hereunder any Encumbrance agreed
to be created by the Parent over its shares in CNA in favour of ABN
AMRO Bank N.V.;
(d) any liens arising in the ordinary course of trading by way of contract
which secure Borrowed Money falling within part (g) of the definition
of
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"PERMITTED BORROWINGS" above or which secure any Indebtedness under
any agreement for the supply of goods or services in respect of which
payment is not deferred for more than 90 days;
(e) any Encumbrance over any asset acquired by any member of the
Restricted Group after the date hereof so long as the same is
discharged within six months of such acquisition;
(f) any Encumbrance imposed by any taxation or governmental authority and
which is being contested in good faith;
(g) any Encumbrance approved in writing by the Agent (acting on the
instructions of the Majority Banks); and
(h) any Encumbrance not falling within paragraphs (a) to (g) above and
securing Indebtedness in aggregate not exceeding NLG 10,000,000 or its
equivalent in other currencies;
"PERMITTED PAYMENTS" means, in so far as the same are applied by the Parent
in satisfaction of the obligations of the Bridge Borrower under the Bridge
Facility:
(a) the proceeds of any equity share capital that has been subscribed for
in the Parent for cash (other than pursuant to a public offering) on
terms that the same is not redeemable or convertible into any other
class of share or loan capital in any member of the Restricted Group
(in either case prior to the date on which all amounts outstanding
under this Agreement have been irrevocably paid in full and no amounts
are capable of being so outstanding) and does not carry the right to
any dividend or other distribution (unless the same is not prohibited
by the application of clause 11.2(k)(i)), or on such other terms as
are satisfactory to the Majority Banks;
(b) dividends paid to members of the Restricted Group by members of the
Unrestricted Group;
(c) Subordinated Debt made available to the Parent; and
(d) any other payments agreed by all of the Banks;
"PHILIPS ADVANCE" means the Advance to be made to the Parent in accordance
with the terms of this Agreement to finance in part the Philips
Transaction;
"PHILIPS TRANSACTION" means the transactions to be undertaken in accordance
with and as contemplated by the terms of the Securities Purchase and
Conversion Agreement;
"PRINCIPAL AGREEMENTS" means the documents and agreements listed in
schedule 9;
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<PAGE>
"PRO-FORMA DEBT SERVICE" means the aggregate of (i) the total forecast
amount of interest (calculated by reference to the rate of interest in
effect in relation to the relevant Borrowed Money of the Restricted Group
on the date on which the calculation falls to be made) and any other
charges payable in respect of Borrowed Money of the Restricted Group in
respect of the period of twelve months immediately following the date on
which any calculation under this Agreement falls to be made, (ii) the
principal amount of any Borrowed Money of the Restricted Group due to be
repaid in accordance with the terms of such Borrowed Money during such
period and (iii) the amount of dividends payable in cash in respect of any
preference shares issued by the Parent;
"PUT OPTION AGREEMENT" means the Put Option Agreement dated 8th January
1997 and made between the Parent and HMC;
"QUALIFYING BANK" means a person, being a bank or financial institution
(whether incorporated in the United Kingdom or elsewhere), which is
eligible to have payments made to it by any Borrower under this Agreement
without any deduction or withholding in respect of Taxes either (i) by
virtue of a double taxation treaty (assuming for this purpose only that a
direction or consent such as is referred to in clause 8.8 has been given),
or (ii) by virtue of the fact that no such deduction or withholding is
imposed in the jurisdiction to which the relevant Borrower is subject;
"QUARTERLY MANAGEMENT ACCOUNTS" means the quarterly management accounts of
the Restricted Group to be delivered (or which may be delivered) to the
Agent pursuant to clause 11 in a form and to accounting policies consistent
with the Management Base Case and containing information of a substantially
similar type as is required by such form;
"QUARTER DAY" means 31st March, 30th June, 30th September and 31st December
in any year;
"QUARTERLY PERIOD" means each period of approximately three months
commencing on the day after a Quarter Day and ending on the next following
Quarter Day;
"QUOTATION DATE" means, in relation to a Term or other period for which
LIBOR is to be determined, the date on which quotations would customarily
be provided by leading banks in the London Interbank Market for deposits in
the relevant currency for delivery on the first day of that Term or other
period;
"RADIO PUBLIC" means Radio Public S.A., a company incorporated in Belgium
and having its registered office at 140, avenue Chazaal, 1030 Brussels,
Belgium, registered in the register of commerce of Brussels under no.
69,463 and in the register of commerce of Leuven under no. 44697;
"RADIO PUBLIC BOND" means the registered loan bonds issued by Radio Public
on 17th July 1995 with an aggregate nominal amount of BEF 3,611,250,000;
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<PAGE>
"REDUCTION DATE" means each Quarter Day during the Reduction Period
beginning with 31st December 2001;
"REDUCTION PERIOD" means the period starting on 30th September, 2001 and
ending on the Termination Date;
"REFERENCE BANKS" means the principal London offices of the Agent, CIBC
Wood Gundy Plc, HSBC Investment Bank plc and/or any other Bank appointed as
such pursuant to clause 18.14;
"RELEVANT DATE" means the earliest date after the date of the Philips
Advance on which, in respect of each of the two most recent previous
consecutive Quarterly Periods, the ratio of Total Debt to Total Annualised
Net Operating Cash Flow (calculated on the last day of each such Quarterly
Period), each as demonstrated in the Compliance Certificate for the
Quarterly Period ending immediately prior to such date, is less than 3:1;
"RELEVANT JANCO PERSON" means, other than the members of the Restricted
Group, any shareholder of Janco or New Janco, any Subsidiary or Associated
Company of such shareholder or any Holding Company of such shareholder or
any Associated Company of such Holding Company;
"RELEVANT JURISDICTION" means each jurisdiction in which a member of the
Restricted Group is incorporated or formed or in which such member of the
Restricted Group has its principal place of business or owns any material
assets;
"RELEVANT PERSON" means UIH or any Subsidiary or Associated Company of UIH
(other than the Parent and its Subsidiaries and any Associated Companies of
the Parent which are its Associated Companies by virtue of being controlled
by the Parent or the Parent owning beneficially and/or legally directly or
indirectly 10 per cent. or more of the equity interest in such person);
"RELEVANT RESERVES" means the non-restricted capital reserves of members of
the Restricted Group incorporated in Austria created in mid-1995 in
connection with the corporate reorganisation of those entities which
reserves will be reduced during any financial year of such entity by the
amount of any amortisation of goodwill, created at such time as a result of
such reorganisation during such financial year;
"RELEVANT SUBSTANCE" means any substance whatsoever (whether in a solid or
liquid form or in the form of a gas or vapour and whether alone or in
combination with any other substance) or waste which is capable of causing
harm to man or any other living organism supported by the environment, or
damaging the environment or public health or welfare;
"RELEVANT TELEKABEL PERSON" means, other than the members of the Restricted
Group, any shareholder of any Telekabel Entity, any Subsidiary or
Associated Company of such shareholder or any Holding Company of such
shareholder or any Associated Company of such Holding Company;
20
<PAGE>
"RESTRICTED GROUP" means the Parent and the Restricted Subsidiaries of the
Parent from time to time;
"RESTRICTED SUBSIDIARIES" means those Subsidiaries of the Parent whose
names, country of incorporation and principal place of business are set out
in part B of schedule 1 together with such Unrestricted Subsidiaries that
have become members of the Restricted Group pursuant to clause 11.1(t);
"RESTRUCTURING" means the proposed transfer for cash consideration (to be
financed by the Bridge Facility or left outstanding on inter-company
account which amounts will not be repayable to the Parent or Radio Public
whilst any amounts are outstanding under the Bridge Facility Agreement) of
the interests of Radio Public and the Parent in, and of the Borrowed Money
owing to the Parent by, the Unrestricted Group to the Bridge Borrower on
terms and conditions satisfactory to all of the Banks and, for the
avoidance of doubt, if the Banks agree that the consideration may be other
than cash, provided that subordination arrangements satisfactory to all the
Banks and have been entered into in relation to any Indebtedness owing from
the Parent to the Bridge Borrower as a result of all or part of the
proceeds of the Bridge Facility being on-lent to the Parent;
"RP SHARE SECURITY" means the share pledge given to the Security Trustee by
the Parent in respect of its shareholding in Radio Public in the agreed
form;
"S.A.R." means the stock appreciation right to be issued to Philips Media
Networks B.V. by the Parent as part of the consideration for the Philips
Transaction in accordance with the terms of the Securities Purchase and
Conversion Agreement;
"SECURITY DOCUMENTS" means the Share Securities, the Austrian Security
Document, the Norwegian Security Documents and the Security Trust Deed and
all other mortgages, charges, pledges, guarantees, inter-creditor
agreements or deeds and other instruments from time to time entered into in
favour of the Agent and/or the Security Trustee and/or the Banks by way of
guarantee or other assurance and/or security for or (in the case of inter-
creditor agreements) otherwise in relation to amounts owed to the Banks,
the Arranger, the Agent or the Security Trustee in respect of any
Indebtedness of the Borrowers or the Guarantors under this Agreement;
"SECURITY PROVIDERS" means those persons (other than Obligors) that have
entered into any of the Security Documents from time to time;
"SECURITIES PURCHASE AND CONVERSION AGREEMENT" means the securities
purchase and conversion agreement entered or to be entered into between
Philips Media B.V. (1), Philips Media Networks B.V. (2), UIH (3), Joint
Venture, Inc. (4) and the Parent (5), including all exhibits and schedules
thereto, in a form satisfactory to the Banks;
"SECURITY TRUSTEE" means the Agent in its capacity as security trustee for
the purposes of the Security Documents;
21
<PAGE>
"SECURITY TRUST DEED" means the Security Trust Deed entered into or to be
entered into between the Banks, the Arrangers, the Agent, the Security
Trustee and each Obligor;
"SHARE SECURITIES" means the RP Share Security, the CNA Share Security and
the Norwegian Share Security and such other pledges/charges over shares in
any of the Obligors as may be executed in favour of the Security Trustee
from time to time as security for the obligations of the Obligors under
this Agreement;
"SIX MONTH PERIOD" means each period of six months ending on the last day
of a calendar month;
"STERLING" and "(Pounds)" mean the lawful currency for the time being of
the United Kingdom and in respect of all payments to be made under this
Agreement in Sterling mean immediately available, freely transferable
cleared funds;
"STOCK OPTION PLAN" means the stock option plan adopted by the Parent on
13th June 1996 and administered by Stichting Administratiekantoor UPC B.V.
pursuant to an agreement between Stichting Administratiekantoor UPC B.V.
and the Parent dated 13th June, 1996;
"SUBORDINATED CREDITOR" means any person who has, at any relevant time,
entered into a Deed of Subordination;
"SUBORDINATED DEBT" means at any relevant time, all Borrowed Money of the
Restricted Group owed to a Subordinated Creditor;
"SUBSIDIARY" of a person means any company or entity directly or indirectly
controlled by such person, for which purpose "CONTROL" means either
ownership of more than 50 per cent of the voting share capital (or
equivalent right of ownership) of such company or entity or power to direct
its policies and management whether by contract or otherwise;
"SUBSTITUTE" has the meaning given to it in clause 17.3;
"SUBSTITUTION CERTIFICATE" means a certificate substantially in the terms
of schedule 5;
"TAXES" includes all present and future taxes, levies, imposts, duties,
fees or charges of whatever nature together with interest thereon and
penalties in respect thereof and "TAXATION" shall be construed accordingly;
"TELECOMMUNICATIONS AND CABLE LAWS" means all laws, statutes, regulations
and judgments relating to telecommunications, cable television and data
services applicable to any member of the Restricted Group and/or the
business carried on by any member of the Restricted Group in any Relevant
Jurisdiction;
"TELEKABEL BOND" means the bearer bonds 1994-2003 issued by Telekabel Wien
in an aggregate nominal amount of BEF 3,863,750,000;
22
<PAGE>
"TELEKABEL ENTITIES" means each of:
(a) Telekabel Wien;
(b) Telekabel-Fernsehnetz Region Baden Betriebsgesellschaft m.b.H, a
company incorporated in Austria with its corporate seat at A-2514
Traiskirchen, Hauptplatz 13, and with registration number FN 111149f;
(c) Telekabel-Fernsehnetz Wiener Neustadt/Neunkirchen Betriebsgesellschaft
m.b.H, a company incorporated in Austria with its corporate seat at A-
2700 Wiener Neustadt, Neunkirchner Strasse 24, and with registration
number FN 114170y;
(d) Telekabel Graz Gesellschaft m.b.H, a company incorporated in Austria
with its corporate seat at A-8020 Graz, Lazarettgurtel 81, and with
registration number FN 55555z;
(e) Telekabel Klagenfurt Gesellschaft m.b.H, a company incorporated in
Austria, with its corporate seat at A-9020 Klagenfurt, Villacher
Strasse 161 and with registration number FN 99365a; and
(f) CNA;
"TELEKABEL NOTES" means the bearer bonds to be issued by Telekabel Wien in
respect of each Advance made to Telekabel Wien, in the form set out in
Schedule 14;
"TELEKABEL WIEN" means Telekabel Wien Gesellschaft m.b.H. a company
incorporated in Austria with its corporate seat at A-1100 Wien, Erlachgasse
116, and with registration number FN 84116 a;
"TERM" means, in relation to an Advance, the period for which that Advance
is, or is to be, borrowed, as specified in the Drawdown Notice for such
Advance;
"TERMINATION DATE" means 30th September, 2006;
"TOTAL ANNUALISED NET OPERATING CASH FLOW" means twice the consolidated Net
Operating Cash Flow for all of the members of the Restricted Group in
respect of the most recently ended Six Month Period for the Restricted
Group in respect of which Monthly Management Accounts have been delivered
to the Agent under this Agreement;
"TOTAL COMMITMENTS" means at any relevant time the total of the Commitments
of all the Banks at such time;
"TOTAL DEBT" means the principal amount of all Borrowed Money of the
Restricted Group (other than Subordinated Debt made available by a Relevant
Person);
23
<PAGE>
"TOTAL DEBT INTEREST CHARGES" means, in relation to any period, the total
amount of all interest, fees and commissions accruing in respect of Total
Debt during such period (having taken into account the effect of any
relevant hedging arrangements);
"UIH" means United International Holdings, Inc. a corporation incorporated
in the State of Delaware, United States of America and having its principal
place of business at 4643 South Ulster, Suite 1300, Denver, Colorado 80237
U.S.A.;
"UNRESTRICTED GROUP" means the Unrestricted Subsidiaries and the
Unrestricted Undertakings;
"UNRESTRICTED SUBSIDIARIES" means those Subsidiaries of the Parent which
are not Restricted Subsidiaries;
"UNRESTRICTED UNDERTAKINGS" means any person (other than the Restricted
Subsidiaries and Unrestricted Subsidiaries) in which UPC has the beneficial
ownership of 10 per cent. or more of the equity securities of such person
(either individually or as part of a group); and
"UPC PIK NOTES" means all of the outstanding 9.96% Series A Convertible
Notes due 2005 and all of the 10.03% Series B Convertible Notes due 2005
issued by the Parent to Philips Media B.V.
1.3 Headings
--------
Clause headings and the table of contents are inserted for convenience of
reference only and shall be ignored in the interpretation of this
Agreement.
1.4 Construction of certain terms
-----------------------------
In this Agreement, unless the context otherwise requires:
(a) references to clauses and schedules are to be construed as references
to the clauses of, and schedules to, this Agreement and references to
this Agreement include its schedules;
(b) references to (or to any specified provision of) this Agreement or any
other document shall be construed as references to this Agreement,
that provision or that document as in force for the time being and as
from time to time amended in accordance with its terms, or, as the
case may be, with the agreement of the relevant parties and (where
such consent is, by the terms of this Agreement or the relevant
document, required to be obtained as a condition to such amendment
being permitted) the prior written consent of the Agent, all of the
Banks or the Majority Banks (as the case may be);
(c) references to a "REGULATION" include any present or future regulation,
rule, directive, requirement, request or guideline (whether or not
having the force of law) of any agency, authority, central bank or
government
24
<PAGE>
department or any self-regulatory or other national or supra-national
authority;
(d) words importing the plural shall include the singular and vice versa;
(e) references to a time of day are to London time;
(f) references to a "PERSON" shall be construed as including references to
an individual, firm, company, corporation, unincorporated body of
persons or any State or any of its agencies;
(g) references to "ASSETS" include all or part of any business,
undertaking, real property, personal property, uncalled capital and
any rights (whether actual or contingent, present or future) to
receive, or require delivery of, any of the foregoing;
(h) references to a "GUARANTEE" include references to an indemnity or
other assurance against financial loss including, without limitation,
an obligation to purchase assets or services as a consequence of a
default by any other person to pay any Indebtedness and "GUARANTEED"
shall be construed accordingly;
(i) references to the "EQUIVALENT" of an amount specified in a particular
currency (the "SPECIFIED CURRENCY AMOUNT") shall be construed as a
reference to the amount of the other relevant currency which can be
purchased with the specified currency amount in the London foreign
exchange market at or about 11 a.m. on the day on which the
calculation falls to be made for spot delivery as determined by the
Agent;
(j) references to the "agreed form" means, in relation to any document,
the form of such document as shall have been agreed between the Parent
and the Agent (acting for and on behalf of all of the Banks);
(k) references to any enactment shall be deemed to include references to
such enactment as re-enacted, amended or extended; and
(l) references to this "AGREEMENT" include (i) any supplemental agreement
entered into in respect of this Agreement and (ii) all Telekabel Notes
issued under this Agreement and references to sums payable under this
Agreement include sums payable under all Telekabel Notes.
1.5 Majority Banks
--------------
Where this Agreement provides for any matter to be determined by reference
to the opinion of the Majority Banks or to be subject to the consent or
request of the Majority Banks or for any action to be taken on the
instructions of the Majority Banks, such opinion, consent, request or
instructions shall (as between the Banks) only be regarded as having been
validly given or issued by the Majority Banks if all the Banks shall have
received prior notice of the matter on which such opinion, consent, request
or instructions are required to
25
<PAGE>
be obtained and the relevant majority of Banks shall have given or issued
such opinion, consent, request or instructions but so that (as between the
Borrowers and the Banks), once informed by the Agent that such opinion,
consent, request or instructions have been given, the Borrowers shall be
entitled (and bound) to assume that such notice shall have been duly
received by each Bank and that the relevant majority shall have been
obtained to constitute Majority Banks whether or not this is in fact the
case.
1.6 Agent's opinion
---------------
Where this Agreement provides for the Agent's opinion to determine whether
any matter would or is reasonably likely to have a Material Adverse Effect
and/or a material adverse effect, as the case may be, the Agent shall act
in accordance with the instructions of the Majority Banks in making such
determination.
26
<PAGE>
2 THE FACILITY
------------
2.1 Amount
------
The Banks, relying upon each of the representations and warranties in
clause 10 agree to lend to the Borrowers upon and subject to the terms of
this Agreement the principal sum of up to NLG 1,100,000,000 or the
equivalent in Optional Currencies (of which, for the avoidance of doubt,
the Norwegian Borrowers may not borrow more than the Norwegian Loan Amount
and which shall include, for the avoidance of doubt, the amounts borrowed
by Telekabel Wien against the issue of Telekabel Notes). The obligation of
each Bank under this Agreement shall be to contribute that proportion of
each Advance which, as at the Drawdown Date of such Advance, its Commitment
bears to the Total Commitments.
2.2 Obligations several
-------------------
The obligations of each Bank under this Agreement are several; the failure
of any Bank to perform such obligations shall not relieve any other Bank,
the Arranger, the Security Trustee, the Agent or any Obligor of any of
their respective obligations or liabilities under this Agreement nor shall
the Agent, the Security Trustee or the Arranger be responsible for the
obligations of any Bank (except for its own obligations, if any, as a Bank)
nor shall any Bank be responsible for the obligations of any other Bank
under this Agreement.
2.3 Interests several
-----------------
Notwithstanding any other term of this Agreement (but without prejudice to
the provisions of this Agreement relating to or requiring action by the
Majority Banks) the interests of the Agent, the Security Trustee, the
Arranger and the Banks are several and the amount due to the Agent (for its
own account), to the Arranger, to the Security Trustee and to each Bank is
a separate and independent debt. The Agent, the Security Trustee, the
Arranger and each Bank shall have the right to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for the
Agent, the Security Trustee, the Arranger or any Bank (as the case may be)
to be joined as an additional party in any proceedings for this purpose.
2.4 Telekabel Wien's interests several
----------------------------------
For the avoidance of doubt, every obligation of Telekabel Wien under this
Agreement is several and it is acknowledged by all parties that Telekabel
Wien save for its obligations under the Guarantee, is not liable for any
obligations of any other Obligor under this Agreement.
27
<PAGE>
3 CONDITIONS
----------
3.1 Documents and evidence
----------------------
(a) Subject to clause 3.1(b) and clause 3.1(c), the obligation of each
Bank to make its Commitment available shall be subject to the
condition that the Agent, or its duly authorised representative, shall
have received, not later than two Banking Days before the day on which
the first Advance is to be made, the documents and evidence specified
in part A of schedule 3 in form and substance satisfactory to all of
the Banks.
(b) The obligation of each Bank to contribute to the Philips Advance is
subject to the further condition that the Agent, or its duly
authorised representative, shall have received, no later than three
Banking Days before the day on which the Drawdown Notice in respect of
the Philips Advance is given, the documents and evidence specified in
part B of schedule 3 in form and substance satisfactory to all of the
Banks together with either the documents and evidence set out in
schedule 3 part C or schedule 3 part D each in form and substance
satisfactory to all the Banks.
(c) The obligation of each Bank to contribute to the first Advance to the
Norwegian Borrowers shall be subject to the further condition that the
Agent, or its duly authorised representative, shall have received, no
later than three Banking Days before the day on which the Drawdown
Notice in respect of such Advance is given, (i) (if the Norwegian
Merger has occurred by such date), the documents and evidence
specified in part C of schedule 3 or (ii) (if the Norwegian Merger has
not occurred by such date) the documents and evidence set out in
schedule 3 part D, in each case in form and substance satisfactory to
the Banks.
3.2 General conditions precedent
----------------------------
If, following the making of an Advance, the Loan will exceed the Loan
immediately prior to the making of such Advance (taking into account any
other Advances or part thereof scheduled to be made or repaid or prepaid on
the date of such Advance) the obligation of each Bank to contribute to any
Advance is subject to the further conditions that at the date of each
Drawdown Notice and on each Drawdown Date:
(a) the representations and warranties set out in clause 10.1 to be
repeated in accordance with clause 10.3 are true and correct on and as
of each such date as if each were made with respect to the facts and
circumstances existing at such date; and
(b) no Default shall have occurred and be continuing or would result from
the making of such Advance.
28
<PAGE>
However, in the case of the drawing of an Advance which would not, if
drawn, cause the aggregate Guilder Amount of Advances outstanding after
such drawing to exceed the aggregate Guilder Amount of Advances outstanding
prior to that drawing (after taking account of any repayment made on the
date of such drawing):
(i) clause 3.2(a) shall apply only if the incorrectness would be
reasonably likely to have a material adverse effect on the ability of
any Borrower to perform its obligations under this Agreement or on the
financial position of the Parent and its Subsidiaries taken as a
whole; and
(ii) clause 3.2(b) shall not apply if the Term of the relevant Advance is
one month.
Nothing in this clause 3.2 shall be construed as constituting a waiver of
any right of the Banks (including, without limitation, their rights under
clause 13.2) arising from any Event of Default which shall have occurred
and be outstanding at the time of the drawing of the relevant Advance.
3.3 Waiver of conditions precedent
------------------------------
The conditions specified in this clause 3 are inserted solely for the
benefit of the Banks and may be waived on their behalf in whole or in part
and with or without conditions by the Agent acting on the instructions of
all of the Banks in respect of the first Advance, the Philips Advance, and
the first Advance to the Norwegian Borrowers and on the instructions of the
Majority Banks with respect to any other Advances without prejudicing the
right of the Agent acting on such instructions to require fulfilment of
such conditions in whole or in part in respect of any other Advance.
3.4 Notification
------------
The Agent shall notify the Banks and the Parent promptly after receipt by
it of the documents and evidence referred to in clause 3.1 in form and
substance satisfactory to it.
3.5 New Janco
---------
(a) Contemporaneously with the completion of the Norwegian Merger, the
Parent shall procure that New Janco and/or the Parent delivers to the
Agent the documents and evidence listed in part B of schedule 11
together with such other documents, evidence and legal opinions as the
Agent shall require so that New Janco assumes all obligations then
owed to the Agent, the Arranger, the Security Trustee and the Banks by
Norkabel provided that such obligations shall not exceed the Norwegian
Loan Amount.
(b) On confirmation by the Agent to the Banks that it has received all of
the documents referred to in paragraph (a) above in form and substance
29
<PAGE>
satisfactory to it, New Janco shall become the sole Norwegian
Borrower under this Agreement provided that it shall not be permitted
to borrow in excess of the Norwegian Loan Amount and such of Norkabel
and its Subsidiaries as were, prior to the date of the Norwegian
Merger, Borrowers and/or Guarantors shall cease to be Borrowers
and/or Guarantors under this Agreement. Delivery of a Deed of
Borrower Accession executed by the Parent and New Janco constitutes
confirmation by New Janco and the Parent that the representations and
warranties set out in clause 10 and to be made by them on the date of
the Deed of Borrower Accession are correct, as if made with reference
to the facts and circumstances then existing.
Each Bank irrevocably authorises the Agent to execute any duly
executed Deed of Borrower Accession on its behalf and each other
Obligor irrevocably authorises the Parent to execute any Deed of
Borrower Accession on its behalf.
3.6 Conditions subsequent
---------------------
The Parent undertakes to procure that:
(a) prior to the earlier to occur of the date of the Philips Advance or
the date of the first Advance made to the Norwegian Borrowers the
constitutional documents of CNA shall be amended to a form
satisfactory to the Agent; and
((b)) ((i)) resolutions of the supervisory board of Telekabel Wien shall
be provided to the Agent approving the terms and conditions of
this Agreement (as amended) and the Austrian Security Document
on or before 12th December 1997; and
(ii) on or before 12th December, 1997 there is delivered to the
Agent the Austrian Security Document and such other documents
as the Agent may require, each duly executed and delivered by
Telekabel Wien, together with such other documents, evidence
and legal opinions as the Agent shall require to ensure that
Telekabel Wien becomes a Borrower and a Guarantor under this
Agreement.
Provided that if the Parent fails to comply with either of the above
undertakings, in whole or in part, without prejudice to any other rights or
remedies available to the Agent, the Security Trustee, the Arranger, the
Banks (or any of them) such failure shall constitute an immediate Event of
Default and the Agent shall be entitled to exercise its rights under clause
13.2. Provided further that until such time as the undertakings set out in
clause 3.6 have been complied with, save with the agreement of all of the
Banks, none of the Banks shall be under any
30
<PAGE>
obligation to make any Advance other than the Advance referred to in clause
4.9(A).
31
<PAGE>
4 ADVANCES; CURRENCIES
--------------------
4.1 Maximum Outstandings
--------------------
(a) Prior to the date of the Philips Advance and subject to the provisions
of clause 4.10, the principal amount of Advances outstanding under the
Facility shall not exceed (i) if the first Advance to a Norwegian
Borrower shall not have been made, NLG 360,000,000 or, (ii) if the
first Advance to a Norwegian Borrower shall have been made, NLG
550,000,000, or, in each case, the equivalent in Optional Currencies.
On each Quarter Day and each Drawdown Date prior to the date on which
the Philips Advance is made, the amount of Total Debt shall not exceed
five times Total Annualised Net Operating Cash Flow (as determined by
reference to the most recently delivered Monthly Management Accounts
at such time) and no Advances (other than the Philips Advance in
accordance with the provisions of clause 4.10) shall be made if,
following the making of such Advance, such limit would be exceeded.
(b) On and from the date of the Philips Advance, the principal amount of
Advances outstanding under the Facility shall not exceed NLG
1,100,000,000 or the equivalent in Optional Currencies. On each
Quarter Day and each Drawdown Date falling within the period set out
in column (I) below, the amount of Total Debt shall not exceed the
multiple of Cable TV Annualised Net Operating Cash Flow or Total
Annualised Net Operating Cash Flow, as the case may be, (each as
determined by reference to the most recently delivered Monthly
Management Accounts at such time) set out against such period in
column (II) and column (III) below, and no Advances shall be made if,
following the making of such Advance, such limit would be exceeded:
<TABLE>
<CAPTION>
==================================================================================================
(I) (II) (III)
Period Multiple of Cable TV Multiple of Total
Annualised Net Annualised Net
Operating Cash Flow Operating Cash Flow
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Up to (but excluding) Completion of the Initial
Equity Raise 7 8.25
- --------------------------------------------------------------------------------------------------
From (and including) Completion of the Initial
Equity Raise to (and including) 30th June 1999 6.25 7.5
- --------------------------------------------------------------------------------------------------
From (and including) 1st July 1999 to (and
including) 30th September 1999 6.5 8
- --------------------------------------------------------------------------------------------------
From (and including) 1st October 1999 to (and 6.75 8
including) 31st December 1999
</TABLE>
32
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
From (and including) 1st January 2000 to (and 6 6
including) 31st December 2000
- --------------------------------------------------------------------------------------------------
From (and including) 1st January 2001 to (and 5 6
including) 31st December 2001
- --------------------------------------------------------------------------------------------------
From (and including) 1st January 2002 to (and 4 4
including) 31st December 2002
- --------------------------------------------------------------------------------------------------
Thereafter 3 3
==================================================================================================
</TABLE>
4.2 Drawdown
--------
Subject to the terms and conditions of this Agreement, an Advance shall be
made available to a Borrower following receipt by the Agent from such
Borrower of a Drawdown Notice not later than 10 a.m. on the third Banking
Day before the proposed Drawdown Date. A Drawdown Notice shall be
effective on actual receipt by the Agent and, once given, shall, subject as
provided in clause 5.6(a), be irrevocable.
4.3 Amount and Term
---------------
Each Advance shall be:
(a) of a Guilder Amount which is a minimum of NLG 10,000,000 and, in the
case of Advances to be made in Guilders, an integral multiple of NLG
5,000,000, or the balance of the Commitments;
(b) denominated in one currency only; and
(c) borrowed for a Term of one, two, three or six months (or, with the
prior agreement of all of the Banks, such other period as the Parent
may select) ending on or before the Termination Date.
4.4 Selection of currencies
-----------------------
Subject to the provisions of clause 4.5, if a Borrower so requests in the
Drawdown Notice for an Advance, such Advance may be drawn down in an
Optional Currency.
4.5 Limit on currencies; non-availability
-------------------------------------
An Advance may not be drawn down in an Optional Currency if (a) in
consequence thereof there would be Advances outstanding in more than 5
different currencies or (b) any Bank reasonably determines that deposits of
such Optional Currency are not readily available to such Bank in an amount
comparable with such Bank's portion of the relevant Advance and so notifies
the Agent not later than 3 p.m. on the third Banking Day before the
proposed Drawdown Date or (c) the Agent determines after consultation with
the Reference Banks (which determination shall be conclusive) at any time
prior to
33
<PAGE>
10 a.m. (local time in the place of payment) on the Drawdown Date
that by reason of any change in currency availability, currency exchange
rates or exchange controls it is or will be impracticable for the relevant
Advance to be drawn down in that Optional Currency. Accordingly, in any
such event, the relevant Advance shall be drawn down in Guilders.
4.6 Currency Amounts
----------------
If an Advance is to be drawn down in an Optional Currency, the Banks shall,
subject to clause 3.2, advance to the relevant Borrower on drawdown of such
Advance, the amount of such Optional Currency requested. The Guilder
Amount of such Advance shall be the amount of Guilders (as determined by
the Agent) which would be required to purchase the amount of such Optional
Currency at the average of the spot rates of exchange quoted to the Agent
by the Reference Banks to be ruling in the London Foreign Exchange Market
for the purchase of such Optional Currency with Guilders on receipt of the
relevant Drawdown Notice. If an Advance is to be drawn down in Guilders,
the Banks shall, subject to clause 3.2, advance to the relevant Borrower on
drawdown of such Advance, the Guilder Amount of such Advance.
4.7 Notification to Banks
---------------------
As soon as practicable after receipt of a Drawdown Notice complying with
the terms of this Agreement the Agent shall notify each Bank and, subject
to clause 3, each of the Banks shall on the Drawdown Date make available to
the Agent its portion of the relevant Advance in accordance with clause
8.2. If an Advance is to be drawn down in an Optional Currency the amount
to be advanced to the relevant Borrower under this clause 4.7 shall be the
amount of such Optional Currency specified in the relevant Drawdown Notice.
If an Advance is to be drawn down in Guilders, the amount to be advanced to
the relevant Borrower under this clause 4.7 shall be the Guilder Amount of
that Advance.
4.8 Application of proceeds
-----------------------
Without prejudice to the Borrowers' obligations under clause 11.1(c), or
clause 4.9 and 4.10, none of the Banks, the Arranger, the Security Trustee
or the Agent shall have any responsibility for the application of the
proceeds of any Advance by any Borrower.
4.9 Initial Advances
----------------
(A) Refinancing the Existing UPC Facility
-------------------------------------
Subject to the provisions of clause 3.1(a), the Borrowers undertake to
comply with the terms of this clause 4 so as to ensure that a Drawdown
Notice is delivered for an Advance to be made on or before 10th
October 1997 (or such other date as may be agreed by the Agent) by the
Parent in an amount not less than the aggregate of the amount
certified to the Parent by the Agent to be equal to the principal
amount outstanding
34
<PAGE>
under the Existing UPC Facility together with all unpaid interest
thereon and any other amounts payable in relation thereto.
The Borrowers irrevocably authorise the Agent, and the Agent agrees,
to apply that part of such Advance as is equal to the amount so
certified in discharge of the Parent's obligations in respect of the
Existing UPC Facility and the Agent's obligations under clause 8.2 in
respect of such Advance shall be to remit the balance following such
discharge (if any) to the Parent forthwith.
Unless and until the Existing UPC Facility has been repaid in full and
cancelled and all (if any) security granted in connection therewith
has been unconditionally discharged in full to the satisfaction of the
Agent or has been assigned or transferred to the Security Trustee, no
further Advances may be made to the Borrowers hereunder.
(B) Refinancing the Existing Norkabel Facility
------------------------------------------
Subject to the provisions of clause 3.1(a) and clause 3.1(c), the
Borrowers undertake to comply with the terms of this clause 4 so as to
ensure that, on the earliest of (i) the date of the Norwegian Merger,
(ii) the date falling three Banking Days prior to the date of the
Philips Advance or (iii) 12th December 1997 (or such other date as may
be agreed by the Agent) a Drawdown Notice is delivered to the Agent by
(i) (if the Norwegian Merger has not occurred) Norkabel or (ii) (if
the Norwegian Merger has occurred) New Janco in an amount not less
than the aggregate of the principal amount certified by the Agent to
the Parent and the relevant Norwegian Borrower to be equal to the
principal amount outstanding under the Existing Norkabel Facility
together with all unpaid interest thereon and any other amounts
payable in relation thereto.
The Borrowers irrevocably authorise the Agent, and the Agent agrees,
to apply that part of such Advance as is equal to the amount so
certified in discharge of Norkabel's obligations in respect of the
Existing Norkabel Facility, and the Agent's obligations under clause
8.2 in respect of such Advance shall be to remit the balance following
such discharge (if any) to the relevant Norwegian Borrower forthwith.
After the earliest of (i) the date of the Norwegian Merger, (ii) the
date falling three Banking Days prior to the date of the Philips
Advance or (iii) 12th December 1997 (or such other date as may be
agreed by the Agent), unless and until the Existing Norkabel Facility
has been repaid in full and cancelled and all or any security granted
in connection therewith has been assigned or transferred to the
Security Trustee to the satisfaction of the Agent no further Advances
may be made if, following the making of such Advance, the Loan would
exceed the Loan immediately prior to such Advance.
35
<PAGE>
4.10 Philips Advance
---------------
(a) Subject to the provisions of clause 3.1(b), the Borrowers undertake to
comply with the terms of this clause 4 so as to ensure that the
Philips Advance is made on or before the date falling 90 days after
the date of the first Advance (or such other date as may be agreed by
the Agent acting on the instructions of all of the Banks) and to
ensure that the Philips Advance is in an amount not less than an
amount which, when aggregated with the amount of the Bridge Facility
which the Bridge Borrower has used in satisfaction of the
consideration payable to the Parent for the purchase of the interests
in the Unrestricted Group pursuant to the Restructuring and any other
funds available to the Parent (if any), is certified by the Parent to
the Agent to be sufficient to consummate the Philips Transaction in
accordance with the terms of the Securities Purchase and Conversion
Agreement.
The Borrowers irrevocably authorise the Agent to apply that part of
the Philips Advance so certified in discharge of the Parent's
obligations in respect of the Securities Purchase and Conversion
Agreement and the Agent's obligations under clause 8.2 in respect of
the Philips Advance shall be to remit the balance following such
discharge (if any) to the Parent forthwith. Unless and until the
Philips Advance has been made no further Advances may be made if,
following the making of such Advance, the Loan would exceed the amount
set out in clause 4.1(a).
(b) If the Philips Advance has not been made on or before the date falling
90 days after the date of the first Advance made under the Facility
(or such other date as may be agreed by the Agent acting on the
instructions of all of the Banks), then the Agent (acting on the
instructions of all of the Banks) and the Parent shall seek to
renegotiate the terms and conditions of the Facility in good faith. If
the Philips Advance has not been made on or before the date falling
180 days after the date of the first Advance (or such other date as
may be agreed by the Agent acting on the instructions of all of the
Banks) then there shall be an Event of Default and the Agent shall be
entitled to exercise all of its rights under clause 13.2.
4.11 Telekabel Bond
--------------
Subject to the Agent receiving confirmation that the Telekabel Bond has
been delivered to the Parent, and subject to the provisions of clause 3.6,
on the date that the Philips Advance is made (or as soon as possible
thereafter), the Borrowers undertake to comply with the terms of this
clause 4 so as to ensure that an Advance is made to Telekabel Wien (the
"TELEKABEL ADVANCE") in an amount not less than the amount equal to the
principal amount outstanding under the Telekabel Bond together with all
unpaid interest thereon and any other amounts payable in relation thereto.
36
<PAGE>
The Borrowers irrevocably authorise the Agent, and the Agent agrees, to
apply that part of the Telekabel Advance as is equal to the amount required
to redeem the Telekabel Bond in full in discharge of Telekabel Wien
obligations in respect of the Telekabel Bond and the Agent's obligations
under clause 8.2 in respect of such Advance shall be to remit the balance
following such discharge (if any) to Telekabel Wien forthwith. Following
the date of the Philips Advance unless and until the Telekabel Advance has
been made, no further Advances (other than the Advance referred to in
clause 4.9(B)) may be made if, following the making of such Advance, the
Loan would exceed the Loan immediately prior to the making of such Advance.
4.12 Subsidiary Drawings
-------------------
The Parent shall not be permitted to on-lend any funds drawn down by the
Parent under the Facility to Telekabel Wien or the Norwegian Borrowers
without the consent of the Majority Banks. Telekabel Wien and the
Norwegian Borrowers undertake that such funds as they may respectively
require for the purposes set out in clause 1.1 shall be drawn by them
direct from the Banks in accordance with the terms of this Agreement
(provided that, in the case of the Norwegian Borrowers, the Norwegian Loan
Amount shall not be exceeded).
4.13 Refinancing the Janco Loan Agreement
------------------------------------
Subject to the provisions of clause 3.1 and provided that the Agent shall
have received the documents and evidence specified in part B of schedule
11, the Parent shall procure that on or prior to 30th June, 2000 New Janco
shall refinance the principal amount of the Indebtedness of New Janco under
the Janco Loan Agreement as at the date of this Agreement by Advances under
this Agreement (the "NEW JANCO ADVANCES") or, if this is not legally
possible at such time, New Janco shall have entered into such other
arrangements as are acceptable to the Majority Banks.
The Borrowers irrevocably authorise the Agent, and the Agent agrees, to
apply the New Janco Advances in discharge of New Janco's obligations in
respect of the Janco Loan Agreement and the Agent's obligations under
clause 8.2 in respect of such Advance shall be to remit the balance
following such discharge (if any) to New Janco forthwith.
The first New Janco Advance shall not be made unless the Parent has
provided the Agent with a legal opinion of Norwegian counsel, acceptable to
the Banks stating that the making of such New Janco Advance will not
adversely affect the security position of the Banks or the liability of the
Norwegian Borrower (or any remaining Norwegian Guarantors, as the case may
be) under the Agreement and will not contravene any provision of Norwegian
law. If the Parent is unable to provide such legal opinion, the Parent and
New Janco shall enter into such other arrangements as may be acceptable to
the Majority Banks.
37
<PAGE>
4.14 Telekabel Notes
---------------
Each borrowing of a portion of the Commitments to be made by Telekabel Wien
under this Agreement shall be made against the issue by Telekabel Wien of a
Telekabel Note to the Agent.
At the same time as and together with a Drawdown Notice in connection with
any such Advance to be made to Telekabel Wien, Telekabel Wien shall deliver
to the Agent an original Telekabel Note the details set out in which shall
correspond to the details of the Advance described in such Drawdown Notice.
The Banks shall be under no obligation to make any funds available to
Telekabel Wien unless the Agent shall have received such Telekabel Note in
a form satisfactory to it.
Telekabel Wien hereby authorises the Agent to complete the provisions in
each Telekabel Note relating to the calculation of interest payable in
connection therewith.
On the condition that the relevant Telekabel Note has been duly completed
and executed and provided that the conditions set out in clause 3 have been
satisfied, the Banks shall contribute to the Advance to be made to
Telekabel Wien against the relevant Telekabel Note in accordance with the
provisions of clauses 4.2 to 4.8 (inclusive).
The Agent shall hold each Telekabel Note for and on behalf of the Banks and
shall not part with possession of such Telekabel Note without the consent
of the Banks. All payments received by the Agent under any Telekabel Note
shall be applied in accordance with the provisions of clause 8. For the
avoidance of doubt, for the purposes of the Security Trust Deed, all
indebtedness of Telekabel Wien under Telekabel Notes shall constitute
"Senior Indebtedness" (as defined in the Security Trust Deed).
The Agent shall be entitled to place all Telekabel Notes deposited with it
in any safe deposit, safe or receptacle selected by the Agent and the Agent
shall not be responsible for any loss incurred in connection with any such
deposit.
5 INTEREST; ALTERNATIVE INTEREST RATES
------------------------------------
5.1 Normal interest rate
--------------------
The Borrowers shall pay interest on each Advance made to them on such
Advance's Maturity Date (or, in the case of an Advance having a Term of
more than six months, by instalments, every six months from the Drawdown
Date of such Advance and on the relevant Maturity Date) at the rate per
annum determined by the Agent to be the aggregate of (a) the applicable
Margin, (b) (in the case of Advances in Sterling) the Additional Cost and
(c) LIBOR.
38
<PAGE>
5.2 Applicable Margin
-----------------
(A) Subject to sub-clauses (B) and (C) below, the Margin in relation to any
Advance and any unpaid sum due under this Agreement under clause 5.3 shall
(subject to the proviso below) be the rate set out in column (I) below
against the ratio of Total Debt to Total Annualised Net Operating Cash Flow
(as shown in the most recently delivered Quarterly Management Accounts and
Compliance Certificate delivered to the Agent prior to, first day of the
relevant Term or, in relation to any unpaid sum due under this Agreement
under clause 5.3, the first day of the relevant period determined in
accordance with clause 5.3) set out in column (II) below as at the first
day of the Term of such Advance or period in respect of which interest is
payable in accordance with clause 5.3 (as the case may be):
<TABLE>
<CAPTION>
(I) (II)
Rate (per cent. Ratio of Total Debt to
--------------- ----------------------
per annum) Total Annualised
------------ ----------------
Net Operating Cash Flow
-----------------------
<S> <C> <C>
2.00 8:1 or greater
1.75 at least <CAPTION> 6.5:1 but less than 8:1
1.25 at least 5:1 but less than 6.5:1
1.00 at least 4:1 but less than 5:1
0.75 at least 3:1 but less than 4:1
0.50 less than 3:1
</TABLE>
provided that (i) if on the relevant date on which the Margin is to be
determined the Philips Advance has not been made then the Margin for such
Advance and/or such unpaid sum shall be 2.00 per cent. per annum, and (ii)
until such time as the Parent shall have delivered to the Agent Quarterly
Management Accounts (relating to any Quarter ending on 31st December 1997
or later) and a Compliance Certificate relating thereto which indicate that
a lower Margin is applicable, the Margin for each Advance shall be 2.00 per
cent. per annum.
(B) The Margin in relation to any Advance or any unpaid sum outstanding on the
date of Completion of the Initial Equity Raise shall from (and including)
such date be 2.00 per cent. per annum.
(C) The Margin in relation to any Advance made or unpaid sum which becomes due
on or after the date of Completion of the Initial Equity Raise shall be
2.00 per cent. per annum.
5.3 Interest for late payment
-------------------------
If any Borrower fails to pay any sum (including, without limitation, any
sum payable pursuant to this clause 5.3 on its due date for payment under
this Agreement) the relevant Borrower shall pay interest on such sum from
the due date up to the date of actual payment (as well after as before
judgment) at a rate determined by the Agent pursuant to this clause 5.3.
The period beginning on
39
<PAGE>
such due date and ending on such date of payment shall be divided into
successive periods of not more than three months as selected by the Agent
(after consultation with the Banks so far as reasonably practicable in the
circumstances) each of which (other than the first, which shall commence on
such due date) shall commence on the last day of the preceding such period.
The rate of interest applicable to each such period shall be the aggregate
(as determined by the Agent) of (a) one per cent per annum, (b) the
applicable Margin, (c) (in the case of amounts in Sterling) the Additional
Cost and (d) LIBOR, unless such unpaid sum is an amount of principal which
shall have become due and payable, by reason of a declaration by the Agent
under clause 13.2(b) or a prepayment pursuant to clauses 6.3 or 15.1, prior
to the Maturity Date relating thereto, in which case the first such period
selected by the Agent shall end on such Maturity Date and interest shall be
payable on such unpaid sum during such period at a rate one per cent above
the rate applicable thereto immediately before it shall have become so due
and payable. Interest under this clause 5.3 shall be due and payable on the
last day of each period determined by the Agent pursuant to this clause 5.3
or, if earlier, on the date on which the sum in respect of which such
interest is accruing shall actually be paid. If, for the reasons specified
in clause 5.6(a)(i) or 5.6(a)(ii), the Agent is unable to determine a rate
in accordance with the foregoing provisions of this clause 5.3, each Bank
shall promptly notify the Agent of the cost of funds to such Bank and
interest on any sum not paid on its due date for payment shall be
calculated for each Bank at a rate determined by the Agent to be one per
cent per annum above the aggregate of the Margin and the cost of funds
(including, in the case of amounts in Sterling, Additional Cost) to such
Bank.
5.4 Notification of interest rate
-----------------------------
The Agent shall notify the Parent, the relevant Borrower and the Banks
promptly of each rate of interest determined by it under this clause 5.
5.5 Reference Bank quotations
-------------------------
If any Reference Bank is unable or otherwise fails to furnish a quotation
for the purpose of calculating LIBOR, the interest rate for the relevant
Term or other period shall be determined, subject to clause 5.6, on the
basis of the quotations furnished by the remaining Reference Banks.
5.6 Market disruption; non-availability
-----------------------------------
(a) If and whenever, at any time prior to the making of an Advance the
London interbank offered rates for deposits of the currency in
question for the relevant period are not displayed on the relevant
page of the Reuter Monitor Money Rates Service (or any replacement
therefor) and:
(i) the Agent shall have determined, after consultation with the
Reference Banks (which determination shall, in the absence of
manifest error, be conclusive), that adequate and fair means do
not exist for ascertaining LIBOR during such Term; or
40
<PAGE>
(ii) none or only one of the Reference Banks supplies the Agent with
a quotation for the purpose of calculating LIBOR; or
(iii) the Agent shall have received notification from Banks with
Contributions aggregating not less than one-third of the total
of the Advances (or, prior to the first Drawdown Date,
Commitments aggregating not less than one-third of the Total
Commitments) that deposits in Guilders are not available to
such Banks in the London Interbank Market in the ordinary
course of business in sufficient amounts to fund their
Contributions to such Advance or that LIBOR does not accurately
reflect the cost to such Banks of obtaining such deposits;
the Agent shall forthwith give notice (a "DETERMINATION NOTICE") to
the Parent and to each of the Banks and such Advance shall not be
made. A Determination Notice shall contain particulars of the
relevant circumstances giving rise to its issue.
(b) After the giving of any Determination Notice the undrawn amount of the
Total Commitments shall not be borrowed until the circumstances giving
rise to the issue of the Determination Notice have ceased.
(c) During the period of 10 days after any Determination Notice has been
given by the Agent under clause 5.6(a), each Bank shall certify an
alternative basis (the "SUBSTITUTE BASIS") for making available or, as
the case may be, maintaining its contribution to the Advance. The
Substitute Basis may (without limitation) include alternative interest
periods, alternative currencies or alternative rates of interest but
shall include a margin above the cost of funds including Additional
Cost, if any, to such Bank equivalent to the Margin. Each Substitute
Basis so certified shall be binding upon the Borrowers and shall take
effect in accordance with its terms from the date specified in the
Determination Notice until such time as none of the circumstances
specified in clause 5.6 (a) continues to exist whereupon the normal
interest rate fixing provisions of this Agreement shall apply.
41
<PAGE>
6 REPAYMENT, PREPAYMENT AND CANCELLATION
--------------------------------------
6.1 Repayment
---------
The Borrowers shall repay each Advance on its Maturity Date in the currency
in which it is denominated. If an advance (the "NEW ADVANCE") is to be
made on a day on which another Advance (the "MATURING ADVANCE") denominated
in the same currency as the new Advance is due to be repaid by the same
Borrower then, subject to the terms of this Agreement and so long as the
conditions referred to in clause 3.2 shall have been satisfied in relation
to the new Advance, (a) the maturing Advance shall be deemed to have been
repaid on its Maturity Date either in whole (if the new Advance is equal to
or greater than the maturing Advance) or in part (if the new Advance is
less than the maturing Advance) and (b) to the extent that the maturing
Advance is so deemed to have been repaid, the principal amount of the new
Advance to be made on such date shall be deemed to have been credited to
the account of the relevant Borrower by the Agent on behalf of the Banks in
accordance with the terms of this Agreement and the Banks shall only be
obliged to make available to the relevant Borrower pursuant to clause 4.6 a
principal amount equal to the amount by which the new Advance exceeds the
maturing Advance. On the Termination Date, all outstanding Advances and
other sums (if any) then owing under this Agreement shall in any event be
repaid or paid in full.
6.2 Voluntary prepayment
--------------------
The Borrowers may, without premium or penalty, prepay any Advance (in whole
or in part provided that, in the case of part, the Guilder Amount of such
part is a minimum of NLG 10,000,000 and, in the case of Advances made in
Guilders, an integral multiple of NLG 10,000,000) at any time subject to
the provisions of this clause 6.
6.3 Additional voluntary prepayment
-------------------------------
Any Borrower may also prepay (in whole but not in part only), without
premium or penalty, but without prejudice to its obligations under clauses
5.6, 8.5 and 15.2, the Contribution of any Bank to which such Borrower
shall have become obliged to pay additional amounts under clause 5.6, 8.5
or 15.2. Upon any notice of such prepayment being given, the Commitment of
the relevant Bank shall be reduced to zero and the amount of the Total
Commitments shall be reduced accordingly.
6.4 Amounts payable on prepayment
-----------------------------
Any prepayment under this Agreement shall be made in the currency in which
the relevant Advance is then denominated together with: (a) accrued
interest to the date of prepayment; (b) any additional amount payable under
clause 5.6, 8.5 or 15.2; and (c) all other sums payable by the relevant
Borrower to the relevant Bank under this Agreement including, without
limitation, any accrued commitment commission payable under clause 7.1(c)
on any undrawn amount
42
<PAGE>
that is cancelled at the same time as such prepayment and any amounts
payable under clause 14.1.
6.5 Mandatory prepayment, Excess Cash Flow recapture and cancellation
-----------------------------------------------------------------
(A) Mandatory prepayment
--------------------
(a) Subject to the provisions of clause 6.5(D) below, the Borrowers
undertake to apply and to procure the application of all of:
(i) the proceeds of all disposals made by any member of the
Restricted Group of assets comprising or contributing 5 per cent. or more
of the total assets, turnover or Net Operating Cash Flow (in any financial
year) of the Restricted Group (taken as a whole);
(ii) the net proceeds of all equity share capital that has been subscribed for
in any member of the Restricted Group for cash other than pursuant to the
Norwegian Merger or in connection with the conversion of the Norwegian I/C
Indebtedness in accordance with clause 11.1(ac); and
(iii) the proceeds of all Borrowed Money (other than Borrowed Money referred to
in paragraphs (v) and (vi) of the definition thereof and Permitted Borrowings)
made available to members of the Restricted Group,
in prepayment of the Loan (or, if less the amount of the Loan).
(b) The Borrowers' obligations under paragraph (a) above shall not apply at any
time when, in respect of each of the two most recent previous consecutive
Quarterly Periods, the ratio of Total Debt to Total Annualised Net
Operating Cash Flow (calculated on the last day of each such Quarterly
Period and each as demonstrated in the Compliance Certificate for the
Quarterly Period ending immediately prior to such date) is less than (and
remains below) 4:1.
(B) Excess Cash Flow recapture
--------------------------
During the Reduction Period, the Borrowers shall apply, or procure the
application of, 75 per cent. of Excess Cash Flow (if any) in respect
of the twelve month period of the Restricted Group ending on 31st
December in each year (commencing with the twelve month period ending
on 31st December, 2001 and calculated by reference to the Compliance
Certificate delivered by the auditors of the Parent in respect of the
most recent financial year ending on such date) in prepayment of the
Loan (or, if less, the amount of the Loan) Provided that:
(i) no such prepayment shall be required to be made if the ratio of
Total Debt to Total Annualised Net Operating Cash Flow
43
<PAGE>
(calculated as at the last day of such twelve month period and as
shown in the most recent Compliance Certificate delivered to the Agent
in accordance with clause 11.1) is less than (and remains below)
3.5:1; and
(ii) no such prepayment shall be required to be made if the amount of
Excess Cash Flow in respect of the most recently ended twelve month
period is less than NLG 10,000,000 (but without prejudice to the
operation of this clause 6.5(B) if the amount of Excess Cash Flow is
NLG 10,000,000 or more). (C) Application of
(C) Application of mandatory prepayments and Excess Cash Flow
---------------------------------------------------------
(a) Each prepayment to be made under paragraphs (A) and (B) above (each
referred to in this clause as a "MANDATORY PAYMENT") shall be made
immediately unless the relevant Borrower states in writing at the time of
its receipt of such Mandatory Payment (or at the time that the auditors of
the Parent deliver the relevant Compliance Certificate, as the case may be)
that it shall be applied on Maturity Dates falling after the date of
receipt of such Mandatory Payment (or delivery of such Compliance
Certificate, as the case may be) in which case the relevant Borrower shall
deposit the amount of such Mandatory Payment (or if less the amount of the
Loan) with the Agent or as the Agent may reasonably direct in an account
(or accounts) bearing interest at market rates on terms that the principal
amount so deposited may only be released to the relevant Borrower by making
the relevant prepayment, beginning with the first such Maturity Date and
continuing until the prepayment obligation under paragraphs (A) and/or (B)
above has been satisfied but that any interest on such principal amount is
to be released to the relevant Borrower following such prepayments; and
(b) if on any Maturity Date upon which an amount of a Mandatory Payment is to
be applied in prepayment of the Loan:
(A) such amount is less than the amount of Advances, whose Maturity Date
is such date, the relevant Borrower may select against which Advance
or Advances the prepayment is to be made and the proportion of the
relevant amount to be prepaid on each Advance but shall ensure that
the full amount of such Mandatory Payment required to be applied is so
applied in prepayment; or
(B) such amount is equal to or greater than the amount of the Advances
whose Maturity Date is such date, the relevant Borrower shall prepay
each such Advance on such date.
44
<PAGE>
(D) Exceptions to clause 6.5(A)
---------------------------
The following shall not constitute Mandatory Prepayments for the
purposes of clause 6.5(A):
(i) Permitted Payments;
(ii) Permitted Disposals made as part of the Restructuring;
(iii) that part of the net proceeds received by the Parent from the
Initial Equity Raise which is equal to the aggregate of all
amounts outstanding in respect of the Bridge Facility provided
that such amount is immediately lent by the Parent to the
Bridge Borrower or used by the Parent to purchase the Belmarken
UIH Shares pursuant to paragraph (i) of the definition of the
Belmarken Funding Arrangements and applied in the irrevocable
prepayment and cancellation in full of the Bridge Facility;
(iv) that part of the net proceeds received by the Parent from the
Initial Equity Raise which exceeds the aggregate of (a) the
amount referred to in (iii) above and (b) the aggregate
outstanding principal amount of all Advances made to the Parent
under this Facility;
(v) the proceeds of any equity share capital subscribed for in
Janco which is permitted pursuant to clause 11.2(g)(iii);
(vi) the proceeds of any equity share capital subscribed for in the
Parent used to redeem or refinance any preference shares issued
pursuant to the Securities Purchase and Conversion Agreement;
(vii) the proceeds from the issuance of ordinary shares in the Parent
to the holder of the option granted pursuant to the option
agreement dated 5th November, 1998 among the Parent, DIC
Communications and Technology Ltd. and PEC Israel Economic
Corporation for cash consideration of up to $90,000,000 plus
unpaid and outstanding interest thereon plus six per cent. of
$90,000,000 to the extent that such amount is, as soon as is
permitted by the terms of such loan, used by the Parent to
acquire or repay the loan of $90,000,000 made by DIC to Cable
Network Zuid-Oost Brabant Holding B.V. on or about 9th November
1998 and provided that, pending such repayment or acquisition,
the relevant proceeds are credited to a blocked account with
the Agent bearing interest at a commercially competitive rate
on terms that amounts standing to the credit of such account
will only be released to the Borrower to effect such repayment
or acquisition; and
45
<PAGE>
(viii) the proceeds received by the Parent from the issue of priority
shares to UIH or a Subsidiary of UIH pursuant to the Initial
Equity Raise provided that such proceeds are nominal;
(E) Cancellation
------------
For the avoidance of doubt, and without prejudice to any other
provision of this Agreement, on the date upon which any Mandatory
Prepayment is to be applied in prepayment of the Loan pursuant to this
clause 6.5 (save in the case of any Mandatory Prepayment made from the
net proceeds received by the Parent from the Initial Equity Raise),
the Total Commitments shall be automatically reduced by an amount
equal to the Guilder Amount of the Mandatory Payment to be so applied.
6.6 Notice of prepayment
--------------------
No prepayment may be effected under this clause 6 unless the relevant
Borrower shall have given the Agent at least 3 Banking Days' notice of its
intention to make such prepayment. Every notice of prepayment shall be
effective only on actual receipt by the Agent, shall be irrevocable and
shall oblige the relevant Borrower to make such prepayment on the date
specified. Upon a prepayment being made during the Reduction Period or in
accordance with clause 6.5 the Total Commitments shall be automatically
reduced by an amount equal to the Guilder Amount of the Advance (or part
thereof) so prepaid. The Borrowers may not prepay the Loan or any part
thereof save as expressly provided in this Agreement.
6.7 Cancellation of Commitments
---------------------------
The Parent may at any time during the Availability Period by notice to the
Agent (effective only on actual receipt) cancel with effect from a date not
less than 3 Banking Days after the receipt by the Agent of such notice the
whole or any part (being NLG 10,000,000 or any larger sum which is an
integral multiple of NLG 10,000,000) of the Total Commitments. Any such
notice of cancellation, once given, shall be irrevocable and upon such
cancellation taking effect the Commitment of each Bank shall be reduced
proportionately.
6.8 Reduction of Total Commitments
------------------------------
On each Reduction Date the Total Commitments shall be automatically reduced
by an amount equal to five per cent. of the amount of the Total Commitments
as at the beginning of the Reduction Period. The Commitment of each Bank
shall be reduced proportionately.
The Borrowers shall prepay or repay Advances in accordance with the terms
of this Agreement on each Reduction Date so that the aggregate of the Loan
does not exceed the aggregate of the Total Commitments as reduced on such
Reduction Date.
46
<PAGE>
6.9 Termination of Commitments
--------------------------
Without prejudice to any other term of this Agreement, any part of the
Commitments which is undrawn and uncancelled on the Termination Date shall
thereupon be automatically reduced to zero and no Advance shall be made to
the Borrowers thereafter.
47
<PAGE>
7 FEES AND EXPENSES
-----------------
7.1 Fees
----
The Parent shall pay to the Agent whether or not any part of the
Commitments is ever advanced:
(a) on the earlier of (i) the date of the first Advance and (ii) the date
falling five Banking Days after the date of this Agreement, for the
account of the Arranger, an arrangement fee of an amount agreed
between the Parent and the Arranger in a letter dated the date hereof;
(b) on the earlier of (i) the date of the first Advance and (ii) the date
falling five Banking Days after the date of this Agreement and on each
anniversary of the date of this Agreement until all moneys owing under
this Agreement have been paid in full, for the account of the Agent,
an agency fee of an amount agreed between the Parent and the Agent in
a letter dated the date hereof; and
(c) in arrears on each Quarter Day after the date of this Agreement and on
the last day of the Availability Period, for the account of each Bank,
commitment commission computed from the date of this Agreement or the
relevant date from which commitment commission is to accrue at the
rate of 0.35 per cent. per annum on the daily undrawn and uncancelled
amount of such Bank's Commitment. If an Advance is outstanding in an
Optional Currency, the amount of the Commitments treated as drawn for
the purpose of calculating commitment commission shall be the Guilder
Amount of such Advance.
7.2 Expenses
--------
The Parent shall pay to the Agent on demand:
(a) all expenses (including reasonable legal, printing and out-of-pocket
expenses) incurred by the Agent, the Security Trustee and the Arranger
in connection with the negotiation, preparation and execution of this
Agreement and the Security Documents, the syndication of the Facility,
the preparation and distribution of the Information Memorandum and
advertising in connection with this Agreement and of any amendment or
extension of, or the granting of any waiver or consent under, this
Agreement or the Security Documents together with interest at the rate
referred to in clause 5.3 from the date of demand for payment of such
expenses to the date of payment (as well after as before judgment);
and
(b) all expenses (including legal and out-of-pocket expenses) incurred by
the Agent, the Security Trustee, the Arranger, the Banks or any of
them in contemplation of, or otherwise in connection with, the
enforcement or attempted enforcement of, or preservation or attempted
preservation of any rights under, this Agreement and/or the Security
Documents,
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<PAGE>
including, without limitation, after the occurrence of a Default or if
otherwise agreed with the Parent, the fees and expenses of accountants
or other experts incurred in relation to any investigation into the
affairs of the Parent or any member of the Restricted Group, or
otherwise in respect of the moneys owing under this Agreement and/or
the Security Documents, together with interest at the rate referred to
in clause 5.3 from the date on which such expenses were incurred to
the date of payment (as well after as before judgment).
7.3 Value Added Tax
---------------
All fees and expenses payable pursuant to this clause 7 shall be paid
together with an amount equal to any value added tax payable by the Agent,
the Arranger or any Bank in respect of such fees and expenses.
7.4 Stamp and other duties
----------------------
The Parent shall pay all stamp, documentary, registration or other similar
duties or Taxes (including any such duties or Taxes payable by, or assessed
on, the Banks or the Agent or the Arranger) imposed on or in connection
with this Agreement and/or the Security Documents or the Facility (other
than those imposed by reason of any assignment or novation by any Bank) and
shall indemnify the Agent, the Arranger and the Banks against any liability
arising by reason of any delay or omission by the Parent to pay such duties
or Taxes.
49
<PAGE>
8 PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS
---------------------------------------------
8.1 No set-off or counterclaim; distribution to the Banks
-----------------------------------------------------
All payments to be made by the Obligors under this Agreement and/or the
Security Documents shall be made in full, without any set-off or
counterclaim whatsoever and, subject as provided in clause 8.5, free and
clear of any deductions or withholdings, in Guilders or the relevant
Optional Currency (except for costs, charges or expenses which shall be
payable in the currency in which they are incurred) on the due date to the
account of the Agent at such bank as the Agent may from time to time
specify for this purpose. Save where this Agreement and/or the Security
Documents provide for a payment to be made for the account of the Agent
(for its own account), the Arranger, the Security Trustee or a particular
Bank (including, without limitation, clauses 6.3, 7, 8.5, 14.1, 14.2, 15.1
and 15.2), in which case the Agent shall distribute the relevant payment to
the Bank concerned, payments to be made by any Obligor under this Agreement
and/or the Security Documents shall be for the account of all the Banks and
the Agent shall forthwith distribute such payments in like funds as are
received by the Agent to the Banks rateably in accordance with their
Commitments or Contributions, as the case may be.
8.2 Payments by the Banks
---------------------
All sums to be advanced by the Banks to the Borrowers under this Agreement
shall be remitted in Guilders or the relevant Optional Currency on the
relevant Drawdown Date to the account of the Agent at such bank as the
Agent may have notified to the Banks and shall be paid by the Agent on such
date in like funds as are received by the Agent to the account of the
relevant Borrower specified in the relevant Drawdown Notice.
8.3 Non-Banking Days
----------------
When any payment under this Agreement would otherwise be due or any
reduction in the Total Commitments pursuant to clause 6.8 would otherwise
be effected on a day which is not a Banking Day, the due date for payment
or the date of such reduction shall be postponed to the next following
Banking Day unless such Banking Day falls in the next calendar month in
which case payment shall be made on the immediately preceding Banking Day.
If any date or day specifically referred to in this Agreement is not a
Banking Day all references thereto shall be deemed to be to the immediately
preceding Banking Day.
8.4 Agent may assume receipt
------------------------
Where any sum is to be paid under this Agreement to the Agent for the
account of another person, the Agent may assume that the payment will be
made when due and may (but shall not be obliged to) make such sum available
to the person so entitled. If it proves to be the case that such payment
was not made to the Agent, then the person to whom such sum was so made
available shall on request refund such sum to the Agent together with
interest thereon sufficient to
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<PAGE>
compensate the Agent for the cost of making available such sum up to the
date of such repayment and the person by whom such sum was payable shall
indemnify the Agent for any and all loss or reasonable expense which the
Agent may sustain or incur as a consequence of such sum not having been
paid on its due date.
8.5 Grossing-up for Taxes
---------------------
Subject to clause 8.6, at any time any Obligor is required to make any
deduction or withholding in respect of Taxes from any payment due under
this Agreement and/or the Security Documents for the account of any Bank,
the Arranger, the Security Trustee or the Agent (or if the Agent is
required to make any such deduction or withholding from a payment to the
Arranger, the Security Trustee or a Bank), the sum due from the relevant
Obligor in respect of such payment shall, subject to the Banks' compliance
with clause 8.8(b), be increased to the extent necessary to ensure that,
after the making of such deduction or withholding, each Bank, the Arranger,
the Security Trustee and the Agent receives on the due date for such
payment (and retains, free from any liability in respect of such deduction
or withholding) a net sum equal to the sum which it would have received had
no such deduction or withholding been required to be made and the relevant
Obligor shall indemnify each Bank, the Arranger, the Security Trustee and
the Agent against any losses or costs incurred by any of them by reason of
any failure of such Obligor to make any such deduction or withholding or by
reason of any increased payment not being made on the due date for such
payment. The relevant Obligor shall promptly deliver to the Agent any
receipts, certificates or other proof evidencing the amounts (if any) paid
or payable in respect of any such deduction or withholding.
8.6 Qualifying Banks
----------------
If any Bank is not or ceases to be a Qualifying Bank then it shall promptly
notify the relevant Obligor upon becoming aware of the same and the
relevant Obligor shall not be obliged to pay such Bank under clause 8.5 any
amount in excess of the amount it would have been obliged to pay if such
Bank was or had not ceased to be a Qualifying Bank provided that this
clause 8.6 shall not apply (and the relevant Obligor shall be obliged to
comply with its obligations under clause 8.5) if after today's date there
shall have been any change in, or in the interpretation or application of,
any relevant law, directive, treaty (including, without limitation, any
applicable double tax treaty) or regulation or practice of any applicable
taxation authority and as a result thereof the relevant Bank ceases to be a
Qualifying Bank or the relevant Obligor will be required to make deduction
or withholding on account of tax irrespective of whether the recipient of
the relevant payment is or is not a Qualifying Bank. Each Bank confirms to
each of the Obligors that it is a Qualifying Bank.
8.7 Claw-back of Tax benefit
------------------------
If following any such deduction or withholding as is referred to in clause
8.5 the Agent, the Arranger, the Security Trustee or any Bank shall receive
or be granted
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<PAGE>
a credit against or remission for any Taxes payable by it, the Agent, the
Arranger, the Security Trustee or such Bank shall, subject to the relevant
Obligor having made any increased payment in accordance with clause 8.5 and
to the extent that the Agent, the Arranger, the Security Trustee or such
Bank can do so without prejudicing the retention of the amount of such
credit or remission and without prejudice to the right of the Agent, the
Arranger, the Security Trustee or such Bank to obtain any other relief or
allowance which may be available to it, reimburse the relevant Obligor with
such amount as the Agent, the Arranger or such Bank shall in its absolute
discretion certify to be the proportion of such credit or remission as will
leave the Agent, the Arranger, the Security Trustee or such Bank (after
such reimbursement) in no worse position than it would have been in had
there been no such deduction or withholding from the payment by the
relevant Obligor as aforesaid. Such reimbursement shall be made forthwith
upon the Agent, the Arranger, the Security Trustee or such Bank certifying
that the amount of such credit or remission has been received by it.
Nothing contained in this Agreement shall oblige the Agent, the Arranger,
the Security Trustee or any Bank to rearrange its tax affairs or to
disclose any information regarding its tax affairs and computations.
Without prejudice to the generality of the foregoing, the Obligors shall
not, by virtue of this clause 8.7, be entitled to enquire about the
Agent's, the Arranger's, the Security Trustee's or any Bank's tax affairs.
8.8 Certification to secure a Tax benefit
-------------------------------------
If, in order to make any payment due under this Agreement to the Agent, the
Arranger, the Security Trustee or any Bank without deduction or withholding
for or on account of Tax or to secure the benefit of any reduced rate of
such deduction or withholding, any Borrower requires a direction from or
the consent of a government or taxing authority:
(a) the Borrowers agree to use their reasonable endeavours to complete
(accurately and in a manner reasonably satisfactory to the Agent, the
Security Trustee, the Arranger or such Bank), execute, arrange for any
required certification of, and deliver to the Agent, the Security
Trustee, the Arranger or such Bank or such government or taxing
authority as the Agent, the Security Trustee, the Arranger or such
Bank reasonably directs, any form or document reasonably required of
it, and to provide such information that the Agent, the Security
Trustee, the Arranger, such Bank or such government or taxing
authority may reasonably require or request in order to assist or
enable the Agent, the Security Trustee, the Arranger or such Bank to
secure that such a direction or consent is given to the relevant
Borrower in respect of any payment. Each Borrower shall perform its
obligations under this sub-paragraph (a) promptly upon the earlier of:
(i) being notified that the form, document or information is required
or requested; and
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<PAGE>
(ii) demand being made by the Agent, the Security Trustee, the
Arranger, such Bank or the relevant government or taxing
authority, as the case may be;
(b) the Agent, the Security Trustee, the Arranger and each such Bank
agrees to use its reasonable endeavours to complete (accurately and in
a manner reasonably satisfactory to the Parent), execute, arrange for
any required certification of, and deliver to the relevant Borrower,
or such government or taxing authority as the Parent may reasonably
direct, any form or document reasonably required of it, and to provide
such information that the Parent or such government or taxing
authority may reasonably require or request in order to assist or
enable the Parent to secure that such a direction or consent is given
to the relevant Borrower in respect of any payment. The obligations of
the Agent, the Security Trustee, the Arranger and such Bank under this
sub-paragraph (b) shall be performed within 30 days of reasonable
demand by the Parent.
8.9 Bank accounts
-------------
Each Bank shall maintain, in accordance with its usual practices, an
account or accounts evidencing the amounts from time to time lent by, owing
to and paid to it under this Agreement. The Agent shall maintain a control
account showing each Advance and other sums owing by each Borrower under
this Agreement and all payments in respect thereof made by the Obligors
from time to time. The control account shall, in the absence of manifest
error, be conclusive as to the amount from time to time owing by each
Borrower under this Agreement.
8.10 Partial payments
----------------
If, on any date on which a payment is due to be made by any Obligor under
this Agreement and/or the Security Documents, the amount received by the
Agent from the relevant Obligor falls short of the total amount of the
payment due to be made by the relevant Obligor on such date then, without
prejudice to any rights or remedies available to the Agent and the Banks
under this Agreement and/or the Security Documents, the Agent shall apply
the amount actually received from the relevant Obligor in or towards
discharge of the obligations of the Borrowers under this Agreement in the
following order, notwithstanding any appropriation made, or purported to be
made, by the relevant Obligor:
(a) firstly, in or towards payment, on a pro rata basis, of any unpaid
fees, costs and expenses of the Agent under this Agreement and/or the
Security Documents;
(b) secondly, in or towards payment to the Arranger of any portion of the
arrangement fee payable under clause 7.1(a) which remains unpaid and
to the Agent of any portion of the agency fee payable under clause
7.1(b) which remains unpaid;
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<PAGE>
(c) thirdly, in or towards payment to the Banks, on a pro rata basis, of
any accrued commitment commission payable under clause 7.1(c) which
shall have become due but remains unpaid;
(d) fourthly, in or towards payment to the Banks, on a pro rata basis, of
any accrued interest which shall have become due but remains unpaid;
(e) fifthly, in or towards payment to the Banks, on a pro rata basis, of
any principal which shall have become due but remains unpaid; and
(f) sixthly, in or towards payment of any other sum which shall have
become due but remains unpaid (and, if more than one such sum so
remains unpaid, on a pro rata basis).
The order of application set out in this clause 8.10(b)-8.10(f) shall be
varied by the Agent if all Banks so direct, without any reference to, or
consent or approval from, any of the Borrowers.
8.11 Calculations
------------
All interest and other payments of an annual nature under this Agreement
shall accrue from day to day and be calculated on the basis of actual days
elapsed and (in the case of Guilders) a 360 day year or (in the case of any
optional currency) in accordance with standard London interbank market
practice in respect of calculating the numbers of days comprising a year.
In calculating the actual number of days elapsed in a period which is one
of a series of consecutive periods with no interval between them or a
period on the last day of which any payment falls to be made in respect of
such period, the first day of such period shall be included but the last
day excluded.
8.12 Certificates conclusive
-----------------------
Any certificate or determination of the Agent or any Bank as to any rate of
interest or any amount payable under this Agreement shall, in the absence
of manifest error, be conclusive and binding on the Obligors and (in the
case of a certificate or determination by the Agent) on the Banks.
8.13 Effect of monetary union
------------------------
If the country of any national currency in which any amount is expressed to
be payable under this Agreement participates in Economic and Monetary Union
in accordance with Article 109j of the Treaty on European Union, then:
(a) any amount expressed to be payable under this Agreement in that
national currency shall be made in that national currency or in euro
as the Agent may, by not less than three Banking Days' notice to the
Obligors and the Banks to that effect, require;
(b) any amount so required to be paid in euro shall be converted from that
national currency at the rate stipulated pursuant to Article 109l(4)
of the
54
<PAGE>
Treaty on European Union and payment of the amount in euro derived
from such conversion shall discharge the obligation of the relevant
party to pay such national currency amount in accordance with, and
subject to, the Regulation(s) made pursuant to Article 109l(4);
(c) after consultation with the Parent and the Banks and notwithstanding
clause 18.11 the Agent shall be entitled to make such amendments to
this Agreement as it may determine to be necessary to take account of
monetary union and any consequent changes in market practices (whether
as to the settlement or rounding of obligations, the calculation of
interest or otherwise howsoever).
Any amendment so made to this Agreement by the Agent shall be promptly
notified to the Banks and the Obligors by the Agent and shall be binding on
all the Banks and the Obligors.
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<PAGE>
9 GUARANTEE
---------
9.1 Limits of Guarantee
-------------------
Notwithstanding the provisions of clause 9.2 to 9.17 inclusive, the
following limitations shall apply to the relevant Guarantors:
(a) Austria
-------
Any payment under the Guarantee by any of the Guarantors incorporated
in Austria (the "AUSTRIAN GUARANTORS") for any amounts not being
direct liabilities of the respective Austrian Guarantor shall only be
up to the amount of Distributable Profits for which CNA shall have
given an instruction in accordance with clause 11.1(af) to the
relevant Austrian Guarantor ("Anweisung auf Schuld") stating that its
interest in such Distributable Profits can be the subject of the
Guarantee. Provided that the Agent agrees that, without prejudice to
any of its other rights under this Agreement, it shall not make a
demand for payment from Telekabel Wien under the Guarantee until 28
days after the date that the Agent has notified Telekabel Wien that a
Default has occurred unless at such time (i) Telekabel Wien has repaid
all amounts in respect of the Telekabel Notes, (ii) Telekabel Wien has
breached any of its obligations under this Agreement or (iii) an Event
of Default has otherwise occurred in relation to Telekabel Wien, in
which case such 28 day grace period (or any unexpired part thereof)
shall not apply. Payments under the Guarantee for direct liabilities
of the relevant Austrian Guarantor are not subject to any restriction.
(b) Belgium
-------
Radio Public shall not have any liability under the Guarantee
contained in this clause 9 unless and until such time as its Articles
of Association have been amended to a form satisfactory to the Agent
which form permits Radio Public to give the Guarantee (to the extent
described in this clause 9.1(b)). Once the Articles of Association of
Radio Public have been amended as set out above, the liability of
Radio Public under the Guarantee shall be limited to the amount that
has been on-lent to Radio Public from time to time from Advances made
to the Parent, together with the amount of any Advances which have
been applied by the Parent in satisfaction of obligations of Radio
Public.
(c) Norway
------
Each Guarantor which is incorporated in Norway (a "NORWEGIAN
GUARANTOR") shall have no liability in excess of the aggregate of (i)
the amounts drawn down and utilised by the Norwegian Borrowers under
the Facility from time to time (up to but not exceeding the Norwegian
Loan Amount) and (ii) a portion of the total loan amount drawn down
and utilised by the Borrowers up to but not exceeding the amount of
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<PAGE>
distributable equity of such Norwegian Guarantor for which adequate
security has been provided in accordance with the provisions of
section 12-10 of the Norwegian Companies Act of 1976.
9.2 Covenant to pay
---------------
In consideration of the Banks making or continuing to make Advances to the
Borrowers pursuant to this Agreement the Guarantors hereby irrevocably and
unconditionally but subject always to the provisions of clause 9.1:
(a) jointly and severally guarantee to each Bank, the Arranger, the
Security Trustee and the Agent, the due performance by the Borrowers
of all of their respective obligations under or pursuant to the
Finance Documents; and
(b) jointly and severally guarantee to each Bank, the Arranger, the
Security Trustee and the Agent the payment of all moneys now or
hereafter due, owing or incurred by the Borrowers under or pursuant to
the Finance Documents when the same become due whether by acceleration
or otherwise.
9.3 Guarantors as principal debtors; indemnity
------------------------------------------
As a separate and independent stipulation, but subject always to the
provisions of clause 9.1, the Guarantors jointly and severally agree that
if any purported obligation or liability of any Borrower which would have
been the subject of this Guarantee had it been valid and enforceable is not
or ceases to be valid or enforceable against such Borrower on any ground
whatsoever whether or not known to the Banks or any of them or the Agent,
the Security Trustee or the Arranger (including, without limitation, any
irregular exercise or absence of any corporate power or lack of authority
of, or breach of duty by, any person purporting to act on behalf of such
Borrower or any legal or other limitation, or any disability or Incapacity
or any change in the constitution of any relevant Borrower) the Guarantors
shall nevertheless be jointly and severally liable in respect of that
purported obligation or liability as if the same were fully valid and
enforceable and such Guarantor was the principal debtor in respect thereof.
The Guarantors hereby irrevocably and unconditionally jointly and severally
agree to indemnify and keep indemnified the Agent, the Arranger, the
Security Trustee and the Banks against any loss or liability arising from
any failure of any Borrower to perform or discharge any such purported
obligation or liability or from any invalidity or unenforceability of any
of the same against any Borrower (subject to the provisions of clause 9.1).
9.4 No security taken by Guarantors
-------------------------------
The Guarantors hereby jointly and severally warrant that they have not
taken or received, and undertake that until all the Guaranteed Liabilities
have been paid or discharged in full, they will not take or receive, the
benefit of any security
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<PAGE>
from any Borrower or any other person in respect of their obligations under
this Guarantee save as may be agreed by the Majority Banks.
9.5 Interest
--------
Each Guarantor agrees to pay interest on each amount demanded of it under
this Guarantee from the date of such demand until payment (as well after as
before judgment) at the rate specified in clause 5.3. Such interest shall
be compounded at the end of each period determined for this purpose by the
Agent in the event of it not being paid when demanded but without prejudice
to the Agent, the Arranger and each Bank's right to require payment of such
interest.
9.6 Continuing security and other matters
-------------------------------------
This Guarantee shall, subject to the provisions of clause 9.1:
(a) extend to the ultimate balance from time to time owing to the Banks
and/or the Agent and/or the Arranger and/or the Security Trustee by
the Borrowers and shall be a continuing guarantee, notwithstanding any
settlement of account or other matter whatsoever;
(b) be in addition to any present or future Collateral Instrument, right
or remedy held by or available to the Banks or any of them, the
Arranger, the Security Trustee or the Agent; and
(c) not be in any way prejudiced or affected by the existence of any such
Collateral Instrument, rights or remedies or by the same becoming
wholly or in part void, voidable or unenforceable on any ground
whatsoever or by the Agent, the Security Trustee or the Arranger or
the Banks or any of them dealing with, exchanging, varying or failing
to perfect or enforce any of the same or giving time for payment or
indulgence or compounding with any other person liable.
9.7 New accounts
------------
If this Guarantee ceases to be continuing for any reason whatsoever each
Bank may nevertheless continue any account of any Borrower or open one or
more new accounts and the liability of each Guarantor under this Guarantee
shall not in any manner be reduced or affected by any subsequent
transactions or receipts or payments into or out of any such account.
9.8 Liability unconditional
-----------------------
The liability of each Guarantor shall not be affected nor shall this
Guarantee be discharged or reduced by reason of:
(a) the Incapacity or any change in the name, style or constitution of any
Obligor or any other person liable; or
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<PAGE>
(b) the Agent, the Security Trustee or the Arranger or any of the Banks
granting any time, indulgence or concession to, or compounding with,
discharging, releasing or varying the liability of any other Obligor
or any other person liable or renewing, determining, varying or
increasing any accommodation, facility or transaction or otherwise
dealing with the same in any manner whatsoever or concurring in,
accepting or varying any compromise, arrangement or settlement or
omitting to claim or enforce payment from any Obligor or any other
person liable; or
(c) any act or omission which would not have discharged or affected the
liability of such Guarantor had it been a principal debtor instead of
a guarantor or by anything done or omitted which but for this
provision might operate to exonerate such Guarantor.
9.9 Collateral Instruments
----------------------
None of the Banks, the Arranger, the Security Trustee and the Agent shall
be obliged to make any claim or demand on any Borrower or to resort to any
Collateral Instrument or other means of payment now or hereafter held by or
available to them or it before enforcing this Guarantee and no action taken
or omitted by any of the Banks, the Arranger, the Security Trustee or the
Agent in connection with any such Collateral Instrument or other means of
payment shall discharge, reduce, prejudice or affect the liability of any
Guarantor under this Guarantee nor shall any of the Banks, the Arranger,
the Security Trustee or the Agent be obliged to apply any money or other
property received or recovered in consequence of any enforcement or
realisation of any such Collateral Instrument or other means of payment in
reduction of the Guaranteed Liabilities.
9.10 Waiver of Guarantors' rights
----------------------------
Until all the Guaranteed Liabilities have been paid, discharged or
satisfied in full (and notwithstanding payment of a dividend in any
liquidation or under any compromise or arrangement) each Guarantor agrees
that, without the prior written consent of the Agent, it will not:
(a) exercise its rights of subrogation, reimbursement and indemnity
against any other Obligor or any other person liable; or
(b) demand or accept any security to be executed in respect of any of its
obligations under this Guarantee or any other Indebtedness now or
hereafter due to such Guarantor from any other member of the
Restricted Group or from any other person liable; or
(c) take any step or enforce any right against any Obligor or any other
person liable in respect of any Guaranteed Liabilities; or
(d) exercise any right of set-off or counterclaim against any other
Obligor or any other person liable or claim or prove or vote as a
creditor in competition with the Agent, the Arranger, the Security
Trustee or any of
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<PAGE>
the Banks in the liquidation, administration or other insolvency
proceeding of any other Obligor or any other person liable or have the
benefit of, or share in, any payment from or composition with, any
other Obligor or any other person liable or any other Collateral
Instrument now or hereafter held by the Agent, the Arranger, the
Security Trustee or any of the Banks for any Guaranteed Liabilities or
for the obligations or liabilities of any other person liable but so
that, if so directed by the Agent, it will prove for the whole or any
part of its claim in the liquidation of any other Obligor on terms
that the benefit of such proof and of all money received by it in
respect thereof shall be held on trust for the Banks, the Arranger,
the Security Trustee and the Agent and applied in or towards discharge
of the Guaranteed Liabilities in such manner as the Agent shall deem
appropriate.
9.11 Suspense accounts
-----------------
Any money received in connection with this Guarantee (whether before or
after any Incapacity of any Obligor) may be placed to the credit of a
suspense account with a view to preserving the rights of the Banks, the
Arranger, the Security Trustee and the Agent to prove for the whole of
their respective claims against any Obligor or any other person liable or
may be applied in or towards satisfaction of the Guaranteed Liabilities as
the Agent may from time to time conclusively determine in its absolute
discretion.
9.12 Settlements conditional
-----------------------
Any release, discharge or settlement between any Guarantor and the Agent,
the Arranger or any of the Banks shall be conditional upon no security,
disposition or payment to the Agent, the Arranger, the Security Trustee or
any of the Banks by any Obligor or any other person liable being void, set
aside or ordered to be refunded pursuant to any enactment or law relating
to bankruptcy, liquidation, administration or insolvency or for any other
reason whatsoever and if such condition shall not be fulfilled the Banks,
the Arranger, the Security Trustee and the Agent shall be entitled to
enforce this Guarantee subsequently as if such release, discharge or
settlement had not occurred and any such payment had not been made.
9.13 Guarantors to deliver up certain property
-----------------------------------------
If, contrary to clauses 9.4 or 9.10, any Guarantor takes or receives the
benefit of any security or receives or recovers any money or other
property, such security, money or other property shall be held on trust for
the Agent, the Arranger, the Security Trustee and the Banks and shall be
delivered to the Agent on demand.
9.14 Retention of this guarantee
---------------------------
The Banks, the Arranger, the Security Trustee and the Agent shall be
entitled to retain this Guarantee after as well as before the payment or
discharge of all the Guaranteed Liabilities for such period as the Agent
may reasonably determine.
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9.15 Changes in constitution or reorganisations of Banks
---------------------------------------------------
For the avoidance of doubt and without prejudice to the provisions of
clause 18, this Guarantee shall remain binding on each Guarantor
notwithstanding any change in the constitution of the Banks or any of them
or the Arranger, the Security Trustee or the Agent or their or its
absorption in, or amalgamation with, or the acquisition of all or part of
their or its undertaking or assets by, any other person, or any
reconstruction or reorganisation of any kind, to the intent that this
Guarantee shall remain valid and effective in all respects in favour of any
successor in title of the Banks, the Arranger, the Security Trustee and the
Agent, any Substitute and any successor Agent appointed pursuant to clause
19.13 or any successor Security Trustee appointed pursuant to the Security
Trust Deed in the same manner as if such successor in title, Substitute or
successor Agent or successor Security Trustee had been named in this
guarantee as a party instead of, or in addition to, the relevant Bank or
the Arranger, the Security Trustee or the Agent, as the case may be.
9.16 Other Guarantors
----------------
Each Guarantor agrees to be bound by this Guarantee notwithstanding that
any other person intended to execute or to be bound by any other guarantee
or assurance under or pursuant to this Agreement may not do so or may not
be effectually bound and notwithstanding that such other guarantee or
assurance may be determined or be or become invalid or unenforceable
against any other person, whether or not the deficiency is known to the
Banks or any of them or the Agent, the Security Trustee or the Arranger.
9.17 Acceding Guarantors and New Janco
---------------------------------
(a) To the extent legally possible, the Parent shall procure that (i) as
soon as reasonably practicable following the Bridge Termination Date
all Unrestricted Subsidiaries which are wholly owned by the Parent and
which are required to become Acceding Guarantors by the Agent (acting
on the instructions of the Majority Banks acting reasonably) and (ii)
all Subsidiaries of any Restricted Subsidiary deemed by the Agent
(acting on the instructions of the Majority Banks acting reasonably)
to be of a material size, become Acceding Guarantors by delivering to
the Agent (as soon as is reasonably practicable following receipt by
the Parent of a written notice from the Agent requiring such action)
Deeds of Guarantor Accession duly executed by such Subsidiaries and
the Parent.
(b) To the extent legally possible, the Parent shall procure that, at the
same time as a Deed of Guarantor Accession is delivered to the Agent,
there is delivered to the Agent all the documents and evidence listed
in schedule 10, part B in respect of the relevant Subsidiary in each
case in form and substance satisfactory to the Agent acting
reasonably.
(c) Delivery of a Deed of Guarantor Accession duly executed by an Acceding
Guarantor and the Parent constitutes confirmation by the
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relevant Acceding Guarantor that the representations and warranties
set out in clause 10.1 to be made by it on the date of the Deed of
Guarantor Accession in accordance with clause 10.3 are correct as if
made by it with reference to the facts and circumstances then
existing.
(d) To the extent legally possible in any Relevant Jurisdiction, each
Acceding Guarantor, before entering into such a Deed of Guarantor
Accession, shall comply with all relevant legislation in its country
of incorporation, to the satisfaction of the Agent, to ensure that the
proposed guarantee to be given is in compliance with any relevant
provisions of such legislation and to ensure that the proposed
guarantee to be given is to be legal valid and binding on the proposed
Acceding Guarantor.
(e) The Arranger and each Bank irrevocably authorises the Agent to
countersign each Deed of Guarantor Accession on its behalf without any
further consent of, or consultation with, the Arranger or any of the
Banks.
(f) Each of the other Obligors irrevocably authorises the Parent to
countersign each Deed of Guarantor Accession on its behalf without any
further consent of, or consultation with, any of the other Obligors.
(g) Contemporaneously with the completion of the Norwegian Merger, the
Parent shall procure that New Janco shall enter into such
documentation as the Agent shall require so as to succeed to and
assume all obligations then owed to the Agent, the Arranger, the
Security Trustee and the Banks by Janco, Norkabel, Kanal 2 A/S,
Norkabel A/S and Oslo Kabelanlegg A/S and shall provide to the Agent
such documents, evidence and legal opinions as the Agent may require
in connection therewith.
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10 REPRESENTATIONS AND WARRANTIES
------------------------------
10.1 Repeated representations and warranties
---------------------------------------
Each Obligor in respect of itself and its Subsidiaries which are members of
the Restricted Group represents and warrants to each of the Banks, the
Arranger, the Security Trustee and the Agent that:
(a) Due incorporation: all of the members of the Restricted Group are duly
-----------------
incorporated and validly existing under the laws of the respective
countries of their incorporation as limited liability companies and
have power to carry on their respective businesses as they are now
being conducted and to own their respective property and other assets;
(b) Power to borrow etc.: each Obligor has power to execute, deliver and
--------------------
perform its obligations under this Agreement and the Security
Documents to which it is a party and, in the case of the Borrowers, to
borrow the Commitments; all necessary corporate, shareholder and other
action has been taken to authorise the execution, delivery and
performance of the same and no limitation on the powers of any
Borrower to borrow or on the powers of any Guarantor to give
guarantees will be exceeded as a result of borrowings under this
Agreement or as a result of the giving of the Guarantee (in each case
as limited, where appropriate, by clause 9.1);
(c) Binding obligations: this Agreement constitutes and the Security
-------------------
Documents to which it is a party, when executed and delivered by the
relevant Obligor will constitute, valid and legally binding
obligations of such Obligor enforceable in accordance with their
respective terms subject to the qualifications contained in the legal
opinions referred to in schedule 3 and mandatory provisions of law
affecting creditors rights generally;
(d) No conflict with other obligations: the execution and delivery of, the
----------------------------------
performance of its obligations under, and compliance with the
provisions of, this Agreement and the Security Documents to which it
is a party by the Obligors will not (i) contravene any existing
applicable law, statute, rule or regulation or any judgment, decree or
permit to which any Obligor is subject, (ii) conflict with, or result
in any breach of any of the terms of, or constitute a default under,
any agreement or other instrument to which any Obligor is a party or
is subject or by which it or any of its property is bound, (iii)
contravene or conflict with any provision of any Obligor's
constitutive documents, (iv) breach in any material respect any term
of the Licences or Necessary Authorisations or (v) save for the
Encumbrances granted to the Security Trustee pursuant to the Security
Documents, result in the creation or imposition of or oblige any
member of the Restricted Group to create any Encumbrance (other than a
Permitted Encumbrance) on any member of the Restricted Group's
undertakings, assets, rights or revenues;
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(e) No filings required: save for the filings, registrations and
-------------------
notarisations referred to in the legal opinions referred to in
schedule 3, it is not necessary to ensure the legality, validity,
enforceability or admissibility in evidence of this Agreement or the
Security Documents that any of them or any other instrument be
notarised, filed, recorded, registered or enrolled in any court,
public office or elsewhere in any Relevant Jurisdiction or that any
stamp, registration or similar tax or charge be paid in any Relevant
Jurisdiction on or in relation to this Agreement or any of the
Security Documents and this Agreement and the Security Documents are
in proper form for their enforcement in the courts of any Relevant
Jurisdiction;
(f) No litigation: no litigation, arbitration or administrative
-------------
proceeding is taking place, pending or, to the knowledge of the
officers of any Obligor, threatened against any member of the
Restricted Group which, if adversely determined would or is reasonably
likely to have a Material Adverse Effect;
(g) Financial statements correct and complete:
-----------------------------------------
(i) the audited consolidated financial statements of the Parent and
the audited financial statements of each member of the
Restricted Group (in the case of Kanal 2 A/S, Oslo Kabelanlegg
A/S, Norkabel A/S, as consolidated into the consolidated
financial statements of Norkabelgruppen A/S and in the case of
CNA, as consolidated into the consolidated financial statements
of the Parent) in respect of the financial year ended on 31st
December 1996 as delivered to the Agent have been prepared in
accordance with GAAP which principles have been consistently
applied and present fairly and accurately the financial
position of the Parent and the financial position of each
member of the Restricted Group respectively as at such date and
the results of the operations of the operations of the Parent
and the results of the operations of each member of the
Restricted Group respectively for the financial year ended on
such date and, as at such date, neither the Parent nor any
member of the Restricted Group had any significant liabilities
(contingent or otherwise) or any losses which are not disclosed
by, or reserved against or provided for in, such financial
statements;
((ii)) ((A)) the unaudited monthly management accounts for each of the
Parent, Radio Public, the Telekabel Entities, Janco and its
Subsidiaries and the Restricted Group dated 30th June, 1997;
and
(B) the unaudited quarterly management accounts for each of
the Parent, Radio Public, the Telekabel Entities, Janco
and its Subsidiaries and the Restricted Group dated 30th
June, 1997;
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as delivered to the Agent have been prepared in accordance with
GAAP which principles have been consistently applied and
present fairly and accurately the results of the operations of
each of the Parent, Radio Public, the Telekabel Entities, Janco
and its Subsidiaries and the Restricted Group dated 30th June,
1997 (as appropriate) for the relevant period; and
(iii) the combined financial projections for the Restricted Group for
the financial years ending 1997 to 2006 inclusive, the
operating statistics projections for such financial years and
the Management Base Case have been prepared based upon
historical financial information and upon the assumptions set
forth therein, which assumptions were reasonable when made and
are reasonable on the date hereof;
(h) No material adverse change: there has been no material adverse
--------------------------
change in the financial position of the Parent or the consolidated
financial position of the Restricted Group from that set forth in the
financial statements referred to in clause 10.1(g)(i) and (ii);
(i) Choice of law: the choice by the Obligors of English law to govern
-------------
this Agreement and the submission by the Obligors to the non-exclusive
jurisdiction of the High Court of Justice in England are valid and
binding;
(j) Title to assets: each Obligor is the legal and beneficial owner of
---------------
and has good and marketable title to its assets free and clear of any
Encumbrance other than Permitted Encumbrances;
(k) Intellectual Property Rights:
----------------------------
(i) the Intellectual Property Rights owned by or licensed to each
member of the Restricted Group are free from any Encumbrance
(save for those created or to be created by or pursuant to the
Security Documents and Permitted Encumbrances) and any other
rights or interests in favour of third parties;
(ii) the Intellectual Property Rights owned by or licensed to each
member of the Restricted Group are all the Intellectual Property
Rights required by them in order to carry on, maintain and
operate in all material respects their respective businesses,
properties and assets and no member of the Restricted Group in
carrying on its business infringes any Intellectual Property
Rights of any third party where any action taken by such third
party in respect of any such infringement would or is reasonably
likely to have a Material Adverse Effect; and
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(iii) no Intellectual Property Rights owned by any member of the
Restricted Group are being infringed, nor is there any
threatened infringement of any such Intellectual Property
Rights which, in either case would or is reasonably likely to
have a Material Adverse Effect;
(l) Copyright matters: each member of the Restricted Group has obtained
-----------------
all consents and taken all other action required in connection with
the secondary transmission by it of any broadcast television signals
(other than where failure to do so would not or is reasonably likely
not to have a Material Adverse Effect) and no member of the Restricted
Group has any knowledge, nor is it aware of any claim, that it is or
may be liable to any person for any copyright infringement of any
nature whatsoever as a result of the operation of its business which
liability would or is reasonably likely to have a Material Adverse
Effect;
(m) Shares: all shares issued by each member of the Restricted Group have
------
been validly allotted; and
(n) Works councils: no Obligor incorporated in the Netherlands has
--------------
instituted a works council or, if any such works council has been
instituted, all action has been taken by or in relation to such works
council necessary to authorise the performance by the Obligors of their
respective obligations under this Agreement and the Security Documents.
10.2 Further representations and warranties
--------------------------------------
Each Obligor in respect of itself and its Subsidiaries which are members of
the Restricted Group further represents and warrants to each of the Banks,
the Arranger, the Security Trustee and the Agent that:
(a) Principal Agreements:
--------------------
(i) the Principal Agreements which have been entered into on or prior
to the date of this Agreement are in full force and effect; and
(ii) to the best of its knowledge and belief after due enquiry, (1) no
party is in breach of any material term thereof, (2) there is no
material dispute subsisting between the parties thereto and (3)
no amendments have been made thereto;
(b) Licences and Necessary Authorisations: the Licences are in full force
-------------------------------------
and effect and each member of the Restricted Group is in compliance in
all material respects with all provisions thereof that are applicable
to it. Each member of the Restricted Group has secured all the
Necessary Authorisations, all such Necessary Authorisations are in
full force and effect and each member of the Restricted Group is in
compliance in all material respects with all provisions thereof. To
the best of its knowledge and belief after due enquiry, neither the
Licences nor any of
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the Necessary Authorisations are the subject of any pending or
threatened attack or revocation;
(c) Consents obtained: every consent, authorisation, licence or approval
-----------------
of, or registration with or declaration to, governmental or public
bodies or authorities of courts (other than the Licences and the
Necessary Authorisations) required by each member of the Restricted
Group to authorise, or required by any member of the Restricted Group
in connection with, the execution, delivery, validity, enforceability
or admissibility in evidence of this Agreement and the Security
Documents to which it is a party or the performance by each member of
the Restricted Group of their respective obligations under this
Agreement and the Security Documents to which they are a party has
been obtained or made and is in full force and effect and there has
been no material default in the observance of the conditions or
restrictions (if any) imposed in, or in connection with, any of the
same;
(d) Contractual commitments: since the audited accounts of the Parent
-----------------------
for the year ended 31st December 1996, no dividends (in cash or
specie) of the Parent or any other rights or benefits have been
declared, made or paid by the Parent and no member of the Restricted
Group has entered into any contractual commitments of a material
nature (other than (i) the Principal Agreements, (ii) for the purpose
of carrying out the business of constructing, installing and operating
cable television and telecommunications systems in the territories
covered by the Licences or such other business as is permitted by the
terms of this Agreement, (iii) contractual commitments constituting
Permitted Borrowings, Permitted Disposals or Permitted Encumbrances or
(iv) in relation to the Philips Transaction);
(e) No withholding Taxes: (assuming the correctness of the confirmation
--------------------
set out in clause 8.6) under the law and practice at today's date no
Taxes are imposed by withholding or otherwise on any payment to be
made to the Agent, the Security Trustee, the Arranger or the Banks by
any member of the Restricted Group under this Agreement or any
Security Document or are imposed on or by virtue of the execution or
delivery by any member of the Restricted Group of this Agreement or
any Security Document to which it is a party or any document or
instrument to be executed or delivered under this Agreement or any
such Security Document;
(f) Telecommunications and Cable Laws: to the best of its knowledge and
---------------------------------
belief after due enquiry, each member of the Restricted Group is in
compliance in all material respects with all Telecommunications and
Cable Laws but excluding, for these purposes only, breaches of
Telecommunications and Cable Laws which have been expressly waived by
the relevant regulatory authority;
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(g) No Default: no member of the Restricted Group is in breach of or in
----------
default under any agreement relating to Indebtedness to which it is a
party or by which it may be bound; and
(h) Information Memorandum: to the best of the Parent's knowledge and
----------------------
belief after due enquiry, as at the date of the Information Memorandum
the factual information relating to the Restricted Group contained in
the Information Memorandum was true and accurate in all material
respects and not misleading in any material respect and the
Information Memorandum does not omit any material facts; all
reasonable enquiries have been made by the Parent to verify the facts
and statements relating to the Restricted Group contained therein; all
opinions, projections and forecasts contained therein and the
assumptions on which such opinions, projections and forecasts were
based on and arrived at after due and careful consideration and
enquiry and represent the views of the Parent as at the date of the
Information Memorandum; there are no material facts or circumstances
which have not been disclosed to the Arranger prior to the date hereof
the omission of which could make any factual information contained in
the Information Memorandum inaccurate or misleading in any material
respect either as at the date of the Information Memorandum or as at
the date of this Agreement or any of the opinions, projections and
forecasts contained in the Information Memorandum (and the assumptions
on which such opinions, projections and forecasts were made)
misleading in any material respect either as at the date of the
Information Memorandum or as the date of this Agreement.
Notwithstanding the above, no warranty or representation is made in
respect of (i) any information, facts, statements, opinions,
projections, forecasts, demographic statistics or circumstances
relating to the cable, media, telecommunications and data services
industry as a whole, and (ii) any person other than any member of the
Restricted Group; and
(i) Environmental Matters
---------------------
(i) each member of the Restricted Group complies, in all respects,
with all requirements of Environmental Laws where failure to do
so has or is reasonably likely to have a Material Adverse Effect;
and
(ii) after due enquiry, no Environmental Claim is, to the knowledge of
any member of the Restricted Group, pending, threatened or
existing, as at the date of this Agreement, which has or is
reasonably likely to have a Material Adverse Effect.
10.3 Repetition
----------
The representations and warranties in clause 10.1, (so that (i) the
representation and warranty in clause 10.1(g)(i) shall for this purpose
refer to the then latest consolidated financial statements of the
Restricted Group verified by the auditors to the Restricted Group and
delivered to the Agent under clause 11.1, (ii) the
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representation and warranty in clause 10.1(g)(ii) shall for this purpose
refer to the then latest Monthly Management Accounts and Quarterly
Management Accounts delivered to the Agent under clause 11.1, (iii) the
representation and warranty contained in clause 10.1(g)(iii) shall for this
purpose refer to the then latest consolidated financial projections of the
Restricted Group and the then latest operating statistics projections for
each franchise and shall not include a representation or warranty as to the
Management Base Case, and (iv) the representation and warranty in clause
10.1(h) shall for this purpose refer to the latest audited financial
statements of the Restricted Group delivered to the Agent under clause
11.1) shall be deemed to be repeated by the Obligors on and as of each
Drawdown Date and each Maturity Date as if made with reference to the facts
and circumstances existing on each such day and, in the case of an Obligor
which becomes a party to this Agreement after the date hereof, shall be
deemed to be repeated by that Obligor on the date that it executes a Deed
of Borrower Accession or Deed of Guarantor Accession.
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11 UNDERTAKINGS
------------
11.1 Positive Covenants
------------------
Each Obligor in respect of itself and its Subsidiaries which are members
of the Restricted Group undertakes with each of the Banks, the Security
Trustee, the Arranger and the Agent that, from the date of this Agreement
and so long as any moneys are owing under this Agreement or remain
available for drawing by the Borrowers, it will:
(a) Notice of Default, etc.
----------------------
procure that the Agent is promptly informed of (i) any occurrence of
which it becomes aware which would or is reasonably likely to have a
Material Adverse Effect, (ii) any Default and any potential breach
of any of the undertakings set out in clause 11 or 12 forthwith upon
becoming aware thereof and will from time to time, if so requested
by the Agent, confirm to the Agent in writing that, save as
otherwise stated in such confirmation, no Default has occurred and
is continuing, (iii) any lapse, suspension or termination of or
refusal by any person to renew or extend any Licence or Necessary
Authorisation or any breach of any Licence or Necessary
Authorisation or any breach of any Licence or Necessary
Authorisation where any such breach would or is reasonably likely to
have a Material Adverse Effect, (iv) (to the extent known to any
member of the Restricted Group) the commencement of all proceedings
and investigations by or before any governmental body and all
actions and proceedings in any court or before any arbitrator where
any such proceedings, investigations or actions would, if adversely
determined, have a Material Adverse Effect (v) any application of
which it becomes aware for any other licence or franchise agreement
by means of cable television systems (including satellite master
antennae television systems and multi-point microwave distributions
systems) with respect to the territory covered by the Licences where
any such application, if successful, would or is reasonably likely
to have a Material Adverse Effect and (vi) any breach of any
Telecommunications and Cable Laws by any member of the Restricted
Group which would or is reasonably likely to have a Material Adverse
Effect;
(b) Consents and licences
---------------------
without prejudice to clauses 3 and 10.1, obtain or cause to be
obtained, maintain in full force and effect and comply in all
material respects with the conditions and restrictions (if any)
imposed in, or in connection with, every consent, authorisation,
licence or approval of governmental or public bodies or authorities
or courts and do, or cause to be done, all other acts and things
which may from time to time be necessary or desirable under
applicable law for the continued due performance of all its
obligations under this Agreement and the Security Documents;
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(c) Use of proceeds
---------------
use the proceeds of drawings under this Agreement exclusively for
the purposes specified in clause 1.1;
(d) Pari passu
----------
ensure that its obligations under this Agreement shall, without
prejudice to the provisions of clause 11.2 or to the security
intended to be created pursuant to the Security Documents, at all
times rank at least pari passu with all its other present and future
unsecured and unsubordinated Indebtedness with the exception of any
obligations which are mandatorily preferred by law and not by
contract;
(e) Business
--------
engage in the business of acting as the holder of shares and/or
interests in other members of the Restricted Group and/or the
Unrestricted Group and/or engage in the business of constructing,
installing, operating and utilising cable television,
telecommunications and data service systems for households and
businesses in Europe and Israel and in no other activities save for
any directly related business reasonably considered to be
financially beneficial to such business; in the case of the Parent
engage in the business of acting as the holding company of its
Subsidiaries (which shall include the raising of Permitted
Borrowings and the on-lending of such Borrowed Money to its
Subsidiaries in accordance with the provisions of this Agreement and
the entry into of hedging arrangements on behalf of its
Subsidiaries) and in no other activities;
(f) Financial statements
--------------------
(in the case of the Parent) prepare:
(i) annual audited:
(A) unconsolidated financial statements of the Parent,
(B) unconsolidated financial statements of Radio Public,
(C) consolidated financial statements of the Telekabel
Entities,
(D) consolidated financial statements of Janco and its
Subsidiaries, and
(E) combined financial statements of the Restricted Group
each in accordance with GAAP (together with a
reconciliation statement to the generally accepting
71
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accounting principles and practices in the United States
of America) and cause such financial statements to be
reported on by its auditors and deliver to the Agent
sufficient copies of the same for distribution to all of
the Banks as soon as practicable but not later than 120
days (or 150 days if the Parent is in active discussions
with its auditors and if such financial statements would
have been subject to a qualification (other than a
qualification of a technical nature and the remedy for
the matter giving rise to the qualification would have
no effect on the results of the relevant members of the
Restricted Group for the period to which such financial
statements relate or on the financial position of the
relevant member of the Restricted Group as at the end of
such period) if delivered within 120 days) after the end
of the financial year to which they relate; and
(ii) semi-annual unaudited:
(A) unconsolidated financial statements of the Parent,
(B) unconsolidated financial statements of Radio Public,
(C) consolidated financial statements of the Telekabel
Entities,
(D) consolidated financial statements of Janco and its
Subsidiaries, and
(E) combined financial statements of the Restricted Group
(on the same basis as that used for the annual financial
statements referred to in (i) above) and deliver to the Agent
sufficient copies of the same for distribution to all of the
Banks as soon as practicable but not later than 45 days after
the end of the Six Month Period to which they relate.
Each set of consolidated financial information or financial
statements of all or any part of the Restricted Group delivered
pursuant to this clause 11.1(f) shall be accompanied by a
calculation in reasonable detail of Net Operating Cashflow for each
of (i) the Parent, (ii) Radio Public (iii) the Telekabel Entities
(iv) Janco and its Subsidiaries and (v) the Restricted Group;
(g) Quarterly Management Accounts
-----------------------------
(in the case of the Parent) in respect of each Quarterly Period
commencing with the Quarterly Period ending 30th September 1997,
prepare unaudited Quarterly Management Accounts for each of:
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(i) the Parent (unconsolidated),
(ii) Radio Public (unconsolidated),
(iii) the Telekabel Entities (consolidated),
(iv) Janco and its Subsidiaries (consolidated), and
(v) the Restricted Group (combined)
in each case containing information of a substantially similar type
and to a substantially similar level of detail as in the format used
in the preparation of the Management Base Case (including, without
limitation, a profit and loss account, balance sheet, cash flow
statement and summary of operating statistics in the form (or in a
form substantially similar to the form) used in the Management Base
Case and, in the case of the last Quarterly Period of each financial
year, a profit and loss account, and cash flow statement for that
financial year in the form (or in a form substantially similar to
the form) used in the Management Base Case) or omitting any such
information or detail or containing such other information or to
such other level of detail as may, from time to time, be approved by
the Agent (acting on the instructions of the Majority Banks acting
reasonably) in writing and deliver a copy of the same to the Agent
for distribution to all of the Banks as soon as practicable but not
later than 45 days after the Quarterly Period to which they relate;
(h) Monthly Management Accounts
---------------------------
(in the case of the Parent) in respect of each calendar month
commencing with September 1997, prepare unaudited Monthly Management
Accounts each of:
(i) the Parent (unconsolidated) ,
(ii) Radio Public (unconsolidated),
(iii) the Telekabel Entities (consolidated),
(iv) Janco and its Subsidiaries (consolidated), and
(v) the Restricted Group (combined)
in each case containing information of a substantially similar type
and to a substantially similar level of detail as in the format used
in the preparation of the Management Base Case (including, without
limitation, a commentary, a profit and loss account and cash flow
statement and a summary of operating statistics in the form (or in a
form substantially similar to the form) used in the Management Base
Case) or omitting any such information or detail or containing such
other information or to such
73
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other level of detail as may, from time to time, be approved by the
Agent (acting on the instructions of the Majority Banks acting
reasonably) in writing and deliver a copy of the same to the Agent
for distribution to all of the Banks as soon as practicable but not
later than 30 days after the calendar month to which they relate;
(i) Change in basis of accounts
---------------------------
(in the case of the Parent) ensure that all financial statements
delivered under clause 10.1(f) are prepared in accordance with GAAP
and in accordance with the accounting principles and practices used
in the preparation of the financial statements referred to in clause
9.1(g)(i) and the 1997 Budget (the "ORIGINAL BASIS") consistently
applied in respect of each financial year unless to do so would be
inconsistent with then current GAAP (the "NEW BASIS"). If the
preparation of financial statements on the Original Basis is
contrary to the New Basis then the Parent shall promptly notify the
Agent in writing of the relevant change and (at the option of the
Parent) shall either (1) prepare and deliver to the Agent audited
financial statements on both the Original Basis and the New Basis
(or shall prepare and deliver financial statements on the New Basis
only but shall also prepare and deliver an audited reconciliation
statement (a "RECONCILIATION STATEMENT") showing those adjustments
necessary in order to reconcile the financial statements produced on
the New Basis to the Original Basis) or (2) request the Agent to
enter into good faith negotiations for such amendments (if any) as
are necessary to the covenants contained in clause 12.1 and any
other provisions of this Agreement affected by such change, in which
event the Agent will enter into such negotiations for a period of
not more than 28 days. If agreement is reached between the Parent
and the Agent (acting on the instructions of the Majority Banks)
within such period as to the amendment of any such covenants or
provisions, then the parties hereto will enter into such
documentation and take such other steps as are required to put such
amendments into effect following which the Parent shall then be
obliged to produce financial statements on the New Basis only. If no
such agreement is reached then the Parent shall be obliged to
prepare and deliver financial statements on both the Original Basis
and the New Basis (or shall prepare and deliver audited financial
statements on the New Basis accompanied by a Reconciliation
Statement).
Where the Parent is under an obligation to deliver financial
statements under clause 11.1(f) on both the Original Basis and the
New Basis (or on the New Basis but accompanied by a Reconciliation
Statement), Monthly Management Accounts and Quarterly Management
Accounts shall also be delivered on both bases or on the New Basis
but accompanied by a Reconciliation Statement.
All financial statements, Quarterly Management Accounts, Monthly
Management Accounts and Reconciliation Statements delivered pursuant
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to this clause 11.1(i) shall be delivered within the relevant time
period set out in clause 11.1.
The provisions of this clause 11.1(i) shall also apply, mutatis
mutandis, to the preparation and delivery of the Annual Budget under
clause 11.1(j)(iii) and the revised financial projections under
clause 11.1(j)(iv).
(j) Delivery of reports
-------------------
deliver to the Agent, for distribution to the Banks (in the case of
a Compliance Certificate issued by the auditors of the Restricted
Group) sufficient copies for all of the Banks or (in any other case)
a copy of each of the following documents, in each case at the time
of issue thereof or (in the case of the Compliance Certificates
referred to in (ii) below) together with the financial statements
prepared in respect of each financial year and Quarterly Management
Accounts prepared in respect of each Quarterly Period pursuant to
clause 11.1(g) in respect of the financial period to which such
Compliance Certificate relates:
(i) every material document issued by the Parent to its
shareholders (in their capacity as a shareholder) or issued by
the Parent or any of its Subsidiaries to its creditors
generally;
(ii) (in the case of the Parent only) a Compliance Certificate
stating that the Restricted Group as at the last day of the
financial period to which such financial statements or
Quarterly Management Accounts relate was in compliance with
the relevant covenants and undertakings in clause 12 (or if it
was not in compliance indicating the extent of the breach);
(iii) (in the case of the Parent only) (for each financial year
falling within the Availability Period) an Annual Budget for
each financial year for the Restricted Group no later than the
last day of the preceding financial year; and
(iv) (in the case of the Parent only)(for each financial year
falling within the Availability Period commencing in 1998) no
later than 30th June in each year, revised financial
projections and revised projections for operating statistics
in relation to the Restricted Group containing information of
a substantially similar type and to a substantially similar
level of detail as the base case financial projections and
operating statistics projections contained in the Management
Base Case, such projections to extend to at least the
Termination Date and to contain details of the assumptions on
the basis of which such projections have been prepared and an
explanation of any discrepancies from the most recently
delivered financial projections and projections for operating
statistics delivered under this sub-paragraph (j)(iv) (or, in
the case of the first such financial
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projections, from the base case financial projections or
operating statistics projections (as the case may be)
contained in the Management Base Case);
(k) Financial Year End
------------------
maintain a financial year end of 31 December for each member of the
Restricted Group save with the prior written consent of the Majority
Banks;
(l) Authorised Officers
-------------------
ensure that any new or replacement Authorised Officer has provided
the Agent with evidence satisfactory to it of such new officer(s)'
authority and a specimen of his or their signature(s) prior to
signing any Compliance Certificates, Drawdown Notices, or any other
notices, requests or confirmations referred to in this Agreement or
relating to the Facility;
(m) Auditors
--------
ensure that Arthur Andersen is appointed as auditor of the Parent
and each Restricted Subsidiary and not change such appointment
without appointing a major accounting firm of recognised
international standing and repute;
(n) Provision of further information
--------------------------------
notify the Agent of any change to the business of any member of the
Restricted Group providing details of such change as soon as
practicable after making such change and provide the Agent with a
copy of (i) each Principal Agreement entered into after the date of
this Agreement and (ii) any material report, notice or other
communication relating to the Licences, the Necessary Authorisations
and such financial and other information concerning each member of
the Restricted Group and their respective affairs as the Agent or
any Bank (acting through the Agent) may from time to time reasonably
require;
(o) Insurance
---------
maintain insurance cover of a type and level which a prudent company
in the same business as the relevant Obligor would effect;
(p) Inspection
----------
if required by the Agent (acting on the instructions of the Majority
Banks), at any time whilst a Default is continuing, permit, to the
extent it is able to do so, representatives of the Agent or any of
the Banks upon reasonable prior written notice to the Parent or its
relevant Subsidiary, after having made arrangements with the Parent
so to do and after entering into a confidentiality undertaking if
reasonably required by the
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Parent (a) visit and inspect the properties of any member of the
Restricted Group during normal business hours, (b) inspect and make
extracts from and copies of its books and records other than records
which the relevant member of the Restricted Group is prohibited by
law from disclosing to the Agent and/or any relevant Bank and (c)
discuss with its principal officers and auditors its business,
assets, liabilities, financial position, results of operations and
business prospects provided that any such discussion with the
auditors shall only be on the basis of the audited accounts of the
Restricted Group and Compliance Certificates issued by the auditors;
(q) Compliance with laws and regulations
------------------------------------
comply with the terms and conditions of all laws (including
Telecommunications and Cable Laws, the Licences and the Necessary
Authorisations), regulations, agreements, licences and concessions
including, without limitation, all Environmental Laws and all
Environmental Licences if the failure to comply therewith, would or
is reasonably likely, in the opinion of the Agent, to have a
Material Adverse Effect;
(r) Taxes
-----
file or cause to be filed all tax returns required to be filed in
all jurisdictions in which it is situated or carries on business or
is otherwise subject to Taxation and will pay all Taxes shown to be
due and payable on such returns or any assessments made against it
within the period stipulated for such payment (other than those
being contested in good faith and where such payment may be lawfully
withheld);
(s) Cost capitalisation policy
--------------------------
maintain a cost capitalisation policy consistent with the cost
capitalisation policy used in the preparation of the financial
statements referred to in clause 10.1(g)(i) or such other cost
capitalisation policy as may be approved by the auditors and the
Agent (acting on the instructions of the Majority Banks) from time
to time;
(t) Further members of the Restricted Group
---------------------------------------
after the Bridge Termination Date, and subject to the provisions of
clause 9.16, it will and will procure that any Acceding Guarantor
which is wholly owned by the Parent and which the Majority Banks and
the Parent agree may become a member of the Restricted Group,
delivers to the Agent such documents and evidence as the Agent may
require, in form and substance satisfactory to the Agent (acting on
the instructions of the Majority Banks). The parties hereto agree
that upon the execution and delivery of all such documents and
evidence, and provided that the Agent has notified each of the other
parties of this Agreement that such
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documents and evidence are in form and substance satisfactory to it,
such Acceding Guarantor shall become a member of the Restricted
Group for the purposes of this Agreement; and
(u) Agreed Hedging Programme
------------------------
as from the date falling three months after the date of this
Agreement, procure that any one or more of the Obligors maintain
interest rate protection arrangements with a Bank, on a rolling
forward not less than two year basis in respect of at least 50 per
cent. of the then forecast amount of the Loan, which interest rate
protection arrangements have the effect of fixing the maximum rate
of interest payable (excluding the Margin and any other associated
costs) by the Borrowers within 200 basis points of three month LIBOR
(as at the date that the relevant arrangements come into effect) for
the relevant currency.
(v) Licences and Necessary Authorisations
-------------------------------------
obtain or cause to be obtained, every consent, authorisation,
licence or approval of, or registration with or declaration to,
governmental or public bodies or authorities or courts in any
Relevant Jurisdiction necessary for the construction, installation
or operation of the Cable Systems (including, without limitation,
the Licences and the Necessary Authorisations) and (A) ensure that
none of the same is revoked, cancelled, suspended, withdrawn,
terminated, expires and is not renewed or otherwise ceases to be in
full force and effect without a new one having first been put in
place with a member of the Restricted Group on substantially
identical terms or on terms more beneficial to the Restricted Group
and (B) ensure that none of the same is modified in any respect and
that no member of the Restricted Group commits any default in the
observance of the conditions or restrictions (if any) imposed in, or
in connection with, any of the same which, in the case of any of the
events listed in this sub-paragraph (B), in the reasonable opinion
of the Majority Banks, would or is reasonably likely to have a
Material Adverse Effect; and
(w) Shareholdings in the Restricted Subsidiaries
--------------------------------------------
save, in each case, with the prior written consent of all of the
Banks:
(i) (in the case of the Parent) maintain (A) 100 per cent. of the
issued share capital of each of CNA and 100 per cent. direct
or indirect ownership of the issued share capital of Radio
Public and maintain at least the percentage of direct
shareholding in Radio Public that it has at the date of this
Agreement, (B) (prior to the Norwegian Merger) not less than
70.2 per cent. of the issued share capital of Janco, (c)
(after the Norwegian Merger but before the Option Date) not
less than 87.3 per cent. of the issued share capital of New
Janco and (d) (after the Option Date and at all
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times after 29th June, 2001) not less than 100 per cent. of
the issued share capital of New Janco and the Parent shall
ensure that at all times thereafter 100 per cent. of the
shares in New Janco are pledged to the Security Trustee
pursuant to the Norwegian Share Security;
(ii) (in the case of CNA) maintain not less than 95 per cent. of
the issued share capital of each of the Telekabel Entities;
(iii) (in the case of Janco) prior to the Norwegian Merger, maintain
not less than 100 per cent. of the issued share capital of
Janco Multicom A/S, Satelvisjon A/S and Norkabel;
(iv) (in the case of Norkabel) prior to the Norwegian Merger,
maintain not less than 100 per cent. of the issued share
capital of Kanal 2 A/S, Norkabel A/S and Oslo Kabelanlegg A/S;
and
(v) as soon as practicable after the Norwegian Merger, the Parent
shall procure that New Janco shall liquidate Kanal 2 A/S,
Janco Multicom A/S (since renamed Janco Telematikk A/S) and
Satelvisjon A/S;
(x) Subordination of loans from Relevant Persons
--------------------------------------------
(in the case of the Parent) shall procure that prior to any Relevant
Person making any Borrowed Money available to any of the members of
the Restricted Group, such Relevant Person shall enter into a Deed
of Subordination on terms and conditions satisfactory to the Agent
and a Charging Entity's Deed of Accession (as such term is defined
in the Security Trust Deed) and provides the Agent with such
documents and evidence as it may reasonably require as to the power
and authority of the Relevant Person to enter into such Deed of
Subordination and Charging Entity's Deed of Accession and that the
same constitute valid and legally binding obligations of such
Relevant Person enforceable in accordance with its terms subject to
substantially similar qualifications to those made in the legal
opinions referred to in part A of schedule 3. In addition, it will
procure that each Security Provider enters into a Charging Entity's
Deed of Accession and provides the Agent with such documents and
evidence as it may reasonably require as to the power and authority
of such Security Provider to enter into such Charging Entity's Deed
of Accession and that the same constitutes valid and legally binding
obligations of such Security Provider enforceable in accordance with
its terms subject to substantially similar qualifications to those
made in the legal opinions referred to in part A of schedule 3. For
the avoidance of doubt, it is agreed that Telekabel Wien shall not
be required to enter into a Deed of Subordination in respect of any
loan provided by Telekabel Wien to another member of the Restricted
Group;
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(y) Norwegian security
------------------
(in the case of each of the Obligors which is incorporated in
Norway) it shall and shall procure that it and each of its
Subsidiaries from time to time (the "JANCO GROUP") shall,
immediately when requested to do so by the Agent, execute all such
documents and so all such acts and things (and shall procure any
other member of the Janco Group to execute all such documents and do
all such acts and things), as may reasonably be required by the
Agent (acting on the instructions of the Majority Banks) and which
may lawfully be done for the purpose of ensuring that all assets of
the Janco Group are duly charged as security for the obligations of
the Norwegian Borrowers hereunder and procure to keep the Agent
informed about any new asset they acquire during the loan period
which could be provided as security for the Norwegian Loan Amount;
(z) UPC debt to be reduced first
----------------------------
(in the case of the Parent) it shall ensure that during the
Reduction Period and in making any prepayment pursuant to clause
6.5, and so long as such action does not result in any adverse
taxation, legal or other material consequences, the aggregate of the
Advances outstanding to the Parent shall be reduced in accordance
with the terms of this Agreement in preference to the aggregate of
the Advances outstanding to any other Borrower by procuring, where
appropriate, that the Restricted Subsidiaries make intercompany
loans directly or indirectly to the Parent to enable the relevant
Advances made to the Parent under this Agreement to be repaid as
required by clause 6 provided that this clause shall not require
Telekabel Wien to make any loans to CNA or other members of the
Restricted Group incorporated in Austria except in accordance with
Austrian law and shall not require or permit Telekabel Wien to make
any loans to any other person other than CNA or other members of the
Restricted Group incorporated in Austria;
(aa) Radio Public Articles of Association
------------------------------------
(in the case of the Parent) it shall procure that on or prior to the
date falling 150 days after the date of this Agreement, the Articles
of Association of Radio Public shall be amended to a form acceptable
to the Agent, which form will permit Radio Public to give the
Guarantee contained in clause 9 (subject always to the provisions of
clause 9.1) and promptly upon such amendment taking place provide a
copy of such amended Articles of Association to the Agent together
with a certified English translation thereof;
(ab) Radio Public Bond
-----------------
the Parent shall either (i) procure that on the date of the Philips
Advance or as soon as practicable thereafter, Radio Public shall
redeem and cancel the Radio Public Bond in full or (ii) on the date
of the Philips Advance or
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<PAGE>
as soon as practicable thereafter, enter into such arrangements as
may be satisfactory to the Banks so as to ensure that all of the
Parent's right, title, benefit and interest under the Radio Public
Bond is assigned to the Security Trustee and that, provided that
such action is at the time acceptable to the Majority Banks, Radio
Public makes a loan to the Parent in a principal amount equal to the
principal amount of the Radio Public Bond, the interest in respect
of which will be set off against the interest payable under the
Radio Public Bond;
(ac) Norwegian I/C Indebtedness
--------------------------
the Parent shall ensure that on the occurrence of the Norwegian
Merger the equivalent of NOK 600,000,000 of the Norwegian I/C
Indebtedness is converted into equity share capital of New Janco,
and that all such equity share capital is pledged to the Security
Trustee on the same terms and conditions as the Norwegian Share
Security. As a condition precedent to the first Advance made to the
Norwegian Borrowers the Parent shall ensure that such arrangements
as may be satisfactory to the Banks are entered into so as to ensure
that all of the Parent's right, title, benefit and interest in
respect of the Norwegian I/C Indebtedness is assigned to the
Security Trustee; and
(ad) Janco Loan Agreement
--------------------
(in the case of the Parent) ensure that, as a condition precedent to
the first Advance made to the Norwegian Borrowers, such arrangements
as may be satisfactory to the Banks are entered into so as to ensure
that all of the Parent's right, title benefit and interest in
respect of the Janco Loan Agreement is assigned to the Security
Trustee.
(ae) ASLK Facility
-------------
(in the case of the Parent and/or Radio Public) (i) ensure that
Radio Public makes no drawing under the ASLK Facility unless and
until all security (including, but not limited to, the subordination
agreement relating to the Radio Public Bond and any other pledges or
charges granted to ASLK Bank N.V.) granted in connection with the
ASLK Facility has been released and (ii) ensure that all such
security granted in connection with the ASLK Facility is so released
within seven days of the date of this Agreement.
(af) Instructions as to debt
-----------------------
(in the case of CNA) (i) ensure that at all times each other
Telekabel Entity has received a valid, irrevocable and unconditional
instruction to assume debt ("Anweisung auf Schuld") stating that
CNA's interest in any Distributable Profits, to the extent that at
any time it exceeds the principal amount of intercompany loans made
by that Telekabel Entity to CNA pursuant to clause 11.1(z) which are
outstanding at that time, is to
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be owed by such Telekabel Entity to the Agent pursuant to the
Guarantee, and (ii) ensure that it calls all relevant shareholders
meetings of each Telekabel Entity to vote upon the amount of
Distributable Profits and votes its shares in each Telekabel Entity
so as to ensure that at all times the amount of Distributable
Profits of such Telekabel Entity is the maximum amount legally
possible for such Telekabel Entity.
11.2 Negative Covenants
------------------
Each Obligor in respect of itself and its Subsidiaries which are members
of the Restricted Group undertakes with each of the Banks, the Security
Trustee, the Arranger and the Agent that, from the date of this Agreement
and so long as any moneys are owing under this Agreement or remain
available for drawing by the Borrowers, without the prior written consent
of the Agent acting on the instructions of the Majority Banks:
(a) Negative pledge
---------------
save for Encumbrances created by the Security Documents, it will not
permit any Encumbrance (other than the Permitted Encumbrances) by
any member of the Restricted Group to subsist, arise or be created
or extended over all or any part of their respective present or
future undertakings, assets, rights or revenues to secure or prefer
any present or future Indebtedness of any member of the Restricted
Group or any other person;
(b) No merger
---------
it will not merge or consolidate with any other company or person
and it will procure that no member of the Restricted Group merges or
consolidates with any other company or person save that subject to
the compliance with the terms of clause 3.5(c) and 9.16(g):
(i) Norkabelgruppen A/S shall be permitted to merge with Oslo
Kabelanlegg A/S and Norkabel A/S (such merged company being
referred to in this Agreement as "NEW NORKABEL"); provided
that promptly thereafter
(ii) New Norkabel shall be permitted to and shall merge with Janco
Kabel-TV A/S (such merged company being referred to in this
Agreement as "NEW JANCO");
(c) Disposals
---------
it will not and will procure that no other member of the Restricted
Group will sell, transfer, lend or otherwise dispose of or cease to
exercise direct control over any part of its present or future
undertaking, assets, rights or revenues whether by one or a series
of transactions related or not (other than (i) Permitted Disposals
made as part of the Restructuring, (ii) transfers, sales and
disposals pursuant to the Norwegian Merger, (iii)
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transfers, sales and disposals the proceeds of which are applied in
prepayment of the Loan pursuant to clause 6.5, (iv) transfers, sales
and disposals in any financial year of assets, rights or revenues
the market value of which does not exceed NLG 250,000, (v)
transfers, sales and disposals made to another member of the
Restricted Group incorporated in the same Relevant Jurisdiction
provided that there is no material adverse effect on the security
position of the Banks and there is no breach of any Licence), (vi)
the transfer, sale or disposal by New Janco of the property referred
to in number 39 of part A paragraph A of schedule 13, (vii) the
transfer by the Parent of the Belmarken UIH Shares to UIH Europe,
Inc. to the extent permitted by proviso (x) to clause 11.2(k)(i),
and (viii) transfers, sales or disposals conducted on arm's length
terms for full consideration in the ordinary course of trading
unless, in respect of each of the two most recent previous
consecutive Quarterly Periods, the ratio of Total Debt to Total
Annualised Net Operating Cash Flow (calculated on the last day of
each such Quarterly Period and as shown in the Compliance
Certificates for the two Quarterly Periods ending immediately prior
to such date) is less than and remains below 4:1;
(d) Intra-Group accounts
--------------------
(without limiting the generality of clause 11.2(c) and other than
(i) the refinancing of the Telekabel Bond, (ii) as envisaged by the
terms of the Securities Purchase and Conversion Agreement and (iii)
the conversion of the Norwegian I/C Indebtedness into equity
securities in New Janco as part of the Norwegian Merger) it will not
subordinate, postpone, defer, assign or otherwise dispose of or deal
with, any Indebtedness owing to it by any member of the Restricted
Group and will procure that no member of the Restricted Group will
subordinate, postpone, defer, assign or otherwise dispose of or deal
with, any Indebtedness owing to it by any other member of the
Restricted Group;
(e) Loans and guarantees
--------------------
it will not, and will procure that no member of the Restricted Group
will, make any loans, grant any credit (save for normal trade credit
in the ordinary course of day-to-day trading) or give any guarantee
to or for the benefit of any person other than:
(i) pursuant to the Bridge Borrower Loan Agreement (in its
original terms) or the loan referred to in paragraph (i) of
the definition of the Belmarken Funding Arrangements (in its
original terms); or
(ii) to or for the benefit of members of the Unrestricted Group in
an aggregate amount (when aggregated with the amount of all
transactions falling within clause 11.2(h)(i), (ii) and (iii))
not in excess of the aggregate of NLG 80,000,000 (or its
equivalent in other currencies) and any additional amount
permitted pursuant to
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paragraph (y) of clause 11.2(h) (excluding for the purposes of
this calculation any loans permitted pursuant to (i) above);
or
(iii) to or for the benefit of another member of the Restricted
Group; or
(iv) as envisaged by the terms of the Securities Purchase and
Conversion Agreement; or
(v) if, in respect of each of the two most recent previous
consecutive Quarterly Periods, the ratio of Total Debt to
Total Annualised Net Operating Cash Flow (calculated on the
last day of each such Quarterly Period and as shown in the
Compliance Certificates for the two Quarterly Periods ending
immediately prior to such date) is less than and remains below
3:1;
(f) Borrowed Money
--------------
(i) it will not and will procure that the Restricted Group (taken
as a whole) and the Bridge Borrower taken together will not
incur Borrowed Money in excess of NLG 1,300,000,000 to be
outstanding at any time, save that Borrowed Money incurred by
the Parent pursuant to the Parent Promissory Note (in its
original terms or as amended in accordance with the proviso
(y) to clause 11.2(k)(i)) and Borrowed Money lent to the
Bridge Borrower by any member of the Restricted Group shall be
ignored for the purposes of clause 11.2(f)(i); and
(ii) it will not and will procure that no member of the Restricted
Group will create, assume, incur or otherwise permit to be
outstanding any Borrowed Money (other than Permitted
Borrowings and other than as envisaged by the terms of the
Securities Purchase and Conversion Agreement) Provided that,
during the Reduction Period, the Parent and/or any member of
the Restricted Group may create, assume, incur or otherwise
permit to be outstanding any such Borrowed Money if the ratio
of Total Debt (calculated as at the relevant date and
including the principal amount of such Borrowed Money) to
Total Annualised Net Operating Cash Flow (as shown in the most
recent Compliance Certificate delivered to the Agent pursuant
to this Agreement) is less than and remains below 3:1;
(g) Issue of shares
---------------
other than pursuant to the Norwegian Merger or as envisaged by the
terms of the Securities Purchase and Conversion Agreement, it will
not and will procure that no member of the Restricted Group reduces
its capital or purchases any class of its shares and that no member
of the Restricted Group issues any shares of any class save that:
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(i) any member of the Restricted Group may issue shares to any
other member of the Restricted Group so long as such shares
are charged or pledged in favour of the Security Trustee
pursuant to the terms of a Security Document and there are
delivered at the same time to the Security Trustee the
relevant share certificates and blank stock transfer forms (or
equivalent documents) in respect thereof together with such
other documents and evidence and legal opinions as the Agent
may require;
(ii) the Parent shall be entitled to (a) issue shares to UIH or any
wholly owned Subsidiary of UIH, (b) issue ordinary shares to
Stichting Administratiekantoor UPC B.V. in accordance with the
Stock Option Plan, (c) issue ordinary shares fully paid and
American Depositary Shares representing ordinary shares
pursuant to the Initial Equity Raise (d) issue ordinary shares
to any Relevant Person or to any other person (not being a
Subsidiary of the Parent) in or towards satisfaction on bona
fide arm's length commercial terms of liabilities of the
Parent or any of its Subsidiaries and (e) purchase its shares
from UPC Intermediates B.V. for the purpose of offering the
same for sale pursuant to the Initial Equity Raise provided
that:
(A) the consideration payable for each such share does not
exceed the gross proceeds for a share in the Parent
pursuant to the Initial Equity Raise;
(B) such consideration is immediately satisfied in part by
the repayment of the outstanding loan of the equivalent
of approximately NLG 110,000,000 made by the Parent to
UPC Intermediates B.V.;
(C) any outstanding consideration is satisfied by way of a
subordinated inter-company loan made by UPC
Intermediates B.V. to UPC; and
(D) prior to such purchase UPC Intermediates B.V. enters
into a Deed of Subordination on terms and conditions
satisfactory to the Agent and a Charging Entity's Deed
of Accession (as such term is defined in the Security
Trust Deed) and provides the Agent with such documents
and evidence as it may reasonably require as to the
power and authority of UPC Intermediates B.V. to enter
into such Deed of Subordination and Charging Entity's
Deed of Accession and that the same constitute valid,
legal and binding obligations of UPC Intermediates B.V.
enforceable in accordance with their terms subject to
substantial similar qualifications to those made in the
legal opinions referred to in part A of schedule 3 which
relate to Deeds of Subordination. Such Deed of
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<PAGE>
Subordination will permit the Parent to repay the
subordinated outstanding inter-company loan to the
extent that it receives cash dividends from UPC
Intermediates B.V. to fund such repayment or the
cancellation of such loan in lieu of such dividends;
(iii) Janco may, with the prior written consent of all of the Banks,
issue equity share capital to a recognised telecommunications
company or other person acceptable to the Majority Banks
provided that the proceeds of such issue are used by Janco to
fund the capital expenditure requirements to provide
telecommunications services in the cable systems operated by
Janco; and
(iv) Telekabel Wien may reclassify into nominal share capital such
of the Relevant Reserves as may be necessary to ensure that
the nominal share capital of Telekabel Wien is equal to
337,300,000 Austrian Schillings.
(h) Investments
-----------
other than as envisaged by the terms of the Securities Purchase and
Conversion Agreement it will not and will procure that no member of
the Restricted Group:
(i) makes any loan (other than pursuant to the Bridge Borrower
Loan Agreement (in its original terms)) or advance to, or
enters into any transaction having the effect of lending money
with, any person (other than another member of the Restricted
Group) or otherwise acquires for a consideration any document
evidencing Indebtedness, capital stock or other securities of
any person (other than another member of the Restricted
Group); or
(ii) acquires all or any substantial part of the assets, property
or business of any other person (other than another member of
the Restricted Group) or any assets that constitute a division
or operating unit of the business of any other person (other
then another member of the Restricted Group); or
(iii) creates or acquires any Subsidiary,
save that the Parent may, issue ordinary shares as permitted by
clause 11.2(g)(ii)(d), enter into the Belmarken Funding
Arrangements, and purchase its shares from UPC Intermediates B.V. on
the terms set out in clause 11.2(g)(ii)(e), and repay or acquire the
loan referred to in clause 6.5(D)(viii) using the proceeds from the
issuance of ordinary shares in the Parent referred to in such clause
and the members of the Restricted Group may undertake transactions
referred to in clause 11.2(h)(i), (ii) or (iii) in relation to the
Unrestricted Group provided that the aggregate
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amount in respect of such transactions (when aggregated with those
transactions referred to in clause 11.2(e)(ii)) shall not be in
excess of the aggregate of:
(x) NLG 80,000,000 (or its equivalent in other currencies); and
(y) the amount set out in column (1) below against the gross cash
proceeds from the Initial Equity Raise in column (2) below:
------------------------------------------------------------
(1) (2)
------------------------------------------------------------
GROSS CASH PROCEEDS FROM VALUE OF ADDITIONAL INVESTMENTS
THE INITIAL EQUITY RAISE (NLG MILLION (OR ITS EQUIVALENT
(NLG MILLION0 IN OTHER CURRENCIES))
------------------------------------------------------------
550 40
------------------------------------------------------------
575 75
------------------------------------------------------------
600 110
------------------------------------------------------------
625 140
------------------------------------------------------------
650 150
------------------------------------------------------------
675 165
------------------------------------------------------------
700 181.5
------------------------------------------------------------
700 to 1,000 181.5 plus 70% of the proceeds
in excess of 700 but less than
1,000
------------------------------------------------------------
1,000 or more 391.5 plus 100% of the proceeds
in excess of 1,000
------------------------------------------------------------
and Provided that:
(A) the amount set out in column (2) shall be reduced by the
amount used by the Parent to repay Indebtedness owed by the
Parent to UIH pursuant to the proviso to clause 11.2(k)(i);
and
(B) the Parent shall use its best endeavours to ensure that all
funding made available by members of the Restricted Group to
the Unrestricted Group shall be provided by way of
intercompany loans and not by equity and shall ensure that,
within 60 days of their creation, such intercompany loans are
pledged in favour of, or for the benefit of, the Banks on
terms reasonably satisfactory to the Agent and that such
documents and evidence as the Agent shall reasonably require
as to the power and authority of the relevant member of the
Restricted Group to enter into such pledge and that the same
constitutes valid and legally binding obligations
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of such member of the Restricted Group enforceable in
accordance with its terms are delivered to the Agent,
and Provided that:
(A) the Parent shall be permitted to subscribe for capital stock
in the Bridge Borrower for a consideration of not more than
NLG 60,000,000 in aggregate so long as the Parent shall
procure that the proceeds of such subscription are used
promptly to fund the acquisition by Cable Network Brabant
Holding N.V. of Stichting Combivisie Regio and Setelco B.V.
and
(B) the Parent and/or any other member of the Restricted Group may
make such loans or acquisitions if, in respect of each of the
two most recent previous consecutive Quarterly Periods, the
ratio of Total Debt to Total Annualised Net Operating Cash
Flow (calculated on the last day of each such Quarterly Period
and as shown in the Compliance Certificates for the two
Quarterly Periods ending immediately prior to such date) is
less than, and remains below 3:1;
(i) Capital expenditure
-------------------
it will not and will procure that no member of the Restricted Group
incurs any capital expenditure other than in relation to the
business of constructing, installing, operating and utilising cable
television, telecommunications and data service systems in the
territories covered by the Licences or any directly related business
reasonably considered to be financially beneficial thereto;
(j) Swaps and hedging
-----------------
it will not and will procure that no member of the Restricted Group
enters into any interest rate or currency swaps or other hedging
arrangements other than non-speculative arrangements directly
relating to the risk management of any Borrowed Money permitted to
subsist by the terms of this Agreement and entered into in the
ordinary course of the business for the genuine hedging of the
relevant underlying transaction;
(k) Subordination of shareholder funding
------------------------------------
(i) (in the case of the Parent only) other than (A) payments to be
made in consummation of the Philips Transaction in accordance
with the terms of the Securities Purchase and Conversion
Agreement, (B) payments made to UIH in relation to the
secondment of UIH employees to the Parent described in
paragraph (j) of the definition of "Permitted Borrowings"
contained in clause 1.2, (C) payments to UIH on bona fide
arm's length commercial terms pursuant to any management
services
88
<PAGE>
agreement and (D) payments to UIH on bona fide arm's length
commercial terms pursuant to any registration rights agreement
providing for the filing of a registration statement by the
Parent under the Securities Act of 1933 with respect to all or
a portion of UIH's or its Subsidiary's ordinary shares of the
Parent or American Depository Shares representing a number of
ordinary shares of the Parent or rights thereto it will not
make to any Relevant Person (a) any direct or indirect
distribution, dividend or other payment (whether in cash,
securities, property or otherwise), including, without
limitation, any loan or any payment on account of any class of
its share capital or capital stock or other securities, or any
interest thereon, (b) any transfer of assets or (c) any
payment (whether in cash, securities, property or otherwise)
of principal of, or interest on, any debt made available to it
by any Relevant Person unless (i) in respect of each of the
two most recent previous consecutive Quarterly Periods, the
ratio of Total Debt to Total Annualised Net Operating Cash
Flow (calculated on the last day of each such Quarterly
Period), each as demonstrated in the Compliance Certificates
for the two Quarterly Periods ending immediately prior to such
date, is less than, and remains below, 3:1, and (ii) no
Default has occurred or would occur or be reasonably likely to
occur as a result of such distribution, transfer or payment,
Provided that (x) the Parent shall be permitted to repay
Indebtedness owed by the Parent to UIH Europe, Inc. in an
amount up to a maximum of 40 per cent. of the gross cash
proceeds of the Initial Equity Raise to the extent that the
same exceed NLG 700,000,000 and are equal to or less than NLG
1,000,000,000 by transferring the Belmarken UIH Shares to UIH
Europe, Inc. at the fair market value (if and to the extent
that the Belmarken Funding Arrangements are effected by the
Parent purchasing the Belmarken UIH Shares from the Bridge
Borrower) and/or utilising the cash proceeds of the Initial
Equity Raise, and (y) the Parent and UIH Europe, Inc. may
amend the terms of the Parent Promissory Note so that the
Parent Promissory Note is (1) repayable on demand at any time
on or after 31st March, 2001 rather than on demand and (2) is
convertible into shares of the Parent at the price per share
offered to the public pursuant to the Initial Equity Raise
rather than NLG 18;
(ii) (in the case of Janco and/or New Janco only) it will not make
to any Relevant Janco Person (a) any direct or indirect
distribution, dividend or other payment (whether in cash,
securities, property or otherwise), including, without
limitation any loan or any payment on account of its share
capital or capital stock or other securities or any interest
thereon, (b) any transfer of assets or (c) any payment
(whether in cash, securities, property or otherwise)
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<PAGE>
of principal of, or interest on, any debt made available to it
by any Relevant Janco Person, other than pursuant to the
Option Agreements (in their form as at the date of this
Agreement) unless (i) in respect of each of the two most
recent previous consecutive Quarterly Periods, the ratio of
Total Debt to Total Annualised Net Operating Cash Flow
(calculated on the last day of each such Quarterly Period),
each as demonstrated in the Compliance Certificates for the
two Quarterly Periods ending immediately prior to such date,
is less than, and remains below, 3:1, and (ii) no Default has
occurred or would occur or would be reasonably likely to occur
as a result of such distribution, transfer or payment.
(iii) (in the case of the Telekabel Entities only) they will not
make to any Relevant Telekabel Person (a) any direct or
indirect distribution, dividend or other payment (whether in
cash, securities, property or otherwise), including, without
limitation, any loan or any payment on account of their share
capital or capital stock or other securities or any interest
thereon, (b) any transfer of assets or (c) any payment
(whether in cash, securities, property or otherwise) of
principal of, or interest on, any debt made available to any
of them by any Relevant Telekabel Person, other than pursuant
to the Austrian Agreements (in their form as at the date of
this Agreement) unless (i) in respect of each of the two most
recent previous consecutive Quarterly Periods, the ratio of
Total Debt to Total Annualised Net Operating Cash Flow
(calculated on the last day of each such Quarterly Period),
each as demonstrated in the Compliance Certificates for the
two Quarterly Periods ending immediately prior to such date,
is less than, and remains below, 3:1, and (ii) no Default has
occurred or would occur or would be reasonably likely to occur
as a result of such distribution, transfer or payment Provided
that if at any time any Telekabel Entity makes any payment of
Distributable Profits to the Agent pursuant to any instruction
("Anweisung auf Schuld") given to it by CNA, the amount of
Distributable Profits which are not subject to such
instruction may be paid by such Telekabel Entity to the
Relevant Telekabel Person entitled thereto;
For the avoidance of doubt (A) this clause 11.2(k) shall not prevent
any payments, distributions or transfers from one member of the
Restricted Group to another member of the Restricted Group and (B)
this clause 11.2(k) shall not prevent the performance of any
contracts for the provision of goods and services on bona fide arm's
length commercial terms between the Telekabel Entities and any
Relevant Telekabel Person or between New Janco and any Relevant
Janco Person;
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<PAGE>
(l) Change of business
------------------
it will not and will procure that the Restricted Group (taken as a
whole) does not change the nature of the business carried on by it
in any material respect from that carried on at the date of this
Agreement and that no member of the Restricted Group ceases to carry
on a business where any such cessation would or is reasonably likely
to have a Material Adverse Effect;
(m) Constitutive documents
----------------------
save for (i) the amendment of the constitutive documents of the
Parent envisaged by the Securities Purchase and Conversion
Agreement, (ii) the amendments to constitutive documents necessary
to enable the Norwegian Merger to take place and (iii) the
amendments to the constitutive documents of Radio Public referred to
in clause 11.1(aa), it will not, and will procure that none of
members of the Restricted Group amends its constitutive documents in
any way which would or is reasonably likely to adversely affect (in
terms of value, enforceability or otherwise) the charge or pledge
granted to the Security Trustee pursuant to the Share Securities;
(n) Securities Purchase and Conversion Agreement
--------------------------------------------
(in the case of the Parent) it will not permit any material
amendment to be made to the Securities Purchase and Conversion
Agreement (or any document, instrument or agreement entered into in
connection therewith) without the prior written consent of the Agent
(acting on the instructions of the Majority Banks);
(o) Indemnity payments
------------------
(in the case of the Parent) it will not make any payment to Philips
Electronics N.V. (or any Subsidiary or Associated Company thereof)
("PHILIPS") in respect of the indemnity granted or to be granted by
the Parent to Philips pursuant to the Securities Purchase and
Conversion Agreement in connection with the obligations of Philips
under the Vienna Agreements (as defined in the Securities Purchase
and Conversion Agreement) until, in respect of each of the two most
recent previous consecutive Quarterly Periods, the ratio of Total
Debt to Total Annualised Net Operating Cash Flow (calculated on the
last day of each such Quarterly Period), each as demonstrated in the
Compliance Certificates for the two Quarterly Periods ending
immediately prior to such date, is less than, and remains below,
3:1; and
(p) Chello and Priority
-------------------
it will not and will not permit any contractual arrangements between
Chello Broadband N.V. and Priority Telecom N.V. and the Restricted
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<PAGE>
Group to be entered into other than on bona fide arm's length
commercial terms.
12 FINANCIAL COVENANTS
-------------------
12.1 Pre Philips Advance Covenants
-----------------------------
The Parent undertakes with each of the Banks, the Arranger, the Security
Trustee and the Agent to ensure that at all times the ratio of Total Debt
to Total Annualised Net Operating Cash Flow (calculated on each Quarter
Day by reference to the Six Month Period ending on such day) shall not
exceed 5:1 at all times prior to the date that the Philips Advance is made
(but, for the avoidance of doubt not on or after such date).
12.2 Post Philips Advance Covenants
------------------------------
From the date that the Philips Advance is made the Parent undertakes with
each of the Banks, the Arranger, the Security Trustee and the Agent:
(a) Total Debt/Total Annualised Net Operating Cash Flow
---------------------------------------------------
to ensure that at all times during the periods set out in column (1)
below the ratio of Total Debt to Total Annualised Net Operating Cash
Flow (calculated on each Quarter Day by reference to the Six Month
Period ending on such day) shall not exceed the ratio set out
against such period in column (2) below:
=================================================================
(1) (2)
Period Ratio
-----------------------------------------------------------------
up to (but excluding) Completion 8.25:1
of the Initial Raise
-----------------------------------------------------------------
from (and including) Completion of the 7.5:1
Initial Raise to (and including)
30th June, 1999
-----------------------------------------------------------------
from (and including) 1st July, 1999 to 8:1
(and including) 31st December, 1999
-----------------------------------------------------------------
from (and including) 1st January, 2000 to 6:1
(and including) 31st December, 2000
-----------------------------------------------------------------
from (and including) 1st January, 2001 to 5:1
(and including) 31st December, 2001
-----------------------------------------------------------------
from (and including) 1st January, 2002 to 4:1
(and including) 31st December, 2002
-----------------------------------------------------------------
Thereafter 3:1
=================================================================
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<PAGE>
(b) Total Debt/Cable TV Annualised Net Operating Cash Flow
------------------------------------------------------
to ensure that at all times up to and including 31st December, 1998
the ratio of Total Debt to Cable TV Annualised Net Operating Cash
Flow (calculated on each Quarter Day by reference to the Six Month
Period ending on such day) shall not exceed the ratio set out
against such period in column (2) below:
================================================================
(1) (2)
Period Ratio
----------------------------------------------------------------
Up to (but excluding) Completion 7:1
of the Initial Equity Raise
----------------------------------------------------------------
from (and including) Completion of 6.25:1
the Initial Raise to (and including)
30th June, 1999
----------------------------------------------------------------
from (and including) 1st July, 1999 to 5:1
(and including) 30th September, 1999
----------------------------------------------------------------
from (and including) 1st October, 1999 to 6.75:1
(and :1ing) 31st December, 1999
----------------------------------------------------------------
from (and including) 1st January, 2000 to 6:1
(and including) 31st December, 2000
----------------------------------------------------------------
from (and including) 1st January, 2001 to 5:1
(and in5:1ding) 31 December, 2001
----------------------------------------------------------------
from (and including) 1st January, 2002 to 4:1
(and including) 31st December, 2002
----------------------------------------------------------------
Thereafter 3:1
================================================================
(c) Senior Debt Interest Cover
--------------------------
to ensure that at all times during the periods set out in column (1)
below, the ratio of Total Annualised Net Operating Cash Flow
(calculated on each Quarter Day by reference to the Six Month Period
ending on such day) to the amount of Total Debt Interest Charges
incurred during such Six Month Period multiplied by two shall be
greater than the number set out against such period in column (2)
below:
================================================================
(1) (2)
Period Ratio
----------------------------------------------------------------
up to (and including) 31st December, 1998 1.5:1
----------------------------------------------------------------
from (and including) 1st January, 1999 to 1.75:1
93
<PAGE>
----------------------------------------------------------------
(and including) 31st December, 1999
----------------------------------------------------------------
from (and including) 1st January, 2000 to 2:1
(and including) 30th June, 2000
----------------------------------------------------------------
from (and including) 1st July, 2000 to 3.1
(and including) 31st December, 2000
----------------------------------------------------------------
from (and including) 1st January, 2001 4:1
================================================================
(d) Pro-forma Debt Service Cover
----------------------------
(i) to ensure that at all times from (and including) 31st
December, 2000, the ratio of Total Annualised Net Operating
Cash Flow (calculated on each Quarter Day by reference to the
Six Month Period ending on such day) to Proforma Debt Service
shall not be less than 1.2:1; and
(ii) to ensure that at all times from (and including) 31st March,
2004, the ratio of Total Annualised Net Operating Cash Flow
(calculated in each Quarter Day by reference to the Six Month
Period ending on such day) to Proforma Debt Service shall not
be less than 1.5:1.
12.3 Auditors certificate
--------------------
If at any time the Majority Banks (acting reasonably and following
consultation with the Parent) do not consider that any figure set out in
any Compliance Certificate issued by any Authorised Officer is correct,
they shall be entitled within 30 days of the date of the delivery of such
Compliance Certificate to the Agent pursuant to clause 11.1 to call for a
certificate from the Parent's auditors as to such figure. For such
purposes the Parent's auditors shall act as independent experts and not as
arbiters and every such certificate shall be addressed to the Agent (on
behalf of the Banks) and be at the expense of the Parent (unless the
certificate so provided by the Parent's auditors shows that the relevant
figures set out in the Compliance Certificate are in fact correct in which
case such certificate shall be at the expense of the Banks). The Majority
Banks may only call for one such certificate in any calendar year unless
the relevant figures set out in the Compliance Certificate are in fact
incorrect in which case the Majority Banks may call for up to three
further such certificates in such financial year, provided that if, in any
of such certificates, the relevant figures set out in the Compliance
Certificate are certified as being in fact correct, then the Majority
Banks may not call for such further certificates in such financial year.
If the Majority Banks call for such a certificate all calculations under
this Agreement by reference to the relevant figure shall (i) until the
Parent's auditors deliver the relevant certificate under this clause 12.3
be made by reference to the figure set out in the relevant Compliance
Certificate delivered to the Agent under this Agreement and (ii) following
the delivery by the Parent's auditors of a certificate under this clause
12.3 be made by reference to such certificate and the Parent undertakes
forthwith to take all action including, without limitation, the
94
<PAGE>
prepayment of all or part of the Loan so as to procure that all
action taken on the basis of the relevant Compliance Certificate
which on the basis of such auditors' certificate would not have been
permitted is reversed.
95
<PAGE>
13 EVENTS OF DEFAULT
-----------------
13.1 Events of default
-----------------
Each of the events and circumstances set out below is an Event of Default
(whether or not caused by any reason outside the control of an Obligor):
(a) Non-payment: any Borrower fails to pay any principal sum due from it
-----------
under this Agreement in the currency, at the time and in the manner
stipulated in this Agreement, or any other sum due from it under
this Agreement within three Banking Days of the due date in the
currency and in the manner stipulated in this Agreement; or
(b) Breach of certain obligations: any Obligor commits any breach of or
-----------------------------
omits to observe any of the obligations or undertakings expressed to
be assumed by it under clauses 11.1(c), (d), (e), (f), (g), (h),
(j)(ii), (k) and (w), clause 11.2(a), (b), (c), (e), (f),(g), (h),
(i), (k) and (n) and clause 12; or
(c) Breach of other obligations: any Obligor commits any breach of or
---------------------------
omits to observe any of the obligations or undertakings expressed to
be assumed by it under this Agreement or the Security Documents
(other than failure to pay any sum when due or any breach of the
undertakings referred to in (b) above) and, in respect of any such
breach or omission which is capable of remedy, such action as the
Agent may require shall not have been taken within 21 days of the
Agent notifying the relevant Obligor of such default and of such
required action; or
(d) Misrepresentation: any representation or warranty made or deemed to
-----------------
be made or repeated by or in respect of any Obligor or any other
member of the Restricted Group in or pursuant to this Agreement or
the Security Documents or in any notice, certificate or statement
referred to in or delivered under this Agreement or the Security
Documents is or proves to have been incorrect or misleading in any
material respect and, in the event that the act or circumstance
which led to such representation or warranty being incorrect or
misleading is capable of remedy, such action as the Agent may
require shall not have been taken within 21 days of the Agent
notifying the relevant Obligor of such act or circumstance and such
required action; or
(e) Challenge to security: any Security Document is not or ceases to be
---------------------
effective (other than those Norwegian Security Documents which are
not required by the Agent to be assumed by or transferred to New
Janco at the time of the Norwegian Merger) or any member of the
Restricted Group shall in any way challenge, or proceedings shall in
any way be brought to challenge, the prior status of the charges
created by the Security Documents or the validity or enforceability
of the Security Documents; or
96
<PAGE>
(f) Cross-default: any Borrowed Money of any member of the Restricted
-------------
Group is not paid when due or any Borrowed Money of any member of
the Restricted Group becomes (whether by declaration or
automatically in accordance with the relevant agreement or
instrument constituting the same) due and payable prior to the date
when it would otherwise have become due or any creditor of any
member of the Restricted Group becomes entitled to declare any
Borrowed Money of any member of the Restricted Group so due and
payable or to require cash collateralisation or security for any
such Borrowed Money or any facility or commitment available to any
member of the Restricted Group relating to Borrowed Money is
withdrawn, suspended or cancelled by reason of any default (however
described) of the company concerned and the amount, or aggregate
amount at any one time, of all Borrowed Money in relation to which
any of the foregoing events shall have occurred and be continuing is
equal to or greater than NLG 10,000,000 or its equivalent in the
currency in which the same is denominated and payable or if the
Bridge Facility becomes (whether by declaration or automatically in
accordance with the terms of the Bridge Facility Agreement) due and
payable prior to the date when it would otherwise have become due;
or
(g) Derivatives Contract default: any member of the Restricted Group
----------------------------
fails to make payment in relation to a Derivatives Contract of any
sum equal to or greater than NLG 10,000,000 in aggregate at any one
time (or its equivalent in the relevant currency of payment) on its
due date or the counterparty to a Derivatives Contract becomes
entitled to terminate that Derivatives Contract early by reason of
default on the part of any member of the Restricted Group and the
Net Derivatives Liability of such member of the Restricted Group, in
the aggregate, under all its Derivatives Contracts at the relevant
time is not less than NLG 10,000,000 (or its equivalent in the
relevant currency); or
(h) Legal process: any judgment or order made against any member of the
-------------
Restricted Group is not stayed or complied with within 14 days or a
creditor attaches or takes possession of, or a distress, execution,
sequestration or other process is levied or enforced upon or sued
out against, any material part of the undertakings, assets, rights
or revenues of any member of the Restricted Group and is not
discharged within seven days; or
(i) Insolvency:
----------
(i) any member of the Restricted Group which is domiciled or which
has a branch office in the Netherlands is declared bankrupt
(in staat van faillissement verklaard) or enters into a
preliminary or definitive moratorium (in voorlopige of
definitieve surseance van betaling gaan) pursuant to the Dutch
Bankruptcy Act (Faillissementswet);
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<PAGE>
(ii) any "Reorganisationsverfahren", "Ausgleich" or "Konkurs" under
the applicable Austrian Laws is being opened on the assets of
any member of the Restricted Group organised in Austria or any
such member of the Restricted Group enters into an agreement
with its creditors having the same effect;
(iii) any member of the Restricted Group incorporated in Belgium is
declared bankrupt under the Bankruptcy Act of 18 April 1851 of
Belgium or any replacement enactment therefor which is entered
into after the date of this Agreement;
(iv) with respect to any member of the Restricted Group
incorporated in Norway, any order of a competent court or an
event analogous thereto shall be made or any effective
resolution passed with a view to the bankruptcy, composition
proceedings, debt negotiations, liquidation, winding-up or
similar event pursuant to the Norwegian Bankruptcy Act of 8th
June 1984;
(j) Reduction or loss of capital: other than in connection with the
----------------------------
Norwegian Merger or as required in order to consummate the Philips
Transaction a meeting is convened by the Parent or any of its
Subsidiaries for the purpose of passing any resolution to purchase,
reduce or redeem any of its share capital; or
(k) Winding up: any petition is presented and is not discharged within
----------
14 days or other step is taken for the purpose of winding up any
member of the Restricted Group (not being a petition which the
relevant member of the Restricted Group can demonstrate to the
satisfaction of the Agent, by providing an opinion of leading
counsel to that effect, is frivolous, vexatious or an abuse of the
process of the court or relates to a claim to which the relevant
member of the Restricted Group has a good defence and which is being
vigorously contested by the relevant member of the Restricted Group)
or an order is made or resolution passed for the winding up of any
member of the Restricted Group or a notice is issued convening a
meeting for the purpose of passing any such resolution; or
(l) Administration: any petition is presented and is not withdrawn
--------------
within 14 days or other step is taken for the purpose of the
appointment of an administrator of any member of the Restricted
Group or the Agent believes that any such petition or other step is
imminent or an administration order is made in relation to any
member of the Restricted Group; or
(m) Appointment of receivers and managers: any administrative or other
-------------------------------------
receiver is appointed of any member of the Restricted Group or any
material part of their respective assets and/or undertakings or any
other steps are taken to enforce any Encumbrance over all or any
part of the assets of any member of the Restricted Group; or
98
<PAGE>
(n) Compositions: any steps are taken, or negotiations commenced, by any
------------
member of the Restricted Group or by any of their respective
creditors with a view to proposing any kind of composition,
compromise or arrangement involving such company and any of its
creditors; or
(o) Analogous proceedings: there occurs, in relation to any member of
---------------------
the Restricted Group, in any country or territory in which any of
them carries on business or to the jurisdiction of whose courts any
part of their respective assets is subject, any event which
corresponds with, or have an effect equivalent or similar to, any of
those mentioned in clauses 13.1(h) to 13.1(n) (inclusive) or any
member of the Restricted Group otherwise becomes subject, in any
such country or territory, to the operation of any law relating to
insolvency, bankruptcy or liquidation; or
(p) Cessation of business: other than in connection with the Norwegian
---------------------
Merger any member of the Restricted Group suspends or ceases or
threatens to suspend or cease to carry on their respective
businesses; or
(q) Seizure: all or a material part of the undertakings, assets, rights
-------
or revenues of, or shares or other ownership interests in, any
member of the Restricted Group are seized, nationalised,
expropriated or compulsorily acquired by or under the authority of
any government; or
(r) Change of Control:
-----------------
(i) after the date of the Philips Advance and prior to the
Relevant Date, UIH and/or any wholly owned Subsidiary of UIH
ceases (A) to own at least 51% of the issued share capital of
the Parent or (B) to own at least 51% of the voting rights
attributable to the issued ordinary share capital of the
Parent or (C) to have the right to receive at least 51% of the
dividends or any other distributions by the Parent; or
(ii) on or after the Relevant Date, (1) UIH and/or any wholly owned
Subsidiary of UIH ceases (A) to own at least 30% of the issued
share capital of the Parent or (B) to own at least 30% of the
voting rights attributable to the issued share capital of the
Parent or (C) to have the right to receive at least 30% of the
dividends or any other distribution by the Parent or (2) any
person or group of persons acting in concert acquires a
shareholding in the Parent greater than that held by UIH
and/or any wholly owned Subsidiary of UIH;
Provided that if, pursuant to the Securities Purchase and Conversion
Agreement, Philips Media Networks B.V. acquires 50 per cent. of the
issued share capital of the Parent and such acquisition would
constitute an Event of Default under this clause 13.1(r) but for
this proviso, then the Banks will consult with UPC and its
shareholders in good faith for a period of up to 90 days during
which period such acquisition will not
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constitute an Event of Default. Immediately upon the ending of such
period, if, following such good faith consultation, the Majority
Banks determine that such acquisition shall constitute an Event of
Default, the Agent and the Banks shall be entitled to exercise their
rights under clause 13.2 in respect of such Event of Default; or
(s) Principal Agreements:
--------------------
(i) save as is required by any term of this Agreement, any
Principal Agreement is terminated, suspended, revoked or
cancelled or otherwise ceases to be in full force and effect
unless services of a similar nature to those provided pursuant
to such Principal Agreement are at all times provided to the
Restricted Group on similar commercial terms or on terms no
less beneficial to the relevant member of the Restricted Group
save where any such services are provided on more onerous
terms to the relevant member of the Restricted Group due to
the mandatory requirements of any regulatory body and any such
termination, suspension, revocation, cancellation or cessation
would have a Material Adverse Effect; or
(ii) any alteration or variation is made to any term of any
Principal Agreement which would have a Material Adverse
Effect; or
(iii) any party breaches any term of or repudiates any of its
obligations under any of the Principal Agreements where such
breach or repudiation would have a Material Adverse Effect; or
(t) Unlawfulness: it becomes unlawful at any time for any Obligor or any
------------
Subordinated Creditor to perform any of their respective material
obligations under this Agreement or the Security Documents or any of
the material obligations of any Obligor or any Subordinated Creditor
under this Agreement or the Security Documents becomes unenforceable
in any way or there ceases to be security over the relevant property
or assets of the relevant Obligor as intended and created by the
Security Documents; or
(u) Environmental matters: as a result of any Environmental Law: (a) the
---------------------
Agent, the Arranger, the Security Trustee or any of the Banks
becomes, in the opinion of the Agent, subject to a material
obligation (actual or contingent, in the case of any contingent
obligation, being one which, at the relevant time, would be likely
to arise) in relation to any Relevant Substance on or from any
property, owned, occupied or leased by any member of the Restricted
Group; or (b) the rights and claims of the Agent, the Arranger, the
Security Trustee, or any of the Banks under this Agreement or any of
the Security Documents become subordinated to the claims and rights
of any competent agency of any Relevant Jurisdiction or the European
Community; or
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(v) Telecommunications and Cable Laws: any member of the Restricted
------------------
Group fails to comply with any term or condition of any
Telecommunications and Cable Law where such non-compliance would or
is reasonably likely to have a Material Adverse Effect; or
(w) Repudiation: any member of the Restricted Group repudiates this
-----------
Agreement or any Security Document to which it is a party or does or
causes or permits to be done any act or thing evidencing an
intention to repudiate this Agreement or any such Security Document;
or
(x) Subordinated Creditors:
----------------------
(i) any Subordinated Creditor commits any breach of or omits to
observe any of the obligations or undertakings expressed to be
assumed by it under a Deed of Subordination and in respect of
any such breach or omission which, in the opinion of the Agent
(acting on the instructions of the Majority Banks (acting
reasonably)) is capable of remedy, such action as the Agent
may require shall not have been taken within 21 days of the
Agent notifying such Subordinated Creditor thereof and of such
required action; or
(ii) any representation or warranty made or deemed to be made or
repeated by or in respect of any Subordinated Creditor in or
pursuant to any Deed of Subordination is or proves to have
been incorrect or misleading in any material respect on the
date on which it was made or deemed to be made or repeated
and, in the event that the act or circumstance which led to
such representation or warranty being incorrect or misleading
is capable of remedy, such action as the Agent may require
shall not have been taken within 21 days of the Agent
notifying the relevant Subordinated Creditor of such act or
circumstance and such required action; or
(iii) any Subordinated Creditor is not or ceases to be bound by a
Deed of Subordination; or
(iv) any payment due from a member of the Restricted Group to a
Subordinated Creditor is not or ceases to be subordinated to
the amounts owing under this Agreement; or
(v) any Subordinated Creditor or any liquidator, administrator or
administrative or other receiver (or similar officer) of any
Subordinated Creditor takes steps to contest the subordination
effected by a Deed of Subordination; or
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(y) Security Documents:
------------------
(i) any Security Provider commits any breach of or omits to
observe any of its obligations or undertakings expressed to be
assumed by it under any Security Document and in respect of
any such breach or omission which is capable of remedy, such
action as the Agent may require shall not have been taken
within 21 days of the Agent and/or the Security Trustee
notifying such Security Provider thereof of such required
action; or
(ii) any representation or warranty made or deemed to be made or
repeated by or in respect of any Security Provider in or
pursuant to any Security Document is or proves to have been
incorrect or misleading in any material respect on the date on
which it was made or deemed to be made or repeated and, in the
event that the act or circumstance which led to such
representation or warranty being incorrect or misleading is
capable of remedy, such action as the Agent and/or the
Security Trustee may require shall not have been taken within
21 days of the Agent and/or the Security Trustee notifying the
relevant Security Provider of such act or circumstance and
such required action; or
(iii) any Security Provider is not or ceases to be bound by any
Security Document; or
(iv) any Security Document is not or ceases to constitute a valid
security interest over the relevant assets of the relevant
Security Provider in accordance with its terms; or
(v) any Security Provider or any liquidator, administrator or
administrative or other receiver (or similar officer) of any
Security Provider takes steps to contest any Security Document
and/or encumbrance effected by a Security Document; or
(z) Material events: any other event occurs or circumstances arise which
---------------
in the opinion of the Agent acting on the instructions of the
Majority Banks is likely to have a Material Adverse Effect; or
(aa) Qualification of accounts: the auditors of any member of the
-------------------------
Restricted Group qualify their report on the audited financial
statements of the relevant member of the Restricted Group and/or the
audited consolidated financial statements of the Restricted Group in
any way whatsoever except where the qualification is of a technical
nature and the remedy for the matter giving rise to the
qualification would have no effect on the results of the relevant
member of the Restricted Group for the period to which such accounts
relate or on the financial position of the relevant member of the
Restricted Group as at the end of such period; or
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(ab) Failure to borrow the Philips Advance: the Parent fails to draw down
-------------------------------------
the Philips Advance in accordance with the terms of this Agreement
on or before the date falling 180 days after the date of the first
Advance (or such other date as may be agreed by the Agent (acting on
the instructions of all of the Banks acting reasonably)) and there
occurs an Event of Default pursuant to clause 4.10(b); or
(ac) Failure to prepay the Bridge Facility: the Parent fails to procure
-------------------------------------
the prepayment and permanent cancellation of the Bridge Facility by
the earlier of 10 Banking Days following the Completion of the
Initial Equity Raise and the next interest payment date under the
Bridge Facility following Completion of the Initial Equity Raise.
13.2 Acceleration
------------
The Agent may and if so requested by the Majority Banks shall, without
prejudice to any other rights of the Banks, at any time after the
happening of an Event of Default so long as the same is continuing,
unremedied or unwaived by notice to the Parent declare that:
(a) the obligation of each Bank to make its Commitment available shall
be terminated, whereupon the Total Commitments shall be reduced to
zero forthwith; and/or
(b) all outstanding Advances and all interest and commitment commission
accrued and all other sums payable under this Agreement have become
immediately due and payable or have become due and payable on
demand, whereupon the same shall, immediately or in accordance with
the terms of such notice, become so due and payable; and/or
(c) the Security Documents (or any of them) have become enforceable
whereupon the same shall be enforceable.
On or at any time after the making of any such declaration, the Agent
shall be entitled, to the exclusion of the Borrowers (and without
prejudice to clause 5.3), to select the duration of each period for the
calculation of interest in relation to any outstanding Advances or other
sums payable under this Agreement Provided that the Agent agrees that,
without prejudice to any of its other rights under this Agreement, it
shall not accelerate the due date of any sums payable by Telekabel Wien
until 28 days after the date that the Agent has given notice to Telekabel
Wien that a Default has occurred unless at such time (i) Telekabel Wien
has breached any of its obligations under this Agreement or (ii) an Event
of Default has otherwise occurred in relation to Telekabel Wien, in which
case such 28 day grace period (or any unexpired part thereof) shall not
apply.
13.3 Demand basis
------------
If, pursuant to clause 13.2(b), the Agent declares all outstanding
Advances to be due and payable on demand then the Agent may (and, if so
instructed by the
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Majority Banks, shall) at any time by written notice to the Parent (a)
call for repayment of the Advances on such date as may be specified in
such notice whereupon the Advances shall become due and payable on the
date so specified together with all interest and commitment commission
accrued and all other sums payable under this Agreement or (b) withdraw
such declaration with effect from the date specified in such notice.
14 INDEMNITIES
-----------
14.1 Miscellaneous indemnities
-------------------------
The Parent shall on demand indemnify each Bank, the Arranger and the
Agent, without prejudice to any of their other rights under this Agreement
and the Security Documents, against any loss (including loss of Margin) or
expense which such Bank, the Arranger or the Agent shall certify as
sustained or incurred by it as a consequence of:
(a) any default in payment by any Obligor of any sum under this Agreement
or any of the Security Documents when due;
(b) the occurrence of any other Event of Default;
(c) any prepayment of all or part of any Advance or being made otherwise
than on its Maturity Date; or
(d) any Advance not being made or issued for any reason (excluding any
default by the Agent, the Arranger or any Bank) after a Drawdown
Notice has been given;
including, in any such case, but not limited to, any loss or expense
sustained or incurred by such Bank in maintaining or funding all or any
part of its Contribution or in liquidating or re-employing deposits from
third parties acquired or contracted for to fund all or any part of its
Contribution or any other amount owing to such Bank.
14.2 Currency of account; currency indemnity
---------------------------------------
No payment by any Obligor under this Agreement which is made in a currency
other than the currency ("CONTRACTUAL CURRENCY") in which such payment is
required to be made pursuant to this Agreement shall discharge the
obligation in respect of which it is made except to the extent of the net
proceeds in the Contractual Currency received by the Agent upon the sale
of the currency so received, after taking into account any premium and
costs of exchange in connection with such sale. For the avoidance of doubt
the Agent, the Arranger, the Security Trustee and the Banks shall not be
obliged to accept any such payment in a currency other than the
Contractual Currency nor shall the Agent, the Arranger, the Security
Trustee or the Banks be liable to any Obligor for any loss or alleged loss
arising from fluctuations in exchange rates between the date on which such
payment is so received by the Agent and the date on which the Agent
effects such sale, as to which the Agent shall (as against the relevant
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Obligor) have an absolute discretion. If any sum due from any Obligor
under this Agreement or any order or judgment given or made in relation
hereto is required to be converted from the Contractual Currency or the
currency in which the same is payable under such order or judgment (the
"FIRST CURRENCY") into another currency (the "SECOND CURRENCY") for the
purpose of (a) making or filing a claim or proof against the relevant
Obligor, (b) obtaining an order or judgment in any court or other tribunal
or (c) enforcing any order or judgment given or made in relation to this
Agreement, the relevant Obligor shall indemnify and hold harmless the
Agent, the Arranger, the Security Trustee and each Bank from and against
any loss suffered as a result of any difference between (i) the rate of
exchange used for such purpose to convert the sum in question from the
first currency into the second currency and (ii) the rate or rates of
exchange at which the Agent, the Arranger, the Security Trustee or such
Bank may in the ordinary course of business purchase the first currency
with the second currency upon receipt of a sum paid to it in satisfaction,
in whole or in part, of any such order, judgment, claim or proof. Any
amount due from any Obligor under the indemnity contained in this clause
14.2 shall be due as a separate debt and shall not be affected by judgment
being obtained for any other sums due under or in respect of this
Agreement and the term "RATE OF EXCHANGE" includes any premium and costs
of exchange payable in connection with the purchase of the first currency
with the second currency.
14.3 Environmental indemnity
-----------------------
The Parent agrees to indemnify on demand each Bank, the Arranger, the
Security Trustee and the Agent, and their respective officers, employees,
agents and delegates (together the "INDEMNIFIED PARTIES") in respect of
which each Bank, the Arranger, the Security Trustee and the Agent holds
this indemnity on trust, without prejudice to any of their other rights
under this Agreement, against any loss, liability, action, claim, demand,
cost, expense, fine or other outgoing whatsoever whether in contract,
tort, delict or otherwise and whether arising at common law, in equity or
by statute which the relevant Indemnified Party shall certify as sustained
or incurred by it at any time as a consequence of, or relating to, or
arising directly or indirectly out of, any Environmental Claims made or
asserted against such Indemnified Party which would not have arisen if
this Agreement had not been executed and which was not caused by the
negligence or wilful default of the relevant Indemnified Party.
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15 UNLAWFULNESS AND INCREASED COSTS; MITIGATION
--------------------------------------------
15.1 Unlawfulness
------------
If it is or becomes contrary to any law or regulation for any Bank to
contribute to Advances or to maintain its Commitment or fund its
Contribution, such Bank shall promptly, through the Agent, notify the
Parent whereupon (a) such Bank's Commitment shall be reduced to zero and
(b) the Borrowers shall be obliged to prepay the Contribution of such Bank
either (i) forthwith or (ii) on a future specified date not being earlier
than the latest date permitted by the relevant law or regulation. Any
prepayment pursuant to this clause 15.1 shall be made together with all
amounts referred to in clause 6.4.
15.2 Increased costs
---------------
If the result of any change in, or in the interpretation or application
of, or the introduction of, any law or any regulation, request or
requirement (whether or not having the force of law, but, if not having
the force of law, with which the relevant Bank or, as the case may be, its
holding company habitually complies), including (without limitation) those
relating to Taxation, capital adequacy, liquidity, reserve assets, cash
ratio deposits and special deposits, is to:
(a) subject any Bank to Taxes or change the basis of Taxation of any Bank
with respect to any payment under this Agreement (other than Taxes or
Taxation on the overall net income, profits or gains of such Bank
imposed in the jurisdiction in which its principal or lending office
under this Agreement is located); and/or
(b) increase the cost to, or impose an additional cost on, any Bank or its
holding company in making or keeping available all or part of such
Bank's Commitment or maintaining or funding all or part of such Bank's
Contribution; and/or
(c) reduce the amount payable or the effective return to any Bank under
this Agreement; and/or
(d) reduce any Bank's or its holding company's rate of return on its
overall capital by reason of a change in the manner in which it is
required to allocate capital resources to such Bank's obligations
under this Agreement; and/or
(e) require any Bank or its holding company to make a payment or forgo a
return calculated by reference to or on any amount received or
receivable by such Bank under this Agreement; and/or
(f) require any Bank or its holding company to incur or sustain a loss
(including a loss of future potential profits) by reason of being
obliged to deduct all or part of such Bank's Commitment or
Contribution from its capital for regulatory purposes,
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then and in each such case (but subject to clause 15.3):
(i) such Bank shall notify the Parent through the Agent in writing of
such event promptly upon its becoming aware of the same; and
(ii) the Parent shall on demand, made at any time whether or not such
Bank's Contribution has been repaid, pay to the Agent for the account
of such Bank the amount which such Bank specifies (in a certificate
setting forth the basis of the computation of such amount but not
including any matters which such Bank or its holding company regards
as confidential) is required to compensate such Bank and/or its
holding company for such liability to Taxes, increased or additional
cost, reduction, payment, forgone return or loss.
For the purposes of this clause 15.2 and clause 15.4 "HOLDING COMPANY"
means, in relation to a Bank, the company or entity (if any) within the
consolidated supervision of which such Bank is included.
15.3 Exceptions
----------
Nothing in clause 15.2 shall entitle any Bank to receive any amount in
respect of compensation for any such liability to Taxes, increased or
additional cost, reduction, payment, forgone return or loss to the extent
that the same:
(a) is taken into account in calculating the Additional Cost; or
(b) is the subject of an additional payment under clause 8.5; or
(c) arises as a consequence of (or of any law or regulation implementing)
(i) the proposals for international convergence of capital
measurement and capital standards published by the Basle Committee
on Banking Regulations and Supervisory Practices in July 1988 and/or
(ii) any applicable directive of the European Union (in each case)
unless it results from any change in, or in the interpretation or
application of, such proposals or any such applicable directive (or
any law or regulation implementing the same) occurring after the
date hereof; or
(d) arises as a result of a breach by such Bank of any regulation, request
or requirement (which either (i) is in existence at the date of this
Agreement or (ii) which comes into effect after the date of this
Agreement and with which such Bank would have complied if such
regulation, request or requirement was in effect on the date of this
Agreement) of any applicable central bank or other fiscal, monetary or
other authority (whether or not having the force of law).
For the purposes of clause 15.3(c) the term "APPLICABLE DIRECTIVE" means
(exclusively) each of the Own Funds Directive (89/299/EEC of 17th April
1989) and the Solvency Ratio Directive (89/647/EEC of 18th December 1989).
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15.4 Mitigation
----------
If circumstances arise which would, or would upon the giving of notice,
result in:
(a) the application of clause 5.6 in relation to any Bank;
(b) any Obligor being required to make an increased payment to any Bank
pursuant to clause 8.5;
(c) the reduction of any Bank's Commitment to zero or the Borrowers being
required to prepay any Bank's Contribution pursuant to clause 15.1; or
(d) the Parent being required to make a payment to any Bank to compensate
such Bank or its holding company for a liability to Taxes, increased
or additional cost, reduction, payment, forgone return or loss
pursuant to clause 15.2(ii);
then, without in any way limiting, reducing or otherwise qualifying the
obligations of the Parent or the Borrowers under clause 8 and this clause
15, such Bank shall, in consultation with the Agent, endeavour to take
such reasonable steps (and/or, in the case of clause 15.2(ii) and where
the increased or additional cost, reduction, payment, forgone return or
loss is that of its holding company, endeavour to procure that its holding
company takes such reasonable steps) as are open to it (or, as the case
may be, its holding company) to mitigate or remove such circumstances
(including (in the case of such Bank) the transfer of its rights and
obligations under this Agreement to another bank or financial institution
acceptable to the Parent) unless the taking of such steps might (in the
opinion of such Bank) be prejudicial to such Bank (or, as the case may be,
its holding company) or be in conflict with such Bank's (or, as the case
may be, its holding company's) general banking policies or involve such
Bank (or, as the case may be, its holding company) in any material expense
or any material increased administrative burden.
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16 SET-OFF AND PRO RATA PAYMENTS
-----------------------------
16.1 Set-off
-------
Each Obligor authorises each Bank to apply any credit balance to which
such Obligor is then entitled on any account of such Obligor with such
Bank at any of its branches in or towards satisfaction of any sum then due
and payable from such Obligor to such Bank under this Agreement. For this
purpose each Bank is authorised to purchase with the moneys standing to
the credit of such account such other currencies as may be necessary to
effect such application. No Bank shall be obliged to exercise any right
given to it by this clause 16.1. Each Bank shall notify the Agent and the
relevant Obligor (giving full details) forthwith upon the exercise or
purported exercise of any right of set-off and the Agent shall inform the
other Banks.
16.2 Pro rata payments
-----------------
(a) If at any time any Bank (the "RECOVERING BANK") receives or recovers
any amount owing to it by any Obligor under this Agreement by direct
payment, set-off or in any manner other than by payment through the
Agent pursuant to clause 8.1 or 8.10 (not being a payment received
from a Substitute in such Bank's Contribution or any other payment
of an amount due to the Recovering Bank for its sole account
pursuant to clauses 6.3, 7, 8.5, 14.1, 14.2, 15 or 15.2), the
Recovering Bank shall, within two Banking Days of such receipt or
recovery (a "RELEVANT RECEIPT") notify the Agent of the amount of
the Relevant Receipt. If the Relevant Receipt exceeds the amount
which the Recovering Bank would have received if the Relevant
Receipt had been received by the Agent and distributed pursuant to
clause 8.1 or 8.10 (as the case may be) then:
(i) within two Banking Days of demand by the Agent, the Recovering
Bank shall pay to the Agent an amount equal (or equivalent) to
the excess;
(ii) the Agent shall treat the excess amount so paid by the
Recovering Bank as if it were a payment made by the relevant
Obligor and shall distribute the same to the Banks (other than
the Recovering Bank) in accordance with clause 8.10; and
(iii) as between the relevant Obligor and the Recovering Bank the
excess amount so re-distributed shall be treated as not having
been paid but the obligations of the relevant Obligor to the
other Banks shall, to the extent of the amount so re-
distributed to them, be treated as discharged.
(b) If any part of the Relevant Receipt subsequently has to be wholly or
partly refunded by the Recovering Bank (whether to a liquidator or
otherwise) each Bank to which any part of such Relevant Receipt was
so re-distributed shall on request from the Recovering Bank repay to
the
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Recovering Bank such Bank's pro rata share of the amount which has
to be refunded by the Recovering Bank.
(c) Each Bank shall on request supply to the Agent such information as
the Agent may from time to time request for the purpose of this
clause 16.2.
(d) Notwithstanding the foregoing provisions of this clause 16.2 no
Recovering Bank shall be obliged to share any Relevant Receipt which
it receives or recovers pursuant to legal proceedings taken by it to
recover any sums owing to it under this Agreement with any other
party which has a legal right to, but does not, either join in such
proceedings or commence and diligently pursue separate proceedings
to enforce its rights in the same or another court (unless the
proceedings instituted by the Recovering Bank are instituted by it
without prior notice having been given to such party through the
Agent).
16.3 No release
----------
For the avoidance of doubt it is hereby declared that failure by any
Recovering Bank to comply with the provisions of clause 16.2 shall not
release any other Recovering Bank from any of its obligations or
liabilities under clause 16.2.
16.4 No charge
---------
The provisions of this clause 16 shall not, and shall not be construed so
as to, constitute a charge by a Bank over all or any part of a sum
received or recovered by it in the circumstances mentioned in clause 16.2.
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17 ASSIGNMENT, SUBSTITUTION AND LENDING OFFICES
--------------------------------------------
17.1 Benefit and burden
------------------
This Agreement shall be binding upon, and enure for the benefit of, the
Banks, the Arranger, the Agent, the Security Trustee and the Obligors and
their respective successors.
17.2 No assignment by Obligors
-------------------------
None of the Obligors may assign or otherwise transfer any of its rights or
obligations under this Agreement.
17.3 Substitution
------------
Each Bank (an "EXISTING BANK") may transfer, by way of novation (but not
by way of assignment or otherwise), all or any part (being at least NLG
15,000,000 and an integral multiple of NLG 5,000,000) of its rights,
benefits and/or obligations under this Agreement (including, for the
avoidance of doubt, any outstanding Telekabel Notes) to a Qualifying Bank
(a "SUBSTITUTE") with the prior consent in writing of the Parent, such
consent not to be unreasonably withheld or delayed. Any such novation
shall be effected upon not less than 5 Banking Days' prior notice by
delivery to the Agent of a duly completed Substitution Certificate duly
executed by the Existing Bank and the Substitute. On the Effective Date
(as specified and defined in a Substitution Certificate so executed and
delivered), to the extent that the Commitment and Contribution of the
Existing Bank are expressed in a Substitution Certificate to be the
subject of the novation in favour of the Substitute effected pursuant to
this clause 17.3, by virtue of the counter-signature of the Substitution
Certificate by the Agent (for itself and the other parties to this
Agreement):
(a) the existing parties to this Agreement and the Security Trust Deed
and the Existing Bank shall be released from their respective
obligations towards one another under this Agreement and the
Security Trust Deed ("DISCHARGED OBLIGATIONS") and their respective
rights against one another under this Agreement and the Security
Trust Deed ("DISCHARGED RIGHTS") shall be cancelled;
(b) the Substitute party to the relevant Substitution Certificate and
the existing parties to this Agreement and the Security Trust Deed
(other than such Existing Bank) shall assume obligations towards
each other which differ from the discharged obligations only insofar
as they are owed to or assumed by such Substitute instead of to or
by such Existing Bank; and
(c) the Substitute party to the relevant Substitution Certificate and
the existing parties to this Agreement and the Security Trust Deed
(other than such Existing Bank) shall acquire rights against each
other which
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differ from the discharged rights only insofar as they are
exercisable by or against such Substitute instead of by or against
such Existing Bank;
and, on such Effective Date, the Substitute shall pay to the Agent for its
own account a fee of(pound)1,000. The Agent shall promptly notify the
Parent of the receipt by it of any Substitution Certificate and shall
promptly deliver a copy of such Substitution Certificate to the Parent.
17.4 Reliance on Substitution Certificate
------------------------------------
The Agent, the Banks, the Arranger, the Security Trustee and the Obligors
shall be fully entitled to rely on any Substitution Certificate delivered
to the Agent in accordance with the foregoing provisions of this clause 17
which is complete and regular on its face as regards its contents and
purportedly signed on behalf of the relevant Existing Bank and the
Substitute and none of the Agent, the Banks, the Arranger, the Security
Trustee or the Obligors shall have any liability or responsibility to any
party as a consequence of placing reliance on and acting in accordance
with any such Substitution Certificate if it proves to be the case that
the same was not authentic or duly authorised.
17.5 Authorisation of Agent
----------------------
Each party to this Agreement irrevocably authorises the Agent to counter-
sign each Substitution Certificate on its behalf for the purposes of
clause 17.3 without any further consent of, or consultation with, any such
party except, in the case of the Parent, the consent required pursuant to
clause 17.3.
17.6 Construction of certain references
----------------------------------
If any Bank novates all or any part of its rights, benefits and
obligations as provided in clause 17.3 all relevant references in this
Agreement and the Security Trust Deed to such Bank shall thereafter be
construed as a reference to such Bank and/or its Substitute to the extent
of their respective interests.
17.7 Lending offices
---------------
Each Bank shall lend through its office at the address specified in part A
of schedule 1 or, as the case may be, in any relevant Substitution
Certificate or through any other office of such Bank selected from time to
time by such Bank through which such Bank wishes to lend for the purposes
of this Agreement, Provided that no such change of lending office may take
place if it would involve any Obligor having to pay any increased cost
with respect to its obligations under this Agreement. If the office
through which a Bank is lending is changed pursuant to this clause 17.7,
such Bank shall notify the Agent promptly of such change.
17.8 Disclosure of information
-------------------------
Subject to such person first executing a confidentiality undertaking in a
form acceptable to the Parent, acting reasonably, any Bank may disclose to
a
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prospective transferee or to any other person who may propose entering
into contractual relations with such Bank in relation to this Agreement
such information about the Restricted Group as such Bank shall consider
appropriate.
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18 ARRANGER, AGENT, SECURITY TRUSTEE AND REFERENCE BANKS
-----------------------------------------------------
18.1 Appointment of Agent
--------------------
Each Bank irrevocably appoints the Agent as its agent for the purposes of
this Agreement and irrevocably authorises the Agent in such capacity:
(a) to execute all documents as may be approved by the Majority Banks
for execution by the Agent; and
(b) (whether or not by or through employees or agents) to take such
action on such Bank's behalf and to exercise such rights, remedies,
powers and discretions as are specifically delegated to the Agent by
this Agreement or, (as the case may be) the Security Documents,
together with such powers and discretions as are reasonably
incidental thereto (but subject to any restrictions or limitations
specified in this Agreement). None of the Agent, or the Arranger or
the Security Trustee shall, however, have any duties, obligations or
liabilities (whether fiduciary or otherwise) to the Banks beyond
those expressly stated in this Agreement and/or the Security
Documents.
Notwithstanding that the Agent and the Security Trustee may from time to
time be the same entity, the Agent and Security Trustee have entered into
this Agreement in their separate capacities as agent for the Banks under
and pursuant to this Agreement and as security trustee for the
Beneficiaries (as defined in the Security Trust Deed) to hold the security
created or to be created by the Security Documents on the terms set out in
the Security Trust Deed. However, where this Agreement provides for the
Agent to communicate with or provide instructions to the Security Trustee,
while the Agent and the Security Trustee are the same entity, it will not
be necessary for there to be any such formal communications or
instructions notwithstanding that this Agreement provides in certain cases
for the same to be in writing.
18.2 Agent's actions
---------------
Any action taken by the Agent under or in relation to this Agreement with
requisite authority, or on the basis of appropriate instructions, received
from the Majority Banks (or as otherwise duly authorised) shall be binding
on all the Banks.
18.3 Agent's duties
--------------
The Agent shall:
(a) promptly notify each Bank of the contents of each notice,
certificate or other document received by the Agent from the Parent
or any other Obligor under or pursuanrt to this Agreement;
(b) consult with the Banks as to whether and, if so, how a discretion
vested in the Agent is, either in any particular instance or
generally, to be
114
<PAGE>
exercised but so that this shall not prevent the Agent in
exceptional circumstances where time does not permit such
consultation and urgent action is required, from exercising its
rights and powers, or from instructing the Security Trustee to
exercise its rights and powers, to preserve the security constituted
by the Security Documents so long as the Agent promptly notifies the
Banks subsequently of such exercise; and
(c) (subject to the other provisions of this clause 18) take such action
or, as the case may be, refrain from taking such action with respect
to the exercise of any of its rights, remedies, powers and
discretions as agent or security agent, as the Majority Banks may
reasonably direct.
18.4 Agent's rights
--------------
The Agent may:
(a) in the exercise of any right, remedy, power or discretion in
relation to any matter, or in any context, not expressly provided
for by this Agreement, act or, as the case may be, refrain from
acting in accordance with the instructions of the Majority Banks,
and shall be fully protected in so doing;
(b) unless and until it shall have received directions from the Majority
Banks, take such action, or refrain from taking such action in
respect of a Default of which the Agent has actual knowledge as it
shall deem advisable in the best interests of the Banks (but shall
not be obliged to do so);
(c) refrain from acting in accordance with any instructions of the
Majority Banks to institute, or to instruct the Security Trustee to
institute any legal proceedings arising out of or in connection with
this Agreement and/or the Security Documents until it and/or the
Security Trustee has been indemnified and/or secured to its
satisfaction against any and all costs, expenses or liabilities
(including legal fees) which it and/or the Security Trustee would or
might incur as a result;
(d) deem and treat (i) each Bank as the person entitled to the benefit
of the Contribution of such Bank for all purposes of this Agreement
and the Security Documents unless and until a Substitution
Certificate shall have been filed with the Agent and shall have
become effective, and (ii) the office set opposite the name of each
Bank in part A of schedule 1 or, as the case may be, in any relevant
Substitution Certificate as such Bank's lending office unless and
until a written notice of change of lending office shall have been
received by the Agent; and the Agent may act upon any such notice
unless and until the same is superseded by a further such notice;
115
<PAGE>
(e) rely as to matters of fact which might reasonably be expected to be
within the knowledge of any Obligor upon a certificate signed by any
director of the relevant Obligor on behalf of such Obligor; and
(f) refrain from doing anything which would, or might in its opinion, be
contrary to any law or regulation of any jurisdiction and may do
anything which is in its opinion necessary or desirable to comply
with any such law or regulation.
18.5 No liability of Arranger, Security Trustee and Agent
----------------------------------------------------
None of the Arranger, the Security Trustee, the Agent or any of their
respective employees and agents shall:
(a) be obliged to request any certificate or opinion under clause 11.1
or any provision of the Security Documents or to make any enquiry as
to the use of the proceeds of the Facility unless (in the case of
the Agent) so required in writing by any Bank, in which case the
Agent shall promptly make the appropriate request of the relevant
Obligor; or
(b) be obliged to make any enquiry as to any breach or default by any
Obligor in the performance or observance of any of the provisions of
this Agreement or as to the existence of a Default unless (in the
case of the Agent) the Agent has actual knowledge thereof or has
been notified in writing thereof by a Bank, in which case the Agent
shall promptly notify the Banks of the relevant event or
circumstance; or
(c) be obliged to enquire whether or not any representation or warranty
made by any Obligor pursuant to this Agreement or any of the
Security Documents is true; or
(d) be obliged to do anything (including, without limitation, disclosing
any document or information) which would, or might in its opinion,
be contrary to any law or regulation or be a breach of any duty of
confidentiality or otherwise be actionable or render it liable to
any person; or
(e) be obliged to account to any Bank for any sum or the profit element
of any sum received by it for its own account; or
(f) be obliged to institute any legal proceedings arising out of or in
connection with, or otherwise take steps to enforce, this Agreement
and/or the Security Documents other than on the instructions of the
Majority Banks; or
(g) be liable to any Bank for any action taken or omitted under or in
connection with this Agreement and/or the Security Documents or the
Loan unless caused by its gross negligence or wilful misconduct.
116
<PAGE>
For the purposes of this clause 18 neither the Agent, nor the Security
Trustee shall be treated as having actual knowledge of any matter of which
the corporate finance or any other division outside the agency or loan
administration department of the person for the time being acting as the
Agent or the Security Trustee, as the case may be, may become aware in the
context of corporate finance, advisory or lending activities from time to
time undertaken by the Agent or the Security Trustee, as the case may be,
for the Parent or any of its Subsidiaries or Associated Companies or any
other person which may be a trade competitor of any of the Obligors or may
otherwise have commercial interests similar to those of any of the
Obligors.
18.6 Non-reliance on Arranger, Security Trustee or Agent
---------------------------------------------------
Each Bank acknowledges, by virtue of its execution of this Agreement or,
as the case may be, a Substitution Certificate, that it has not relied on
any statement, opinion, forecast or other representation made by the
Arranger, the Security Trustee or the Agent to induce it to enter into
this Agreement and that it has made and will continue to make, without
reliance on the Agent, the Security Trustee or the Arranger and based on
such documents as it considers appropriate, its own appraisal of the
creditworthiness of the Parent and its Subsidiaries and its own
independent investigation of the financial condition, prospects and
affairs of the Parent and its Subsidiaries in connection with the making
and continuation of the Loan under this Agreement. None of the Arranger,
the Security Trustee or the Agent shall have any duty or responsibility,
either initially or on a continuing basis, to provide any Bank with any
credit or other information with respect to the Obligors whether coming
into its possession before the making of any Advance or at any time or
times thereafter, other than (in the case of the Agent) as provided in
clause 18.3(a).
18.7 No Responsibility on Arranger, Security Trustee or Agent for any Obligor's
--------------------------------------------------------------------------
performance
-----------
None of the Arranger, the Security Trustee or the Agent shall have any
responsibility or liability to any Bank:
(a) on account of the failure of any Obligor to perform its obligations
under this Agreement or any Security Document; or
(b) for the financial condition of any Obligor; or
(c) for the completeness or accuracy of any statements, representations
or warranties in this Agreement, any Security Document or the
Information Memorandum or any document delivered under this
Agreement or any Security Document; or
(d) for the execution, effectiveness, adequacy, genuineness, validity,
enforceability or admissibility in evidence of this Agreement or any
of the Security Documents or of any certificate, report or other
document
117
<PAGE>
executed or delivered under this Agreement or any of the Security
Documents; or
(e) otherwise in connection with the Facility or its negotiation or for
acting (or, as the case may be, refraining from acting) in
accordance with the instructions of the Majority Banks.
18.8 Reliance on documents and professional advice
---------------------------------------------
The Arranger and the Agent shall be entitled to rely on any communication,
instrument or document believed by it to be genuine and correct and to
have been signed or sent by the proper person and shall be entitled to
rely as to legal or other professional matters on opinions and statements
of any legal or other professional advisers selected or approved by it
(including those in the Agent's employment).
18.9 Other dealings
--------------
The Arranger and the Agent may, without any liability to account to the
Banks, accept deposits from, lend money to, and generally engage in any
kind of banking or other business with, and provide advisory or other
services to, the Parent or any of its Subsidiaries or associated companies
or any of the Banks as if it were not the Arranger or the Agent, as the
case may be.
18.10 Rights of Agent as Bank; no partnership
---------------------------------------
With respect to its own Commitment and Contribution (if any) the Agent
shall have the same rights and powers under this Agreement and the
Security Documents as any other Bank and may exercise the same as though
it were not performing the duties and functions delegated to it under this
Agreement and/or the Security Documents and the term "BANKS" shall, unless
the context clearly otherwise indicates, include the Agent in its
individual capacity as a Bank. This Agreement shall not and shall not be
construed so as to constitute a partnership between the parties or any of
them.
18.11 Amendments; waivers
-------------------
(a) Subject to clause 18.11(b), the Agent may, with the consent of the
Majority Banks (or if and to the extent expressly authorised by the
other provisions of this Agreement) and, if so instructed by the
Majority Banks, shall (i) agree amendments or modifications to this
Agreement with the Obligors and/or (ii) vary or waive breaches of,
or defaults under, or otherwise excuse performance of, any provision
of this Agreement by any Obligor. Any such action so authorised and
effected by the Agent shall be documented in such manner as the
Agent shall (with the approval of the Majority Banks) determine,
shall be promptly notified to the Banks by the Agent and (without
prejudice to the generality of clause 18.2) shall be binding on all
the Banks.
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<PAGE>
(b) Except with the prior written consent of all the Banks, the Agent
shall not have authority on behalf of the Banks (A) to agree with
any Obligor any amendment or modification to this Agreement or to
grant waivers in respect of breaches or defaults or to vary or
excuse performance of or under this Agreement by any Obligor, if the
effect of such amendment, modification, waiver, variation or excuse
would be to (i) reduce the Margin, (ii) postpone the due date or
reduce the amount of any reduction in availability, any payment of
principal, interest, commitment commission or other amount payable
by any Obligor under this Agreement, (iii) change the currency in
which any amount is payable by any Obligor under this Agreement,
(iv) increase any Bank's Commitment, (v) extend the Availability
Period, (vi) change the definition of "Majority Banks" in clause
1.2, (vii) change any provision of this Agreement which expressly or
impliedly requires the approval or consent of all the Banks such
that the relevant approval or consent may be given otherwise than
with the sanction of all the Banks, (viii) change clause 4.1, (ix)
change the order of distribution under clause 8.10, (x) change
clause 16.2, (xi) change this clause 18.11 or (B) release any member
of the Restricted Group or any of their respective assets from the
security created by any of the Security Documents unless such
release is to permit the disposal or other dealing with such asset
in accordance with the terms of this Agreement and any relevant
Security Document or (C) release any Guarantor from its obligations
under any Guarantee to which it is a party.
(c) For the purposes of this clause 18.11 it is expressly agreed and
acknowledged that the execution of a Deed of Borrower Accession or a
Deed of Guarantor Accession or any deed or instrument pursuant to a
further assurance provision in the Security Documents shall not
constitute an amendment or modification to, or variation of, this
Agreement or any of the Security Documents.
18.12 Reimbursement and indemnity by Banks
------------------------------------
Each Bank shall reimburse the Arranger and the Agent (rateably in
accordance with such Bank's Commitment or Contribution), to the extent
that the Arranger or the Agent is not reimbursed by the Obligors, for the
costs, charges and expenses incurred by the Arranger and the Agent in
connection with the negotiation, preparation and execution of this
Agreement and the Security Documents and/or in contemplation of, or
otherwise in connection with, the enforcement or attempted enforcement of,
or the preservation or attempted preservation of any rights under, or in
carrying out its duties under, this Agreement and/or any of the Security
Documents including (in each case) the fees and expenses of legal or other
professional advisers. Each Bank shall on demand indemnify the Agent
(rateably in accordance with its Commitment or Contribution) against all
liabilities, damages, costs and claims whatsoever incurred by the Agent in
connection with this Agreement and the Security Documents or the
performance of its duties under this Agreement and the
119
<PAGE>
Security Documents or any action taken or omitted by the Agent under this
Agreement and/or any of the Security Documents, unless such liabilities,
damages, costs or claims arise from the Agent's own gross negligence or
wilful misconduct.
18.13 Retirement of Agent
-------------------
(a) The Agent may retire from its appointment as Agent under this
Agreement having given to the Parent and each of the Banks not less
than 30 days' notice of its intention to do so, provided that no
such retirement shall take effect unless there has been appointed by
the Banks as a successor agent:
(i) a Bank nominated by the Majority Banks with the consent of the
Parent (not to be unreasonably withheld or delayed) or,
failing such a nomination,
(ii) any reputable and experienced bank or financial institution
with offices in London nominated by the Agent with the consent
of the Parent (not to be unreasonably withheld or delayed).
Any corporation into which the Agent may be merged or converted or
any corporation with which the Agent may be consolidated or any
corporation resulting from any merger, conversion, amalgamation,
consolidation or other reorganisation to which the Agent shall be a
party shall, to the extent permitted by applicable law, be the
successor Agent under this Agreement without the execution or filing
of any document or any further act on the part of any of the parties
to this Agreement, save that notice of any such merger, conversion,
amalgamation, consolidation or other reorganisation shall forthwith
be given to the Parent and the Banks.
(b) Upon any such successor as aforesaid being appointed, the retiring
Agent shall be discharged from any further obligation under this
Agreement (but shall continue to have the benefit of this clause 18
in respect of any action it has taken or refrained from taking prior
to such discharge) and its successor and each of the other parties
to this Agreement shall have the same rights and obligations among
themselves as they would have had if such successor had been a party
to this Agreement in place of the retiring Agent. The retiring Agent
shall (at the expense of the Parent) provide its successor with
copies of such of its records as its successor reasonably requires
to carry out its functions under this Agreement.
18.14 Change of Reference Banks
-------------------------
If (a) the whole of the Contribution (if any) of any Reference Bank is
prepaid, (b) the Commitment (if any) of any Reference Bank is reduced to
zero in accordance with clause 6.3 or 15.1, (c) a Reference Bank novates
the whole of its rights and obligations (if any) as a Bank under this
Agreement or (d) any
120
<PAGE>
Reference Bank ceases to provide quotations to the Agent for the purposes
of determining LIBOR, the Agent may, acting on the instructions of the
Majority Banks, terminate the appointment of such Reference Bank and after
consultation with the Parent appoint another Bank to replace such
Reference Bank.
18.15 Prompt distribution of proceeds
-------------------------------
Moneys received by the Security Trustee (whether from a Receiver or
otherwise) pursuant to the exercise of (or otherwise by virtue of the
existence of) any rights and powers under or pursuant to any of the
Security Documents shall be paid to the Agent for distribution in
accordance with the terms of the Security Trust Deed shall be distributed
by the Agent as soon as is practicable after the relevant moneys are
received by, or otherwise become available to, the Agent save that
(without prejudice to any other provision contained in any of the Security
Documents) the Agent (acting on the instructions of the Majority Banks)
may credit any moneys received by it to a suspense account for so long and
in such manner as the Agent may from time to time determine with a view to
preserving the rights of the Agent and/or the Arranger and/or the Banks or
any of them to prove for the whole of their respective claims against any
Obligor or any other person liable.
121
<PAGE>
19. NOTICES AND OTHER MATTERS
-------------------------
19.1 Notices
-------
Every notice, request, demand or other communication under this Agreement
shall:
(a) be in writing delivered personally or by first-class prepaid letter
(airmail if available) or telefax;
(b) be deemed to have been received, subject as otherwise provided in
this Agreement, in the case of a letter when delivered and, in the
case of a telefax, when a complete and legible copy is received by
the addressee (unless the date of despatch is not a business day in
the country of the addressee or the time of despatch of any telefax
is after the close of business in the country of the addressee in
which case it shall be deemed to have been received at the opening
of business on the next such business day); and
(c) be sent:
(i) to each Obligor at:
Fred. Roeskestraat 123
PO Box 74763,
1070 BT Amsterdam
Telefax: (31) 20578 9861
Attention: Chief Financial Officer
and,
in addition, the case of Telekabel Wien only, to:
Telekabel Wien G.m.b.H
Erlachgasse 116
1100, Wien, Austria
Telefax: 431 1701 211
Attention: Chief Financial Officer
(ii) to the Agent, the Arranger and the Security Trustee at:
Triton Court,
14/18 Finsbury Square,
London EC2A 1DB
Telefax: (44) 171 638 2551
Attention: Manager, Loans Agency
and:
Telefax: (44) 171 638 0006
Attention: Director, Communications Finance
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<PAGE>
(iii) to each Bank
at its address or telefax number
specified in
part A of schedule 1 or
in any relevant Substitution Certificate
or to such other address or telefax number as is notified by the
relevant party to the other parties to this Agreement.
19.2 Notices through the Agent
-------------------------
Every notice, request, demand or other communication under this Agreement
to be given by any Obligor to any other party shall be given to the Agent
for onward transmission as appropriate and to be given to the Obligors (or
any of them) shall (except as otherwise provided in this Agreement) be
given by the Agent.
19.3 No implied waivers, remedies cumulative
---------------------------------------
No failure or delay on the part of the Agent, the Arranger, the Banks or
any of them to exercise any power, right or remedy under this Agreement
shall operate as a waiver thereof, nor shall any single or partial
exercise by the Agent, the Arranger, the Banks or any of them of any
power, right or remedy preclude any other or further exercise thereof or
the exercise of any other power, right or remedy. The remedies provided in
this Agreement are cumulative and are not exclusive of any remedies
provided by law.
19.4 English translations
--------------------
All certificates, instruments and other documents to be delivered under or
supplied in connection with this Agreement shall be in the English
language or shall be accompanied by a certified English translation upon
which the Agent, the Arranger and the Banks shall be entitled to rely.
19.5 Counterparts
------------
This Agreement may be executed in any number of counterparts and by the
different parties on separate counterparts, each of which when so executed
and delivered shall be an original, but all counterparts shall together
constitute one and the same instrument.
19.6 No breach of Austrian Agreements
--------------------------------
The Banks (i) confirm that they have received copies of the Austrian
Agreements in their form at the date of the first supplemental agreement
to this Agreement, and (ii) further confirm, and authorise the Agent to
confirm, that if they, the Agent or the Security Trustee become majority
shareholders in CNA following enforcement of the CNA Share Security they
will not, and they will not instruct the Agent or the Security Trustee to,
require CNA to take any advice
123
<PAGE>
which would to their knowledge, after taking advice, constitute a breach
of the Austrian Agreements in their form at the date of the first
supplemental agreements to this Agreement if such action would also
constitute a breach of the Austrian Agreements in their form at the date
on which such action is taken. These confirmations, however, do not
constitute (a) a waiver of any rights the Banks, the Agent or the Security
Trustee may have under the Austrian Agreements as such shareholders or (b)
a guarantee of CNA's obligations under the Austrian Agreements. The Banks
do not have authority to bind any third party who becomes a shareholder in
CNA, whether following enforcement of the CNA Share Security or otherwise,
but the Banks agree that if they, the Agent or the Security Trustee
dispose of the shares in CNA, upon enforcement of the CNA Share Security,
or as shareholders in CNA following enforcement of the CNA Share Security,
otherwise than by means of a public offer, public sale or public auction
they will make such disposal on terms that the acquirer gives a
confirmation in the same terms as this clause 19.6.
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<PAGE>
20 GOVERNING LAW AND JURISDICTION
------------------------------
20.1 Law
---
This Agreement shall be governed by English law.
20.2 Submission to jurisdiction
--------------------------
The parties to this Agreement agree for the benefit of the Agent, the
Arranger, the Security Trustee and the Banks that:
(a) if any party has any claim against any other arising out of or in
connection with this Agreement such claim shall (subject to clause
20.2(c) be referred to the High Court of Justice in England, to the
jurisdiction of which each of the parties irrevocably submits;
(b) the jurisdiction of the High Court of Justice in England over any
such claim against the Agent, the Arranger, the Security Trustee or
any Bank shall be an exclusive jurisdiction and no courts outside
England shall have jurisdiction to hear or determine any such claim;
and
(c) nothing in this clause 20.2 shall limit the right of the Agent, the
Security Trustee, the Arranger or the Banks to refer any such claim
against any Obligor to any other court of competent jurisdiction
outside England, to the jurisdiction of which each Obligor hereby
irrevocably agrees to submit, nor shall the taking of proceedings by
the Agent, the Security Trustee, the Arranger or any Bank before the
courts in one or more jurisdictions preclude the taking of
proceedings in any other jurisdiction whether concurrently or not.
20.3 Agent for service of process
----------------------------
Each Obligor irrevocably designates, appoints and empowers TG Registrars
Limited at present of 150 Aldersgate Street, London EC1A 4EJ to receive
for it and on its behalf service of process issued out of the High Court
of Justice in England in relation to any claim arising out of or in
connection with this Agreement.
IN WITNESS whereof the parties to this Agreement have caused this Agreement to
be duly executed on the date first above written.
125
<PAGE>
SCHEDULE 1
----------
Part A - The Banks and their Commitments
----------------------------------------
Name Address and telefax number Commitment NLG
- ----- -------------- -------------
The Toronto-Dominion Triton Court 139,700,000
Bank 14/18 Finsbury Square
London EC2A 1DB
Fax: 0171 638 0006
Attention: Sean Macdonald
Communications Finance
Fax: 0171 638 2551
Attention: Loan Administration
Barclays Bank plc Structured Finance 93,060,000
5 The North Colonnade
Canary Wharf
London E14 4BB
Fax: 0171 773 1832
Attention: Claire Appleby
CIBC Wood Gundy Plc Cottons Centre 73,060,000
Cottons Lane
London SE1 2QL
Fax: 0171 234 6085
Attention: Louise Moat
Director, Media &
Communications
HSBC Investment Bank plc Thames Exchange 69,813,000
2nd Floor
10 Queen Street Place
London EC4R 1BL
Fax: 0171 336 9609
Attention: Tim Pennington
Bank of America N.T. & New Broad Street House 93,060,000
S.A. 35 New Broad Street
126
<PAGE>
London EC2M 1NH
Fax: 0171 282 6810
Attention: Kevin Harber
Vice President
The Royal Bank of Waterhouse Square 93,060,000
Scotland plc 138-142 Holborn
London EC1N 2TH
Fax: 0171 427 9920
Attention: David Lucas
BankBoston, N.A. 39 Victoria Street 40,000,000
P.O. Box 155
London SW1H 0ED
Fax: 0171 932 9110/
0171 222 5649
Attention: Stuart Paterson/
Mark Evans (Credit matters)
Richard Nel (Administration)
Citibank, N.A. 8th Floor 50,000,000
Zone 5
399 Park Avenue
New York
NY10043 USA
Fax: 001 212 793 6873/
001 302 894 6144
Attention: Julio Ojea Quintana
(Credit matters)
Leonard Mudlock/
Jacquelyn Wells
(Operational matters)
Export Development 151 O'Connor Street 70,000,000
Corporation Ottawa, Ontario
Canada K1A 1K3
Fax: 001 613 598 6858/
001 613 598 2514
Attention: Joe Morin
(Credit matters)
Viola Wedge Moores
(Operational matters)
127
<PAGE>
Riggs Bank N.A. 21 Great Winchester Street 25,000,000
London EC2N 2HH
Fax: 0171 522 0962
0171 920 9457
Attention: Nazz Hiller
Gema Cassidy
(Operational matters)
Deutsche Bank AG London 6 Bishopsgate 60,000,000
London EC2N 4DA
Fax: 0171 545 7130
Attention: Martin Flaherty
MeesPierson Coolsingel 93 30,000,000
Postbus 749
3000 AS Rotterdam
Fax: 00 31 10 401 5906
Attention: Jan-Evert Post/
Oskar Nooij
Banque Paribas 37 Place du Marche 40,000,000
Saint Honore
75031 Paris
Cedex 01
Fax: 00 331 429 80779
Attention: Denis de Paillerets
Gisele Sadorge, Ref: 378D
Bank Austria AG Bank Austria House 45,000,000
32/36 City Road
London EC1Y 2BD
Fax: 0171 417 4803
Attention: Stephen Dodd
Bank of Nova Scotia Scotia House 30,000,000
33 Finsbury Square
London EC2A 1BB
Fax: 0171 454 9019
Attention: John Leftley
Bankers Trust Company 1 Appold Street 30,000,000
128
<PAGE>
Broadgate
London EC2A 2HE
Fax: 0171 982 5591
Attention: Ted Steube
British Linen Bank 4 Melville Street 30,000,000
Edinburgh EH3 7NZ
Fax: 0131 243 8391
Attention: Stuart Gibson
De Nationale 4 Carnegieplein 45,000,000
Investeringsbank N.V. P.O. Box 380
2501 BH The Hague
The Netherlands
Fax: 00 31 70 342 5543
Attention: Annemiek Hulleman
Banque Artesia Nederland Harengracht 539-543 20,000,000
N.V P.O. Box 274
1000 AG Amsterdam
The Netherlands
Fax: 00 31 20 5204 590
Attention: H.D.R. Fledderus
Bank of Scotland International Division 23,247,000
Orchard Brae House
30 Queensferry Road
Edinburgh EH4 2UG
Fax: 0131 343 7080
Attention: Tim Dickie
129
<PAGE>
Part B - Restricted Subsidiaries and Original Guarantors
--------------------------------------------------------
<TABLE>
<CAPTION>
================================================================================
Company Country of Address
- ------- ---------- -------
Incorporation
-------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Cable Networks Austria The Netherlands Fred. Roeskestraat 123
Holding b.v. P.O. Box 74763
1070 BT
Amsterdam
- --------------------------------------------------------------------------------
Telekabel Wien G.m.b.H. Austria Erlachgasse 116
1100, Wien, Austria
- --------------------------------------------------------------------------------
Telekabel Klagenfurt G.m.b.H. Austria Villacherstrasse 161 9020,
Klagenfurt, Austria
- --------------------------------------------------------------------------------
Telekabel Graz G.m.b.H. Austria Lazarettgurtel 81, 8020,
Graz, Austria
- --------------------------------------------------------------------------------
Telekabel-Fernsehnetz Wiener Austria Neunkirchnerstrasse 24,
Neustadt 2700, Wiener Neustadt,
Neunkirchen Betriebs-G.m.b.H. Austria
- --------------------------------------------------------------------------------
Telekabel-Fernsehnetz Region Austria Hauptplatz 13, 2514
Baden Betriebs- G.m.b.H. Traiskirchen, Austria
- --------------------------------------------------------------------------------
Radio Public S.A. Belgium Chazallaan 140, 1030
Brussels, Belgium
- --------------------------------------------------------------------------------
Janco Multicom A/S Norway Ensjveien 7, 0655 Oslo,
Norway
- --------------------------------------------------------------------------------
</TABLE>
130
<PAGE>
Part C - Borrowers
------------------
<TABLE>
<CAPTION>
================================================================================
Company Country of Incorporation Address
- ------- ------------------------ -------
- --------------------------------------------------------------------------------
<S> <C> <C>
United Pan-Europe The Netherlands Fred. Roeskestraat 123
Communications N.V. P.O. Box 74763
1076 EE Amsterdam
- --------------------------------------------------------------------------------
Telekabel Wien G.m.b.H. Austria Erlachgasse 116, 1100 Wien,
Austria
- --------------------------------------------------------------------------------
Janco Multicom A/S Norway Ensjveien 7,
0655 Oslo,
Norway
================================================================================
</TABLE>
131
<PAGE>
SCHEDULE 2
----------
Form of Drawdown Notice
-----------------------
To: The Toronto-Dominion Bank,
Triton Court,
14/18 Finsbury Square,
London EC2A 1DB.
Attention: Manager, Loans Agency [Date]
NLG 1,100,000,000 Multi-currency Revolving Credit
-------------------------------------------------
Facility Agreement dated 8th October 1997 (as from time to time amended,
------------------------------------------------------------------------
varied, extended, restated, refinanced or replaced, the "AGREEMENT")
--------------------------------------------------------------------
We refer to the Agreement and hereby give you notice that [[if the Borrower is
the Parent or the Norwegian Borrower only] we wish to draw down an Advance of
[amount] on [date] for a Term of [ ] months [[if the Borrower is Telekabel Wien
only] we wish to issue a Telekabel Note in the nominal amount of [ ] on [date]
for a Term of [ ] months]. The funds should be credited to [name and number of
account] with [details of bank in [principal financial centre for relevant
Optional Currency.]]
We confirm that:
(i) so far as we are aware, no event or circumstance has occurred and is
continuing which constitutes a Default; [and]
(ii) the representations and warranties contained in clause 10.1 of the
Agreement to be repeated in accordance with clause 10.3 of the
Agreement;
(A) [if the aggregate Guilder Amount of Advances outstanding after
such drawing would exceed the aggregate Guilder Amount of
Advances outstanding prior to that drawing (after taking into
account any repayment made on the date of such drawing)] are
true and correct; or
(B) [in all other circumstances] are not incorrect or misleading
in any way which would be reasonably likely to have a material
adverse effect on the ability of any Borrower to perform its
obligations under the Agreement or on the financial position
of the Parent and its Subsidiaries taken as a whole;
as at the date of this notice as if made with respect to the facts and
circumstances existing at the date of this notice; [and]
(iii) [[if the Borrower is the Norwegian Borrower only] the amount of the
Advance, when aggregated with other Advances outstanding to the
Norwegian Borrowers, is less than the Norwegian Loan Amount].
132
<PAGE>
[[If the Borrower is Telekabel Wien only] We enclose a Telekabel Note in respect
of the drawdown requested by this notice which has been duly completed save for
the provision of such Telekabel Note dealing with the calculation of interest.
We hereby authorise you to complete on our behalf the provisions of such
Telekabel Note dealing with the calculation of interest.]
The Parent confirms that Total Annualised Net Operating Cash Flow is the most
recently delivered Monthly Management Account was [ ].
[The Parent confirms that Cable TV Annualised Net Operating Cash Flow in the
most recently delivered Monthly Management Accounts was [ ]].
The Parent confirms that the ratio of Total Debt (including for these purposes,
the amount of the Advance the subject of this notice) to Total Annualised Net
Operating Cash Flow as calculated from the most recently delivered Monthly
Management Accounts delivered to the Agent under the Agreement was [ ].
[The Parent confirms that the ratio of Total Debt (including for these purposes,
the amount of the Advance the subject of this notice) to Cable TV Annualised Net
Operating Cash Flow as calculated from the most recently delivered Monthly
Management Accounts delivered to the Agent under the Agreement was [ ]].
Words and expressions defined in the Agreement shall have the same meanings
where used in this notice.
For and on behalf of
United Pan-Europe Communications N.V.
..........................
[if Borrower is not the Parent]
For and on behalf of
[Name of relevant Borrower]
..........................
133
<PAGE>
SCHEDULE 3
----------
Part A - documents and evidence required as conditions precedent to first
-------------------------------------------------------------------------
Advance
-------
(a) A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of the Parent, of the constitutive documents of the Parent and
each member of the Restricted Group amended as agreed between the Parent
and the Agent.
(b) A copy, certified as a true copy by an Authorised Officer of the Parent,
of resolutions of the Supervisory Board of Directors of the Parent
evidencing approval of this Agreement, the Security Documents to which it
is a party and authorising its appropriate officers to execute and deliver
this Agreement, such Security Documents and to give all notices and take
all other action required by the Parent under this Agreement and each such
Security Document.
(c) A copy, certified as a true copy by an Authorised Officer of the Parent of
resolutions of the Board of Directors of each of the members of the
Restricted Group (except for the Austrian members of the Restricted Group)
evidencing approval of this Agreement and the Security Documents to which
they are a party and authorising their respective appropriate officers to
execute and deliver such Security Documents and to give all notices and
take all other action required by such member of the Restricted Group
thereunder.
(d) Specimen signatures, authenticated by an Authorised Officer of the Parent,
of the persons authorised in the resolutions referred to in paragraphs (b)
and (c) above, together with originals of the powers of attorney granted
by the Parent and any member of the Restricted Group in connection with
the Finance Documents.
(e) A copy, certified as a true copy by an Authorised Officer of the Parent,
of all consents, authorisations, licences and approvals required by the
members of the Restricted Group to authorise, or required by the members
of the Restricted Group in connection with, the execution, delivery,
validity, enforceability and admissibility in evidence of this Agreement
and the Security Documents and the performance by the members of the
Restricted Group of their respective obligations under this Agreement and
the Security Documents.
(f) An opinion of Norton Rose, dated not more than five Banking Days prior to
the first Drawdown Date, in a form acceptable to the Agent.
(g) A copy, certified as a true copy by an Authorised Officer of the Parent of
a letter from each Obligor's agent for receipt of service of process
referred to this Agreement and in the Security Trust Deed accepting its
appointment.
(h) The Share Securities and the Security Trust Deed duly executed by the
Parent and/or by the other members of the Restricted Group party thereto
together with all documents, deeds, notices and certificates required to
be delivered pursuant to the terms thereof.
134
<PAGE>
(i) The Disclosure Letter.
(j) The audited financial statements for the financial year ended on 31
December 1996 referred to in clause 10.1(g)(i) and the monthly management
accounts and quarterly management accounts referred to in clause
10.1(g)(ii).
(k) A copy of the Management Base Case.
(l) A copy of the accountants letter relating to the Management Base Case.
(m) Copies, certified by the Authorised Officer of the Parent to be true,
complete and up to date copies of:
(i) the Licences;
(ii) the Principal Agreements; and
(iii) the Necessary Authorisations.
Documents and evidence required as conditions precedent in Austria
- ------------------------------------------------------------------
1 List of receivables pledged by the Austrian Security Document to be
provided on or before 12 December, 1997 under clause 3.6(b).
2 Written confirmation from the secretary of Telekabel Wien that the pledge
pursuant to the Austrian Security Document has been noted in the
computerised company books of Telekabel Wien to be provided on or before
12 December, 1997 under clause 3.6(b).
3 Originals of the notice and acknowledgement of the pledge of bank account
duly signed by Telekabel Wien and acknowledged by the relevant bank, as
set out in the schedule to the Austrian Security Document to be provided
on or before 12 December, 1997 under clause 3.6(b).
4 A resolution of CNA, as 95 per cent. shareholder in each other Telekabel
Entity (other than Telekabel Wien), inter alia, approving the entry into
by such Telekabel Entity of the Guarantee, in a form acceptable to the
Agent.
5 An opinion of Ortner, Poch, Foramitti Rechtsanwalte, special legal
advisers to the Banks in Austria, dated not more than five Banking Days
prior to the first Drawdown Date, in a form acceptable to the Agent.
Documents and evidence required as conditions precedent in Belgium
- ------------------------------------------------------------------
1 Entry in the share register of Radio Public of the pledge of shares in
Radio Public given by the Parent, signed by the Parent.
2 Regulatory approvals of Radio Public for Etterbeek, Schaarbeek,
Koekelberg, Jette, Ganshoren, Berghem-Sainte-Agathe, Forest, Leuven,
Heverlee and Kessel-Lo and two letters of the Belgian Institute for Post
and Telecommunication
135
<PAGE>
authorising Radio Public to operate an Internet Service and a
telecommunications service from 7th May 1997.
3 An opinion of Coppens, Van Ommeslaghe & Faures, special legal advisers to
the Banks in Belgium, dated not more than five Banking Days prior to the
first Drawdown Date, in a form acceptable to the Agent.
Documents and evidence required as conditions precedent in the Netherlands
- --------------------------------------------------------------------------
1 An extract from the trade register of the Chamber of Commerce of the
Parent and each member of the Restricted Group incorporated in The
Netherlands.
2 A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of the Parent, of the shareholders' register of (i) the Parent and
(ii) each member of the Restricted Group incorporated in The Netherlands.
3 Resolution of the Board of Supervisory directors of the Parent evidencing
approval of this Agreement and the Security Documents to which the Parent
is a party and authorising the appropriate officers of the Parent to
execute and deliver the Agreement and the Security Documents and to give
all notices and other action required thereunder.
4 A confirmation satisfactory to the Agent from ABN Amro Bank N.V. of all
amounts outstanding under the Existing UPC Facility to be repaid for value
10th October 1997 and confirming that all and any security granted in
connection with such facility will be released and that such facility
shall be irrevocably cancelled on receipt of such amount.
5 An opinion of (i) Trenite Van Doorne and (ii) Horlings, Bronwer &
Horlings, special legal advisers to the Banks in the Netherlands, dated
not more than five Banking Days prior to the first Drawdown Date, in a
form acceptable to the Agent.
Documents and evidence required as conditions precedent in Norway
- -----------------------------------------------------------------
1 A shareholders' resolution of the shareholders of Janco evidencing
approval of the shareholders of Janco to the terms of this Agreement and
the obligations of Janco thereunder.
2 A letter from the Norwegian Bankruptcy Register confirming that as of the
first Drawdown Date, none of the members of the Restricted Group
incorporated in Norway have been reported from the local probate courts to
the said register bankrupt.
3 Copies, certified as true copies by an Authorised Officer of the Parent,
of shareholders' registers ("aksjonaerprotokoll") of Janco.
136
<PAGE>
4 An opinion of Wiersholm, Mellbye & Bech, special legal advisers to the
Banks in Norway, dated not more than five Banking Days prior to the first
Drawdown Date, in a form acceptable to the Agent.
5 Originals of the notice of assignment of dividends and acknowledgement of
notice duly signed by the Parent and acknowledged by Janco, as set out in
exhibits 1 and 2 to the Norwegian Share Security.
137
<PAGE>
SCHEDULE 3
----------
Part B - Documents and evidence required as conditions precedent to Philips
---------------------------------------------------------------------------
Advance
-------
(a) A copy certified to be a true copy by an Authorised Officer of the Parent
of the Securities Purchase and Conversion Agreement and the Bridge
Facility Agreement.
(b) Evidence satisfactory to the Agent that:
(i) all conditions to the Securities Purchase and Conversion Agreement
have been satisfied other than those dependant upon the drawdown of
the Philips Advance and, if the Parent is required to issue any
Initial Preference Shares (as defined in the Securities Purchase and
Conversion Agreement) pursuant to the terms of the Securities
Purchase and Conversion Agreement such shares are consistent with
the outline terms and conditions contained in the Securities
Purchase and Conversion Agreement;
(ii) all conditions precedent set out in the Bridge Facility Agreement
have been satisfied and a drawdown notice in respect of the full
amount of the Bridge Facility has been given in accordance with the
terms thereof;
(iii) the Parent has sufficient funds at its disposal, in the opinion of
the Agent, which when aggregated with the Philips Advance will
enable the Parent to consummate the Philips Transaction in
accordance with the terms of the Securities Purchase and Conversion
Agreement.
(c) Such other documents and evidence as the Agent shall reasonably require.
138
<PAGE>
SCHEDULE 3
----------
Part C - Documents and evidence required as conditions precedent to the first
-----------------------------------------------------------------------------
Advance made to the Norwegian Borrowers if at that time the Norwegian Merger
----------------------------------------------------------------------------
has occurred
------------
(a) An opinion of Wiersholm, Mellbye & Bech, special legal advisers to the
Banks in Norway dated not more than five Banking Days prior to the date of
the first Advance to be made to the Norwegian Borrowers, in a form
acceptable to the Agent.
(b) Each of the Norwegian Security Documents listed in part B of schedule 13
duly executed by the members of the Restricted Group party thereto
together with all documents, deeds, notices and certificates required to
be delivered pursuant to the terms thereof.
(c) A confirmation from ING Bank N.V. specifying the total of all amounts
outstanding under the Existing Norkabel Facility as at the proposed date
of the first Advance to be made to the Norwegian Borrowers and that such
of the Norwegian Security Documents that are to be assigned or transferred
to the Security Trustee by ING Bank N.V. have been deposited with the law
firm Thommessen, Krefting, Greve, Lund in Oslo, who have been irrevocably
instructed to release the said documents to the law firm Wiersholm,
Mellbye & Bech in Oslo on behalf of the Security Trustee upon confirmation
from ING Bank N.V. that the said amounts have been received and that upon
the said amounts being received all other security granted to ING Bank
N.V. in connection with the Norkabel Facility shall be released, cancelled
or discharged (as the case may be).
(d) each of the documents and evidence specified in part B of schedule 11.
(e) A shareholders resolution of the shareholders of Janco evidencing approval
of the shareholders of Janco to the terms of the Norwegian Security
Documents and the obligations of Janco under those documents.
(f) A copy, certified as a true copy by an Authorised Officer of the Parent of
the Shareholders' registers ("aksjonaerprotokoll") of Janco.
(g) A letter from the Norwegian Bankruptcy Register confirming that as of the
date of the first drawdown to be made to the Norwegian Borrowers, that
Janco has not been reported from the local probate court to the said local
register bankrupt.
(h) Consent in writing to record the mortgages over leased real estates with
appurtenances forming part of the Norwegian Security Documents, from the
landlords who have not given such consent earlier on.
(i) Evidence of the discharge of all Encumbrances granted by Janco prior to
the date of the Norwegian Merger.
139
<PAGE>
(j) An assignment given by the Parent of all of its rights title benefit and
interest in and under the Janco Loan Agreement, in form and substance
satisfactory to the Majority Banks together with such Board Resolutions,
legal opinions and such other documents and evidence to show that the
obligations of the Parent thereunder are legal, valid and binding, as the
Agent, acting on the instructions of the Majority Banks, may reasonable
require.
(k) A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of each relevant company, of the constitutive documents as at the
date of foundation of such company of each member of the Restricted Group
incorporated in Norway.
140
<PAGE>
SCHEDULE 3
----------
Part D - Documents and evidence required as conditions precedent to the first
-----------------------------------------------------------------------------
Advance made to the Norwegian Borrowers if at that time the Norwegian Merger
----------------------------------------------------------------------------
has not occurred
----------------
(a) An opinion of Wiersholm, Mellbye & Bech, special legal advisers to the
Banks in Norway dated not more than five Banking Days prior to the date of
the first Advance to be made to the Norwegian Borrowers, in a form
acceptable to the Agent.
(b) Each of the Norwegian Security Documents listed in part A of schedule 13
duly executed by the members of the Restricted Group party thereto
together with all documents, deeds, notices and certificates required to
be delivered pursuant to the terms thereof.
(c) A confirmation from ING Bank N.V. specifying the total of all amounts
outstanding under the Existing Norkabel Facility as at the proposed date
of the first Advance to be made to the Norwegian Borrowers and that such
of the Norwegian Security Documents that are to be assigned or transferred
to the Security Trustee by ING Bank N.V. have been deposited with the law
firm Thommessen, Krefting, Greve, Lund in Oslo, who have been irrevocably
instructed to release the said documents to the law firm Wiersholm,
Mellbye & Bech in Oslo on behalf of the Security Trustee upon confirmation
from ING Bank N.V. that the said amounts have been received and that upon
the said amounts being received all other security granted to ING Bank
N.V. in connection with the Norkabel Facility shall be released, cancelled
or discharged (as the case may be).
(d) A shareholders resolution of the shareholders of Janco evidencing approval
of the shareholders of Janco to the terms of the Norwegian Security
Documents and the obligations of Janco under those documents.
(e) A copy, certified as a true copy by an Authorised Officer of the Parent of
the Shareholders' registers ("aksjonaerprotokoll") of each member of the
Restricted Group incorporated in Norway.
(f) A letter from the Norwegian Bankruptcy Register confirming that as of the
date of the first drawdown to be made to the Norwegian Borrowers, no
member of the Restricted Group incorporated in Norway has been reported
from the local probate court to the said local register bankrupt.
(g) Consent in writing to record the mortgages over leased real estates with
appurtenances forming part of the Norwegian Security Documents, from the
landlords who have not given such consent earlier on.
(h) Evidence of the discharge of all Encumbrances granted by Janco prior to
the date of the first Advance to be made to the Norwegian Borrowers.
141
<PAGE>
(i) An assignment given by the Parent of all of its rights title benefit and
interest in and under the Janco Loan Agreement, in form and substance
satisfactory to the Majority Banks together with such Board Resolutions,
legal opinions and such other documents and evidence to show that the
obligations of the Parent thereunder are legal, valid and binding, as the
Agent, acting on the instructions of the Majority Banks, may reasonable
require.
(j) A copy, certified as a true, complete and up-to-date copy by an Authorised
Officer of each relevant company, of the constitutive documents as at the
date of the foundation of such company of each member of the Restricted
Group incorporated in Norway.
142
<PAGE>
SCHEDULE 4
----------
Calculation of Additional Cost
------------------------------
1 The Additional Cost shall be calculated by the Agent in respect of each
period for which it falls to be calculated relating to an Advance in
accordance with the following formulae:
In relation to each Sterling Advance:
CL + S(L - Z) + 0.01F
---------------------- = per cent. per annum
100- (C + S)
In relation to each other Advance:
0.01F
Y------ = per cent. per annum
100
Where:
C = The amount required to be held as a non-interest bearing cash
ratio deposit with the Bank of England expressed as a
percentage of an eligible institution's eligible liabilities
(above any stated minimum).
F = The amount of Sterling per(pound)1,000,000 of the fee base of
an authorised institution payable to the Financial Services
Authority per annum (disregarding any minimum fee payable
under the Fees Regulations).
L = The rate of interest per annum at which Sterling deposits are
offered by the Agent to leading banks in the London Interbank
Market at or about 11.00 a.m. on the date of calculation for a
period comparable to the period for which the Additional Cost
is to be calculated.
S = The amount required to be placed as special deposits with the
Bank of England, expressed as a percentage of an eligible
institution's eligible liabilities (above any stated minimum).
Y = The fraction of foreign currency liabilities taken into
account under the Fees Regulations in calculating the fee base
(disregarding any offset for claims on non-resident offices).
Z = The lower of L and the rate of interest per annum paid by the
Bank of England on special deposits at or about 11.00 a.m. on
the date of calculation.
143
<PAGE>
2 For the purposes of calculating the Additional Cost:
(a) C, L, S and Z are included in the formula as numbers and not as
percentages, e.g. if C = 0.15 per cent. and L = 7 per cent. CL is
calculated as 0.15 x 7;
(b) the formula is applied on the first day of each period for which it
falls to be calculated (and the result shall apply for the duration
of such period);
(c) each amount is rounded up to the nearest four decimal places; and
(d) if the formulae produce a negative percentage, the percentage shall
be taken as zero.
3 If alternative or additional financial requirements are imposed by the
Bank of England, the Financial Services Authority or any other United
Kingdom governmental authority or agency which in the Agent's opinion
(after consultation with the Banks) make the formulae (or either of them)
no longer appropriate, the Agent shall be entitled by notice to the
Borrower to stipulate such other formulae as shall be suitable to apply in
substitution for the formulae. Any such other formulae so stipulated shall
take effect in accordance with the terms of such notice.
4 In this schedule 4:
"AUTHORISED" and "INSTITUTION" have the meanings given to those terms in
the Banking Act 1987;
"BANK OF ENGLAND ACT" means the Bank of England Act 1998;
"ELIGIBLE INSTITUTION" has the meaning given to that term in schedule 2 to
the Bank of England Act;
"ELIGIBLE LIABILITIES" has the meaning given to that term in the Cash
Ratio Deposits (Eligible Liabilities) Order 1998 or the applicable
substitute order made under the Bank of England Act as is in force on the
date of application of the formulae;
"FEE BASE" has the meaning given to that term in the Fees Regulations;
"FEES REGULATIONS" means the Banking Supervision (Fees) Regulations 1998
or the applicable substitute regulations made under the Bank of England
Act as are in force on the date of application of the formulae; and
"SPECIAL DEPOSITS" has the meaning given to that term by the Bank of
England on the date of application of the formulae.
144
<PAGE>
SCHEDULE 5
----------
Form of Substitution Certificate
--------------------------------
BANKS ARE ADVISED NOT TO EMPLOY SUBSTITUTION CERTIFICATES WITHOUT FIRST ENSURING
- --------------------------------------------------------------------------------
THAT THE TRANSACTION COMPLIES WITH ALL APPLICABLE LAWS AND REGULATIONS,
- -----------------------------------------------------------------------
INCLUDING THE FINANCIAL SERVICES ACT 1986 AND REGULATIONS MADE THEREUNDER.
- --------------------------------------------------------------------------
To: The Toronto-Dominion Bank,
Triton Court,
14/18 Finsbury Square,
London EC2A 1DB.
Attention: Manager, Loans Agency ' 19'
Substitution Certificate
------------------------
This Substitution Certificate relates to an Agreement (as from time to
time amended, varied, extended, restated, refinanced or replaced, the
"AGREEMENT") dated ! 1997 between United Pan-Europe Communications N.V. as
Parent and a Borrower (1), the entities listed in part C of schedule 1 thereto
as Borrowers (2), the entities listed in part B of schedule 1 thereto as
Guarantors (3), The Toronto-Dominion Bank as Arranger (4), the banks and
financial institutions whose respective names and addresses are set out in part
A of schedule 1 thereto as Banks (5), The Toronto-Dominion Bank as Agent (6) and
The Toronto-Dominion Bank as Security Trustee (7). Terms defined in the
Agreement shall have the same meaning in this Substitution Certificate.
1 [Name of Existing Bank] (the "Existing Bank") (a) confirms the accuracy of
the summary of its Commitment and Contribution set out in the schedule to
this Substitution Certificate; and (b) requests [Substitute Bank] (the
"Substitute") to accept by way of novation the portion of its Commitment
and Contribution specified in the schedule to this Substitution
Certificate by counter-signing and delivering this Substitution
Certificate to the Agent at its address for the service of notices
specified in the Agreement.
2 The Substitute requests the Agent (on behalf of itself, the Arranger, the
Security Trustee, the Interest Rate Beneficiaries (as defined in the
Security Trust Deed), the Obligors and the Banks) to accept this
Substitution Certificate as being delivered to the Agent pursuant to and
for the purposes of clause ERROR! REFERENCE SOURCE NOT FOUND. of the
Agreement, so as to take effect in accordance with its terms on [date of
transfer], [being not earlier than 5 Banking Days after date of delivery
of the Certificate to the Agent] (the "Effective Date").
3 The Agent (on behalf of itself and the other parties to the Agreement)
confirms the novation effected by this Substitution Certificate pursuant
to and for the purposes of clause 17.3 of the Agreement.
145
<PAGE>
4 The Substitute confirms:
(a) that it has received a copy of the Agreement, the Security Trust
Deed and all other Security Documents and other documentation and
information required by it in connection with the transactions
contemplated by this Substitution Certificate;
(b) that it has made its own assessment of the execution, effectiveness,
adequacy, genuineness, validity, enforceability and admissibility in
evidence of the Agreement, the Security Documents and this
Substitution Certificate and has not relied and will not rely on the
Existing Bank or any statements made by the Existing Bank in that
respect;
(c) that it has made and will continue to make its own appraisal of the
creditworthiness of the Parent and its Subsidiaries and its own
independent investigation of the financial condition, prospects and
affairs of the Parent and its Subsidiaries and has not relied and
will not rely on the Existing Bank, the Agent, the Arranger, the
Security Trustee or any other Bank or any statement, opinion,
forecast or other representation made by the Existing Bank, the
Agent, the Arranger, the Security Trustee or any other Bank in that
respect;
(d) accordingly, none of the Existing Bank, the Agent, the Arranger, the
Security Trustee or any other Bank shall have no liability or
responsibility to the Substitute in respect of any of the foregoing
matters[; and]
(e) it is a Qualifying Bank.
5 Execution of this Substitution Certificate by the Substitute constitutes
its representation to the Existing Bank and all other parties to the
Agreement and the Security Trust Deed that it has power to become party to
the Agreement and the Security Trust Deed as a Bank on the terms herein
and therein set out and has taken all necessary steps to authorise
execution and delivery of this Substitution Certificate.
6 The Substitute acknowledges that the Existing Bank has no obligation to
repurchase or reacquire any of the rights and obligations novated by
virtue of this Substitution Certificate or to support, indemnify or
compensate the Substitute for any losses suffered by the Substitute as a
consequence of the novation effected by virtue of this Substitution
Certificate.
7 The Substitute hereby undertakes to the Existing Bank, the Obligors, the
Arranger, the Security Trustee, the Interest Rate Beneficiaries and the
Agent that it will perform in accordance with their terms all those
obligations which by the respective terms of the Agreement and the
Security Trust Deed will be assumed by it after acceptance of this
Substitution Certificate by the Agent.
8 This Substitution Certificate is governed by English law.
146
<PAGE>
Note: This Substitution Certificate is not a security, bond, note, debenture,
- ----
investment or similar instrument.
AS WITNESS the hands of the authorised signatories of the parties hereto on the
date appearing below.
THE SCHEDULE
------------
Amount Advance Maturity Date Portion novated
-------------- ------------- ---------------
Guilder Portion novated
------- ---------------
Amount of NLG
--------- ---
Commitment
----------
NLG
---
Administrative Details of Substitute
------------------------------------
Lending office:
Account for payments:
Telephone:
Telefax:
Attention:
[Existing Bank] [Substitute]
By: By:
Date: Date:
The Agent
By:
on its own behalf
and on behalf of the Parent and the other parties to the Agreement and the
Security Trust Deed
Date:
147
<PAGE>
SCHEDULE 6
----------
Part A - Compliance Certificate to be delivered by an Authorised Officer of
---------------------------------------------------------------------------
the Parent
----------
The Toronto-Dominion Bank,
Triton Court,
14/18 Finsbury Square
London
EC2A 1DB
Attention: Manager, Loans Agency [Date]
Dear Sirs,
United Pan-Europe Communications N.V.
-------------------------------------
NLG 1,100,000,000 Multi-Currency Revolving
------------------------------------------
Credit Facility, Loan Agreement dated [ ], 1997
---------------------------------------------------
(as from time to time amended, varied, extended, restated, refinanced
---------------------------------------------------------------------
or replaced the "LOAN AGREEMENT")
---------------------------------
We refer to the Loan Agreement and deliver this Certificate in respect of
the Six Months Period ended [Quarter Day] pursuant to clause 11.1(j)(ii)
thereof. Terms defined in the Loan Agreement shall have the same meaning when
used in this Certificate.
We confirm that:
1 Net Operating Cash Flow for the Restricted Group in respect of the Six
Month Period ending on [Quarter Day] was [ ] [insert calculation
details].
2 Cable TV Net Operating Cash Flow for the Restricted Group in respect of
the Six Month Period ending on [Quarter Day] was [ ] [insert
calculation details].
3 As at the end of [Quarter Day] Total Debt was [ ] [insert calculation
details].
4 Total Debt Interest Charges for the Six Month Period ending on [Quarter
Day] was [ ] [insert calculation details].
5 On the basis of the current rate of interest payable in relation thereto,
the total forecast amount of interest and any other charges payable in
respect of [Borrowed Money of the Restricted Group] during the twelve
months immediately following [Quarter Day] will be [ ]. The principal
amount of [Borrowed Money of the Restricted Group] to be repaid in
accordance with the terms of [such Borrowed Money] during such twelve
months will be [ ] [insert calculation details]/1/
Based on the above, we confirm that on [Quarter Day]:
148
<PAGE>
1 The ratio of Total Debt to Total Annualised Net Operating Cash Flow was
[ ] [insert calculation details].
2 The ratio of Total Debt to Cable TV Annualised Net Operating Cash Flow was
[ ] [insert calculation details].
3 The ratio of Total Annualised Net Operating Cash Flow to Total Debt
Interest charges was [ ] [insert calculation details].
4 The ratio of Total Annualised Net Operating Cash Flow to Proforma Debt
Service was [ ] [insert calculation details]./1/
Accordingly, we confirm that [save as disclosed in this certificate] on
[Quarter Day] the Parent was in compliance with those covenants contained in
clause 12.2(a) to (d) inclusive of the Loan Agreement which were applicable as
at [Quarter Day].
We confirm that the representations and warranties contained in clause
10.1 of the Loan Agreement to be repeated in accordance with clause 10.3 of the
Loan Agreement, are true and correct as at the date hereof as if made with
respect to the facts and circumstances existing at such date.
For and on behalf of
United Pan-Europe Communications N.V.
..................
Authorised Officer
/1/ From and including 31st December 2000 only
149
<PAGE>
SCHEDULE 6
----------
Part B - Compliance Certificate to be delivered by the auditors of the
----------------------------------------------------------------------
Restricted Group
----------------
The Toronto-Dominion Bank,
Triton Court,
14/18 Finsbury Square
London
EC2A 1DB
Attention: Manager, Loans Agency [Date]
Dear Sirs,
United Pan-Europe Communications N.V.
-------------------------------------
NLG 1,100,000,000,000 Revolving
-------------------------------
Credit Facility, Loan Agreement dated [ ], 1997
--------------------------------------------------
(as from time to time amended, varied, extended, restated,
----------------------------------------------------------
refinanced or replaced the "LOAN AGREEMENT")
--------------------------------------------
We refer to the Loan Agreement and deliver this Certificate in respect of
the financial year ended [year end] pursuant to clause 11.1(j)(ii) thereof.
Terms defined in the Loan Agreement shall have the same meaning when used in
this Certificate.
We confirm that in our opinion:
1 Net Operating Cash Flow for the Restricted Group in respect of the
financial year ending on [year end] was [ ] [insert calculation
details].
2 Cable TV Net Operating Cash Flow for the Restricted Group in respect of
the financial year ending on [year end] was [ ] [insert calculation
details].
3 As at the end of [year end] Total Debt was [ ] [insert calculation
details].
4 Total Debt Interest Charges for the financial year ending on [year end]
was [ ] [insert calculation details].
5 On the basis of the current rate of interest payable in relation thereto,
interest and any other specific rate charges payable in respect of
[Borrowed Money of the Restricted Group] during the twelve months
immediately following [year end] will be [ ]. The principal amount of
[Borrowed Money of the Restricted Group] to be repaid in accordance with
the terms of such Borrowed Money during such twelve months will be [ ]
[insert calculation details]./1/
Based on the above, we confirm that on [year end]:
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1 The ratio of Total Debt to Total Annualised Net Operating Cash Flow was
[ ] [insert calculation details].
2 The ratio of Total Debt to Cable TV Annualised Net Operating Cash Flow was
[ ] [insert calculation details].
3 The ratio of Total Annualised Net Operating Cash Flow to Total Debt
Interest Charges was [ ] [insert calculation details].
4 The ratio of Total Annualised Net Operating Cash Flow to Pro-forma Debt
Service was [ ] [insert calculation details].
Accordingly, we confirm that in our opinion [and save as disclosed in this
Certificate] as at [year end] the Parent was in compliance with those covenants
contained in clause 12.2 (a) to (d) (inclusive) of the Loan Agreement which were
applicable as at [year end].
For and on behalf of
....................
Auditors
/1/ From and including 31st December 2000 only.
151
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SCHEDULE 7
----------
Licences
--------
A: Austrian Licences
-----------------
"AUSTRIAN LICENCES" means the following documents and agreements:
(a) Telekabel Wien
--------------
(i) Gewerbeschein dated 5th November 1981 and
(ii) Gewerbeschein dated 30th October 1979
(iii) Konzessionsdekret dated 8th October 1981
(iv) Fernmeldebewilligung dated 13th September 1993
(v) Wegerechte: Bescheld der Germeinde Wien dated 1st
March 1978
(b) Telekabel Graz GmbH
-------------------
(i) Gewerbeschein dated 22nd April 1980
(ii) Gewerbeschein dated 7th May 1984
(iii) Fernmeldebewilligung dated 24th October 1995
(c) Telekabel Klagenfurt GmbH
-------------------------
(i) Gewerbeschein dated 10th November 1980
(ii) Gewerbeschein dated 16th December 1982
(iii) Fernmeldebewilligung dated 17th January 1995
(d) Telekabel-Fernsehnetz Baden Betriebsgesellschaft mbh
----------------------------------------------------
(i) Gewerbeschein dated 4th December 1981
(ii) Fernmeldebewillignung dated 26th July 1990 held by Kabel -
TV - Sud GmbH (minority shareholder)
(e) Telekabel-Fernsehnetz Wiener Neustadt/Neunkirchen
---------------------------------------------------------------
Betriebsgesellschaft mbh
------------------------
(i) Gewerbeschein dated 26th June 1984
(ii) Fernmeldebewilligung dated 25th July 1990 held by Kabel-TV-
Wiener Neustadt GmbH (minority shareholder).
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B: Belgian Licences
----------------
"BELGIAN LICENCES" means the following documents and agreements:
1 BRUSSELS AREA:
--------------
(a) Municipality of Etterbeek:
--------------------------
Licence given by settlement agreement dated 26 May 1997 and authorisation
dated 19 May 1969.
(b) Municipality of Schaerbeek
--------------------------
Licence given by agreement dated 17 July 1968 and authorisation dated 21
October 1969.
(c) Municipality of Koekelberg
--------------------------
Licence given by agreement dated 19 April 1968 and authorisation dated 21
October 1969.
(d) Municipality of Jette
---------------------
Licence given by agreement dated 7 May 1968 and authorisation dated 6
February 1970.
(e) Municipality of Ganshoren
-------------------------
Licence given by agreements dated 19 March 1969 and 18 November 1988 and
authorisation dated 6 February 1970.
(f) Municipality of Berghem-St-Agathe
---------------------------------
Licence given by agreement dated 29th December 1969 and agreement dated 20
July 1988, and authorisation dated 22 December 1970.
(g) Municipality of Forest
----------------------
Licence given by agreement dated 31 March 1969 and authorisation dated 21
December 1970.
2 LEUVEN AREA:
------------
(a) Municipality of Heverlee
------------------------
Licence given by agreement dated 22 November 1968 and authorisation dated
1971.
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(b) Municipality of Kessel-Lo
-------------------------
Licence given by agreement dated 5 December 1968, and authorisation dated
1971.
(c) Municipality of Leuven
----------------------
Licence given by agreement dated 30 August 1968, and authorisation dated
1971.
3 TELECOMMUNICATIONS SERVICES
---------------------------
(a) Letter of the IBPT authorising Radio Public to provide Internet access
through the company's public telecommunications structure;
(b) Letter of the IBPT authorising Radio Public to operate a public
telecommunications system service as of 7 May 1997, in the territories of
Etterbeek, Shaerbeek, Koekelberg, Jette, Ganshoren, Berghem-St.-Agathe,
Forest and Leuven.
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SCHEDULE 8
----------
Form of Deed of Subordination
-----------------------------
DATED '
-------
[SUBORDINATED CREDITOR] (1)
and
THE TORONTO-DOMINION BANK (2)
(as Security Trustee)
------------------------------
DEED OF SUBORDINATION
------------------------------
NORTON ROSE
London
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<PAGE>
THIS DEED OF SUBORDINATION is dated' and made BETWEEN:
(1) [NAME OF SUBORDINATED CREDITOR] (No. [ ]) whose [registered
office/principal place of business] is at [ ] (the "SUBORDINATED
CREDITOR"); and
(2) THE TORONTO-DOMINION BANK of Triton Court, 14/18 Finsbury Square, London
EC2A 1DB as Security Trustee.
WHEREAS
(A) By an agreement dated [ ], 1997 (as from time to time amended, varied,
extended, restated, refinanced or replaced, the "FACILITY AGREEMENT") made
between (1) United Pan-Europe Communications N.V., as Parent and a
Borrower, (2) the entities listed in part C of schedule 1 thereto as
Borrowers, (3) the entities listed in part B of schedule 1 thereto as
Original Guarantors, (4) the Arranger, (5) the banks whose names and
addresses are set out in part A of schedule 1 thereto as Banks and (6) the
Agent and (7) the Security Trustee, the Banks agreed, upon and subject to
the terms and conditions of the Facility Agreement, to make available to
the Borrowers a reducing revolving credit facility of up to NLG
1,100,000,000.
(B) The Subordinated Creditor has or will make certain Borrowed Money
available to the Borrowers and/or other members of the Restricted Group
pursuant to the Subordinated Agreements.
(C) The Parent has agreed to procure that the Subordinated Creditor enter into
this Deed pursuant to clause 11.1(x) of the Facility Agreement.
WITNESSES as follows:
1 DEFINITIONS AND INTERPRETATION
------------------------------
1.1 Definitions
In this Deed:
"DISTRIBUTION" means any payment by or distribution of assets whether in
cash, property, securities or otherwise;
"GROUP LIABILITIES" means all Liabilities of the Subordinated Creditor to
any member of the Restricted Group;
"INSOLVENCY EVENT" means, any of the events set out in clauses 13.1(i),
(k), (l) or (o) of the Facility Agreement;
"LIABILITIES" means any obligation for the payment or repayment of money,
whether as principal or as surety and whether present or future, actual or
contingent;
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"SUBORDINATED AGREEMENTS" means the agreements described in the schedule
together with any other agreement relating to Subordinated Borrowed Money;
"SUBORDINATED BORROWED MONEY" means all Liabilities of members of the
Restricted Group to the Subordinated Creditor in respect of Borrowed Money
howsoever arising, including, without limitation, any such Liabilities
arising by virtue of any right of subrogation, reimbursement or indemnity;
and
"SUBORDINATED LIABILITIES" means all Subordinated Borrowed Money
including, without limitation, all Liabilities of any member of the
Restricted Group under the Subordinated Agreements, including interest
thereon or which may arise as a result of the Subordinated Creditor
entering into or performing all or any of its obligations under any
Subordinated Agreement.
1.2 Facility Agreement definitions
------------------------------
Unless the context otherwise requires, or unless otherwise defined in this
Deed (i) words and expressions defined in the Facility Agreement shall
have the same meaning when used in this Deed (including its recitals) and
(ii) words and expressions defined in the Security Trust Deed shall,
unless otherwise defined in the Facility Agreement, shall have the same
meaning when used in this Deed (including its recitals).
1.3 Interpretation
--------------
The interpretative provisions in clauses 1.3, 1.4, 1.5 and 1.6 of the
Facility Agreement shall apply, mutatis mutandis, in this Deed.
1.4 Effect as a Deed
----------------
This Deed is intended to take effect as a deed notwithstanding that the
Security Trustee and/or the Subordinated Creditor may have executed it
under hand only.
1.5 Successors and assigns
----------------------
The expressions "Borrower", "Obligor", "Subordinated Creditor",
"Beneficiary", "Security Trustee", "Agent", "Parent" and "Member of the
Restricted Group" include, where the context admits, their respective
successors.
2 DEFERRAL UNDERTAKINGS
---------------------
2.1 Subordinated Creditor undertakings
----------------------------------
The Subordinated Creditor hereby undertakes with the Security Trustee
that, notwithstanding any provision of any of the Subordinated Agreements,
for so long as any Secured Obligations remain outstanding, it will, and
will procure that its Subsidiaries will, unless with the prior written
consent of the Security Trustee, directly or indirectly:
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(a) not demand or accept payment or repayment of, in whole or part, from
any member of the Restricted Group or any other person liable, any
of the Subordinated Liabilities or any distribution of assets
(whether in cash, property, securities or otherwise) in respect of
the same;
(b) not take, accept, receive or permit to exist any Encumbrance to
secure the payment and/or repayment of any of the Subordinated
Liabilities;
(c) not assign, transfer, create any Encumbrance over or otherwise
dispose of, any of the Subordinated Liabilities;
(d) not take, accept or receive any Distribution; or
(e) (save only to the extent it may be required to do so under any
applicable law) not set-off any Subordinated Liabilities against any
Group Liabilities;
(f) not commence any proceedings against any member of the Restricted
Group or take any action for or in respect of the recovery of any of
the Subordinated Liabilities, or any part thereof (including,
without limitation, any action or step with a view to winding up any
member of the Restricted Group);
(g) not enter into any transaction, whether by way of borrowing or
otherwise, constituting, or otherwise suffer to arise any Group
Liabilities;
(h) not agree to any variation of the terms of any Subordinated
Agreement; or
(i) procure that each of its Subsidiaries (which is not a member of the
Restricted Group) enters into a Deed of Subordination prior to any
moneys in respect of any loans made by such Subsidiary to any member
of the Restricted Group and provides the Agent with such evidence as
it may reasonably request as to the power and authority of the
relevant Subsidiary to enter into such Deed of Subordination and
that such Deed of Subordination constitutes valid and legally
binding obligations of the relevant Subsidiary enforceable in
accordance with its terms.
[2.2 Permitted payments
------------------
If (A) no Default has occurred and is continuing or would result from the
making of any payment under this clause 2.2 and (B) in respect of each of
the two most recent previous consecutive Quarterly Periods the ratio of
Total Debt to Total Annualised Net Operating Cash Flow (calculated on the
last day of each such Quarterly Period by reference to the Six Month
Period ended on such date) each as demonstrated in the Compliance
Certificate for the relevant Quarterly Period that has been delivered to
the Agent under the Facility Agreement for the Quarterly Period ending
immediately prior to such date is less than and remains below 3:1, then
this clause shall not prevent the payment of any interest on any
Subordinated Agreement.]
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2.3 Notification of Subordinated Liabilities
----------------------------------------
The Subordinated Creditor hereby agrees to notify the Security Trustee of
the amounts from time to time of the Subordinated Liabilities and the
Group Liabilities which may be scheduled to be made by any member of the
Restricted Group to the Subordinated Creditor.
3 SUBORDINATION
-------------
3.1 Insolvency Events
-----------------
Upon an Insolvency Event occurring in respect of any member of the
Restricted Group:
(a) the claims of the Subordinated Creditor in respect of the
Subordinated Liabilities shall be postponed in all respects to the
Secured Obligations;
(b) the Subordinated Creditor shall not, unless otherwise directed by
the Security Trustee, prove for the Subordinated Liabilities until
the Secured Obligations have first been paid or discharged in full
(and for all purposes any Distribution received by the Security
Trustee shall only be taken to discharge the Secured Obligations to
the extent of the actual amount received);
(c) if the Subordinated Creditor is directed by the Security Trustee to
prove for the Subordinated Liabilities then it shall act in
accordance with such directions and shall procure that any resultant
Distributions shall be made by the liquidator of the relevant member
of the Restricted Group, or any other person making the
Distribution, to the Security Trustee to the extent necessary to
repay all the Secured Obligations in full; and
(d) the Subordinated Creditor hereby irrevocably authorises and directs
the Security Trustee to submit any proof and/or to instruct the
relevant liquidator or other person to make Distributions in
accordance with the foregoing.
3.2 Payments contrary to this Deed
------------------------------
In the event of:
(a) any payment or other Distribution being made to, or a right of set-
off of the Group Liabilities against the Subordinated Liabilities
being exercised by, the Subordinated Creditor or any member of the
Restricted Group contrary to the provisions of this Deed;
(b) any Distribution being made by a liquidator or other person to the
Subordinated Creditor, rather than to the Security Trustee, as
required by clause 3.1; or
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(c) the Subordinated Creditor or any member of the Restricted Group
being required to exercise rights of set-off of the Group
Liabilities against the Subordinated Liabilities under applicable
law (as contemplated in clause 2.1(e)).
the Subordinated Creditor shall forthwith pay to the Security Trustee an
amount equal to the Distributions which shall have been so received by it
up to an aggregate amount equal to the Secured Obligations or, as the case
may be, in the case of set-off, an amount equal to the sum set-off up to
an aggregate amount equal to the Secured Obligations and, until such
payment to the Security Trustee, the Subordinated Creditor will hold such
sums on trust for the Security Trustee and any such sums so paid to the
Security Trustee shall be applied in accordance with the terms of the
Security Trust Deed in or toward discharge of the Secured Obligations.
3.3 Subordinated Agreements
-----------------------
Notwithstanding clauses 2 and 3, nothing contained in this Deed is
intended to or shall impair, as between the members of the Restricted
Group and the Subordinated Creditor, the obligations of the members of the
Restricted Group under the Subordinated Agreements, including the
obligation to pay to the Subordinated Creditor all of the Subordinated
Liabilities. Until all of the Subordinated Liabilities are paid in full by
the relevant members of the Restricted Group in funds which may, at the
time when the same are received, be fully retained by the Subordinated
Creditor after giving effect to this Deed, the members of the Restricted
Group shall remain fully liable under the Subordinated Agreements and any
payment made to the Subordinated Creditor in contravention of the terms of
this Deed or by the Subordinated Creditor to the Agent pursuant to this
Deed shall not be deemed for these purposes to have in any way
extinguished the obligations of the members of the Restricted Group to the
Subordinated Creditor in relation to the Subordinated Liabilities pursuant
to the Subordinated Agreements.
3.4 Subrogation
-----------
If the Secured Obligations are partially paid out of any proceeds received
in respect of or on account of any Subordinated Liabilities, the Creditor
will not be subrogated to the Secured Obligations so paid (or any
Collateral Instrument) until the Secured Obligations have been irrevocably
paid in full.
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4 CONTINUING OBLIGATIONS
----------------------
4.1 Continuing obligations
----------------------
The obligations of the Subordinated Creditor hereunder shall be continuing
obligations and shall be and remain fully effective until this Deed is
formally released following the discharge in full of the Secured
Obligations notwithstanding any intermediate reduction or settlement of
the Secured Obligations or any part thereof and notwithstanding any
increase in or variation of the Secured Obligations or any amendment,
variation, extension, restatement, refinancing or replacement of the
Facility Agreement any Interest Rate Hedging Arrangements or Security
Document.
4.2 Statements of account
---------------------
Any statement of account of the Parent, signed as correct by an officer of
the Agent, showing the amount of the Secured Obligations shall be prima
facie evidence of the amount of the Secured obligations.
4.3 Continuing security and other matters
-------------------------------------
This Deed shall:
(a) secure the ultimate balance from time to time of the Secured
Obligations and shall be a continuing security, notwithstanding any
settlement of account or other matter whatsoever;
(b) be in addition to any present or future Collateral Instrument, right
or remedy held by or available to the Beneficiaries or any of them;
and
(c) not be in any way prejudiced or affected by the existence of any
Collateral Instrument or other right or remedy or by the same
becoming wholly or in part void, voidable or unenforceable on any
ground whatsoever or by the Beneficiaries or any of them dealing
with, exchanging, varying or failing to perfect or enforce any of
the same or giving time for payment or indulgence or compounding
with any other person liable.
4.4 Liability unconditional
-----------------------
The liability of the Subordinated Creditor shall not be affected,
discharged or reduced by reason of:
(a) the Incapacity or any change in the name, style or constitution of
any Obligor or any other person;
(b) the Beneficiaries (or any of them) granting any time, indulgence or
concession to, or compounding with, discharging, releasing or
varying the liability of, any Obligor or any other person or
renewing, determining, varying or increasing any accommodation,
facility or transaction or otherwise dealing with the same in any
manner whatsoever or concurring
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in, accepting or varying any compromise, arrangement or settlement
or omitting to claim or enforce payment from any Obligor or any
other person; or
(c) any act or omission which but for this provision might operate to
exonerate the Subordinated Creditor.
4.5 Collateral Instruments
----------------------
None of the Beneficiaries shall be obliged to make any claim or demand on
the Obligors or to resort to any Collateral Instrument or other means of
payment now or hereafter held by or available to them or it before
enforcing this Deed and no action taken or omitted by the Beneficiaries in
connection with any such Collateral Instrument or other means of payment
shall discharge, reduce, prejudice or affect the liability of the
Subordinated Creditor under this Deed nor (until sufficient money has been
received by the Beneficiaries (whether or not credited to a suspense
account), to discharge irrevocably the Secured Obligations in full and no
Beneficiary is under any commitment to permit any Secured Obligations to
become outstanding) shall any of the Beneficiaries be obliged to account
for any money or other property received or recovered in consequence of
any enforcement or realisation of any such Collateral Instrument or other
means of payment.
4.6 Suspense accounts
-----------------
Any money received in connection with this Deed (whether before or after
any Incapacity of any Obligor, any other person or the Subordinated
Creditor) may be placed to the credit of an interest bearing suspense
account (until sufficient money has been credited to such suspense account
to irrevocably discharge the Secured Obligations in full and no
Beneficiary is under any commitment to permit any Secured Obligations to
become outstanding) with a view to preserving the rights of the
Beneficiaries to prove for the whole of their respective claims against
the Obligors or any other person liable or may be applied in or towards
satisfaction of such of the Secured Obligations in accordance with the
terms of the Security Trust Deed. Interest shall accrue on monies from
time to time standing to the credit of any suspense account at the rate
agreed between the Security Trustee and the Subordinated Creditor at the
relevant time or, failing such agreement, the Security Trustee's overnight
deposit rate from time to time and shall be credited to such suspense
account or may be applied in or towards satisfaction of the Secured
Obligations in accordance with the terms of the Security Trust Deed.
4.7 Settlements conditional
-----------------------
Any release, discharge or settlement between the Subordinated Creditor and
the Beneficiaries (or any of them) shall be conditional upon no security,
disposition or payment to the Beneficiaries (or any of them) by any
Obligor or any other person liable being void, set aside or ordered to be
refunded pursuant to any enactment or law relating to bankruptcy,
liquidation, administration or insolvency or for any other reason
whatsoever and if such condition shall not be
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fulfilled the Security Trustee shall be entitled to enforce this Deed
subsequently as if such release, discharge or settlement had not occurred
and any such payment had not been made.
4.8 Retention of this Deed
----------------------
Notwithstanding any other provision of this Deed, this Deed shall not be
released, the Security Trustee shall be entitled to retain this Deed and
all the provisions of this Deed shall remain in full force and effect
until the irrevocable payment or discharge in full of all the Secured
Obligations.
5 REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Representations and warranties
------------------------------
The Subordinated Creditor represents and warrants in respect of itself and
its Subsidiaries to the Security Trustee that:
(a) Due incorporation
-----------------
the Subordinated Creditor is duly [incorporated] under the laws of !
as a [limited liability company] and has the [corporate] power to
carry on its business as it is now being conducted and to own its
property and other assets;
(b) Corporate power
---------------
the Subordinated Creditor has the [corporate] power to execute,
deliver and perform its obligations under this Deed; all necessary
[corporate, shareholder] and other action has been taken to
authorise the execution, delivery and performance of the same;
(c) Binding obligations
-------------------
this Deed constitutes valid and legally binding obligations of the
Subordinated Creditor enforceable in accordance with its terms;
(d) No conflict with other obligations
----------------------------------
the execution and delivery of, the performance of its obligations
under, and compliance with the provisions of, this Deed by the
Subordinated Creditor will not (i) contravene any existing
applicable law, statute, rule or regulation or any judgment, decree
or licence to which the Subordinated Creditor is subject, (ii)
conflict with, or result in any breach of any of the terms of, or
constitute a default under, any agreement, permit or other
instrument to which the Subordinated Creditor is a party or is
subject or by which it or any of its property is bound, (iii)
contravene or conflict with any provision of the Subordinated
Creditor's [Memorandum and Articles of Association] or (iv) result
in the
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creation or imposition of or oblige the Subordinated Creditor or any
of its Subsidiaries to create any Encumbrance on any of the
Subordinated Creditor's or any of its Subsidiaries' undertakings,
assets, rights or revenues;
(e) Consents obtained
-----------------
every consent, authorisation, licence or approval of, or
registration with or declaration to, governmental or public bodies
or authorities (in each case, solely in their capacity as such a
body or authority and not in any other capacity) or courts required
by the Subordinated Creditor to authorise, or required by the
Subordinated Creditor in connection with, the execution, delivery,
validity, enforceability or admissibility in evidence of this Deed
or the performance by the Subordinated Creditor of its obligations
under this Deed has been obtained or made and is in full force and
effect and there has been no material default which is continuing in
the observance of the conditions or restrictions (if any) imposed
in, or in connection with, any of the same;
(f) No filings required
-------------------
it is not necessary to ensure the legality, validity, enforceability
or admissibility in evidence of this Deed that it or any other
instrument be notarised, filed, recorded, registered or enrolled in
any court, public office in any relevant jurisdiction or that any
stamp, registration or similar tax or charge be paid in any relevant
jurisdiction on or in relation to this Deed and this Deed is in
proper form for its enforcement in the courts of any relevant
jurisdiction;
(g) No litigation
-------------
no litigation, arbitration or administrative proceeding is taking
place, or, to the knowledge of the officers of the Subordinated
Creditor pending or threatened against the Subordinated Creditor or
any of its Subsidiaries or Associated Companies which would or is
reasonably likely to have a material adverse effect on the ability
of the Subordinated Creditor to fulfil its obligations under this
Deed; and
(h) Choice of law
-------------
the choice by the Subordinated Creditor of English law to govern
this Deed and the submission by the Subordinated Creditor to the
jurisdiction of the English courts is valid and binding.
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5.2 Repetition
----------
The representations and warranties in clause 5.1 shall be deemed to be
repeated by the Subordinated Creditor in respect of itself and its
Subsidiaries on and as of each date on which any of the representations
and warranties contained in clause 10.1 of the Facility Agreement are
repeated or deemed to be repeated with reference to the facts and
circumstances existing on such day.
5.3 Covenant
--------
The Subordinated Creditor undertakes with the Security Trustee that it
will, without prejudice to clause 5.1, (i) obtain or cause to be obtained,
maintain in full force and effect and comply in all material respects with
the conditions and restrictions (if any) imposed in, or in connection
with, every consent, authorisation, licence or approval of governmental or
public bodies or authorities (in each case, solely in their capacity as
such a body or authority and not in any other capacity) or courts (and do,
or cause to be done, all other acts and things) which may from time to
time be necessary or reasonably desirable under applicable law of any
relevant jurisdiction for the continued due performance of all its
obligations under this Deed, and (A) ensure that none of the same is
revoked, cancelled, suspended, withdrawn, terminated, expires and is not
renewed or otherwise ceases to be in full force and effect without a new
one having first been put in place with the Subordinated Creditor on
substantially identical terms or on terms more beneficial to the
Subordinated Creditor, and (B) ensure that none of the same is modified in
any material respect and that the Subordinated Creditor does not commit
any default in the observance of the conditions or restrictions (if any)
imposed in, or in connection with, any of the same which, in the case of
any of the events referred to in (B) above, in the reasonable opinion of
the Majority Banks, would or is reasonably likely to have a material
adverse effect on the ability of the Subordinated Creditor to perform all
or any of its obligations under or otherwise to comply with the terms of
this Deed, and (ii) ensure that this Deed is notarised, filed, recorded,
registered or enrolled in any court or public office in any relevant
jurisdiction necessary to ensure the legality, validity, enforceability or
admissibility in evidence thereof and that any stamp, registration or
similar tax or charge is paid in any relevant jurisdiction on or in
relation to this Deed.
6 BENEFIT OF THIS DEED
--------------------
6.1 Benefit and burden
------------------
This Deed shall be binding upon the Subordinated Creditor and its
successors in title and shall enure for the benefit of the Security
Trustee (and any successor Security Trustee appointed pursuant to the
terms of the Security Trust Deed) and their respective successors for the
benefit of the Beneficiaries in accordance with the provisions of the
Security Trust Deed.
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6.2 No assignment
-------------
The Subordinated Creditor may not assign or transfer any of its rights or
obligations under this Deed.
6.3 The Security Trust Deed
-----------------------
The Subordinated Creditor and the Security Trustee hereby acknowledge that
the covenants of the Creditor contained in this Deed and the rights
constituted by this Deed and all moneys, property and assets paid to, or
held, received or recovered by the Security Trustee pursuant to or in
connection with this Deed are held by the Security Trustee subject to and
on the terms of the trusts declared in the Security Trust Deed.
6.4 Changes in constitution or reorganisation of Beneficiaries
----------------------------------------------------------
For the avoidance of doubt and without prejudice to the provisions of
clause 6.1, this Deed shall remain binding on the Subordinated Creditor
notwithstanding any change in the constitution of any of the Beneficiaries
or their or its absorption in, or amalgamation with, or the acquisition of
all or part of their or its undertaking or assets by, any other person, or
any reconstruction or reorganisation of any kind, to the intent that this
Deed shall remain valid and effective in all respects in favour of the
Security Trustee (and any successor Security Trustee appointed pursuant to
the provisions of the Security Trust Deed and their respective successors
in title) as trustee for the Beneficiaries and any assignee, transferee or
other successor in title of a Beneficiary.
7 NOTICES AND OTHER MATTERS
-------------------------
7.1 Notices
-------
Every notice, request, demand or other communication under this Deed shall
be made in accordance with the provisions, mutatis mutandis, of clause 19
of the Facility Agreement and shall be sent to the Subordinated Creditor
at its address set out above (facsimile number: [!]) or to the Security
Trustee at its address set out in clause 19 of the Facility Agreement or
to such other address or facsimile number as is notified by one party to
this Deed to the other.
7.2 No implied waivers, remedies cumulative
---------------------------------------
No failure or delay on the part of the Security Trustee to exercise any
power, right or remedy under this Deed shall operate as a waiver thereof,
nor shall any single or partial exercise by the Security Trustee of any
power, right or remedy preclude any other or further exercise thereof or
the exercise of any other power, right or remedy. The remedies provided in
this Deed are cumulative and are not exclusive of any remedies provided by
law.
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7.3 Other Collateral Instruments
----------------------------
The Subordinated Creditor agrees to be bound by this Deed notwithstanding
that any other person intended to execute or to be bound by any Collateral
Instrument may not do so or may not be effectually bound and
notwithstanding that such other Collateral Instrument may be determined or
be or become invalid or unenforceable against any other person, whether or
not the deficiency is known to the Security Trustee or any of the other
Beneficiaries.
7.4 Severability
------------
Each of the provisions of this Deed is severable and distinct from one
another and if at any time one or more of such provisions is or becomes
illegal, invalid or unenforceable under any applicable law the validity
legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
7.5 Counterparts
------------
This Deed may be executed in any number of counterparts and by the
different parties on separate counterparts, each of which when so executed
and delivered shall be an original, but all counterparts shall together
constitute one and the same instrument.
8 LAW AND JURISDICTION
--------------------
8.1 Governing law
-------------
This Deed is governed by and shall be construed in accordance with English
law.
8.2 Submission to jurisdiction
--------------------------
The Subordinated Creditor agrees for the benefit of the Security Trustees
that:
(a) if any party has any claim against any other arising out of or in
connection with this Agreement such claim shall (subject to clause
8.2(c)) be referred to the High Court of Justice in England, to the
jurisdiction of which each of the parties irrevocably submits;
(b) the jurisdiction of the High Court of Justice in England over any
such claim against the Security Trustee shall be an exclusive
jurisdiction and no courts outside England shall have jurisdiction
to hear or determine any such claim; and
(c) nothing in this clause 8.2 shall limit the right of the Security
Trustee to refer any such claim against the Subordinated Creditor to
any other court of competent jurisdiction outside England, to the
jurisdiction of which the Subordinated Creditor hereby irrevocably
agrees to submit, nor shall the taking of proceedings by the
Security Trustee before the courts in one or
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more jurisdictions preclude the taking of proceedings in any other
jurisdiction whether concurrently or not.
8.3 Agent for service of process
----------------------------
The Subordinated Creditor irrevocably designates, appoints and empowers !
Limited at present of ! to receive for it and on its behalf service of
process issued out of the High Court of Justice in England in relation to
any claim arising out of or in connection with this Agreement.
IN WITNESS whereof this Deed has been executed by each party hereto the day and
year first above written.
168
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Schedule
--------
Subordinated Agreements
-----------------------
1 The agreements, the details of which are set out below:
Date Document Parties
---- -------- -------
! ! !
2 Each and every Encumbrance issued or entered into by the Parent or any
member of the Restricted Group in favour of the Subordinated Creditor in
respect of the Subordinated Borrowed Money.
169
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SUBORDINATED CREDITOR
- ---------------------
EXECUTED as a DEED )
by [SUBORDINATED CREDITOR] )
SECURITY TRUSTEE
- ----------------
SIGNED for and on behalf of )
THE TORONTO-DOMINION BANK )
by: )
170
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SCHEDULE 9
----------
Principal Agreements
--------------------
1 The General Services Agreements between the Parent and each of:
(i) Radio Public, effective from 1st January 1995;
(ii) Norkabel, effective from 1st January, 1997; and
(iii) the Telekabel Entities (other than CNA), effective from 1st January,
1995.
2 The Radio Public Bond.
3 The Telekabel Bond.
4 The Austrian Agreements.
5 The Option Agreements.
6 The Stock Option Plan.
7 The Securities Purchase and Conversion Agreement.
8 The Janco Loan Agreement.
9 The documents constituting the Norwegian I/C Indebtedness.
171
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SCHEDULE 10
-----------
Part A - Deed of Guarantor Accession
------------------------------------
To: THE TORONTO-DOMINION BANK as Security Trustee
From: [PROPOSED GUARANTOR] and [UNITED PAN-EUROPE
COMMUNICATIONS N.V.]
Date: [ ]
UNITED PAN-EUROPE COMMUNICATIONS N.V. NLG 1,100,000,000 Senior Reducing
Revolving Credit Agreement dated , 1997 (as from time to time
amended, varied, extended, restated, refinanced or replaced the "FACILITY
AGREEMENT")
We refer to clause 9.17 of the Facility Agreement. Words and expressions defined
in the Facility Agreement have the same meanings when used in this Deed.
We, [name of company] of [address] agree to become an Acceding Guarantor and to
be bound by the terms of the Facility Agreement as an Acceding Guarantor in
accordance with clause 9.16 of the Facility Agreement and the Security Trust
Deed as a Guarantor in accordance with clause 10.16 of the Security Trust Deed.
[LOCAL LAW LIMITATIONS ON AMOUNTS GUARANTEED BY ACCEDING GUARANTOR (IF ANY)]
Our address for notices for the purposes of clause 19.1 of the Facility
Agreement is:
[
]
This Deed is intended to be executed as a deed and is governed by English law.
[PROPOSED GUARANTOR] [UNITED PAN-EUROPE
COMMUNICATIONS N.V.]
[Appropriate execution clause] [Appropriate execution clause]
By: By:
172
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By:
THE TORONTO-DOMINION BANK
[Appropriate execution clause]
By
173
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SCHEDULE 10
-----------
Part B - Documents and Evidence to be delivered by an Acceding Guarantor
------------------------------------------------------------------------
(a) Deed of Guarantor Accession, duly executed under seal by the
Acceding Guarantor and the Parent;
(b) a Share Security over the shares of the Acceding Guarantor, duly
executed as a deed by the parties to it (the "Relevant Shareholders")
and such other Security Documents as the Agent may reasonably require;
(c) a copy of the constitutional documents of each of the Acceding
Guarantor and the Relevant Shareholders;
(d) a copy of a resolution of the board of directors of each of the
Acceding Guarantor and Relevant Shareholders approving the terms of,
and the transactions contemplated by, the Deed of Guarantor Accession,
the relevant Security Documents or the relevant Share Security (as
appropriate) and authorising its appropriate officers to execute and
deliver the Deed of Guarantor Accession, the relevant Security
Documents or the Share Security (as appropriate) and give all notices
and take all other action required by it under the Finance Documents;
(e) a certificate of a director of the Acceding Guarantor certifying that
the amounts to be guaranteed by the Acceding Guarantor would not cause
any guaranteeing limit binding on it to be exceeded;
(f) a copy of any other authorisation or other document, opinion or
assurance which is necessary for the execution, delivery and validity
and enforceability of the Deed of Guarantor Accession, the relevant
Security Documents or the Share Security;
(g) a specimen of the signature of each person authorised by a resolution
referred to in paragraph (d) above;
(h) if available, a copy of the latest audited accounts of the Acceding
Guarantor;
(i) a legal opinion of English legal advisers, acceptable to the Agent,
addressed to the Security Trustee on behalf of the Beneficiaries (as
defined in the Security Trust Deed)
(j) if the Acceding Guarantor and/or a Relevant Shareholder is
incorporated in a jurisdiction outside England, a legal opinion of
legal advisers, acceptable to the Agent, in the jurisdiction of
incorporation of the Acceding Guarantor and/or Relevant Shareholder
(as appropriate), addressed to the Security Trustee on behalf of the
Beneficiaries (as defined in the Security Trust Deed);
(k) a certificate of an authorised signatory of the Acceding Guarantor and
each Relevant Shareholder certifying that each copy document specified
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in part B of this schedule 10 and relating to it is correct, complete
and in full force and effect as at a date no earlier than the date of
the Deed of Guarantor Accession, relevant Security Documents or the
Share Security (as appropriate);
(l) a certificate of an authorised signatory of the Parent confirming that
its constitutional documents have not been amended (or, if they have,
enclosing a copy of the amended constitutional documents) and that all
authorisations and resolutions authorising its appropriate officers to
execute and deliver the Deed of Guarantor Accession remain in full
force and effect;
(m) if applicable, share certificates and stock transfer forms executed in
blank and all other documents required to be delivered to the Security
Trustee in connection with the relevant Share Security and such other
documents as may be required pursuant to the relevant Security
Documents; and
(n) such other documents as the Agent may reasonably require after taking
the advice of the legal advisers referred to in paragraphs (i)and (j)
above.
175
<PAGE>
SCHEDULE 11
-----------
Part A - Deed of Borrower Accession
-----------------------------------
To: THE TORONTO-DOMINION BANK as Agent
From: [NEW JANCO] [TELEKABEL WIEN] and [UNITED PAN-EUROPE
COMMUNICATIONS N.V.]
Date: [ ]
UNITED PAN-EUROPE COMMUNICATIONS N.V. NLG 1,100,000,000 Senior Reducing
Revolving Credit Agreement dated , 1997 (as from time to time
amended, varied, extended, restated, refinanced or replaced the "FACILITY
AGREEMENT")
We refer to [clause 3.5] [clause 3.6] of the Facility Agreement. Words and
expressions defined in the Facility Agreement have the same meanings when used
in this Deed.
[Name of New Janco] [Telekabel Wien] of [address] (the "PROPOSED BORROWER")
agrees to become a Borrower and to be bound by the terms of the Facility
Agreement as a Borrower in accordance with [clause 3.5] [clause 3.6] of the
Facility Agreement and the Security Trust Deed as a Borrower in accordance with
clause 10.16 of the Security Trust Deed.
The address for notices of [New Janco] [Telekabel Wien] for the purposes of
clause 19.1 of the Facility Agreement is:
[
]
This Deed is intended to be executed as a deed and is governed by English law.
[NEW JANCO] [TELEKABEL WIEN] [UNITED PAN-EUROPE
COMMUNICATIONS N.V.]
Authorised Signatory Authorised Signatory
[Appropriate execution clause] [Appropriate execution clause]
By: By:
By:
THE TORONTO-DOMINION BANK
[Appropriate execution clause]
By
176
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SCHEDULE 11
-----------
Part B - Documents and Evidence to be delivered by New Janco
------------------------------------------------------------
(a) a Deed of Borrower Accession, duly executed by New Janco and the
Parent;
(b) a copy of the articles of association, certificate of registration and
other constitutional documents of New Janco (as updated following the
Norwegian Merger);
(c) a copy of a resolution of the board of directors of New Janco
approving the terms of, and the transactions contemplated by, the Deed
of Borrower Accession and authorising its appropriate officers to
execute and deliver the Deed of Borrower Accession and to give all
notices (including, where applicable, Drawdown Notices) and take all
other action required by it under the Finance Documents;
(d) a certificate of a director of New Janco confirming that utilisation
of the Facility up to the Norwegian Loan Amount would not cause any
borrowing limit binding on it to be exceeded;
(e) a copy of any other authorisation or other document, opinion or
assurance which is necessary for the execution, delivery, validity and
enforceability of the Deed of Borrower Accession or any other Finance
Document insofar as it is necessitated by the execution of the Deed of
Borrower Accession;
(f) a specimen of the signature of each person authorised by the
resolution referred to in paragraph (c) above;
(g) if available, the latest audited accounts of New Janco;
(h) a legal opinion of English legal advisers, acceptable to the Agent,
addressed to the Banks;
(i) a legal opinion of legal advisers, acceptable to the Agent, in Norway,
addressed to the Banks;
(j) a certificate of an authorised signatory of New Janco certifying that
each copy document specified in part B of this schedule 11 is correct,
complete and in full force and effect as at a date no earlier than the
date of the Deed of Borrower Accession;
(k) a certificate of an authorised signatory of the Parent confirming that
its constitutional documents have not been amended (or, if they have,
enclosing a copy of the amended constitutional documents) and that all
authorisations and resolutions authorising its appropriate officers to
177
<PAGE>
execute and deliver the Deed of Borrower Accession in full force and
effect;
(l) Copy of minutes from general meeting in Norkabelgruppen AS, evidencing
the decision to merge Norkabelgruppen AS and Janco Kabel-TV AS,
including copies of summons to such general meeting (with annexes);
(m) Copy of minutes from general meeting in Janco Kabel-TV AS, evidencing
the decision to merge Norkabelgruppen AS and Janco Kabel-TV AS,
including copies of summons to such general meeting (with annexes);
(n) Copy of merger agreement between Norkabelgruppen AS and Janco Kabel-TV
AS (with annexes);
(o) Copies of minutes from board meeting in Norkabelgruppen AS, evidencing
the board's approval of the merger agreement with Janco Kabel-TV AS;
(p) Copies of minutes from board meeting in Janco-Kabel-TV AS, evidencing
the board's approval of the merger agreement with Norkabelgruppen AS;
(q) Copy of minutes from board meeting in Norkabelgruppen AS, evidencing
the decision to merge Norkabelgruppen AS, Norkabel AS and Oslo
Kabelanlegg AS;
(r) Copy of filing to the Norwegian Companies Register from Norkabel AS,
regarding the decision to merge Norkabel AS with Norkabelgruppen AS;
(s) Copy of filing to the Norwegian Companies Register from Oslo
Kabelanlegg AS, regarding the decision to merge Oslo Kabelanlegg AS
with Norkabelgruppen AS;
(t) Copy of filing to the Norwegian Companies Register from
Norkabelgruppen AS, regarding the decision to merge Norkabelgruppen AS
with Janco Kabel-TV AS;
(u) Copy of existing company certificates of Norkabel AS, Oslo Kabelanlegg
AS, Norkabelgruppen AS and Janco Kabel-TV AS (not more than one month
old) prior to the mergers;
(v) Copy of new company certificate of Janco Kabel-TV AS after
registration of the merger with Norkabelgruppen AS;
(w) Such other documents as the Agent may reasonably require to ensure
that all security granted to the Security Trustee prior to the
Norwegian Merger remains in place.
178
<PAGE>
SCHEDULE 12
-----------
[Intentionally left blank]
179
<PAGE>
SCHEDULE 13
-----------
Part A - Norwegian Security Documents
-------------------------------------
(if at the relevant time the Norwegian Merger
---------------------------------------------
has not occurred)
-----------------
A SECURITY PROVIDED BY NORKABEL, KANAL 2 A/S ("KANAL"), NORKABEL A/S ("NAS")
AND OSLO KABELANLEGG A/S ("OK")
1 Norkabel Pledge(s) of Shares by United Communications International, the
Parent and/or Janco dated 5th March 1997, which has been either assigned
for the benefit of the Security Trustee by ING Bank N.V. or re-executed in
favour of the Security Trustee in the same form mutatis mutandis;
2 Kanal Pledge of Shares by Norkabel, dated 5th March 1997, which has been
either assigned for the benefit of the Security Trustee by ING Bank N.V.
or re-executed in favour of the Security Trustee in the same form mutatis
mutandis;
3 NAS Pledge of Shares by Norkabel, dated 5th March 1997, which has been
either assigned for the benefit of the Security Trustee by ING Bank N.V.
or re-executed in favour of the Security Trustee in the same form mutatis
mutandis;
4 OK Pledge of Shares by Norkabel, dated 5th March 1997, which has been
either assigned for the benefit of the Security Trustee by ING Bank N.V.
or re-executed in favour of the Security Trustee in the same form mutatis
mutandis;
5 Assignment of Receivables by Norkabel, dated 5th March 1997, which has
been either assigned for the benefit of the Security Trustee by ING Bank
N.V. or re-executed in favour of the Security Trustee in the same form
mutatis mutandis;
6 Assignment of Receivables by NAS, dated 5th March 1997, which has been
either assigned for the benefit of the Security Trustee by ING Bank N.V.
or re-executed in favour of the Security Trustee in the same form mutatis
mutandis;
7 Assignment of Receivables by OK, dated 5th March 1997, which has been
either assigned for the benefit of the Security Trustee by ING Bank N.V.
or re-executed in favour of the Security Trustee in the same form mutatis
mutandis;
8 Assignment of Receivables by Kanal, dated 5th March 1997, which has been
either assigned for the benefit of the Security Trustee by ING Bank N.V.
or re-executed in favour of the Security Trustee in the same form mutatis
mutandis;
9 Pledge of Bank Accounts by Norkabel, NAS, OK and Kanal, dated 5th March
1997, which has been either assigned for the benefit of the Security
Trustee by ING Bank N.V. or re-executed in favour of the Security Trustee
in the same form mutatis mutandis;
10 Declarations of Norkabel concerning Mortgages over Stock of Goods and
Motor Vehicles together with Factoring Agreement and Transcript of
Register, in
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<PAGE>
substantially the form given to ING Bank N.V. in connection with the
Existing Norkabel Facility;
11 Declarations of NAS concerning Mortgages over Stock of Goods and Motor
Vehicles together with Factoring Agreement and Transcript of Register, in
substantially the form given to ING Bank N.V. in connection with the
Existing Norkabel Facility;
12 Declarations of OK concerning Mortgages over Stock of Goods and Motor
Vehicles together with Factoring Agreement and Transcript of Register, in
substantially the form given to ING Bank N.V. in connection with the
Existing Norkabel Facility;
13 Declarations of Kanal concerning Mortgages over Stock of Goods and Motor
Vehicles together with Factoring Agreement and Transcript of Register, in
substantially the form given to ING Bank N.V. in connection with the
Existing Norkabel Facility;
14 Declaration relating to transfer of existing mortgages by Norkabel and
NAS, in the form given to ING Bank N.V. in connection with the Existing
Norkabel Facility, mutatis mutandis;
15 Declaration relating to mortgages over new property by Norkabel and NAS,
in the form given to ING Bank N.V. in connection with the Existing
Norkabel Facility, mutatis mutandis;
16 Assignment and Notice of Programme Supply Agreements by Norkabel and NAS,
in the form given to ING Bank N.V. in connection with the Existing
Norkabel Facility, mutatis mutandis;
17 Assignment of General Services Agreement by Norkabel, in the form given to
ING Bank N.V. in connection with the Existing Norkabel Facility, mutatis
mutandis;
18 Assignment of Insurance Proceeds by Norkabel, NAS, OK and Kanal, in the
form given to ING Bank N.V. in connection with the Existing Norkabel
Facility, mutatis mutandis;
19 [Intentionally left blank];
20 A Mortgage Deed for NOK 720,000,000 dated 16 November 1989, under the name
of Askim Antenneservice, registered over the Mortgagors' Leased Real
Estate and Appurtenances (leierett med driftsilbeh0r) in Eidsbergvn. 5,
gnr. 52, bnr. 47 in the municipality of Askim, in the form given to ING
Bank N.V. in connection with the Existing Norkabel Facility, mutatis
mutandis;
21 A Mortgage Deed for NOK 720,000,000 registered 17 November 1989 under the
name of Drammen Kabel-TV, registered over the Mortgagors' Leased Real
Estate and Appurtenances (leierett med drifstilbeh0r) in hans Kjaersgt. 2,
gnr. 111, bnr.
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<PAGE>
248 in the municipality of Drammen, in the form given to ING Bank N.V. in
connection with the Existing Norkabel Facility, mutatis mutandis;
22 A Mortgage Deed for NOK 724,000,000 registered 10 March 1992 under the
name of AS KA-TEL, registered over the Mortgagors' Leased Real Estate and
Appurtenances (leierett med drifstilbeh0r) in gnr. 7613, bnr. 9 in the
municipality of Kongsberg, in the form given to ING Bank N.V. in
connection with the Existing Norkabel Facility, mutatis mutandis;
23 A Mortgage Deed for NOK 720,000,000 registered 9 February 1990 under the
name of Moss Kabel TV, registered over the Mortgagors' Leased Real Estate
and Appurtenances (leierett med drifstilbeh0r) in Vaerftsgaten 10, gnr. 1,
bnr. 2750 in the municipality of Moss, in the form given to ING Bank N.V.
in connection with the Existing Norkabel Facility, mutatis mutandis;
24 A Mortgage Deed for NOK 720,000,000 registered 31 January 1990 under the
name of 0stfold Kabelnett A/S, registered over the Mortgagors' Leased Real
Estate and Appurtenances (leierett med drifstilbeh0r) in Violgt. 8, gnr.
62, bnr. 111 in the municipality of Halden, in the form given to ING Bank
N.V. in connection with the Existing Norkabel Facility, mutatis mutandis;
25 A Mortgage Deed for NOK 720,000,000 registered 17 November 1989 under the
name of Teletransmisjon A/S, registered over the Mortgagors' Leased Real
Estate and Appurtenances (leierett med drifstilbeh0r) in Lensmannslia 30,
gnr. 50, bnr. 23 parcel A in the municipality of Asker, in the form given
to ING Bank N.V. in connection with the Existing Norkabel Facility,
mutatis mutandis;
26 A Mortgage Deed for NOK 720,000,000 registered 13 March 1990 under the
name of West Satellite A/S, registered over the Mortgagors' Leased Real
Estate and Appurtenances (leierett med drifstilbeh0r) in Arken Senter
Asane 39, gnr. 88, bnr. 387, 388, 389, 390 and 391 in the municipality of
Bergen, in the form given to ING Bank N.V. in connection with the Existing
Norkabel Facility, mutatis mutandis;
27 A Mortgage Deed for NOK 720,000,000 registered 12 September 1990 under the
name of West Satellite A/S, registered over the Mortgagors' Real Estate
and Appurtenances (fast eiendom med drifstilbeh0r) in Tjensvolltorget 27,
gnr. 25, bnr. 161 in the municipality of Stavanger, in the form given to
ING Bank N.V. in connection with the Existing Norkabel Facility, mutatis
mutandis;
28 A Mortgage Deed for NOK 725,000,000 dated 10 June 1993, under the name of
NAS, registered over the Mortgagors' Leased Real Estate and Appurtenances
(leierett med driftstilbeh0r) in gnr. 2076 bnr. 169 in the municipality of
Sarpsborg, in the form given to ING Bank N.V. in connection with the
Existing Norkabel Facility, mutatis mutandis;
29 A Mortgage Deed for NOK 725,000,000 dated 10 June 1993, under the name of
NAS, registered over the Mortgagors' Leased Real Estate and Appurtenances
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(leierett med driftstilbeh0r) in gnr. 15, bnr. 661 in the municipality of
Karm0y, in the form given to ING Bank N.V. in connection with the Existing
Norkabel Facility, mutatis mutandis;
30 A Mortgage Deed for NOK 725,000,000 dated 10 June 1993, under the name of
NAS, registered over the Mortgagors' Leased Real Estate and Appurtenances
(leierett med driftstilbeh0r) in gnr. 188, bnr. 202 in the municipality of
Bergen, in the form given to ING Bank N.V. in connection with the Existing
Norkabel Facility, mutatis mutandis;
31 A Mortgage Deed for NOK 725,000,000 dated 5 November 1993, under the name
of NAS, registered over the Mortgagors' Leased Real Estate and
Appurtenances (leierett med driftstilbeh0r) in gnr. 86, bnr. 33 in the
municipality of Frogn, in the form given to ING Bank N.V. in connection
with the Existing Norkabel Facility, mutatis mutandis;
32 A Mortgage Deed for NOK 725,000,000 registered 10 March 1995 under the
name of NAS, registered over the Mortgagors' Leased Real Estate and
Appurtenances (leierett med driftstilbeh0r) in gnr. 148, bnr. 834 and 306
in the municipality of Karm0y, in the form given to ING Bank N.V. in
connection with the Existing Norkabel Facility, mutatis mutandis;
33 A Mortgage Deed for NOK 725,000,000 registered 23 March 1995 under the
name of NAS, registered over the Mortgagors' Leased Real Estate and
Appurtenances (leierett med driftstilbeh0r) in gnr. 16, bnr. 109 in the
municipality of Stavanger, in the form given to ING Bank N.V. in
connection with the Existing Norkabel Facility, mutatis mutandis;
34 A Mortgage Deed for NOK 725,000,000 registered 23 March 1995 under the
name of NAS, registered over the Mortgagors' Leased Real Estate and
Appurtenances (leierett med driftstilbeh0r) in gnr. 150 bnr. 1141 in the
municipality of Kristiansand, in the form given to ING Bank N.V. in
connection with the Existing Norkabel Facility, mutatis mutandis;
35 A Mortgage Deed for NOK 725,000,000 registered 15 June 1995 under the name
of NAS, registered over the Mortgagors' Leased Real Estate and
Appurtenances (leierett med driftstilbeh0r) in gnr. 38, bnr. 158 in the
municipality of Oslo, in the form given to ING Bank N.V. in connection
with the Existing Norkabel Facility, mutatis mutandis;
36 A Mortgage Deed for NOK 725,000,000 registered 15 June 1995 under the name
of NAS, registered over the Mortgagors' Leased Real Estate and
Appurtenances (leierett med driftstilbeh0r) in gnr. 24 bnr. 4 in the
municipality of Nedre Eiker, in the form given to ING Bank N.V. in
connection with the Existing Norkabel Facility, mutatis mutandis;
37 A Mortgage Deed for NOK 725,000,000 registered 20 June 1995 under the name
of NAS, registered over the Mortgagors' Leased Real Estate and
Appurtenances
83
<PAGE>
(leierett med driftstilbeh0r) in gnr. 39, bnr. 137 in the municipality of
Ringerike, in the form given to ING Bank N.V. in connection with the
Existing Norkabel Facility, mutatis mutandis;
38 A Mortgage Deed for NOK 725,000,000 registered 23 June 1995 under the name
of NAS, registered over the Mortgagors' Leased Real Estate and
Appurtenances (leierett med driftstilbeh0r) in gnr. 30 bnr. 230 in the
municipality of Skedsmo, in the form given to ING Bank N.V. in connection
with the Existing Norkabel Facility, mutatis mutandis;
39 A Mortgage Deed for NOK 2,080,000 registered 17 October 1995 under the
name of Norkabel, registered over the Mortgagors' Leased Real Estate and
Appurtenances (leierett med driftstilbeh0r) in gnr. 32, bnr. 279 and 771
in the municipality of Oslo, in the form given to ING Bank N.V. in
connection with the Existing Norkabel Facility, mutatis mutandis;
40 A Mortgage Deed for NOK 725,000,000 registered 28 August 1995 under the
name of NAS, registered over the Mortgagors' Leased Real Estate and
Appurtenances (leierett med driftstilbeh0r) in gnr. 34, bnr. 14 in the
municipality of R0yken, in the form given to ING Bank N.V. in connection
with the Existing Norkabel Facility, mutatis mutandis;
41 [Intentionally left blank];
42 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med driftstilbeh0r) in gnr.
152 bnr. 1756 in the municipality of Kristiansand, in the form given to
ING Bank N.V. in connection with the Existing Norkabel Facility, mutatis
mutandis;
43 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med drifstilbeh0r) in gnr.
34 bnr. 14 in the municipality of R0yken, in the form given to ING Bank
N.V. in connection with the Existing Norkabel Facility, mutatis mutandis;
44 A Mortgage Deed for NOK 900,000,000 registered over the Mortgagors' Leased
Real Estate and Appurtenances (leierett med drifstilbeh0r) in gnr. 12 bnr.
751 in the municipality of Kristiansand, in the form given to ING Bank
N.V. in connection with the Existing Norkabel Facility, mutatis mutandis;
45 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med drifstilbeh0r) in gnr.
188 bnr. 202 in the municipality of Bergen, in the form given to ING Bank
N.V. in connection with the Existing Norkabel Facility, mutatis mutandis;
46 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med drifstilbeh0r) in gnr.
38 bnr. 158 in the municipality of Oslo, in the form given to ING Bank
N.V. in connection with the Existing Norkabel Facility, mutatis mutandis;
184
<PAGE>
47 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med drifstilbeh0r) in gnr.
134 bnr. 8 in the municipality of Drammen, in the form given to ING Bank
N.V. in connection with the Existing Norkabel Facility, mutatis mutandis;
48 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med drifstilbeh0r) in gnr.
132 bnr. 214 in the municipality of Drammen, in the form given to ING Bank
N.V. in connection with the Existing Norkabel Facility, mutatis mutandis;
49 A Mortgage Deed for NOK 900,000,000 registered over the Mortgagors' Leased
Real Estate and Appurtenances (leierett med drifstilbeh0r) in gnr. 117
bnr. 517 in the municipality of Drammen, in the form given to ING Bank
N.V. in connection with the Existing Norkabel Facility, mutatis mutandis;
50 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med drifstilbeh0r) in gnr.
17 bnr. 3 in the municipality of Drammen, in the form given to ING Bank
N.V. in connection with the Existing Norkabel Facility, mutatis mutandis;
51 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med drifstilbeh0r) in gnr.
142 bnr. 6 in the municipality of Lier, in the form given to ING Bank N.V.
in connection with the Existing Norkabel Facility, mutatis mutandis;
52 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med driftstilbeh0r) gnr.
8651 bnr. 1, 114, 115, 116, 117, 118, 119 and 120 in the municipality of
Kongsberg, in the form given to ING Bank N.V., in connection with the
Existing Norkabel Facility, mutatis mutandis;
53 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med drifstilbeh0r) in gnr.
12 bnr. 26 in the municipality of Askim, in the form given to ING Bank
N.V., in connection with the Existing Norkabel Facility, mutatis mutandis;
54 A Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
Leased Real Estate and Appurtenances (leierett med driftstilbeh0r) in gnr.
33 bnr. 500 in the municipality of Haugesund, in the form given to ING
Bank N.V., in connection with the Existing Norkabel Facility, mutatis
mutandis;
B SECURITY PROVIDED BY JANCO KABEL-TV A/S
185
<PAGE>
1 Assignment of Receivables by Janco, in a form satisfactory to the Banks.
2 Declaration of Janco concerning mortgages over Stock of Goods and Motor
Vehicles together with Factoring Agreement, in a form satisfactory to the
Banks.
3 Pledge of Bank Accounts by Janco, in a form satisfactory to the Banks.
4 Assignment of Insurance Proceeds by Janco, in a form satisfactory to the
Banks.
5 Assignment and Notice of Programme Supply Agreement by Janco, in a form
satisfactory to the Banks.
6 Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagor's
easement rights to antennas and appurtenances (leierett med
driftstilbeh0r) in gnr. 75 bnr. 1 in the municipality of Oslo with Oslo
Municipality as the servient tenant, in a form satisfactory to the Banks.
7 Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors'
easement rights to antennas and appurtenances (leierett med
driftstilbeh0r) in gnr. 98 bnr. 7 in the municipality of Oslo with Asbj0rn
Lie Kristoffersen as the servient tenant, in a form satisfactory to the
Banks.
8 Mortgage Deed for NOK 900,000,000 to be registered over the Mortgagors
Leased Real Estate and Appurtenances (leierett med driftstilbeh0r) at
Ensj0veien 7, Oslo leased pursuant to a Lease Agreement dated 24th June
1997, in a form satisfactory to the Banks.
9 A Declaration of Pledge and Deposit of a new promissory note to be issued
by Janco in the principal amount of NLG75,440,850 which, upon full
repayment of ING Bank B.V., shall replace, supersede and be in
substitution of the unsecured promissory note dated October 26th, 1995 in
the principal amount of USD$70,780,401.40 pledged to ING Bank N.V. in
connection with the Existing Nakabel Facility.
186
<PAGE>
SCHEDULE 13
-----------
Part B - Norwegian Security Documents (if at the relevant time
--------------------------------------------------------------
the Norwegian Merger has occurred)
----------------------------------
The documents listed in part A of schedule 13 with the following numbers:-
B1 to B5 and B8 and B9 (inclusive); and
A15 to A54 exclusive A17 (inclusive)
each in the form granted to ING Bank N.V. in connection with the Existing
Norkabel Facility, mutatis mutandis, or in a form acceptable to the Banks
together with a declaration by Janco concerning the security documents provided
by Norkabel, Norkabel A/S, Kanal 2 A/S and Oslo Kableanlegg A/S, in favour of
The Toronto-Dominion Bank as Security Trustee, in a form satisfactory to the
Banks: the declaration will be numbered A9.
187
<PAGE>
SCHEDULE 14
-----------
Form of Telekabel Note
-----------------------
TELEKABEL WIEN GESELLSCHAFT M.B.H
[CURRENCY][AMOUNT]
BEARER BOND (THE "NOTE")
ISSUED SUBJECT TO THE TERMS AND CONDITIONS SET OUT BELOW
VIENNA [DATE]
TERMS AND CONDITIONS
- --------------------
1 FORM AND DENOMINATION
---------------------
This Note is issued in bearer form. The holder of this Note shall be
entitled to exercise any rights hereunder. The nominal amount of this Note
is [currency][amount].
2 INTEREST
--------
Interest on this Note shall accrue at [rate] per cent. per annum (being
the aggregate of (a) the applicable Margin (which, unless otherwise agreed
by the issuer shall not exceed 2 per cent. per annum), (b) the Additional
Cost (if the nominal amount is denominated in Sterling and (c) LIBOR).
Interest shall be payable on this Note on [[interim interest payment date]
and on] [date of maturity].
3 TERM AND FINAL MATURITY
-----------------------
Subject to clause 4 below, this Note shall be redeemed in full on [date of
maturity].
4 TERM AND CONDITIONS
-------------------
This Note has been issued on terms and conditions agreed between, inter
alia, United Pan-Europe Communications N.V., Telekabel Wien Gesellschaft
m.b.H., The Toronto-Dominion Bank as Arranger, The Toronto-Dominion Bank
as Agent on behalf of certain Banks and The Toronto-Dominion Bank as
Security Trustee. Unless the context otherwise requires, the words and
expressions defined in such terms and conditions shall have the same
meanings when used in this Note.
Signed
Telekabel Wien Gesellschaft m.b.H.
[Completed under instructions from Telekabel Wien Gesellschaft m.b.H. by the
Agent]
188
<PAGE>
Rider A
- -------
10.7A Third Amendment Agreement to Credit Facility Agreement dated January 22,
1999, between CNBH and Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A.
Rider B
- -------
10.8A Amendment 1 dated July 1, 1997, to the NLG 375,000,000 principal amount
Bank Facility Agreement between KTA and ABN AMRO Bank N.V.
10.8B Amendment No. 2 dated August 28, 1998, to the Bank Facility Agreement
between KTA and ABN AMRO Bank N.V.**
Rider C
- -------
1.2 Form of Agreement between U.S. and International Underwriting Syndicates
Rider D
- -------
Supplemental Agreement dated January 25, 1999, relating to a Loan
Agreement for a NLG1,100,000,000 Multi-currency Revolving Credit Facility
between the Company and certain of its subsidiaries and The Toronto-
Dominion Bank
<PAGE>
EXHIBIT 10.7A
THIRD AMENDMENT AGREEMENT
TO
CREDIT FACILITY AGREEMENT
BETWEEN
CABLE NETWORK BRABANT HOLDING B.V.
AND
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.
AS AGENT
AND
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.
AS INITIAL LENDER
DATED JANUARY 22, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - INTRODUCTION.................................................... 4
ARTICLE II - AMENDMENTS TO CREDIT FACILITY AGREEMENT........................ 4
ARTICLE III - INFORMATION PACKAGE, AGREED BASE CASE AND SCHEDULE 7.......... 8
ARTICLE IV - REPRESENTATIONS AND WARRANTIES................................. 8
ARTICLE V - MISCELLANEOUS................................................... 9
</TABLE>
<PAGE>
THIRD AMENDMENT AGREEMENT TO CREDIT FACILITY AGREEMENT
THE UNDERSIGNED:
1. Cable Network Brabant Holding B.V., a limited liability company organised
and existing under the laws of the Netherlands, with registered seat at
Eindhoven (hereinafter referred to as the "Company");
and
2. Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., a cooperative
association organised and existing under the laws of the Netherlands with
registered seat at Amsterdam (hereinafter referred to as the "Agent");
and
3. Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., a cooperative
association organised and existing under the laws of the Netherlands with
registered seat at Amsterdam (hereinafter referred to as the "Initial
Lender");
WHEREAS:
(A) the Company and the Agent, acting for itself and in the various capacities
as referred to in the Credit Facility Agreement (including its capacity as
Initial Lender), are parties to a Credit Facility Agreement dated February
20, 1998, as amended on August 7 and September 30, 1998, (the "Credit
Facility Agreement"), pursuant to which the Lenders have agreed to finance
Project A, Project B, Project C and Project D (as defined therein) up to an
amount of NLG 266,000,000 (two hundred and sixty-six million Netherlands
Guilders), subject to the terms and conditions of the Credit Facility
Agreement;
(B) the Company has requested the Initial Lender to increase the facility
amount with an additional NLG 8,000,000 (eight million Netherlands
Guilders) in relation to the acquisition and upgrading by the Company of
the cable networks of the municipalities of Geldrop and St. Oedenrode
("Project E"), which concurs with the sale of the cable network of the
municipality of Schlindel by the Company; and
(C) the Company and the Initial Lender, acting for itself and in its capacity
as Agent for the Lenders, desire to amend and supplement the Credit
Facility Agreement;
<PAGE>
HAVE AGREED AS FOLLOWS:
ARTICLE I - INTRODUCTION
(a) Wherever used in this Third Amendment Agreement, unless the context shall
otherwise require, the terms defined in the Credit Facility Agreement, and
not otherwise defined herein, shall have the same meaning when used in this
Third Amendment Agreement.
(b) The term "Agreement" as used in the Credit Facility Agreement and all other
instruments and agreements executed thereunder shall for all purposes refer
to the Credit Facility Agreement as amended by this Third Amendment
Agreement.
(c) References made in this Third Amendment Agreement to Sections and/or
Articles refer to Sections and/or Articles of the Credit Facility Agreement
unless such Section and/or Article is followed by the words "of/in/to this
Third Amendment Agreement".
ARTICLE II - AMENDMENTS TO CREDIT FACILITY AGREEMENT
Recitals:
The amount mentioned in the recitals under (c) shall be NLG 274,000,000 (two
hundred seventy-four million Netherlands Guilders) instead of NLG 266,000,000
(two hundred sixty-six million Netherlands Guilders).
Section 1.01 Definitions:
(a) The definition of "Projects" is amended as follows: "Projects" means
Project A, Project B, Project C, Project D and Project E, jointly.
(b) In the definition of "Security", the reference to Sections 4.01(d) and
4.03(c) is expanded to include the new Section 4.04(c).
(c) The following additional definitions will be added to Section 1.01, which
read as follows:
"Project E" means the acquisition of the cable networks of the
municipalities of Geldrop and St. Oedenrode as
well as the development and exploitation of
enhanced cable TV services (including expanded
basic TV, premium TV and interactive pay per
view), data and internet services and telephony
services as further described in the Agreed Base
Case, as amended;
<PAGE>
"Tranche D" means such part of the Loan as is equivalent to
NLG 8,000,000 (eight million Netherlands Guilders)
(the "Tranche D Amount") which is to be provided
by the Initial Lender and which is, upon
disbursement, to be applied exclusively by the
Company to the financing of Project E;
"Tranche D Stop Date" means December 31, 1999;
Section 3.01 Loan:
The amount mentioned under Section 3.01 shall be NLG 274,000,000 (two hundred
and seventy-four million Netherlands Guilders) instead of NLG 266,000,000 (two
hundred and sixty-six million Netherlands Guilders).
Section 3.02 Disbursements:
Section 3.02(b)(2) is amended as follows: the words "in respect of Tranche B and
Tranche C:" will be replaced by "in respect to Tranche B, Tranche C and Tranche
D".
Section 3.04 Suspension and Cancellation:
(a) In Section 3.04(c) the word "and" in the sixth line (text of conformed
copy) shall be replaced by a semi-colon and this sub-section shall be
supplemented as follows:
"and in respect of Tranche D: at the Tranche D Stop Date and the
Tranche D Amount, to the extent not disbursed hereunder as per the
Tranche D Stop Date, shall be canceled at the Tranche D Stop Date."
(b) In Section 3.04(d) the words "the Tranche A Amount, the Tranche B Amount or
the Tranche C Amount" shall be replaced by "the Tranche A Amount, the
Tranche B Amount, the Tranche C Amount or the Tranche D Amount."
<PAGE>
Section 4.02 Conditions for any Disbursement:
In Section 4.02(a)(6) the reference to "Project A, Project B, Project C or
Project D" shall be replaced by a reference to "Project A, Project B, Project C,
Project D or Project E".
New Section 4.04 Conditions of First Disbursement under Tranche D:
(a) A new section 4.04 shall be added to Article IV - Conditions of
Disbursement, which reads as follows:
Section 4.04 Conditions of First Disbursement under Tranche D
The obligation of the Initial Lender to make the first Disbursement under
Tranche D shall be subject to the performance by the Company of all of its
obligations theretofore to be performed under this Agreement and to the
fulfilment, in a manner satisfactory to the Agent (acting reasonably),
prior to or concurrently with the making of such first Disbursement under
Tranche D, of the following further conditions:
(a) an amendment agreement to the Project Support Agreement dated February
20, 1998, as amended on August 7 and September 30, 1998, among the
Agent, the Initial Lender, the Company and UPC, in form and substance
satisfactory to the Agent, shall have been entered into between the
respective parties thereto and shall have become (or, as the case may
be, shall remain) unconditional and fully effective in accordance with
its terms (except for this Agreement having become unconditional and
fully effective);
(b) all required and relevant governmental, corporate, creditors',
shareholders' and other licenses, approvals or consents shall have
been obtained for:
(1) the financing by the Initial Lender under this Agreement;
(2) the carrying on of the business of the Company as it is presently
carried on and is contemplated to be carried on;
(3) the carrying out of Project E in accordance with the Agreed Base
Case;
(4) the due execution and delivery of, and performance under, this
Agreement, the Project Agreements, the Security and any documents
in implementation of any thereof; and
<PAGE>
(5) the remittance to the Agent and the Lenders or their respective
assigns of all monies payable in respect of this Agreement and
the Security;
(c) the Security, consisting of the rights as specified under Section
4.01(d) to the extent applicable, shall have been created and
perfected in a manner satisfactory to the Agent (acting reasonably)
with regard to any assets forming part of or related to the cable
networks of Geldrop and St. Oedenrode;
(d) the Agent shall have received a legal opinion or opinions addressed to
the Agent and Initial Lender, in form and substance and containing
statements as specified under Section 4.01(e);
(e) the Company shall have acquired legal or beneficial ownership of the
cable networks of Geldrop and St. Oedenrode, free and clear of any
mortgages, pledges, attachments or limited rights; except that it is
acknowledged and accepted by the Agent that the Company may not have
acquired the legal ownership of the cable networks as such;
(f) UPC shall have fully paid up, or caused a Subsidiary to pay up,
additional share capital of NLG 2,000,000 (two million Netherlands
Guilders) in addition to the share capital referred to in Section
4.01(a)(1) and 4.03(g);
(g) the Agent shall have been provided with evidence that letters have
been sent to the municipalities of Geldrop and St. Oedenrode,
concerning the abandonment of any ownership rights of the cable
networks by these municipalities in favour of the Company;
(h) the Company shall have provided evidence that it has used its best
effort to have the municipalities of Geldrop and St. Oedenrode sign
the letters referred to in (g) above;
(i) Palet Kabelcom B.V. ("PK"), N.V. PNEM Teleservices and/or Provinciale
Noordbrabantse Energle-Maatschappij PNEM ("PNEM") and the Company
shall have entered into an agreement to effectuate that PK can legally
dispose of all assets which are to be transferred to the Company, or
that PK shall be substituted by N.V. PNEM Teleservices and/or PNEM as
a party to the PK Asset Purchase Agreement of September 1, 1998.
Section 5.01 Affirmative covenants:
(a) In Section 5.01(f) the reference to "Section 4.01(c) and 4.03(b)" shall be
replaced by a reference to "Sections 4.01(c), 4.03(b) and 4.04(b)".
<PAGE>
(b) In Section 5.01 a new Section 5.01(p) shall be added which reads as
follows:
"(p) use its best efforts to secure that ultimately March 31, 1999, the
declarations of the municipalities as referred to in sub-Sections
4.04(g) and (h) will have been obtained by the Company from the
respective municipalities and that the letters referred to in sub-
Section 4.04(g) shall have been signed by the respective
municipalities."
Section 7.01 Syndication:
In Section 7.01(f) the reference to "Sections 4.01 and 4.03" shall be replaced
by a reference to "Sections 4.01, 4.03 and 4.04".
ARTICLE III - INFORMATION PACKAGE, AGREED BASE CASE AND SCHEDULE 7
(a) As of the date of signing of this Third Amendment Agreement, the amended
version of the Information Package (as included in Schedule A hereto) will
be applicable, and any reference to the definition of the Information
Package or Schedule 3 of the Credit Facility Agreement will, as of that
date, be construed as a reference to the amended version of the Information
Package.
(b) As of the date of the first disbursement under Tranche D the amended
version of the Agreed Base Case (as included in Schedule B hereto), will be
applicable, and any reference to the definition of the Agreed Base Case or
Schedule 1 of the Credit Facility Agreement will, as of that date, be
construed as a reference to the amended version of the Agreed Base Case.
(c) As of the date of the first disbursement under Tranche D an amended
repayment schedule (as included in Schedule C hereto) will be applicable,
and any reference to Schedule 7 to the Credit Facility Agreement will, as
of that date, be construed as a reference to the amended repayment
schedule.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
The Company hereby repeats as of the date of this Third Amendment Agreement the
representations and warranties as set forth under Sections 2.01, 2.02, 2.03 and
2.04 as if references thereto are references to the Credit Facility Agreement,
as amended per this Third Amendment Agreement.
<PAGE>
ARTICLE V - MISCELLANEOUS
(a) Except to the extent that any terms or conditions of the Credit Facility
Agreement are expressly amended by the terms of this Third Amendment
Agreement, all terms and conditions of the Credit Facility Agreement and
all other instruments and agreements executed thereunder remain in full
force and effect.
(b) This Third Amendment Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized
representatives, have caused this Third Amendment Agreement to be signed in
their respective names on January 22, 1999.
/s/
- -----------------------------------
Cable Network Brabant Holding B.V.
Represented By: O.T. Zuidema
/s/
- ----------------------------------------------------
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
(Agent)
Represented By: M.R. Wind
/s/
- ----------------------------------------------------
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
(Initial Lender)
Represented By: M.R. Wind
<PAGE>
EXHIBIT 10.8A
AMENDMENT 1
-----------
to the NLG 375,000,000 principal amount
BANK FACILITY AGREEMENT
between
KABELTELEVISIE AMSTERDAM B.V.
en
ABN AMRO BANK N.V.
____________________________________________________
The undersigned,
Kabeltelevisie Amsterdam B.V. (the "Borrower"), a private company with limited
liability under the law of The Netherlands, with corporate seat in Amsterdam;
and
ABN AMRO Bank N.V. ("ABN AMRO"), acting for itself in various capacities as
referred to herein, including its capacity as a Bank) and, as the case may be,
in accordance with article 25 of the Bank Facility Agreement as defined below,
as agent (the "Agent") for the Banks (if any, as may be the case in accordance
with article 25 referred to) as defined hereafter, a public company with limited
liability incorporated under the law of The Netherlands, with corporate seat in
Amsterdam, The Netherlands;
CONSIDERING THE FOLLOWING:
(A) The Borrower and ABN AMRO have entered into a NLG 375,000,000 principal
amount Bank Facility Agreement as of January 31, 1996 (the "Bank Facility
Agreement");
(B) The Borrower and ABN AMRO want to amend article 12 of the Bank Facility
Agreement;
<PAGE>
(C) Capitalized terms and expressions as used in this agreement have the same
meaning as in the Bank Facility Agreement;
HAVE AGREED
to amend the Bank Facility Agreement, to the effect that article 12 thereof
shall read as follows:
Article 12 - Interest and Fees Payable by the Borrower
- ------------------------------------------------------
12.1 The Borrower shall with respect to an Advance drawn by the Borrower or
with respect to an Overdraft created by the Borrower pay interest at
the rates set forth below:
(a) to the Banks, with respect to and calculated over any unpaid
balance of any Variable Rate Advance under the Term Loan Facility
or the Construction Loan Facility: the interest rate equal to
AIBOR, applicable on the Advance Date on which the relevant
Advance was drawn, for the relevant Variable Rate Interest Period
increased by the Margin;
(b) to the Banks, with respect to and calculated over any Variable
Rate Advance under the Working Capital Facility: the interest
rate equal to AIBOR, applicable on the Advance Date on which the
relevant Advance was drawn, for the relevant Variable Interest
Rate Period increased by 45/100 of one per cent. (0.45%);
(c) to the Banks, with respect to and calculated over any unpaid
balance of any Fixed Rate Advance: the interest rate per annum,
as agreed between the Borrower and the Agent prior to the
relevant Advance Date with respect to such Advance as per the
Fixing Date specified in the relevant Notice of Drawdown
increased by the Margin;
(d) to ABN AMRO with respect to an Overdraft the interest rate equal
to the "fictief promesse disconto" (with a minimum of 2.75%) as
published from
<PAGE>
time to time in "Het Financieele Dagblad", increased by 70/100 of
one per cent. (0.70%).
12.2 Any amounts of interest as referred to above in article 12.1 under
(a), (b), (c) and (d) shall be calculated on the basis of a year of
360 days and actual days elapsed. Any amount of unpaid interest
accrued:
- on any Fixed Rate Advance shall be due and payable semi-annually
in arrears on the date which is six months, twelve months, etc.
from the relevant Advance Date;
- on any Variable Rate Advance shall be due and payable (i) at the
end of the relevant Variable Rate Interest Period, if such period
is six months or less, and (ii) after (a) six months and (b) at
the end of the relevant Variable Rate Interest Period, if such
period exceeds six months; and
- on any Overdraft shall be due and payable quarterly in arrears;
with due observance of article 12.3.
12.3 The Term Loan Advance and any Construction Loan Advance shall be drawn
on such Advance Dates, or be rolled over on such Roll Over Moments,
with such Fixed Rate Interest Periods or Variable Rate Interest
Periods, that the number of different Interest Payment Dates at any
time applicable to such advances shall not exceed five.
12.4.1 The Borrower shall pay a commitment fee to the Banks, equal to 0.30%
per annum, calculated on the basis of a year of 360 days and actual
days elapsed, over (i) such portions of the Term Loan Facility and the
Construction Loan Facility which shall not have been drawn down under
the Term Loan Facility and the Construction Loan Facility and (ii) the
principal amount of the Working Capital Facility, whether a portion
thereof has been drawndown or not, for the following periods:
<PAGE>
- Available Term Loan Commitment: from the date of this Agreement
(such date included) up to June 1, 1996;
- Available Construction Loan Commitment: from the date of this
Agreement (such date included) up to and including December 31,
1999, with due observance of the maximum amounts available for
drawdown in the years referred to in article 2.3.1; and
- Available Working Capital Commitment: from the date of this
Agreement (such date included) up to the Final Maturity Date.
12.4.2 In the event of a drawndown as referred to in article 2.3.2, the
excess portion shall be deemed to have been available under the
Available Construction Loan Commitment as from January 1 of the year
of such drawdown and the commitment fee as referred to in article
12.4.1 shall be increased accordingly.
12.4.3 The fee referred to above in article 12.4.1, increased as the case may
be in accordance with article 12.4.2, shall be due and payable in
arrears and in quarterly instalments.
12.5 The Borrower shall, in establishing and conducting its interest rate
management exercise prudent care. Upon written request by the Agent,
the Borrower and the Agent shall discuss the possibility and
desirability of converting a Variable Rate Advance or Variable Rate
Advances into a Fixed Rate Advance or Fixed Rate Advances, with a view
to limit or exclude variable rate exposure.
This agreement shall be effective as from July 1, 1997.
/s/ B. Meenderman
- -----------------------------
Kabeltelevisie Amsterdam B.V.
/s/
- -----------------------------
ABN AMRO Bank N.V.
<PAGE>
MASTER SECONDED EMPLOYEE SERVICES AGREEMENT
THIS MASTER SECONDED EMPLOYEE SERVICES AGREEMENT, dated January __, 1999 (this
"Agreement"), is between
---------
UNITED INTERNATIONAL HOLDINGS, INC. ("UIH"), a corporation organized under the
---
laws of the State of Delaware, U.S.A., and
UNITED PAN-EUROPE COMMUNICATIONS N.V. ("UPC"), a company organized under the
---
laws of the Netherlands.
Recitals
--------
A. UIH has seconded certain of its employees to UPC and to certain entities
(the "Operating Companies") operating multi-channel subscription television
-------------------
systems and other businesses in which UPC owns interests.
B. This Agreement sets forth the terms and conditions upon which certain
employees of UIH have been, or may be, seconded to UPC and the Operating
Companies.
Agreement
---------
The parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
-----------
following meanings:
a. "Affiliate" means, with respect to any Person, any other Person who or
---------
which, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with such Person.
For this purpose, "control" means the power to manage, directly or
-------
indirectly, the operation of the business of a Person, whether through
the ownership or voting securities, by contract or otherwise.
b. "Costs" has the meaning specified in Section 3(a).
-----
c. "Indemnified Party" has the meaning specified in Section 4(c).
-----------------
d. "Indemnifying Party" has the meaning specified in Section 4(c).
------------------
e. "Operating Companies" has the meaning specified in Recital A.
-------------------
f. "Person" means any individual, corporation, partnership, firm, joint
------
venture, joint stock company, limited liability company, trust, estate,
unincorporated organization, governmental or regulatory body or other
entity.
<PAGE>
g. "Seconded Employees" means the individuals seconded pursuant to this
------------------
Agreement.
h. "UIH Losses" has the meaning specified in Section 4(a).
----------
i. "UPC Losses" has the meaning specified in Section 4(b).
----------
2. Secondments.
-----------
a. Seconded Employees; Reassignment. All employees and consultants of UIH
--------------------------------
that are now seconded to UPC or to its Operating Companies as evidenced
by the books and records of UIH will continue to be seconded pursuant to
this Agreement. In addition, at UPC's request, UIH may second additional
employees and consultants to UPC or its Operating Companies from time to
time as agreed by the parties hereto and pursuant to this Agreement.
Each Seconded Employee may be reassigned by UPC to another Operating
Company at any time subject to such Seconded Employee's secondment
agreement with UIH and UPC ("Employee Contract"), but without UIH's
consent, unless such consent or the approval of UIH or its
representatives is required pursuant to the terms of any other agreement
or understanding concerning UPC.
b. Work Permits; No Alteration of Employment Contracts. With respect to
---------------------------------------------------
each Seconded Employee and where appropriate, UPC shall obtain, or shall
cause to be obtained, any visas, work permits and such other permissions
or consents of whatever nature that may be necessary and arrange for any
medical examinations or medical reports that may be required. If any of
the foregoing visas, permits, permissions or consents are already in
place in UIH's name, such visas, permits, permissions or consents shall
be deemed, as between the parties hereto, to be in UPC's name. Except
for its right to terminate any Seconded Employee's employment according
to Section 2(d) and during the period of such Seconded Employee's
secondment hereunder, UIH shall not alter any terms of the Employee
Contract or any agreement or other document evidencing such Seconded
Employee's employment without UPC's prior written consent, except that
without UPC's consent UIH, on its own initiative or at the direction of
its third-party insurance carriers, may change the terms and features of
its standard benefit package, its "Tax Equalization Policy" and its
policies regarding repatriation of Seconded Employees.
c. Rights and Duties; Employees of UIH. During the period that the
-----------------------------------
Seconded Employees are seconded hereunder, (i) they shall have the
rights, duties and responsibilities assigned from time to time by UPC or
an Operating Company, as applicable, pursuant to the terms of the
governing documents of such Person; and (ii) they shall remain employees
of UIH and shall continue to receive their salaries and other employee
benefits from UIH. UPC and any Operating Company may provide additional
remuneration to any Seconded Employee.
2
<PAGE>
d. Termination of Secondments; Termination of Employment. UPC may
-----------------------------------------------------
terminate pursuant to the terms of the Employee Contract any secondment
hereunder at any time without UIH's consent, unless such consent or the
approval of UIH or its representatives is required pursuant to the terms
of any other agreement or understanding concerning UPC. If a Seconded
Employee's employment is terminated for any reason, such Seconded
Employee's secondment pursuant to this Agreement shall terminate
automatically on the date the Seconded Employee's employment terminates.
UIH may terminate any Seconded Employee's employment, at any time
without UPC's consent, (i) if the Seconded Employee's conduct
constitutes willful misconduct that is materially injurious to UIH or
the Seconded Employee's conduct would constitute a felony or other crime
of moral turpitude where committed, (ii) if the Seconded Employee dies
or becomes disabled or (iii) if UPC terminates the Seconded Employee's
secondment hereunder. If UIH terminates any Seconded Employee's
employment in accordance with the preceding sentence, UPC shall bear all
the Costs of separation or severance resulting therefrom. If UIH
terminates any Seconded Employee's employment otherwise, UIH shall bear
all Costs of separation or severance resulting therefrom.
3. Reimbursement of Costs.
----------------------
a. Costs. UPC shall reimburse UIH for all costs, expenses, charges and
-----
disbursements (the "Costs") incurred by UIH in connection with
-----
secondment of the Seconded Employees to UPC, including without
limitation any cost, expense, charge or disbursement arising by virtue
of the terms of any agreement or other document evidencing any Seconded
Employee's employment, any compensation and employee benefits paid to or
provided for the Seconded Employees, any cost of living differential,
any housing allowance, any tax equalization cost borne by UIH relating
to the period of secondment, relocation costs incurred by UIH in
connection with sending the Seconded Employees to the location for their
secondments, repatriation costs incurred by UIH in connection with
returning the Seconded Employees to the United States of America, any
automobile expense, any temporary living expense, any home leave expense
and any other out-of-pocket expense incurred by UIH in connection with
this Agreement and employment of the Seconded Employees. UPC shall
reimburse, or shall cause the appropriate Operating Company to
reimburse, the Seconded Employees directly for any out-of-pocket
expenses incurred by them in connection with the performance of their
services to UPC or the Operating Companies, as applicable, and if UIH
has paid or reimbursed such expenses, UPC shall reimburse UIH for such
expenses.
b. Invoices; Payment. UIH shall invoice UPC periodically for the Costs.
-----------------
UPC will pay, or cause its Operating Companies to pay, as applicable,
all such invoices promptly, but not later than 30 days after UPC
receives such invoices, in immediately available, U.S. dollar funds and
in accordance with the other payment instructions indicated thereon.
Interest on late payments shall accrue at the Dutch statutory rate.
3
<PAGE>
c. Tax Gross Up. All payments to UIH hereunder shall be received by UIH
------------
without deduction for any taxes. If UPC or any Operating Company is
required by law to withhold or otherwise deduct any taxes in respect of
any sum payable to UIH hereunder, the sum payable to UIH shall be
increased by the amount necessary so that after making all required
deductions, including deductions applicable to additional sums by which
the original sum payable to UIH is increased pursuant to this Section
3(c), UIH shall receive an amount equal to the sum it would have
received had no such deductions been made. If UPC or such Operating
Company deducts withholding taxes from any sums payable to UIH
hereunder, then UPC shall deliver, or cause such Operating Company to
deliver, to UIH at the same time that such sums are due and payable to
UIH, the original of a document evidencing the payment of such
withholding taxes.
4. Liability/Indemnity.
-------------------
a. UIH Losses. UPC is responsible for the supervision of the Seconded
----------
Employees during their secondment hereunder. UPC indemnifies UIH and
holds harmless UIH, its Affiliates, and except for the Seconded Employee
in question, its and their officers, directors, employees and agents
from and against all liabilities, losses, costs or expenses (including
reasonable attorneys' fees and expenses) actually incurred by UIH
resulting from (i) any act, error or omission, intentional, negligent or
otherwise, of any Seconded Employee as though such Seconded Employee
were UPC's employee or (ii) the willful misconduct or gross negligence
of UPC in performing its obligations under this Agreement (all such
liabilities, losses, costs or expenses, collectively "UIH Losses").
----------
b. UPC Losses. UIH indemnifies UPC and holds harmless UPC, its Affiliates,
----------
and except for the Seconded Employee in question, its and their
officers, directors, employees and agents from and against all
liabilities, losses, costs or expenses (including reasonable attorneys'
fees and expenses) actually incurred by UPC resulting from the willful
misconduct or gross negligence of UIH in performing its obligations
under this Agreement (all such liabilities, losses, costs or expenses,
collectively "UPC Losses"). UIH shall not be liable for any liabilities,
----------
losses costs or expenses, consequential or otherwise, arising from, in
whole or in part, any Seconded Employee, which shall be the sole
responsibility of UPC.
c. Indemnification Procedure; Notice; Defense. Promptly after becoming
------------------------------------------
aware of any UIH Losses or UPC Losses, as applicable, or the making of
any claim or demand by any third party that may result in the incurrence
of a UIH Loss or a UPC Loss, as applicable, the party indemnified (the
"Indemnified Party") pursuant to this Section 4 will notify the party
-----------------
providing indemnification (the "Indemnifying Party") pursuant to Section
------------------
4 of this Agreement of such incurrence, claim or demand; provided, that
the failure of the Indemnified Party to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of any liability under Section
4(a) or 4(b) hereof, as applicable, except if
4
<PAGE>
the Indemnifying Party has been prejudiced by such failure to be so
notified. In case of any notice to the Indemnifying Party, the
Indemnifying Party shall be entitled to participate in, and, if it
wishes, to assume, the defense of any such claim or demand and, after
notice of its intent to assume such defense, the Indemnifying Party will
not be liable for any attorney's fees or other expenses subsequently
incurred by the Indemnified Party in connection with such claim;
provided that the Indemnified Party shall have the right to employ
--------
counsel to represent it if, in the reasonable judgment of the
Indemnified Party's counsel, there is reasonably likely to be a conflict
of interest such that representation of the Indemnifying Party and the
Indemnified Party by the same counsel would violate the Code of
Professional Responsibility or similar rules, in which event the
reasonable fees and expenses of appropriate separate counsel shall be
borne by the Indemnifying Party. If the Indemnifying Party does not
elect within a reasonable time after receipt of notice to assume the
defense of any suit brought to enforce a claim or demand referred to
above, the Indemnified Party shall be entitled to assume the control of
such defense, in which case the reasonable fees and expenses incurred by
such Indemnified Party in the conduct of such defense, including the
reasonable fees and expenses of counsel, shall be reimbursed by the
Indemnifying Party as the same are incurred from time to time by such
Indemnifying Party. In no event shall an Indemnifying Party be liable
for the fees and expenses of more than one counsel for an Indemnified
Party (in addition to local counsel) in connection with any one action
or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No
Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened
claim or action in respect of which any Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party unless such settlement includes an unconditional
release of such Indemnified Party from all liability on any claims that
are the subject matter of such action.
5. Term; Termination; Survival.
---------------------------
a. This Agreement is effective on the date hereof, and shall continue until
the date of its termination pursuant to Section 5(b).
b. This Agreement shall terminate upon the first to occur of the following
events: (i) upon written agreement of the parties hereto to terminate
this Agreement; (ii) December 31, 2009; or (iii) upon written notice by
one party to the other party at any time after the occurrence of a
material default or breach of any provision of this Agreement by the
other party that continues uncured for 30 days, after deliver to the
other party of written notice thereof. If this Agreement is terminated
pursuant to clause (iii) of this Section 5(b) because UPC has committed
a material default or breach that continues uncured for the required
time period, UPC shall bear all the Costs of separation or severance of
any Seconded Employee's employment resulting from such termination. If
this Agreement is terminated pursuant to clause (iii) of this Section
5(b) because UIH has committed a material default or breach that
continues
5
<PAGE>
uncured for the required time period, UIH shall bear all the Costs of
separation or severance of any Seconded Employee's employment resulting
from such termination.
c. No termination of this Agreement shall affect any obligations of the
parties hereto arising before or as a result of circumstances in
existence before such termination. The provisions contained in this
Section 5 and Sections 4, 6, 7 and 8 shall survive any termination of
this Agreement.
6. Confidentiality. Each party hereto shall maintain in confidence, treat as
---------------
proprietary and take all reasonable measures to prevent disclosure of all
information and records (with the exception of publicly available
information and records) concerning the Seconded Employees, and will not
use or disclose such information and records other than for performance of
such party's obligations hereunder or as such party may consider necessary
or appropriate pursuant to reporting requirements or other disclosure
obligations under law.
7. Assignment. Except as otherwise provided herein, neither party hereto may
----------
assign or transfer any of its interests, or delegate any of its
obligations, hereunder without the prior written consent of the other
party. UIH, upon written notice to UPC, may assign its interests in, and
delegate its obligations under, this Agreement to any Affiliate and upon
such assignment, UIH shall have no further obligations or liability
hereunder. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns.
8. Miscellaneous.
-------------
a. Amendment; Waiver. Except as otherwise provided in Section 8(h), this
-----------------
Agreement may not be amended nor may any rights hereunder be waived
except by an instrument in writing signed by the parties hereto. The
waiver of any breach of any term or condition hereof shall not be deemed
a waiver of any other or subsequent breach. No failure to exercise and
no delay in exercising, on the part of either party hereto, any right,
power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies at
law.
b. Independent Contractor. UIH is an independent contractor and nothing in
----------------------
this Agreement shall be deemed or construed by the parties hereto or any
third party as creating the relationship of principal and agent,
employer and employee, master and servant, partnership or joint venture
between the parties hereto. Nothing herein shall prevent or prohibit UIH
or any of its Affiliates from providing to any other Person services the
same as or similar to the services to be performed for UPC hereunder.
6
<PAGE>
c. Further Assurances. Each party hereto shall execute, acknowledge,
------------------
deliver, file and record such further certificates, amendments,
instruments, agreements and documents, and do all such other acts and
things, as may be required by law or as, in the reasonable opinion of
either party hereto, may be necessary or advisable to carry out the
intents and purposes hereof.
d. Headings. Titles and headings of the sections of this Agreement are for
--------
convenience of reference only and do not form a part of this Agreement
and shall not in any way affect the interpretation of this Agreement.
e. Entire Agreement. This Agreement is the entire agreement and
----------------
understanding between the parties hereto concerning the subject matter
hereof and supersedes and replaces all prior agreements and
understandings between the parties hereto with respect thereto.
f. Severability. If any provision of this Agreement or the application
------------
thereof to any Person or circumstance is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provisions to such Persons
or circumstances other than those as to which it has been invalid or
unenforceable, shall remain in full force and effect and shall in no way
be affected, impaired or invalidated thereby.
g. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Colorado, USA, other than its
rules of conflicts of laws to the extent that the application of the
laws of another jurisdiction would be required thereby.
h. Notices. All notices, demands or other communications to be given under
-------
or by reason of this Agreement shall be in writing and shall be deemed
to have been received when delivered personally, by facsimile or mailed
by certified or registered mail, return receipt requested and postage
prepaid, as follows:
(i) If to UIH, to it at:
United International Holdings, Inc.
4643 South Ulster Street, Suite 1300
Denver, Colorado 80237, U.S.A.
Facsimile: +1 (303) 770-4207
Attention: President
Copy to: Legal Department
7
<PAGE>
(ii) If to UPC, to it at:
United Pan-Europe Communications N.V.
Fred. Roeskestraat 123
1076 EE Amsterdam
The Netherlands
Facsimile: +31 (20) 778-9881
Attention: President
Copy to: Legal Department
Either party hereto may change its address for notices, demands and other
communications hereunder by giving notice of such change to the other party in
accordance with this Section 8(h).
i. No Third-Party Beneficiaries. Notwithstanding anything to the contrary
----------------------------
herein, no Person shall be a third-party beneficiary to this Agreement.
j. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which, when executed, shall constitute an original
of this Agreement, and all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Master Seconded
Employee Services Agreement as set forth above.
UNITED INTERNATIONAL HOLDINGS, INC.
By:
-------------------------------------
Name:
Its:
UNITED PAN-EUROPE COMMUNICATIONS N.V.
By:
-------------------------------------
Name:
Its:
By:
-------------------------------------
Name:
Its:
8
<PAGE>
UIH MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") is made and entered
into this ___ day of January, 1999, by and between UNITED INTERNATIONAL
HOLDINGS, INC., a corporation organized under the laws of the State of
Delaware, U.S.A ("UIH"), and UNITED PAN-EUROPE COMMUNICATIONS N.V., a company
organized under the laws of the Netherlands (the "Company").
Recitals
--------
A. UIH owns majority interests in various international
telecommunications operating companies, including the Company. UIH incurs
certain overhead and other expenses on behalf of the Company and its other
operating companies. These include expenses not readily allocable among the
operating companies, such as accounting, financial reporting, investor
relations, human resources, information technology, equipment procurement and
testing expenses, corporate offices lease payments and costs associated with
corporate finance activities (the "Services").
B. The Company owns interests in and operates cable-based
telecommunications networks in Europe and Israel and benefits from the Services
UIH performs for, and expenses UIH incurs on behalf of the Company.
C. The parties have agreed on an equitable allocation and reimbursement
of such expenses.
Agreement
---------
1. Performance of Services. UIH will continue to perform the Services
-----------------------
for the Company in a manner consistent with the Services previously performed.
2. Fees and Expenses.
-----------------
2.1 Fee. For its services under this Agreement, UIH shall receive a
---
fixed amount, which amount shall be adjusted on or before January 1 of each year
for the subsequent year by the board of directors of UIH in its reasonable
discretion to allocate corporate legal expenses among UIH's operating companies
including the Company, taking into account the relative size of the operating
companies and their estimated use of UIH resources. The fixed amount payable by
the Company for the year commencing on January 1, 1999 shall be $300,000 per
month.
2.2 Expenses. During the period of this Agreement, the Company shall
--------
reimburse UIH for all out-of-pocket expenses reasonably incurred by UIH's
employees and other personnel in the provision of services pursuant to this
Agreement. Such expenses will be reimbursed at cost upon receipt of the related
invoice and shall include travel, meal, lodging and entertainment expenses.
3. Liability and Indemnification. Neither UIH nor any of its directors,
-----------------------------
officers, employees, agents and legal representatives shall have any liability
(whether direct or indirect, in
<PAGE>
contract or tort or otherwise) to the Company or any of its directors or
officers (or their affiliates) for any loss, claim or damage asserted against or
incurred by the Company or any of its directors or officers (or any affiliate
thereof) arising out of or in connection with the provision by UIH of the
Services, except to the extent such loss, claim, or damage is caused by willful
misconduct or fraud by UIH. The Company, to the maximum extent permitted by law,
shall indemnify and keep UIH fully indemnified from and against any loss, claim
or damage incurred by UIH as a result of any action or claim brought against it
by any third party in respect of the provision by UIH of the services stipulated
under this Agreement, except to the extent caused by willful misconduct or fraud
by UIH.
4. Term. This Agreement shall be effective upon the date hereof, and
----
shall continue until December 31, 2009.
5. Miscellaneous.
-------------
5.1 Waiver. Any term or condition of this Agreement may be waived at
------
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
5.2 Amendment. This Agreement shall not be amended or modified, nor
---------
rights hereunder waived, except by a writing, signed by both parties.
5.3 No Third-Party Beneficiary. The terms and provisions of this
--------------------------
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties hereto to confer third-party beneficiary rights upon any person.
5.4 Invalid Provisions. If any provision of this Agreement is held
------------------
to be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
5.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the
2
<PAGE>
same instrument. The parties acknowledge that the persons named below have the
requisite authority to execute this Agreement and bind their respective
principals.
5.6 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Colorado.
5.7 Binding Effect. This Agreement shall bind the parties, their
--------------
assigns and successors in interest.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date set forth above.
UNITED INTERNATIONAL HOLDINGS, INC.,
a Delaware corporation
By:
-----------------------------------
UNITED PAN-EUROPE COMMUNICATIONS N.V.,
an entity incorporated in The Netherlands
By:
-----------------------------------
3
<PAGE>
EXHIBIT 10.28
CONSULTING AGREEMENT
Consulting Agreement dated June 1, 1995, between United International
Holdings, Inc., a Delaware corporation, (the "Company") and Mark L. Schneider
("Consultant") who resides in Arapahoe County, Colorado.
Recitals
Consultant has resigned as president of the Company and has agreed to
serve as a consultant to the Company on the terms of this Agreement. He will
continue to serve as a director. This Agreement is intended to describe the
entire relationship between Consultant and the Company with respect to his
former employment, his future consulting services to the Company and his
services as the Company's representative with other entities.
Consultant has significant experience in international cable
television franchise development, television programming and related businesses,
and the Company intends to call upon that experience as it considers advisable
in its absolute discretion in connection with its international cable television
business.
Agreement
For good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the Company and Consultant agree as follows.
<PAGE>
1. Term. The Company agrees to retain Consultant and Consultant
----
agrees to serve the Company for a period beginning on the date of this Agreement
and ending on May 31, 2000 (the "Consulting Period").
2. Duties; Supervision. For up to 90 days, including travel days,
-------------------
each calendar year, Consultant will provide consulting services to the Company
only as assigned by the Chief Executive Officer of the Company or such other
officer of the Company as the Board of Directors shall from time-to-time
designate as the officer responsible for the supervision of Consultant's
services hereunder ("Executive Officer"). Consultant's services shall be
scheduled to accommodate Consultant's other business activities to the extent
reasonably possible. Consultant shall report to the Executive Officer with
respect to Consultant's services hereunder and shall be subject to the Executive
Officer's sole supervision. Consultant's assignments will be made by the Chief
Executive Officer, will be commensurate in status to the services provided by
Consultant as President of the Company and, it is anticipated, will relate to
technology, telephony and programming services and franchise business, new
business in foreign countries, and acting as the Company's liaison with, and as
a board member of, Interactive Television Network. The Executive Officer shall
provide reports of Consultant's services hereunder to the Chairman of the Board
of Directors of the Company (the "Chairman") from time to time and, as
requested, to the Board of Directors or to the committee of the Board described
in Section 12.
-2-
<PAGE>
3. Compensation; Reimbursements. (a) Cash, Benefits. The Company
---------------------------- --------------
shall pay Consultant an annual fee of $300,000 during the Consulting Period in
equal semi-monthly installments on its normal payroll days. Consultant shall be
entitled to health and dental insurance, disability insurance and similar
benefits that are provided to executive officers of the Company, and shall have
all other incidental perquisites available to Consultant in his previous
capacity as President of the Company or made available to the top executives of
the Company. The Company shall not, however, be required to adopt or to maintain
in existence any benefit plan or modify the terms of eligibility under any plan
to accommodate Consultant, but shall, if Consultant is ineligible under any such
plan, provide comparable benefits purchased separately.
(b) Office Expenses. The Company shall pay or shall reimburse
---------------
Consultant for reasonable office expenses incurred by him during the Consulting
Period, including actual rent incurred for up to 1,500 square feet of office
space plus parking for Consultant and a secretary, salary of a secretary,
expenses for office equipment and supplies, accounting services, and startup
costs for establishing an office in a Class A building outside the Company's
offices, such that Consultant will have an office and working space for a
secretary and other functions equivalent to the office space provided to
Consultant by the Company during his tenure as President.
-3-
<PAGE>
(c) Stock Options. All options to purchase stock in the Company that
-------------
are held by Consultant as of the date of this Agreement and that are not vested
shall vest on the date of this Agreement. All unexercised options held by
Consultant shall expire in accordance with the applicable plan or agreement
governing such options. Consultant shall be entitled to receive additional
options to acquire stock of the Company during the Consulting Period in an
amount to be determined by the Board of Directors on the recommendation of the
Chairman, but shall receive at least options to purchase a number of shares of
the Company equal to 90 per cent of the average number of shares provided in
options granted to the Chairman, Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer and Executive Vice President. The calculation
of such shares shall be equitably adjusted for unusual circumstances including,
without limitation, (i) any initial extraordinary grant to a newly hired officer
to fill a vacancy in any of those positions shall be excluded from the
calculation, but subsequent grants in the ordinary course to such new officer
shall be included, and (ii) if any such office is not filled and option grants
are not made with respect to such position, appropriate adjustments shall be
made to reflect that circumstance in determining the average number of options
granted, the intent being that, over the term of this Agreement, Consultant
shall receive options to purchase a number of shares not less than 90 percent of
the number of shares in options granted to the top five officers of the Company.
Any such options granted during the Consulting Period shall be at prices
(including any favorable repricing), and with vesting
-4-
<PAGE>
provisions and other terms (to the extent permitted under applicable law)
substantially equivalent (but no less favorable) to those granted to the other
executive officers of the Company. To the extent that other compensation
programs for the executives listed above are instituted in lieu of stock
options, Consultant shall participate in those programs such that the change in
the form of compensation to such executives is not detrimental to his rights
under this Paragraph 3(c).
(d) Expenses. The Company shall pay directly or reimburse Consultant
--------
for the reasonable amount of hotel, travel, entertainment and other expenses
necessarily incurred by Consultant in the discharge of his duties hereunder upon
submission and approval of written statements and bills in accordance with the
then regular procedures and standards of the Company for reimbursement of
expenses incurred by the Chairman and the Chief Executive Officer of the
Company.
(e) No Director's Fees. During the Consulting Period, Consultant will
------------------
not be separately compensated for his services as a director of the Company, and
will be entitled to reimbursement of expenses incurred in performing his duties
as a director on the same basis as employees of the Company are reimbursed for
expenses they incur as a director of the Company.
(f) Attorney' Fees. The Company shall reimburse Consultant for the
--------------
reasonable fees and expenses of his attorneys
-5-
<PAGE>
incurred in connection with the preparation of this Agreement and related
matters.
4. Termination. If during the Consulting Period
-----------
(a) either
(i)(A) the Board of Directors of the Company shall determine
that it is desirable to terminate this Agreement or (B) the Company shall breach
any material term of this Agreement and, if such breach is curable, shall fail
to correct such breach within 20 days after notice by Consultant to the Company
of its commission of the same; or
(ii)(A) Consultant shall be convicted by a final, non-
appealable judgment of a felony involving moral turpitude, or (B) Consultant
shall desire to terminate this Agreement other than pursuant to Subparagraph
4(a)(i)(B) above, then, and in each such case, either the Company or the
Consultant (whichever is applicable) shall have the right to give notice of
termination of Consultant's services hereunder. This Agreement and Consultant's
services hereunder shall terminate on the date specified in such notice, which
shall not be sooner than 10 days after the date such notice is given (except in
the case of a termination pursuant to Subparagraph 4(a)(i)(B) or Subparagraphs
4(a)(ii)(A) or (B), which may be effective immediately).
-6-
<PAGE>
(b) If Consultant shall die during the Consulting Period,
then this Agreement shall terminate on the date of Consultant's death.
(c) In the case of a termination pursuant to Subparagraph
4(a)(ii), Consultant shall be entitled to receive his compensation benefits and
reimbursements at the rates and at the times provided in Section 3 only to the
date on which such termination shall take effect and shall thereafter be
entitled to no further compensation, benefits or reimbursements under this
Agreement. The termination of this Agreement shall not, of itself, affect any
benefit otherwise available to Consultant from the Company in accordance with
its terms after termination of employment.
(d) In the case of a termination pursuant to Subparagraph
4(a)(i) or Paragraph 4(b), (i) Consultant or his personal representative shall
be entitled to receive Consultant's compensation, including all benefits and
payments under Paragraphs 3(a), 3(b) and 3(c), after the date of termination at
the rate and at the times provided in Section 3 to the end of the Consulting
Period (except in the case of termination pursuant to Paragraph 4(b) options to
which Consultant would be entitled under Paragraph 3(c) shall be granted in the
calendar year of death in proportion to the number of months (or part thereof)
elapsed in the year, and none shall be granted thereafter), (ii) all stock
options held by Consultant that are not vested as of the date of such
termination shall immediately vest, and (iii)
-7-
<PAGE>
all stock options held by Consultant shall expire in accordance with the
applicable plan, if any, or stock option agreement governing such options;
provided Consultant shall receive reimbursement for expenses pursuant to
Paragraph 3(d) only for expenses incurred through the date of termination.
5. Noncompetition and Noninterference. (a) In view of the unique
----------------------------------
and important services that Consultant has been retained to render to the
Company, Consultant's knowledge of proprietary information relating to the
business of the Company, and entities in which it owns, directly or indirectly,
an equity interest ("Related Companies"), and similar knowledge regarding the
Company and Related Companies that Consultant currently has and that it is
expected that Consultant will obtain, and in consideration of the compensation
to be received hereunder, Consultant agrees, subject to Paragraph 5(b), that
during the Consulting Period, he will not without the consent of the Company
Participate In (as hereinafter defined in this Paragraph 5(a)) any business that
competes with the Company or any Related Company in any material respect in the
subscription television, telephony and related business in the respective
specific geographic areas in which the Company or such Related Company conducts
business. For purposes of this Section 5, the term "Participate In" shall mean:
"directly or indirectly, for his own benefit or for, with or through any other
person, firm or corporation, own, manage, operate, control, or participate in
the ownership, or control of, or be connected with as a director, officer,
employee, partner." Notwithstanding the foregoing,
-8-
<PAGE>
Consultant shall not be deemed to Participate In a business merely because he
owns not more than 5% of the outstanding common stock of a corporation, if, at
the time of its acquisition by Consultant, such stock is listed on a national
securities exchange, is reported on Nasdaq or is regularly traded in the over-
the-counter market by a member of a national securities exchange. Consultant
also agrees that until the earliest of (i) one year after the termination of
this Agreement pursuant to Subparagraph 4(a)(ii)(B), and (ii) the expiration of
the Consulting Period or earlier termination of this Agreement pursuant to
Subparagraph 4(a)(i), he will not (i) Participate In any business or
organization (a "Competitor") in a capacity that directly assists such
Competitor in competing with the Company or any Related Company in any material
respect in the subscription television, telephony and related businesses in the
respective specific geographic areas where the Company or any Related Company
conducted such businesses at the time this Agreement terminated, (ii) own a
controlling interest in a business or organization that competes in a material
respect in the subscription television, telephony and related businesses in the
respective specific geographic areas where the Company or any Related Company
conducted such businesses at the time this Agreement terminated, or (iii)
solicit or interfere with, or endeavor to entice away from the Company or any
Related Company, any of their respective employees, consultants or partners. The
employment by Consultant or a business that Consultant Participates In of a
person employed or formerly employed by the Company shall not be prohibited by
this Paragraph if such person
-9-
<PAGE>
sought out such employment on his own initiative. Consultant agrees that the
provisions of this Section 5 are necessary and reasonable to protect the Company
and each Related Company in the conduct of their respective businesses. If any
restriction contained in this Section 5 shall be deemed to be invalid, illegal
or unenforceable by reason of the extent, duration or geographical scope hereof,
or otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope or other provisions hereof, and
in its reduced form such restriction shall then be enforceable in the manner
contemplated hereby.
(b) Notwithstanding Paragraph 5(a), Consultant shall not be
limited in his ability to Participate In or otherwise conduct any business or
pursue any business opportunity specifically declined by the Company that
Consultant has first offered to the Company on terms substantially equivalent to
the terms on which Consultant has the opportunity to participate individually or
with others and as to which Consultant has provided the Company with all
information available to him. If the Company does not accept Consultant's offer
within 20 business days and thereafter diligently and in good faith pursue the
negotiation of a definitive agreement as to its participation in such business
or business opportunity, the matter will be deemed to have been declined.
6. Confidentiality. Consultant agrees that during the Consulting
---------------
Period (otherwise than in the performance of his
-10-
<PAGE>
duties hereunder) and thereafter, he shall use his reasonable efforts to prevent
the public disclosure of any confidential or proprietary information concerning
the business, accounts or finances of the Company or any Related Company that
have come to his knowledge during his employment with the Company or any of it
Related Company, and which have not previously been publicly disclosed.
7. Delivery of Materials. Consultant agrees that at the request of
---------------------
the Company upon the termination of the Consulting Period he will deliver to the
Company all documents, papers, materials and other property of the Company or
any Related Company relating to their affairs, which may then be in his
possession or under his control. Consultant may, however, retain all memorabilia
and personal papers that have been acquired during the course of his engagement.
8. Remedies. (a) Upon any material breach by Consultant of the
--------
terms of this Agreement, the Company and any Related Company shall be entitled,
in addition to any other remedies available to it if it so elects, to institute
and prosecute proceedings at law or in equity to obtain damages with respect to
such breach or to enjoin Consultant from engaging in any activity in violation
hereof. Consultant agrees that any breach or threatened breach by Consultant of
any of Sections 5, 6, or 7 hereof may cause immediate, irreparable injury to the
Company and any affected Related Company and that money damages may not provide
an adequate remedy for any such breach or
-11-
<PAGE>
threatened breach. Accordingly, Consultant hereby agrees that upon any such
breach or threatened breach by him of such Sections the Company or any affected
Related Company shall be entitled, in addition to any other lawful remedies that
may be available to it, to seek injunctive relief.
(b) The Company may, in addition to the remedies described in
Paragraph 8(a), sue for damages for breach of this Agreement by Consultant upon
authorization of its Board of Directors.
(c) Consultant agrees that his sole and exclusive remedy for any
breach of this Agreement by the Company shall be the termination of this
Agreement and, upon such termination, the receipt by him of any amounts due him
hereunder as provided in Section 4. Nothing contained in this Subparagraph 8(c)
shall limit Consultant's remedies for any act or omission of the Company, except
with respect to the Company's breach of this Agreement.
9. Indemnification. The Company will indemnify and hold harmless
---------------
Consultant in respect of any liability, damage, amount paid in settlement, cost
or expense (including reasonable counsel fees) incurred in connection with any
threatened, pending or completed claim, action, suit, proceeding or
investigation (whether civil, criminal or administrative) by any person other
than the Company to which he is or was a party, or threatened to be made a
party, by reason of his being or having been an
-12-
<PAGE>
officer, director, employee or consultant of the Company or serving at the
request of the Company as a director, officer, employee or agent of a Related
Company to the full extent permitted by the Certificate of Incorporation or
Bylaws of the Company, any standard indemnity agreement between the Company and
its officers and directors, or by applicable law.
10. Release by Consultant. (a) In consideration of the rights and
---------------------
obligations created by this Agreement, Consultant for himself, his heirs,
personal representatives, successors and assigns, hereby fully and forever
releases and discharges the Company, its affiliates, Related Companies and each
of them, as well as their officers, directors, shareholders, employees, agents,
attorneys and the successors and assigns of each of them, from any and all
claims, demands, obligations, actions, liabilities and damages of every kind and
nature whatsoever, at law or in equity, known or unknown, suspected or
unsuspected, that Consultant may now have or claim at any future time to have,
based in whole or in part upon any act or omission through the date of this
Agreement, including without limitation those claims, demands, obligations,
actions, liabilities and damages arising from, relating to or based upon
Consultant's employment with the Company or separation from employment with the
Company, except as provided herein.
(b) Consultant agrees that the release in Paragraph 10(a) includes but
is not limited to an express waiver of rights and claims under federal and state
statutes that
-13-
<PAGE>
prohibit employment discrimination on the basis of sex, race, national origin,
religion, disability and age, as well as all common law rights and claims, such
as breach of contract, express or implied, tort, whether negligent or
intentional, constructive discharge, and wrongful discharge. Consultant agrees
that the benefits under this Agreement, which he accepts by signing this
Agreement and to which he would not otherwise be entitled to the extent provided
herein, have value to him that exceeds the value of compensation only for his
services as a consultant to the Company.
(c) It is intended that this release be construed in the broadest
possible manner, to further the intention of the parties that all potential
disputes between them arising out of or connected to Consultant's employment
with the Company and any Related Company be forever resolved, subject only to
the exceptions in Paragraph 10(d) below.
(d) Consultant's release in Paragraph 10(a) does not include (i) the
indemnity obligations described in Section 9 of this Agreement, (ii) any
indemnity obligations under any indemnity agreement between Consultant and the
Company or any Related Company, (iii) any reimbursement due Consultant as of the
date hereof for expenses that are reimbursable under current Company policies,
or (iv) claims arising after the date hereof.
11. Release by the Company. (a) In consideration of the rights and
----------------------
obligations created by this Agreement, the
-14-
<PAGE>
Company, for itself, as well as (to the extent that the Company may legally do
so) its officers, directors, shareholders, employees, agents, attorneys,
successors and assigns, hereby fully and forever releases and discharges
Consultant, his heirs, personal representatives, successors and assigns, from
any and all claims, demands, obligations, actions, liabilities and damages of
every kind and nature whatsoever, at law or in equity, known or unknown,
suspected or unsuspected that the Company may now have or claim at any future
time to have, based in whole or in part upon any act or omission through the
date of Consultant's separation from employment with the Company, including
without limitation those claims, demands, obligations, actions, liabilities and
damages arising from, relating to or based upon Consultant's employment with the
Company or separation from employment with the Company.
(b) It is intended that this release be construed in the broadest
possible manner, to further the intention of the parties that all potential
disputes between them arising out of or connected to Consultant's employment
with the Company and any Related Company be forever resolved.
12. Dispute Resolution. Any dispute or disagreement between
------------------
Consultant and the Executive Officer arising under Sections 2, 13 or 14 of this
Agreement shall initially be referred to the Executive Officer and the Chairman
who shall meet together with Consultant in one or more meetings initiated at the
request of any of them. If they are unable to resolve any
-15-
<PAGE>
dispute within a reasonable time, the dispute shall be referred at the request
of any of them to a committee of the Board of Directors to resolve such
disputes. The committee shall consist initially of the Chairman, Lawrence Flinn,
Jr. and Bruce Spector, or in his absence, Antony Ressler. If any of them shall
no longer be a member of the Board of Directors of the Company, the Board of
Directors shall select a replacement member of the committee. The decision of
the majority of the committee with respect to any dispute referred to them shall
be binding on Consultant and the Company, subject always to the authority of the
Board of Directors of the Company. No provision in Sections 2, 13 or 14 of this
Agreement and no decision of the committee or the Board of Directors may be the
basis for claim of breach of the Company's obligations hereunder.
13. Resignation from other Boards. Consultant shall resign promptly
-----------------------------
from the boards of directors or other governing bodies of each Related Company
and as an officer of each of them upon request of the committee of the board of
directors of the Company described in Section 12 of this Agreement. The
committee shall give due consideration to Consultant's duties hereunder as they
may relate to the offices held in Related Companies and to appropriate
transitions to other personnel; however, it may exercise its discretion
absolutely with respect to any such decision. The decision of the majority of
the committee, however, shall be binding on Consultant and the Company as
provided in Paragraph 12 above. No severance or other compensation shall be
payable to Consultant by virtue of his
-16-
<PAGE>
service with a Related Company or his resignation at the request of the
committee.
14. Publicity. The Company and Consultant shall mutually agree upon
---------
a press release and a letter to employees of the Company and similar public
relations matters with respect to Consultant's resignation from the Company and
the terms of this Agreement. Any dispute as to the content of any such release,
letter or other publicity shall be resolved by the Chairman and Executive
Officer, or, if they cannot agree, by the committee described in Section 12.
The Company may, however, make any release or securities law filing that its
counsel advises is necessary or advisable without Consultant's consent.
15. Survival. The covenants, agreements, representations and
--------
warranties contained in or made pursuant to this Agreement shall survive
termination of this Agreement as provided herein.
16. Notices. All notices to be given hereunder shall be deemed duly
-------
given when delivered personally in writing, sent by fax to the numbers provided
below, or five days after mailed, certified mail, return receipt requested,
postage prepaid and addressed as follows:
-17-
<PAGE>
If to be given to the Company:
United International Holdings, Inc.
4643 South Ulster Street
Suite 1300
Denver, Colorado 80237
Fax: (303) 770-8464
Attn: Chairman
and
Attn: Chief Executive Officer
If to be given to Consultant:
Mark L. Schneider
4828 South Albion Street
Littleton, Colorado 80121
or to any such address or fax number as either of the parties may furnish to the
other in writing in accordance with this Section 16 except that notices of
change of address or fax number shall not be deemed given until received.
17. Miscellaneous. This Agreement may not be amended nor may any
-------------
provision hereof be waived, except by an instrument in writing duly signed by
the party sought to be charged with such amendment or waiver, and constitutes
the entire agreement between the Company and Consultant with respect to the
subject matter hereof. This Agreement shall be interpreted, governed and
controlled by the internal laws of the State of Colorado, without reference to
principles of conflict of laws. In any proceeding under this Agreement, the
prevailing party shall be entitled to receive reasonable attorney's fees.
-18-
<PAGE>
18. Approval. This Agreement has been negotiated between Consultant
--------
and disinterested members of the Board of Directors of the Company and was
approved by the disinterested members of the Board of Directors of the Company.
United International Holdings, Inc.
By: /s/ Bruce H. Spector
-------------------------
Bruce H. Spector
Director
and
By: /s/ Lawrence Flinn, Jr.
-------------------------
Lawrence Flinn, Jr.
Director
/s/ Mark L. Schneider
------------------------------
Mark L. Schneider
-19-
<PAGE>
EXHIBIT 10.30
AGREEMENT
THIS AGREEMENT, dated effective as of February __, 1999 (the "Agreement"),
is by and between UNITED INTERNATIONAL HOLDINGS, INC. ("UIH"), a corporation
organized under the laws of the State of Delaware, U.S.A., and UNITED PAN-EUROPE
COMMUNICATIONS N.V. ("UPC"), a company organized under the laws of The
Netherlands.
Recitals
--------
A. UIH is the majority shareholder of UPC. UIH currently consolidates
the financial results of UPC in UIH's financial statements. As a subsidiary of
UIH, UPC is subject to the covenants and restrictions of the indenture governing
UIH's debt securities.
B. In connection with this shareholder relationship, UIH and UPC have
agreed to take certain actions and restrict certain activities with respect to
one another, all as more particularly set forth in this Agreement.
Agreement
---------
1. Covenant Not to Compete. For so long as UIH holds 50% or more of the
-----------------------
outstanding ordinary shares of UPC on a fully diluted basis:
(a) UIH shall not pursue any video services, telephone or Internet
access or content business opportunities specifically directed to the Europe (as
defined below) or Middle East (as defined below) markets unless: (i) UIH has
first presented such opportunity in writing to the Supervisory Board of UPC and
(ii) the members of the Supervisory Board who are not directors or officers of
UIH of UPC have declined to pursue such opportunity in writing to UIH.
(b) UIH shall not pursue any video services, telephone or Internet
access or content business opportunities in markets outside of Europe or the
Middle East in which UIH then has operations unless: (i) UPC has first
presented such opportunity in writing to the Board of Directors of UIH and (ii)
the Board of Directors of UIH has declined to pursue such opportunity in writing
to UPC.
For purposes of this section 1, "Europe" shall include Albania, Austria,
Belarus, Belgium, Bosnia, Bulgaria, Croatia, Czech Republic, Denmark, Estonia,
Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia,
Liechtenstein, Lithuania, Luxembourg, Moldova, The Netherlands, Norway, Poland,
Portugal, Romania, Russia, Slovak Republic, Spain, Sweden, Switzerland, Ukraine
and the United Kingdom and the "Middle East" shall include Armenia, Azerbaijan,
Bahrain, Cyprus, Egypt, Georgia, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon,
Oman, Palestine, Qatar, Saudi Arabia, Syria, Turkey, United Arab Emirates and
Yemen, as such territories are currently constituted or as they may be
constituted in the future.
<PAGE>
2. Sale of UIH Class A Common Stock Held by UPC. UPC shall sell to UIH
--------------------------------------------
or any UIH affiliate designated by UIH(?) all or any portion of UIH's Class A
Common Stock (the "Class A Stock") held by UPC or any of its subsidiaries, free
and clear of any liens, pledges or other encumbrances, upon receipt by the
Supervisory Board of UPC of a written request by UIH (the "Sale Notice") that
UPC do so. UPC shall set a closing date for the sale of the amount of Class A
Stock specified int eh Sale Notice. The closing date shall be a business day
int he United States and The Netherlands at least ten days and no more than 30
days after receipt of the Sale Notice by UPC. UPC shall notify UIH of the
closing date as soon as possible. The selling price of the Class A Stock shall
be the average closing price of the Class A Stock as reported on the Nasdaq
National Market for the ten trading days preceding the closing date. UPC shall
not sell directly or indirectly, nor permit any of its subsidiaries to sell, any
shares of Class A Stock, until after having provided UIH with the opportunity to
acquire such shares.
3. Compliance with UIH's Reporting Requirements. In order to assist UIH
--------------------------------------------
in complying with its reporting obligations under the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and all other U.S.
federal and state securities laws (collectively, the "U.S. Securities Laws") or
to avoid potential liability by UIH thereunder, UPC shall (a) timely provide UIH
with audited financial statements of UPC in such form and with respect to such
periods as UIH shall reasonably request, until UIH is no longer required to
include financial statements of UPC in UIH's filings under the U.S. Securities
Laws, and (b) not alter or amend its accounting principles without the prior
written consent of UIH, until such time as UIH no longer consolidates UPC's
financial results. UPC hereby consents to the public disclosure by UIH of all
matters deemed necessary or appropriate by UIH in its sole discretion in order
to comply with or satisfy its public disclosure obligations o UIH or any
affiliate of UIH under the U.S. Securities Laws.
4. Indemnification by UPC. (a) As additional consideration for UIH to
----------------------
execute the underwriting agreement in connection with UPC's initial public
offering of securities (the "Underwriting Agreement"), UPC shall defend,
indemnify and hold UIH harmless form and against any and all losses, claims,
damages, obligations, liens, assessments, judgments, fines, liabilities, and
other costs and expenses (including without limitation interest, penalties and
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted, as the same are incurred (collectively, "Liabilities")) that UIH may
sustain or suffer based upon, arising out of, by reason of or otherwise in
respect of or in connection with the Underwriting Agreement; provided, however,
-------- -------
that UPC will not be liability to UIH (i) to the extent that in finally
judicially determined that such Liabilities resulted from the willful misconduct
or gross negligence of UIH; or (ii) to the extent that it is finally judicially
determined that such Liabilities resulted form the material breach by UIH of any
representation, warranty, covenant or other agreement of UIH contained in the
Underwriting Agreement; provided, further, that if and to the extent that such
-------- -------
indemnification is unenforceable for any reason, UPC shall make the maximum
contribution to the payment and satisfaction of such indemnified liability which
shall be permissible under applicable laws. The indemnification and
contribution provided for in this Section 4 will remain in full force and effect
regardless of any investigation made by or on behalf of UIH.
2
<PAGE>
(b) Indemnification Procedure; Notice; Defense. Promptly after
------------------------------------------
becoming aware of any Liabilities or the making of any claim or demand by any
third party that may result in the incurrence of any Liabilities, UIH shall
notify UPC of such incurrence, claim or demand; provided, that the failure of
--------
UIH to so notify UPC shall not relieve UPC of any liability under Section 4(a)
hereof, except if UPC has been prejudiced by such failure to be so notified. In
case of any notice to UPC, UPC shall be entitled to participate in, and, if it
wishes, to assume, the defense of any such claim or demand and, after notice of
its intent to assume such defense, UPC will not be liable for any attorney's
fees or other expenses subsequently incurred by UIH in connection with such
claim; provided that UIH shall have the right to employ counsel to represent it
--------
if, in the reasonable judgment of UIH's counsel, there is reasonably likely to
be a conflict of interest such that representation of UIH and UPC by the same
counsel would violate the Code of Professional Responsibility or similar rules,
in which event the reasonable fees and expenses of appropriate separate counsel
shall be borne by UPC. If UPC does not elect within a reasonable time after
receipt of notice to assume the defense of any suit brought to enforce a claim
or demand referred to above, UIH shall be entitled to assume the control of such
defense, in which case the reasonable fees and expenses incurred by UIH int he
conduct of such defense, including the reasonable fees and expenses of counsel,
shall be reimbursed by UPC as the same are incurred from time to time by UIH (in
addition to local counsel) in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. UPC shall not, without the prior written
consent of UIH, effect any settlement of any pending or threatened claim or
action in respect of which UIH is or could have been a party and indemnity could
have been sought hereunder by UIH unless such settlement includes an
unconditional release of UIH from all liability on any claims that are the
subject matter of such action.
5. Compliance by UPC with UIH Indenture. UPC shall take no action or
------------------------------------
inaction that will result in a breach of the Indenture, dated as of February 5,
1998, by and between UIH and Firstar Bank of Minnesota, N.A., as trustee, as the
same may be amended or supplemented (the "Indenture") provided that such
replacement or refinancing indenture does not contain covenants applicable to
UPC by reason of this paragraph that are materially more restrictive, taken as a
whole.
6. Term; Termination. This Agreement shall be effect from the date set
-----------------
forth above until this Agreement is terminated pursuant to this Section 6. This
Agreement shall terminate, (i) for purposes of Section 1, when UIH ceases to
hold 50% or more of the outstanding ordinary shares of UPC on a fully diluted
basis, (ii) for purposes of Section 2, at such time as UPC or its subsidiaries
no longer holds any Class A Stock, (iii) for purposes of Section 3, when UIH or
its affiliates are no longer subject to periodic reporting requirements under
the U.S. Securities Laws or financial information about UPC is no longer
required to be reported by UIH under the U.S. Securities Laws, (iv) for purposes
of Section 4, when UIH no longer has any obligations or liabilities under the
Underwriting Agreement and (v) for purposes of Section 5, when UPC is no longer
subject to the terms of the UIH Indenture or any replacement agreement.
7. Assignment Successors. Except as otherwise provided herein, neither
---------------------
party hereto may assign or transfer any of its interests, or delegate any of its
obligations, hereunder without the prior written consent of the other party.
UIH, upon written notice to UPC, may assign its interests
3
<PAGE>
in this Agreement to any affiliate of UIH. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective successor
and assigns.
8. Miscellaneous.
-------------
(a) Amendment; Waiver. The Agreement may not be amended nor may any
-----------------
rights hereunder be waived except by an instrument in writing signed by the
parties hereto. The waiver of any breach of any term or condition hereof shall
not be deemed a waiver of any other or subsequent breach. No failure to
exercise and no delay in exercising, on the part of either party hereto, any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies at law.
(b) Further Assurances. Each party hereto shall execute, acknowledge,
------------------
deliver, file and record such further certificates, amendments, instruments,
agreements and documents, and do all such other acts and things, as may be
required by law or as, in the reasonable opinion of either party hereto, may be
necessary or advisable to carry out the intents and purposes hereof.
(c) Headings. Titles and headings of the sections of this Agreement
--------
are for convenience of reference only and do not form a part of this Agreement
and shall not in any way affect the interpretation of this Agreement.
(d) Entire Agreement. This Agreement is the entire agreement and
----------------
understanding between the parties hereto concerning the subject matter hereof
and supersedes and replaces all prior agreements and understandings between the
parties hereto with respect thereto.
(e) Severability. If any provision of this Agreement or the
------------
application thereof to any person or circumstance is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provisions to such persons or
circumstances other than those to which it has been invalid or unenforceable,
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby.
(f) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Colorado, USA, other than its rules
of conflicts of laws to the extent that the application of the laws of another
jurisdiction would be required thereby.
(g) Notices. All notices, demands or other communications to be given
-------
under or by reason of this Agreement shall be in writing and shall be deemed to
have been received when delivered personally, by facsimile or mailed by
certified or registered mail, return receipt requested and postage prepaid, as
follows:
(i) If to UIH, to it at:
United International Holdings, Inc.
4
<PAGE>
4643 South Ulster Street, Suite 1300
Denver, Colorado 80237, U.S.A.
Facsimile: +1(303)770-4207
Attention: President
Copy to: Legal Department
(ii) If to UPC, to it at:
United Pan-Europe Communications N.V.
Fred. Roeskestraat 123
1076 EE Amsterdam
The Netherlands
Facsimile: +31(20)778-9881
Attention: President
Copy to: General Counsel
Either party hereto may change its address for notices, demands and other
communications hereunder by giving notice of such change to the other party in
accordance with this Section 8(g).
(h) No Third-Party Beneficiaries. Notwithstanding anything to the
----------------------------
contrary herein, no person shall be a third-party beneficiary to this Agreement.
(i) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which, when executed, shall constitute an original of this
Agreement, and all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to
be effective in accordance with Section 6 hereof.
UNITED INTERNATIONAL HOLDINGS, INC.
By:_____________________________________________________
Michael T. Fries, President
UNITED PAN-EUROPE COMMUNICATIONS N.V.
By:______________________________________________________
J. Timothy Bryan, President
By:______________________________________________________
Anton H.E. v. Voskuijlen, Senior Vice President, Legal
5
<PAGE>
EXHIBIT 10.33
25 January 1999
N.V. NUON Energie-Onderneming voor Gelderland, Friesland en Flevoland
N.V. KRATON
Utrechtseweg 68 Arnhem
The Netherlands
Fax no: +31 26 377 2071
Re: Share Purchase Agreement made 19 January, 1999 as amended (the "Agreement")
Gentlemen,
UPC wishes to express its appreciation to you that in view of interpretation
differences, relating to the Loan Agreement for a US$125,000,000 Extendable
Senior Secured Bridge Loan Facility dated 5th December, 1997, as amended and
supplemented (the "Bridge Loan"), you have agreed to hereby make the following
amendments to the Agreement:
1. In clause 1.1, the following definitions are added:
"UPCNV' shall mean United Pan-Europe Communications N.V."
"designated Affiliated Entity' shall mean UPC Intermediates B.V., unless
and until UPCNV designates another Affiliated Entity pursuant to Section
12.4."
2. The definition of UPC Shares is amended as follows: "UPC Shares" means all
of the shares held by Belmarken in the capital of UTH as at the date of
this Agreement."
3. Notwithstanding anything to the contrary contained in the last sentence of
Section 12.4, references to UPC in the definition of "Remaining Payment in
Cash", and in clauses 2.4, 4.1(iii), 4.3, 4.4, 4.5, 5.3, and clauses 5.4,
10.6 and 12.5 of the Agreement, shall refer only to the designated
Affiliated Entity unless and until a waiver is obtained under the Bridge
Loan (or no longer required because the Bridge Loan has been paid off), in
which case it shall refer only to the designated Affiliated Entity and
Belmarken, jointly and severally.
4. In Schedule A to the Agreement, the figure "10%" is replaced with "20%" in
both places in the row concerning IPO Revenues > NLG 1,400 million.
5. It is confirmed and agreed that in Schedule B, under the heading "Number of
Shares", "70% (seventy percent)" is replaced by "75% (seventy-five
percent)".
6. Clauses 6.2 is amended by adding to the end thereof the following:
"Notwithstanding anything to the contrary in this Agreement, NUON shall
have no recourse directly or indirectly against UPCNV for the satisfaction
of the Replacement Payment, the Remaining Payment in Cash, the First
Fallback Payment or the Second Fallback Payment; however, NUON shall have
full recourse to the designated Affiliated Entity."
7. A new Clause 5.6 is added as follows: "In the event following the
completion of the Third Party Sale or the execution by NUON of its first
right of pledge on the NUON Shares or the
<PAGE>
UPC Shares, as the case may be, NUON has not received payment in full under
this Agreement, then UPCNV herewith irrevocably agrees that, immediately
upon the request of NUON it will transfer to NUON 10% of its then
outstanding ordinary shares against payment of nominal value of such shares
in accordance with an arrangement to be completed within twenty (20)
Business Days from the date of this amendment."
8. The definition of "Completion Date" in Clause 1.1 of the Agreement is
amended in its entirety to read as follows: "Completion Date" means (A) in
relation to an IPO, the later of (i) the settlement date for the sale of
ordinary shares in connection with the Listing and (ii) the settlement date
for the sale of the American Depositary Shares in connection with the US
Securities and Exchange Commission's declaration of effectiveness of
UPCNV's registration statement therefor, and the day on which the
Completion Conditions shall have been satisfied or waived or (b) otherwise,
the day on which the Completion Conditions shall have been satisfied or
waived, or (c) such other date as UPC and NUON may agree;"
9. The parties agree that the Initial Payment in Cash is to be made on the
later of (i) the settlement date for the sale of ordinary shares in
connection with the Listing and (ii) the settlement date for the sale of
the American Depositary Shares in connection with the US Securities and
Exchange Commission's declaration of effectiveness of UPCNV's registration
statement therefor.
10. Clause 7.1 is amended to add a new sub-clause (E) to read as follows:
Belmarken having been designated as the Affiliated Entity in accordance
with clause 12.4. Belmarken will not amend or agree to amend the provision
in the Bridge Loan requiring payment on June 5, 1999; following repayment
of the Bridge Loan, Belmarken shall become the designated Affiliated
Entity.
11. Clause 13.1 is restated in its entirety to read as follows:
"UPC, Belmarken and the designated Affiliated Entity shall each be
severally liable for their respective obligations under this Agreement,
except where otherwise specifically provided herein that they shall be
jointly liable."
12. In addition, following the effective date of the supplemental agreement
concerning UPCNV's NLG 1,100 million Senior Revolving Credit Facility
("Senior Facility") being entered into in connection with UPCNV's IPO,
UPCNV will ensure that NUON's claims against Belmarken under the Agreement
shall at all times rank at least pari passu with the claims of any present
or future creditor of Belmarken, other than (i) claims now existing or
arising from any existing obligations under the Bridge Loan, (ii) claims
which are mandatorily preferred by law and not by contract and (iii) the
claims of the Senior Facility lenders in respect of Belmarken's interests
in MediaReseaux S.A.
13. Further to its letter dated January 21, 1999 to UTH, NUON confirms that
there are no further conditions to the extension of its loan to N.V.
Telekabel Beheer, except that a first right of pledge over the shares of
all of the subsidiaries of N.V. Telekabel Beheer will have to be vested in
its favour within 7 days from the date of this letter agreement. UTH agrees
to cause such pledge to be vested and UPC and Belmarken herewith consent to
the vesting of such first right of pledge. As a consequence the above loan
is now due and payable by March 15, 1999, which payment date will be
extended by a period of one time fourteen days, if payment in full of the
loan to NUON within that extended period, in the opinion of NUON is very
probable.
<PAGE>
For the avoidance of doubt, the parties acknowledge that any payments to be made
under the Agreement may be paid by the party responsible therefor at any time on
or before the due date thereof without penalty or premium.
References in the Agreement to "this Agreement" or words of similar import shall
refer to the Agreement, as amended hereby. The provisions of Clauses 18, 19, 20,
22, and 23 shall apply to this letter agreement as if set out in full.
If you concur with the above, please return one copy of this document to us duly
executed by you as evidence of your agreement.
Yours sincerely,
/s/ J. Timothy Bryan /s/ A.H.E van Voskuijlen
- --------------------------------------------------
UNITED PAN-EUROPE
COMMUNICATIONS N.V.
BELMARKEN HOLDING B.V.
UPC INTERMEDIATES B.V.
Agreed and accepted:
/s/
-----------------------------
N.V. NUON ENERGIE-ONDERNEMING
VOOR GELDERLAND, FRIESLAND EN
FLEVOLAND
N.V. KRATON
Agreed and accepted:
/s/ H. Koning
-----------------------------
UNITED TELEKABEL HOLDING N.V.
<PAGE>
SHARE PURCHASE AGREEMENT
This agreement is made this nineteenth day of January 1999, by and between
1. UNITED PAN-EUROPE COMMUNICATIONS N.V., having its statutory seat at
-------------------------------------
Amsterdam, the Netherlands, for the purpose hereof represented by Mr J.
Timothy Bryan and Mr Anton H.E. van Voskuijlen, Managing Directors of UPC,
(hereinafter, together with its wholly-owned subsidiary Belmarken and/or its
designated Affiliated Entity as defined in sub-clause 12.4 as the context
---------------
requires, referred to as: "UPC"),
2. BELMARKEN HOLDING B.V., having its statutory seat at Amsterdam, the
----------------------
Netherlands, for the purpose hereof represented by Mr J. Timothy Bryan and
Mr Anton H.E. van Voskuijlen, Managing Directors of UPC, (hereinafter
referred to as: "Belmarken"),
3. N.V. NUON ENERGIE-ONDERNEMING VOOR GELDERLAND, FRIESLAND EN FLEVOLAND,
---------------------------------------------------------------------
having its statutory seat at Arnhem, the Netherlands, for the purpose hereof
represented by Mr Tobias Swelheim, its Chief Executive Officer,
(hereinafter, together with its subsidiary Kraton as the context requires,
referred to as: "NUON"),
4. N.V. KRATON, having its statutory seat at Arnhem, the Netherlands, for the
-----------
purpose hereof represented by Mr Tobias Swelheim, its Chief Executive
Officer, (hereinafter referred to as: "Kraton"),
5. UNITED TELEKABEL HOLDING N.V., having its statutory seat at Amster dam, the
-----------------------------
Netherlands, for the purpose hereof represented by Mr Ferdinand C.E.M.
Hetterschijt, its Chief Executive Officer and Mr H.C. Blankers, its Chief
Financial Officer, (hereinafter referred to as: "UTH"),
<PAGE>
-2-
UPC, Belmarken, NUON, Kraton and UTH hereinafter collectively referred to
as: "parties" and individually as: a "party";
WHEREAS:
- -------
A. On 6 August 1998 UPC and NUON have completed a merger of their Dutch
broadband cable television and telecommunication companies and activities by
contributing these companies and activities to UTH.
B. UPC is through its wholly-owned subsidiary Belmarken the beneficial owner of
51% of the issued share capital of UTH.
C. NUON is through its subsidiary Kraton the beneficial owner of 49% of the
issued share capital of UTH.
D. In order to facilitate UPC's requirement to consolidate the activities of
UTH in the medium term, UPC and NUON have entered into an option agreement
dated 6 August 1998, granting each other specific call and put option rights
with respect to NUON's shareholding in UTH.
E. UPC is preparing an initial public offering of shares in the capital of UPC
through an official public listing of all of the ordinary shares in the
capital of UPC on the Amsterdam Stock Exchange and Nasdaq or on one or more
other stock exchanges (the "IPO").
F. UPC has expressed its desire to acquire NUON's shareholding in UTH earlier
than anticipated, i.e. concurrently with completion of the IPO or, failing
such IPO on or before 30 June 1999 (the "Stop Date"), ultimately on 30
November 1999.
G. The approval of each of the supervisory boards of NUON and UPC and of the
board of directors of UPC's parent company United International Holdings,
Inc ("UIH") has been obtained.
<PAGE>
-3-
IT IS HEREBY AGREED AS FOLLOWS:
- ------------------------------
CLAUSE 1 - INTERPRETATION
- -------------------------
1.1 In this Agreement
"Acquisition Agreement" means the acquisition agreement dated 2 April 1998
between UPC, NUON and UTH;
"Agreement" means this agreement for the sale and purchase of the NUON
Shares and the Subordinated Loan between NUON, UPC and UTH;
"Agreed Indexation" means the indexation included in the Purchase Price in
accordance with sub-clause 3.1;
--------------
"Business Day" means a day (other than a Saturday or a Sunday) on which
banks are open for business in Amsterdam;
"Completion" means the completion of the sale and purchase (i.e. the legal
transfer) of the NUON Shares and the Subordinated Loan under this Agreement;
"Completion Arrangements" means the completion arrangements for the
Completion referred to in Schedule F to this Agreement;
----------
"Completion Conditions" means the conditions to Completion listed in sub-
---
clause 7.1;
----------
"Completion Date" means the Listing Date or, if later, the day on which the
Completion Conditions shall have been satisfied or waived, or such other
date as UPC and NUON may agree;
"Final Payment Date" means the date on which payment of the Remaining
Payment in Cash will take place, being a date no later than twenty-four (24)
months after the Completion Date;
"First Fallback Payment" means an amount equal to fifty (50) percent of the
Purchase Price;
<PAGE>
-4-
"Initial Payment in Cash" means the part of the Purchase Price referred to
in sub-clause 4.1 (i) to be paid in cash on the Completion Date;
------------------
"IPO Revenue" means the aggregate consideration received for securities
offered and sold in the IPO, including but not limited to, shares in the
capital of UPC and ADR's;
"Listing" means the first listing of shares in the capital of UPC on the
Amster dam Stock Exchange or one or more other stock exchanges;
"Listing Date" means the date on which the Listing has been obtained;
"Management Services Agreement" means the management services agreement
dated 6 August 1998, effective as of 1 January 1998, between NUON and UTH;
"NLG" means the currency of the Netherlands;
"NUON Shares" means all of the shares held by NUON in the capital of UTH as
at the date of this Agreement;
"Option Agreement" means the Option Agreement dated 6 August 1998 between
UPC, NUON and UTH;
"Payment in Shares" means the payment of a number of officially listed
shares in the capital of UPC, as determined in accordance with sub-clause
----------
4.1 (ii) to be paid on the Second Payment Date;
--------
"Purchase Price" means the aggregate consideration payable for the NUON
Shares and the Subordinated Loan referred to in sub-clause 3.1;
--------------
"Remaining Payment in Cash" means the amount to be paid in cash by UPC on
the Final Payment Date;
"Replacement Payment" means a cash amount of at the maximum equal to 50% of
the Purchase Price;
"Sale" means the sale of any of the Shares in accordance with the terms and
conditions of Schedule B;
----------
<PAGE>
-5-
"Second Payment Date" means the date on which the transfer of the Payment in
Shares, or, as the case may be, the payment of the Replacement Payment, will
take place, being a date no later than the date six months and one day after
the Listing Date;
"Second Fallback Payment" means an amount equal to fifty (50) percent of the
Purchase Price;
"Second Fallback Payment Date" means the date on which the Second Fallback
Payment will take place, being a date no later than eighteen (18) months
after the Stop Date;
"Shareholders Agreement" means the shareholders agreement dated 6 August
1998 between UPC, NUON and UTH;
"Shares" means ordinary shares in the capital of UPC acquired by NUON
pursuant to the Payment in Shares;
"Stop Date" means 30 June 1999;
"Subordinated Loan" means the amount of NLG 33,000,000 (in words: thirty
three million Dutch Guilders) owed by UTH to NUON pursuant to the subordi-
nated loan agreement dated 23 december 1998 between NUON as lender and UTH
as borrower;
"TeleKabel Loan" means monies owed by N.V. TeleKabel Beheer to NUON pursuant
to the Loan Agreement dated 26/31 August 1998, as amended by letter
agreement dated 15 January 1999 by and between N.V. TeleKabel Beheer and
NUON and approved by the Supervisory Board of UTH including all costs,
penalties and interest accrued thereon;
"Third Party Sale" means the joint sale and transfer of the NUON Shares and
the UPC Shares to a third party in accordance with the terms and conditions
of Schedule E;
----------
"UPC Shares" means all of the shares held by UPC in the capital of UTH as at
the date of this Agreement.
<PAGE>
-6-
1.2 At Completion, where appropriate and to the extent required, the relevant
clauses of this Agreement, including but not limited to, clauses 2 and 3,
---------------
shall be adapted as to fully reflect variations, if any, after the date of
this Agreement in the amount of the Subordinated Loan and the number of NUON
Shares held by NUON at the date of this Agreement.
CLAUSE 2 - SALE AND PURCHASE OF THE NUON SHARES AND THE SUBORDINATED LOAN
- -------------------------------------------------------------------------
2.1 Per, and with effect of, the Completion Date, NUON hereby sells and UPC
hereby purchases the NUON Shares, together with all rights and obligations
attaining to them.
2.2 Per, and with effect of, the Completion Date, NUON hereby sells and UPC
hereby purchases the Subordinated Loan, together with all rights and
obligations attaining to it.
2.3 The NUON Shares and the Subordinated Loan are sold free from all claims,
liens, charges, encumbrances and other rights exercisable by third parties.
2.4 In consideration for the NUON Shares and the Subordinated Loan, UPC shall
pay to NUON the Purchase Price.
CLAUSE 3 - PURCHASE PRICE
- -------------------------
3.1 The total consideration payable for the NUON Shares and the Subordinated
Loan under this Agreement (the "Purchase Price") shall consist of the
following items:
(i) equity value of NLG 331,600,000 (the "Equity Part");
(ii) goodwill of NLG 156,000,000 (the "Goodwill Part");
(iii) an amount of NLG 33,000,000, being the nominal amount of the
Subordinated Loan;
(iv) the Agreed Indexation in accordance with sub-clause 3.2;
--------------
(v) the interest accrued on the Subordinated Loan in accordance with sub-
---
clause 3.3.
----------
<PAGE>
-7-
3.2 The Equity Part and Goodwill Part forming part of the Purchase Price shall
be subject to an indexation of five and a half (5.5) percent per annum as of
1 January 1998 until Completion Date.
3.3 The Subordinated Loan forming part of the Purchase Price shall bear an
interest of five and a half (5.5) percent per annum as of 23 December 1998
until the Completion Date.
<PAGE>
-8-
CLAUSE 4 - PAYMENT OF THE PURCHASE PRICE IN THE EVENT OF A LISTING
- ------------------------------------------------------------------
4.1 In the event of a Listing on or before the Stop Date, the Purchase Price
shall be paid in the following manner:
(i) an initial payment in cash as determined in accordance with Schedule A
----------
to this Agreement (the "Initial Payment in Cash"), to be paid on the
Completion Date by way of wire transfer to a bankaccount of NUON to be
designated by NUON at least three (3) Business Days prior to the
(anticipated) Completion Date;
(ii) a number of ordinary shares in the capital of UPC as determined in
accordance with Schedule B to this Agreement (the "Payment in
----------
Shares"), to be transferred on the Second Payment Date to a deposit
account of NUON, to be designated by NUON at least three (3) Business
Days prior to the Second Completion Date.
(iii) a remaining payment in cash as determined in accordance with Schedule
--------
A to this Agreement (the "Remaining Payment in Cash"), to be paid
-
on the Final Payment Date in accordance with sub-clause 4.5.
-------------
4.2 The conditions listed in Schedule B shall apply to NUON in respect of its
----------
shareholding in the capital of UPC acquired pursuant to the Payment in
Shares.
4.3 UPC shall, at its discretion, have the right to replace all or part of the
Payment in Shares with the Replacement Payment, to be paid on the Second
Payment Date together with any costs incurred by NUON towards WDR's
engagement by NUON as referred to in Schedule B, by way of wire transfer to
----------
a bank account of NUON, to be designated by NUON at least three (3) Business
Days prior to the Second Payment Date, provided that (i) such decision to
replace (all or part of) the Payment in Shares by the Replacement Payment
shall be irrevocable and unconditional and (ii) UPC shall notify NUON
thereof in writing on a date no later than fifteen (15) Business Days prior
to the Second Payment Date.
4.4 On the Final Payment Date, UPC shall pay the Remaining Payment in Cash
together with the interest accrued thereon in accordance with sub-clause 4.5
--------------
as of the Completion Date until the Final Payment Date by way of wire
transfer to a bank account of NUON to be designated by NUON at least three
(3) Business Days prior to the anticipated Final Payment Date.
<PAGE>
-9-
4.5 UPC shall pay to NUON interest on the Remaining Payment in Cash, as follows:
(i) for the first eight (8) months from the Completion Date: five (5)
percent per annum; and
(ii) for the second eight (8) months from the Completion Date: seven (7)
percent per annum; and
(iii) for the period thereafter until the Second Payment Date: nine (9)
percent per annum.
4.6 In the event NUON has not received payment (i) of the Replacement Payment on
the Second Payment Date in accordance with sub-clause 4.3 or (ii) of the
--------------
Remaining Payment in Cash on the Final Payment Date in accordance with sub-
---
clause 4.4, sub-clause 6.2 shall apply.
---------- --------------
CLAUSE 5 - COMPLETION AND PAYMENT IN THE EVENT A LISTING HAS NOT OCCURRED ON OR
- -------------------------------------------------------------------------------
BEFORE THE STOP DATE
- --------------------
5.1 In the event a Listing has not occurred on or before the Stop Date, UPC
shall proceed to Completion in accordance with sub-clause 5.3 on a date no
--------------
later than 30 November 1999.
5.2 UPC shall notify NUON in the form of Schedule C of the anticipated Comple-
----------
tion Date, taking into account a notice period of ten (10) Business Days.
5.3 On the Completion Date, UPC shall pay a cash amount equal to fifty (50)
percent of the Purchase Price (the "First Fallback Payment") by way of wire
transfer to NUON's bank account to be designated in writing at least three
(3) Business Days prior to the (anticipated) Completion Date.
On the Second Fallback Payment Date UPC shall pay the Second Fallback
Payment together with the interest accrued thereon in accordance with sub-
---
clause 5.4 as of the Completion Date until the Second Fallback Payment Date
----------
by way of wire transfer to NUON's bank account to be designated in writing
at least three (3) Business Days prior to the (anticipated) Second Fallback
Payment Date.
5.4 UPC shall pay to NUON interest on the Second Fallback Payment as follows:
<PAGE>
-10-
(i) for the first six (6) months from the Completion Date: five (5)
percent per annum; and
(ii) for the second six (6) months from the Completion Date: seven (7)
percent per annum; and
(iii) for the period thereafter until the Second Payment Date: nine (9)
percent per annum.
5.5 In the event NUON has not received payment of the Second Fallback Payment on
the Second Fallback Payment Date in accordance with sub-clause 5.3, clause
-------------- ------
6.2 shall apply.
---
CLAUSE 6 - FIRST RIGHT OF PLEDGE IN FAVOUR OF NUON AND REMEDIES IN THE EVENT
- ----------- -----------------------------------------------------------------
OF A BREACH
-----------
6.1 Within ten (10) Business Days after the date of this Agreement, UPC shall
vest a first priority right of pledge on the UPC Shares (effective as of the
Completion Date or the Stop Date, whichever is the earlier date) in favour
of NUON in the form of the draft deed of pledge attached to this Agreement
as Schedule D as a first rank security for the due and timely performance by
----------
UPC of its obligations under this Agreement, including but not limited to,
all payment obligations.
6.2 In the event following the Completion Date, or the Stop Date, whichever is
the earlier date (a "Breach")
(i) NUON has not received payment of the Replacement Payment on the Second
Payment Date pursuant to and in accordance with sub-clause 4.3, or as
--------------
the case may be, of the Remaining Payment in Cash on the Final Payment
Date in accordance with sub-clause 4.4, or, as the case may be, of the
--------------
Second Fallback Payment on the Second Fallback Payment Date in
accordance with sub-clause 5.3: or
--------------
(ii) of any other material non-performance by UPC or UTH of their obliga-
tions under this Agreement which has not been rectified within 10 (ten)
Business Days from receipt of a written default notice from NUON
reasonably specifying such default;
the following shall apply without prejudice to any other rights of NUON:
<PAGE>
-11-
(a) NUON shall, to its discretion, either (i) execute ('uitwinnen') its
first right of pledge on the NUON Shares and the UPC Shares to the
extent required or (ii) obtain in close cooperation with UPC a Third
Party Sale in accordance with the terms and conditions of Schedule E.
----------
(b) Conditional upon a Breach, UPC hereby irrevocably grants power of
attorney to NUON to take all actions for and on behalf of UPC to
efficiently procure a Third Party Sale, including, but not limited to,
the engagement of brokers and the entering into of a sale and purchase
agreement as selling shareholder of UTH.
(c) On the date of completion of the Third Party Sale (the "Third Party Sale
Completion Date"), NUON shall be paid out of the Third Party Sale
Proceeds (i) the Replacement Payment together with any costs incurred by
NUON towards WDR's engagement by NUON as referred to in Schedule B and,
----------
as the case may be, (ii) the Remaining Payment in Cash together with the
interest accrued thereon in accordance with sub-clause 4.5 as of the
--------------
Completion Date until the Third Party Sale Completion Date, or, as the
case may be, (iii) the Second Fallback Payment together with the
interest accrued thereon in accordance with sub-clause 5.4 as of the
--------------
Completion Date until the Third Party Sale Completion Date, or, as the
case may be, (iv) any and all damages, costs and interests incurred by
NUON as a consequence of a Breach, by way of wire transfer to NUON's
bank account to be designated in writing at least three (3) Business
Days prior to the (anticipated) Third Party Sale Completion Date.
CLAUSE 7 - COMPLETION CONDITIONS
- --------------------------------
7.1 The obligations of NUON and UPC to complete this Agreement are in all
respects conditional upon the following matters (the "Completion
Conditions"):
(A) UPC having vested a first right of pledge on the UPC Shares (effective
as of the Completion Date or the Stop Date, whichever is the earliest
date) and the NUON Shares in favour of NUON (effective as of Completion)
substantially in the form of the draft deed of pledge attached to this
Agreement as Schedule D as a first rank security for the
----------
<PAGE>
-12-
due and timely performance by UPC of its obligations under this
Agreement, including but not limited to, all payment obligations;
(B) NUON having complied with its obligations under article 25 of the Works
Council Act;
(C) NUON having received a satisfactory written confirmation from the banks
that are currently arranging alternative loans to UTH and/or N.V.
TeleKabel Beheer enabling them to pay to NUON all monies owed by N.V.
TeleKabel Beheer pursuant to the TeleKabel Loan, that there are no
outstanding issues on the Completion Date that would prevent them from
providing the alternative loans and the subsequent repayment to NUON;
(D) UPC having entered into arrangements to the satisfaction of NUON,
ensuring that NUON shall acquire the Payment in Shares on the Second
Payment Date in accordance with sub-clause 4.1 (ii) and to the effect
-------------------
that NUON will be able to immediately complete the reselling of the
Shares on the Amsterdam Stock Exchange, preferably all in one
transaction.
7.2 The parties will use all reasonable endeavours to fulfil the Completion
Conditions and will notify the other parties immediately upon becoming aware
of the satisfaction of each such condition.
CLAUSE 8 - COMPLETION
- ---------------------
8.1 Completion shall take place at 11.00 a.m. on the Completion Date or, as the
case may be, the Third Party Sale Completion Date, at the offices of Loeff
Claeys Verbeke at Apollolaan 15, 1070 AB Amsterdam, or such other time or
place as the parties may agree.
In the event of a Listing on or before the Stop Date, Completion shall take
place on the Listing Date.
8.2 At Completion UPC, NUON and UTH shall respectively do those things listed as
their respective obligations in the Completion Arrangements set forth in
Schedule F.
----------
8.3 Without prejudice to any other rights under this Agreement:
<PAGE>
-13-
(a) UPC shall not be obliged to complete this Agreement until (i) the
Completion Condition of sub-clause 7.1 (B) has been satisfied and (ii)
------------------
NUON complies in all material respects with the requirements applicable
to it in sub-clause 8.2 and Schedule F; and
-------------- ----------
(b) NUON shall not be obliged to complete this Agreement until (i) the
Completion Conditions of subclause 7.1 have been satisfied and (ii) UPC
-------------
complies in all material respects with the requirements applicable to it
in sub-clause 8.2 and Schedule F.
-------------- ----------
8.4 If the respective obligations of UPC and NUON under sub-clause 8.2 and
--------------
Schedule F are not complied with in all material respects on the Completion
----------
Date, UPC (in the case of non-compliance by NUON) or NUON (in the case of
non-compliance by UPC) may:
(a) defer Completion (so that the provisions of this clause 8 shall apply to
--------
Completion as so deferred);
(b) proceed to Completion as far as practicable (without limiting its rights
under this Agreement).
CLAUSE 9 - EFFECT OF COMPLETION ON EXISTING AGREEMENTS
- ------------------------------------------------------
Upon Completion in accordance with this Agreement, the following agreements
shall be deemed terminated:
(i) the Option Agreement;
(ii) the Acquisition Agreement, except for clause 3.1, 3.2 and 3.3 of Schedule
-----------------------
VI A thereto;
(iii) the Shareholders Agreement, except for clause 10 (Confidentiality) which
---------
shall be deemed after three years from the date of this Agreement; and
(iv) the Management Services Agreement.
CLAUSE 10 - FURTHER ARRANGEMENTS
- --------------------------------
10.1 Effective as of the Completion Date all existing obligations of NUON and
its subsidiaries (NUON and its subsidiaries collectively referred to as
the "NUON Group") with respect to the NUON Group being a customer to UTH's
telecom
<PAGE>
-14-
network or in any way paying for or compensating for costs related to this
telecom network, will be deemed terminated.
10.2 As soon as practicable after the date of this Agreement, the NUON Group
and UTH will enter into an agreement for the preferred suppliership of
UTH, the basic terms and conditions of which are attached to this
Agreement as Schedule G.
----------
10.3 As of the date of this Agreement, the changes in corporate governance set
forth in Schedule H shall apply.
----------
10.4 As of the Completion Date, the terms and conditions of Schedule I shall
----------
apply to the employment and employment conditions of former Nuon
employees.
10.5 As of the Completion Date, the terms and conditions of Schedule J shall
----------
apply to NUON's preferred suppliership for energy and energy related
services to UPC and its affiliates.
10.6 As of the Completion Date, NUON, UPC and UTH herewith irrevocably and
unconditionally waive their claims, threatened or pending, under the
Acquisition Agreement and each of NUON, UPC and UTH is herewith
unconditionally and irrevocably released from such claims. In addition to
the foregoing, as of the Completion Date, UPC shall indemnify and hold
harmless NUON for any claims regarding transfer tax
("overdrachtsbelasting") and property tax ("onroerende zaak belasting")
related to the period that NUON has acquired cable networks, which were
later transferred or contributed to N.V. TeleKabel, up to a maximum of NLG
13 million (in words: thirteen million Dutch guilders).
10.7 Within ten (10) Business Days from the date of this Agreement, UPC shall
provide NUON with arrangements to the satisfaction of NUON, ensuring that
NUON shall acquire the Payment in Shares in accordance with sub-clause 4.1
--------------
(ii) and to the effect that NUON will be able to immediately complete the
----
reselling of the Shares on the Amsterdam Stock Exchange, preferably all in
one transaction.
10.8 NUON shall use its reasonable efforts to complete the compliance with its
obligations under article 25 of the Works Council Act within ten (10)
Business Days from the date of this Agreement and NUON shall inform UPC as
soon as it is of the opinion that such obligations have been complied
with.
<PAGE>
-15-
CLAUSE 11 - REMEDIES AND WAIVERS
- --------------------------------
11.1 No delay or omission on the part of any party to this Agreement in
exercising any right, power or remedy provided by law or under this
Agreement or any other documents referred to in it shall:
(a) affect that right, power or remedy; or
(b) operate as a waiver of it.
11.2 The single or partial exercise of any right, power or remedy provided by
law or under this Agreement shall not preclude any other or further
exercise of it or the exercise of any other right, power or remedy.
11.3 The rights, power and remedies provided in this Agreement are, unless
otherwise stated, cumulative and not exclusive of any rights, power and
remedies provided by law.
CLAUSE 12 - ASSIGNMENT
- ----------------------
12.1 Neither this Agreement, nor any interest in it, nor any other document to
be executed pursuant to this Agreement shall be assignable by any party in
whole or in part at any time to any third party or parties without the
prior written approval of the other parties to this Agreement and each
party undertakes that it will not assign the whole or any part of any
interest in this Agreement or any such other document at any time to any
person without such prior written approval of the other parties to this
Agreement.
12.2 In the event of a sale and transfer by UPC of any of the UPC Shares to a
third party, UPC shall cause such third party to agree and acknowledge:
(i) that it shall be a party to all the terms and conditions of this
Agreement in respect of the transferred UPC Shares; and
(ii) that it shall accept several liability for the performance by UPC of
its obligations under this Agreement.
12.3 In the event of a sale and transfer by NUON of any of the NUON Shares to a
third party, NUON shall cause such third party to agree and acknowledge:
<PAGE>
-16-
(i) that it shall be a party to all the terms and conditions of this
Agreement in respect of the transferred NUON Shares; and
(ii) that it shall accept several liability for the performance by UPC of
its obligations under this Agreement.
12.4 At any time before the Completion Date UPC may notify NUON in writing that
one or more affiliated entities (each an "Affiliated Entity") is to
purchase NUON Shares and/or the Subordinated Loan pursuant to this
Agreement. Such notification shall specify the name and, if applicable,
registered office of the Affiliated Entity and the NUON Shares to be
purchased by the Affiliated Entity (the "Relevant NUON Shares"), on
condition that such Affiliated Entity accepts several liability for the
proper performance by UPC of its obligations under this Agreement. Such
notification shall operate as an assignment by UPC of its rights under
this Agreement to the extent they relate to the Relevant NUON Shares
and/or the Subordinated Loan. Any such assignment shall not in any way
limit or diminish the obligations of UPC under this Agreement. Such
assignment(s) shall neither increase nor decrease the liabilities or
rights of NUON or UPC, respectively, under this Agreement.
12.5 If UPC elects to assign any of its rights and obligations under this
Agreement to one or more Affiliated Entities (as defined in sub-clause
----------
12.4), UPC will guarantee to NUON the due and punctual payment and
----
performance of all the obligations and liabilities of such Affiliated
Entities arising under this Agreement.
The obligations of UPC under this clause:
(a) constitute a direct, primary and unconditional liability to pay on
demand by NUON any sum which the Affiliated Entity is liable to pay
under this Agreement pursuant to a settlement between the relevant
Affiliated Entity and NUON or a judgement of the Amsterdam Court
pursuant to clause 22 and to perform on demand by NUON any obligation
---------
of the Affiliated Entity under this Agreement without the need for any
recourse on the part of NUON against the Affiliated Entity;
(b) will not be affected by any circumstances relating to the Affiliated
Entity.
CLAUSE 13 - FURTHER ASSURANCE
- -----------------------------
<PAGE>
-17-
13.1 UPC and Belmarken or its designated Affiliated Entity, in case UPC
provides NUON with a notice as referred to in sub-clause 12.4, agree with
---------------
NUON to be jointly and severally liable for any and all obligations,
liabilities and indemnities of any one of them.
13.2 NUON and Kraton agree with UPC to be jointly and severally liable for any
and all obligations, liabilities and indemnities of any one of them.
13.3 Each of the parties shall from time to time, on being requested to do so
by a party to this Agreement now or at any time in the future, do or so
far as each is able procure the doing of all such acts and/or execute or
procure the execution of all such documents in a form reasonably
satisfactory to the requesting party necessary for giving full effect to
this Agreement and securing to such requesting party the full benefit of
the rights, powers and remedies conferred upon it in this Agreement.
CLAUSE 14 - ENTIRE AGREEMENT
- ----------------------------
14.1 For the purpose of this clause 14, "Pre-contractual Statement" means a
---------
draft, agreement, undertaking, representation, warranty, promise,
assurance or arrangement of any nature whatsoever, whether or not in
writing, relating to this Agreement made or given by a party to this
Agreement or any other person at any time prior to the date of this
Agreement.
14.2 This Agreement and any other documents referred to in this Agreement
constitute the whole and only agreement between the parties relating to
the sale and purchase of the NUON Shares and the Subordinated Loan.
14.3 Except to the extent repeated in this Agreement, this Agreement supersedes
and extinguishes any Pre-contractual Statement.
14.4 Each party acknowledges that in entering into this Agreement and any other
documents referred to in this Agreement it is not relying upon any Pre-
contractual Statement which is not set out in this Agreement.
14.5 No party shall have any right of action against any other party to this
Agreement arising out of or in connection with any Pre-contractual
Statement (except in the case of fraud) except to the extent repeated in
this Agreement.
<PAGE>
-18-
14.6 This Agreement may only be varied in a writing signed by each of the
parties.
CLAUSE 15 - NOTICES
- -------------------
15.1 Any notice or other communication under this Agreement shall only be
effective if it is in writing and otherwise complies with this clause 15.
---------
15.2 No notice or other communication given or made under this Agreement may be
withdrawn or revoked.
15.3 Any notice or other communication given or made under this Agreement shall
be addressed as provided in sub-clause 15.5 and, if so addressed, shall,
---------------
in the absence of earlier receipt, be deemed to have been duly given or
made as follows:
(a) if sent by personal delivery, on delivery at the address of the
relevant party;
(b) if sent by registered mail, three Business Days after the date of
posting; and
(c) if sent by facsimile (with a copy sent by personal delivery or post),
when dispatched.
15.4 Any notice or other communication given or made, or deemed to have been
given or made, outside working hours will be deemed not to have been given
or made until the start of the next period of working hours.
15.5 The relevant notice details are:
NUON and Kraton:
Utrechtseweg 68
Arnhem, The Netherlands
Fax number : +31 26 377 2071
Attention : Board of Management ("Hoofddirectie")
UPC and Belmarken:
Frederik Roeskestraat 123,
1076 EE Amsterdam, The Netherlands
Fax number : +31 20 778 9871
<PAGE>
-19-
Attention : General Counsel
UTH:
Kabelweg 55
1014 BA Amsterdam, The Netherlands
Fax number : +31 20 776 6899
Attention : General Counsel
15.6 A party may notify the other party of a change to its notice details. The
notification shall only be effective on:
(a) any effective date specified in the notification; or
(b) if no date is specified or the date specified is less than five
Business Days after the date when the notice is received, the date
falling five clear Business Days after the notification has been
received.
CLAUSE 16 - ANNOUNCEMENTS
- -------------------------
16.1 Subject to sub-clause 16.2 no announcement concerning the sale of the NUON
---------------
Shares or any ancillary matter shall be made by either party without the
prior written approval of the other, such approval not to be unreasonably
withheld or delayed.
16.2 A party may make an announcement concerning the sale of the NUON Shares or
any ancillary matter if required by:
(a) the law of any relevant jurisdiction; or
(b) any securities exchange or regulatory or governmental body to which
either party is subject or submits, wherever situated, including
(without limitation) the Amsterdam Exchanges.
PROVIDED THAT any such announcement shall be made by a party only after
consultation with the other parties.
16.3 The restrictions contained in this clause 16 shall continue to apply after
---------
Completion without limit in time.
CLAUSE 17 - CONFIDENTIALITY
- ---------------------------
<PAGE>
-20-
17.1 Subject to sub-clause 17.3, during a period of three years after
---------------
Completion, NUON undertakes not to disclose to third parties any
confidential information concerning the mode of operation, suppliers, or
customers of UTH as carried on at Completion.
17.2 Subject to sub-clause 17.3, each party shall treat as strictly
---------------
confidential all information received or obtained as a result of entering
into or performing this Agreement which relates to:
(a) the provisions of this Agreement; or
(b) the negotiations relating to this Agreement; or
(c) the other parties.
17.3 Each party may disclose information which would otherwise be confidential
if and to the extent:
(a) required by the law of any jurisdiction;
(b) required by any securities exchange or regulatory or governmental body
to which either party is subject or submits, wherever situated,
including (without limitation) the Amsterdam Exchanges, whether or not
requirement for information has the force of law;
(c) required to vest the full benefit of this Agreement in that party;
(d) disclosed to the professional advisers, auditors or bankers of that
party (subject to duties of confidentiality);
(e) the information has come into the public domain through no fault of
that party; or
(f) the other party has given prior written approval to the disclosure,
such approval not to be unreasonably withheld or delayed.
PROVIDED THAT any such information disclosed pursuant to paragraph (a),
-------------
(b) or (c) by a party, shall be disclosed only after consultation with the
----------
other parties.
NUON has been informed by UPC that this Agreement will be filed as an
exhibit to UPC's registration statement for the IPO.
<PAGE>
-21-
17.4 Subject to sub-clause 17.1, the restrictions contained in this clause 17
--------------- ---------
shall continue to apply after the consummation of the sale and purchase of
the NUON Shares without limit in time.
CLAUSE 18 - COSTS AND EXPENSES
- ------------------------------
Save as otherwise stated in any other provision of this Agreement, each party
shall pay its own costs and expenses in relation to the negotiations leading up
to the sale of the NUON Shares and the Subordinated Loan and to the preparation,
execution and carrying into effect of this Agreement and all other documents
referred to in any of them.
CLAUSE 19 - COUNTERPARTS
- ------------------------
This Agreement may be executed in any number of counterparts, and by the parties
on separate counterparts, but shall not be effective until each party has
executed at least one counterpart. Each counterpart shall constitute an original
of this Agreement, but all the counterparts together constitute but one and the
same instrument.
CLAUSE 20 - INVALIDITY
- ----------------------
If at any time any provision of this Agreement is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, that shall not
affect or impair:
(a) the legality, validity or enforceability in that jurisdiction of any other
provision of this Agreement; or
(b) the legality, validity or enforceability under the law of any other
jurisdiction of that or any other provision of this Agreement.
CLAUSE 21 - LANGUAGE
- --------------------
Each notice, demand, request, statement, instrument, certificate, or other
communication given, delivered or made by one party to another under or in
<PAGE>
-22-
connection with this Agreement shall be in English, unless such communication is
made between Dutch parties only.
CLAUSE 22 - CHOICE OF GOVERNING LAW AND JURISDICTION
- ----------------------------------------------------
22.1 This Agreement shall be governed by and construed in accordance with
Netherlands law.
22.2 The Amsterdam Court is to have jurisdiction to settle any dispute in
connection with this Agreement. This jurisdiction agreement is
irrevocable.
CLAUSE 23 - MISCELLANEOUS
- -------------------------
The parties waive their rights, if any, to annul, rescind or dissolve
(including: "ontbinding" en "vernietiging") this Agreement.
Thus agreed on and signed in 5 original copies in Amsterdam on January 19, 1999.
1. UNITED PAN-EUROPE COMMUNICATIONS N.V.
/s/ /s/
- --------------------------- ----------------------------------
By : J. Timothy Bryan By : Anton H.E. van Voskuijlen
Its: Managing Director Its: Managing Director
2. BELMARKEN HOLDING B.V.
/s/ /s/
- --------------------------- ----------------------------------
By : J. Timothy Bryan By : Anton H.E. van Voskuijlen
Its: Managing Director of UPC Its: Managing Director of UPC
<PAGE>
-23-
3. N.V. NUON ENERGIE-ONDERNEMING VOOR GELDERLAND, FRIESLAND EN FLEVOLAND
/s/
- ---------------------------------
By : Mr Tobias Swelheim
Its: Chief Executive Officer
4. N.V. KRATON
/s/
- ---------------------------------
By : Mr Tobias Swelheim
Its: Chief Executive Officer
5. UNITED TELEKABEL HOLDING N.V.
/s/ /s/
- --------------------------------- --------------------------------
By : Mr F.C.E.M. Hetterschijt By : Mr H.C. Blankers
Its: Chief Executive Officer Its: Chief Executive Officer
<PAGE>
EXHIBIT 23.1
As independent public auditors, we hereby consent to the use in this
Registration Statement of our reports, dated January 14, 1999 on United Pan-
Europe Communications N.V. for the nine months ended September 30, 1998, the
years ended December 31, 1997 and 1996 and the six months ended December 31,
1995, included in this Registration Statement, and to all references to our
Firm included in this Registration Statement.
ARTHUR ANDERSEN
Amstelveen, The Netherlands
February 4, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated September 11, 1998 (except for Note 14 for which the date is
January 14, 1999), on our audits of the financial statements of N.V. Telekabel
Beheer as of December 31, 1995, 1996 and 1997 and for the period from August
22, 1995 until December 31, 1995 and for the years ended December 31, 1996 and
1997. We also consent to the reference to our firm under the caption "Experts".
Arnhem, February 4, 1999
PricewaterhouseCoopers N.V.
<PAGE>
EXHIBIT 23.3
As independent public auditors, we hereby consent to the use in this
Registration Statement of our reports, dated October 24, 1996 on
NorkabelGruppen AS for the year ended December 31, 1995, included in this
Registration Statement, and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN & CO.
Oslo, Norway
February 4, 1999
