<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File No. 000-25365
UNITED PAN-EUROPE COMMUNICATIONS N.V.
(Exact name of Registrant as specified in its charter)
The Netherlands 98-0191997
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Fred. Roeskestraat 123, P.O. Box 74763
1070 BT Amsterdam, The Netherlands 1070 BT
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (31) 20-778-9840
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
American Depository Shares each representing one ordinary share
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant, computed by reference to the last sales price of such stock, as of
the close of trading on March 28, 2000 was USD26.1 billion.
The number of shares outstanding of the Registrant's common stock as of
March 28, 2000 was:
436,229,439 ordinary shares, including
shares represented by American Depository Receipts
===============================================================================
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999
Table of Contents
------------------
<TABLE>
<CAPTION>
Page
Number
------
PART I
<C> <S> <C>
Item 1. Business................................................................... 1
Item 2. Properties................................................................. 31
Item 3. Legal Proceedings.......................................................... 31
Item 4. Submission of Matters to a Vote of Security Holders........................ 31
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..... 32
Item 6. Selected Financial Data................................................... 33
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................. 35
Item 7A. Quantitative and Qualitative Disclosure About Market Risk................. 56
Item 8. Financial Statements and Supplementary Data............................... 61
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................... 113
PART III
Item 10. Directors and Executive Officers of the Registrant........................ 114
Item 11. Executive Compensation.................................................... 118
Item 12. Security Ownership of Certain Beneficial Owners and Management............ 125
Item 13. Certain Relationships and Related Transactions............................ 126
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........... 130
</TABLE>
<PAGE>
PART 1
Item 1. Business
--------
(a) General Development of Business
-------------------------------
We own and operate broadband communications networks in 12 countries in
Europe and in Israel. We provide communications services in many European
countries through our business lines: cable television, DTH and programming,
telephone and Internet/data services. Our subscriber base is the largest of any
group of broadband communications networks operated across Europe.
While we began business as cable television service providers, over the
last few years we have been upgrading many of our networks so that they are
capable of providing telephone and Internet/data access services as well as
enhanced or more advanced video services. Our telephone service is branded
"Priority Telecom" and has been launched in many of our markets in 1998 and
1999. Our chello broadband subsidiary has launched an Internet/access and
portal service branded under its name in many of our systems during 1999. We
have launched chello broadband services on broadband networks other than our
own, including on systems owned by UnitedGlobalCom, Inc. ("United"), our
majority shareholder.
We operated from July 1995 to December 1997 as a 50/50 joint venture
between United and Philips. In December 1997, we and United acquired the 50% of
our ordinary shares held by Philips. Following this acquisition and until our
initial public offering in February 1999, we became a wholly owned subsidiary of
United, other than approximately 7% of our stock held by a foundation to support
our stock option plans to employees.
We have grown substantially since formation through acquisitions of cable
television systems and related businesses in our existing and new markets.
During 1999 we grew from a number of acquisitions. We expect to grow further
from acquisitions.
(b) Narrative Description of Business
---------------------------------
We own and operate broadband communications networks in 12 countries in
Europe, excluding our investment in Germany, and in Israel. We believe our
leading position in providing video services across Europe helps our expansion
and integration of our business lines: cable television, DTH and programming,
telephone, and Internet/data services. Our goal is to enhance our position as a
leading pan-European distributor of video programming services and to become a
leading pan-European provider of telephone services and Internet/data services,
offering a one-stop shopping solution for personal and business communication
needs.
Summary Operating and Financial Data
In the tables below, the "UPC Ownership Interest" column shows the
percentage we own of the operating systems in which we have an interest. Due to
our business combinations in France and Romania that occurred after December
31, 1999, our ownership interests in our existing systems in these countries
decreased. Due to our acquisition of the minority interest in our Hungarian
system, Telekabel Hungary, subsequent to December 31, 1999, our ownership
interest increased. When we refer to information as "UPC Equity in," we mean
that we have multiplied the statistic for each operating system by our
percentage ownership of that system.
1
<PAGE>
Summary Operating Data 1999
The operating data set forth below reflects the aggregate statistics of the
operating systems in which the Company has an ownership interest.
<TABLE>
<CAPTION>
As at December 31, 1999
------------------------------------------------------------------------------------
Homes in Two way UPC
Service Homes Homes Basic Basic Paid-in
Area Passed Passed Subscribers Penetration Ownership
------------- ------------ ----------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Multi-channel TV:
Consolidated companies:
Norway............................... 529,000 468,095 55,519 327,520 70.0% 100.0%
Sweden............................... 770,000 421,624 167,700 243,006 57.6% 100.0%
Belgium.............................. 133,120 133,000 130,835 125,082 94.0% 100.0%
France............................... 1,265,827 927,000 95,174 334,609 36.1% 100.0%
The Netherlands...................... 1,714,607 1,660,171 1,376,147 1,517,432 91.4% 100.0%
Austria.............................. 1,081,100 906,340 753,050 470,543 51.9% 95.0%
Poland............................... 1,950,000 1,756,200 - 1,023,822 58.3% 100.0%
Hungary (Telekabel Hungary).......... 901,500 655,272 83,291 518,577 79.1% 79.3%
Hungary (Monor)...................... 85,693 70,061 84,916 32,369 46.2% 95.1%
Czech Republic....................... 817,138 736,462 10,000 374,332 50.8% 94.6-100.0%
Romania.............................. 284,320 166,394 - 112,099 67.4% 51.0-100.0%
Slovak Republic...................... 417,813 304,360 - 244,733 80.4% 94.6-100.0%
Non-consolidated companies:
Israel............................... 660,000 608,817 380,698 424,987 69.8% 46.6%
Malta................................ 177,000 173,503 - 76,522 44.1% 50.0%
------------- ------------ ----------- -------------
Total........................... 10,787,118 8,987,299 3,137,330 5,825,633
============= ============ =========== =============
Direct to Home (DTH):
Consolidated companies:
Poland............................ - - - 254,092 N/A 100.0%
------------- ------------ ----------- -------------
Total.......................... - - - 254,092
============= ============ =========== =============
<CAPTION>
As as December 31, 1999
---------------------------------------
Equity in Equity in Equity in
Homes in Homes Basic
Service Area Passed Subscribers
-------------- ---------- -----------
<S> <C> <C> <C>
Multi-channel TV:
Consolidated companies:
Norway............................... 529,000 468,095 327,520
Sweden............................... 770,000 421,624 243,006
Belgium.............................. 133,120 133,000 125,082
France............................... 1,265,827 927,000 334,609
The Netherlands...................... 1,714,607 1,660,171 1,517,432
Austria.............................. 1,027,045 861,023 447,016
Poland............................... 1,950,000 1,756,200 1,023,822
Hungary (Telekabel Hungary).......... 714,439 519,303 410,972
Hungary (Monor)...................... 81,494 66,628 30,783
Czech Republic....................... 786,111 705,435 357,228
Romania.............................. 251,000 151,890 100,441
Slovak Republic...................... 412,791 299,523 241,836
Non-consolidated companies:
Israel............................... 307,560 283,709 198,044
Malta................................ 88,500 86,752 38,261
------------ ------------- -----------
------------ ------------- -----------
Total........................... 10,031,494 8,340,353 5,396,052
============ ============= ===========
Direct to Home (DTH):
Consolidated companies:
Poland............................ - - 254,092
------------- ------------ -----------
Total.......................... - - 254,092
============= ============ ===========
</TABLE>
2
<PAGE>
Summary Operating Data 1999 (Continued)
<TABLE>
<CAPTION>
As at December 31, 1999
----------------------------------------------------------------------------
UPC
Subscribers Lines UPC Equity in
------------------------ ------------------------ Paid-in Residential
Residential Businesses Residential Businesses Ownership Subscribers
------------ ----------- ------------ ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cable Telephony
Consolidated companies:
Norway ....................................... 3,226 1 3,636 355 100.0% 3,226
France ....................................... 13,253 227 13,609 526 100.0% 13,253
The Netherlands .............................. 57,398 3 67,374 830 100.0% 57,398
Austria ...................................... 36,806 712 38,105 2,186 95.0% 34,966
------- ------ ------- ------- -------
Total ................................... 110,683 943 122,724 3,897 108,843
======= ====== ======= ======= =======
Non-Cable Telephony
Consolidated companies:
The Netherlands (Uniport Carrier Select) 20,265 8,527 -- -- 80.0% 16,212
Czech Republic ............................... 3,031 -- 3,051 -- 94.6% 2,867
Hungary (Monor) .............................. 64,696 3,128 66,828 6,393 95.1% 61,526
------- ------ ------- ------- -------
Total ................................... 87,992 11,655 69,879 6,393 80,605
======= ======= ======= ======= =======
Data services
Consolidated companies:
Norway ....................................... 3,268 3 n/a n/a 100.0% 3,268
Sweden ....................................... 5,243 - n/a n/a 100.0% 5,243
Belgium ...................................... 6,799 655 n/a n/a 100.0% 6,799
France ....................................... 3,234 43 n/a n/a 100.0% 3,234
The Netherlands .............................. 58,512 1,553 n/a n/a 100.0% 58,512
Austria ...................................... 40,770 1,371 n/a n/a 95.0% 38,732
Hungary (Telekabel Hungary) .................. 99 n/a n/a 79.3% 78
------- ------- ------- ------- -------
Total ................................... 117,925 3,625 -- -- 115,866
======= ======= ======= ======= =======
<CAPTION>
As at December 31, 1999
------------------------------------------
UPC UPC UPC
Equity in Equity in Equity in
Business Residential Business Lines
Subscribers Lines Served Served
----------- ------------ ---------------
<S> <C> <C> <C>
Cable Telephony
Consolidated companies:
Norway ....................................... 1 3,636 355
France ....................................... 227 13,609 526
The Netherlands .............................. 3 67,374 830
Austria ...................................... 676 36,200 2,077
------- ------- -------
Total ................................... 907 120,819 3,788
======= ======= =======
Non-Cable Telephony
Consolidated companies:
The Netherlands (Uniport Carrier Select) 6,822 -- --
Czech Republic ............................... -- 2,886 --
Hungary (Monor) .............................. 2,975 63,553 6,080
------- ------- -------
Total ................................... 9,797 66,439 6,080
======= ======= =======
Data services
Consolidated companies:
Norway ....................................... 3 n/a n/a
Sweden ....................................... -- n/a n/a
Belgium ...................................... 655 n/a n/a
France ....................................... 43 n/a n/a
The Netherlands .............................. 1,553 n/a n/a
Austria ...................................... 1,302 n/a n/a
Hungary (Telekabel Hungary) .................. -- n/a n/a
------- ------- -------
Total ................................... 3,556 -- --
======= ======= =======
</TABLE>
3
<PAGE>
Summary Operating Data 1999 (1) (continued)
<TABLE>
<CAPTION>
At December 31,
For the twelve months period ending December 31, 1999 1999
---------------------------------------------------------------------- ---------------
Net Net Long-
Operating Income/ Adjusted Capital Term
Revenue Income/(loss) (loss) EBITDA (3) Expenditures Debt (4)
------- ------------- ------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated companies:
Norway................................. 47,371 (22,973) (34,871) 7,900 54,403 130,843
Sweden ................................ 13,081 (13,857) (14,486) 332 11,903 28,843
Belgium................................ 17,235 (7,571) (8,604) 1,586 8,047 -
France................................. 29,135 (30,608) (46,331) (9,537) 67,321 155,176
The Netherlands ....................... 149,349 (57,485) (95,475) 29,179 189,673 584,529
Austria................................ 98,936 (8,365) (12,682) 31,670 89,779 166,241
Hungary (Telekabel Hungary)............ 33,388 2,784 (1,239) 10,783 36,876 -
Hungary (Monor) ....................... 19,174 7,459 3,212 13,420 3,386 33,280
Poland ................................ 35,694 (110,235) (135,522) (72,503) 40,450 284,310
Czech Republic ........................ 8,231 (4,466) (5,368) (629) 2,373 -
Romania................................ 2,749 932 119 1,113 515 -
Slovak Republic........................ 5,168 (4,165) (5,466) 1,111 4,473 -
Non-consolidated companies:
Israel................................. 158,321 17,828 (6,078) 71,837 32,129 205,786
Malta.................................. 15,078 3,188 741 5,218 9,594 27,497
The Netherlands (A2000) (2)............ 73,699 (23,998) (38,522) 15,512 49,525 N/A
</TABLE>
4
<PAGE>
Summary Operating Data 1998
The operating data set forth below reflects the aggregate statistics of the
operating systems in which the Company has an ownership interest.
<TABLE>
<CAPTION>
As at December 31, 1998
----------------------------------------------------------------------------------------
UPC
Homes in Two way UPC Equity in
Service Homes Homes Basic Basic Paid-in Homes in
Area Passed Passed Subscribers Penetration Ownership Service Area
----------- ----------- ----------- ----------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-channel TV:
Consolidated companies:
Norway............................. 529,924 463,235 15,803 323,387 69.8% 100.0% 529,924
Belgium............................ 133,000 133,000 91,735 127,398 95.8% 100.0% 133,000
France............................. 150,000 74,623 74,623 29,107 39.0% 99.6% 149,400
The Netherlands (UTH) (5).......... 943,027 914,737 484,133 867,800 94.9% 51.0% 480,944
Austria............................ 1,073,297 900,350 516,700 454,957 50.5% 95.0% 1,019,632
Hungary (Telekabel Hungary) (6).... 901,500 510,622 - 442,567 86.7% 79.3% 714,439
Czech Republic..................... 229,531 151,716 - 54,153 35.7% 100.0% 229,531
Romania............................ 180,000 98,174 - 61,999 63.2% 51.0-100.0% 165,300
Slovak Republic.................... 67,959 37,641 - 21,044 55.9% 75.0-100.0% 62,499
Non-consolidated companies:
Israel............................. 595,000 575,976 363,819 402,355 69.9% 46.6% 277,270
Malta.............................. 179,000 162,996 - 70,363 43.2% 50.0% 89,500
Hungary (Monor) ................... 85,000 68,339 - 30,623 44.8% 44.8% 38,080
The Netherlands (A2000)............ 578,500 572,936 386,109 529,067 92.3% 25.5% 147,518
----------- ----------- ----------- ----------- ----------
Total......................... 5,645,738 4,664,345 1,932,922 3,414,820 4,037,037
=========== =========== =========== =========== ==========
<CAPTION>
As at December 31, 1998
--------------------------
UPC UPC
Equity in Equity in
Homes Basic
Passed Subscribers
--------- ------------
<S> <C> <C>
Multi-channel TV:
Consolidated companies:
Norway............................. 463,235 323,387
Belgium............................ 133,000 127,398
France............................. 74,325 28,991
The Netherlands (UTH) (5).......... 466,516 442,578
Austria............................ 855,333 432,209
Hungary (Telekabel Hungary) (6).... 404,668 350,734
Czech Republic..................... 151,716 54,153
Romania............................ 84,209 51,282
Slovak Republic.................... 33,380 18,209
Non-consolidated companies:
Israel............................. 268,405 187,497
Malta.............................. 81,498 35,182
Hungary (Monor) ................... 30,616 13,719
The Netherlands (A2000)............ 146,099 134,912
---------- -----------
Total......................... 3,193,000 2,200,251
========== ===========
</TABLE>
5
<PAGE>
Summary Operating Data 1998
The operating data set forth below reflects the aggregate statistics of the
operating systems in which the Company has an ownership interest.
<TABLE>
<CAPTION>
As at December 31, 1998
-----------------------------------------------------------------------------------------
UPC
Subscribers Lines served UPC Equity in
------------------------------ ------------------------------- Paid-in Residentiale
Residential Businesses Residential Businesses Ownership Subscribers
------------------ ----------- --------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cable Telephony
Non-consolidated companies:
The Netherlands (A2000) ........... 18,111 3 19,850 830 25.5% 4,618
Non Cable Telephony
Consolidated companies:
The Netherlands (UTH) (5) (7)...... 20,500 72 20,500 - 51.0% 10,455
Non-consolidated companies:
Hungary (Monor) ................... - - 69,244 - 44.8% -
-------------- ----------- --------------- ----------- --------------
Total......................... 38,611 75 109,594 830 15,073
============== =========== =============== =========== ==============
Data services
Consolidated companies:
Norway............................. 768 - n/a n/a 100.0% 768
Belgium............................ 1,869 284 n/a n/a 100.0% 1,869
The Netherlands (UTH) (5).......... 3,379 - n/a n/a 51.0% 1,723
Austria............................ 9,054 603 n/a n/a 95.0% 8,601
Non-consolidated companies:
The Netherlands (A2000)............ 8,128 253 n/a n/a 25.5% 2,073
-------------- ----------- ------------- ---------- -------------
Total......................... 23,198 1,140 n/a n/a 15,034
============== =========== ============= ========== =============
<CAPTION>
As at December 31, 1998
---------------------------------------------
UPC UPC UPC
Equity in Equity in Equity in
Business Residential Business Lines
Subscribers Lines Served Served
------------- ---------------- -------------
<S> <C> <C> <C>
Cable Telephony
Non-consolidated companies:
The Netherlands (A2000) ........... 1 5,062 212
Non Cable Telephony
Consolidated companies:
The Netherlands (UTH) (5) (7)...... 37 10,455 -
Non-consolidated companies:
Hungary (Monor) ................... - 30,987 -
----------- ---------------- --------------
Total......................... 38 46,504 212
=========== ================ ==============
Data services
Consolidated companies:
Norway............................. - n/a n/a
Belgium............................ 284 n/a n/a
The Netherlands (UTH) (5).......... - n/a n/a
Austria............................ 573 n/a n/a
Non-consolidated companies:
The Netherlands (A2000)............ 65 n/a n/a
----------- -------------- -------------
Total......................... 922 n/a n/a
=========== ============== =============
</TABLE>
6
<PAGE>
Summary Operating Data 1998 (1) (continued)
<TABLE>
<CAPTION>
At December 31,
For the twelve months period ended December 31, 1998 1998
------------------------------------------------------------- ---------------
Net Net Long-
Operating Income/ Adjusted Capital Term
Revenue Income/(loss) (loss) EBITDA (3) Expenditures Debt (4)
-------- --------------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Consolidated companies:
Norway ............................. 42,052 (14,653) (30,460) 14,997 23,332 61,040
Belgium............................. 16,691 (4,001) (6,932) 6,018 10,162 -
France ............................. 3,657 (4,361) (5,973) (2,304) 26,009 18,303
The Netherlands (UTH) (5)........... 44,980 (4,373) (22,405) 13,547 11,174 105,607
Austria............................. 80,388 691 (4,230) 36,762 39,081 96,883
Hungary (Telekabel Hungary) (6)..... 12,572 749 60 4,533 6,074 13,333
Czech Republic...................... 4,043 (4,841) (3,118) (856) 472 -
Romania............................. 1,888 660 276 864 523 -
Slovak Republic..................... 750 (1,392) (1,705) (788) 3,088 -
Non-consolidated companies:
Israel.............................. 140,053 30,682 4,330 77,460 29,161 228,364
Malta............................... 13,618 2,660 848 5,145 9,705 20,975
Hungary (Monor)..................... 16,176 6,652 1,787 10,233 4,489 35,640
The Netherlands (A2000) (2)......... 56,097 (18,142) (29,446) 14,531 51,871 212,110
</TABLE>
(1) Financial data for new acquisitions are included from their effective date
of consolidation.
(2) A2000 includes operations for the twelve months period ended December 31,
1999 and 1998 respectively. Effective September 1, 1999, UPC started to
consolidate A2000. A2000's results of operations, for the twelve month
periods ended December 31, 1999 and 1998, respectively has been included in
the financial data of UPC Nederland.
(3) 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. We believe Adjusted EBITDA helps investors to assess the cash
flow from our operations from period to period and thus to value out
business. Adjusted EBITDA should not, however, be considered a replacement
for net income, cash flow 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. Several of our consolidated
operating companies are restricted by terms of their debt arrangements.
Each company has its own operating expenses and capital expenditure
requirements, which can limit our use of cash. Our representation of
Adjusted EBITDA may not be comparable to statistics with a similar name
reported by other companies. Not all companies and analysts calculate
Adjusted EBITDA in the same manner.
(4) Excludes intercompany debt.
(5) UTH was founded in August 1998. The 1998 financial information in the
tables covers the period from inception through December 31, 1998. In 1999
the name was changed into UPC Nederland.
(6) Telekabel Hungary was founded on June 30, 1998. The 1998 financial
information in the tables covers the period from inception through
December 31, 1998.
(7) UTH's 80% subsidiary offers a carrier select telephony service.
7
<PAGE>
UPC Video Services: Video Distribution and Programming
Video Distribution Overview
We own and operate established cable television systems and are expanding
and upgrading those systems. As of December 31, 1999, our operating systems had
approximately 5.8 million aggregate subscribers to their basic tier video
services, excluding 254,075 subscribers who subscribe for our DTH service in
Poland. Video distribution services accounted for approximately 81.2 % of our
consolidated revenues 1999.
We offer our subscribers some of the most advanced analog video services
available today and a large choice of FM radio programs and plan to further
increase our offerings through an integrated digital set-top box. In addition,
because many of our operations are two-way capable, we have been able to add
more interactive 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.
We plan to continue increasing our 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 and, where possible, migrating popular
commercial channels into an expanded basic tier service. Generally, basic tier
pricing is regulated while the expanded basic tier is not price-regulated. In
addition, we plan to offer subscribers additional choice by offering thematic
groupings of tiered video services in a variety of genres and by increasing the
number and time availability of pay-per-view offerings.
Overview of our UPCtv Programming Business
We have been involved in several country-specific programming ventures
including those dedicated to creating channels for Spain, the Slovak Republic,
Poland, Israel and Malta, as well as programming ventures for Hungary and the
Czech Republic that we have sold. Together, these programming ventures have
developed channels in key genres including sports, children, documentaries and
movies, which are subtitled or dubbed in the local language. We believe that
our programming ventures add value to our video distribution business by
providing compelling content to our subscribers.
We have launched six channels of various genres since May 1999. We plan to
distribute our UPCtv channels to entities that are not affiliated with us and in
countries where we do not currently operate. We have already reached agreement
to distribute one or more of our channels to non-affiliated systems in Germany
(6.0 million subscribers), Sweden (1.3 million subscribers), The Netherlands
(1.5 million subscribers), Romania (0.1 million subscribers) and Turkey (0.1
million subscribers).
In addition to the UPCtv channels created for our own systems, we own:
. 80% of a company that provides Irish general entertainment programming to the
UK market; and
. 50% of another company that produces a movie channel, a documentary channel,
a children's channel and a music channel independently, as well as a history
channel in joint venture with A&E Networks for the Spanish and Portuguese
markets.
As of December 31, 1999, these two companies sold their channels to non-UPC
cable and DTH operators serving an aggregate of approximately 2.8 million
subscribers.
8
<PAGE>
As of December 31, 1999, we owned 13.3% of SBS. In January 2000, we
increased our ownership in SBS to 23.5%. We have recently announced our
intention to offer to acquire the remaining shares of SBS. SBS creates,
acquires, packages and distributes programming and other media content in many
of our territories and elsewhere in Europe via television channels, radio
stations and the Internet. SBS owns and/or operates ten television and 16 radio
stations across ten European countries in addition to various promotional web-
sites. In March 2000, SBS acquired a 33% interest in TVN, one of Poland's
leading television stations.
In March 2000, UPCtv and MTV Networks Europe formed a 50/50 joint venture
partnership which will produce and distribute two new 24-hour music channels
specifically targeted at the Polish marketplace: MTV Polska and VH1 Polska. In
addition, the company will be responsible for creation and distribution of
related MTV and VH1 branded web-sites, and will act as distribution agent in
Poland for MTV Networks Europe's digital portfolio, including M2, MTV Extra, MTV
Base and VH1 Classic. Both MTV Polska and VH1 Polska will be distributed via the
UPC-owned Wizja TV DTH and PTK cable platforms and via other cable operators.
System Upgrade and Digital Distribution Platform
Over the past few years we have been upgrading our cable television systems
to high-speed, two-way capacity. In addition to being able to offer telephone
and Internet/data services, the upgraded network allows us to offer enhanced
video services such as impulse pay-per-view. As of December 31, 1999,
approximately 57% of the network in our Western Europe systems had been
upgraded. We continue to evaluate upgrading our network in our other systems.
We are constructing a satellite-based pan-European digital distribution
platform, which we call Eurohits, that will enable digital distribution of our
new channels and other television signals to our upgraded networks. We are
scheduled to launch our digital distribution platform in the first quarter of
2000. When this digital distribution platform is constructed, we will 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. Near video on demand is
achieved by broadcasting movies as frequently as every 15 minutes, thus enabling
subscribers to choose a movie at a convenient start time. We are negotiating to
acquire rights to broadcast first-run hit movies, adult programming and special
events over this planned digital distribution platform.
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 will enable subscribers to customize their subscriptions for our
products and services to suit their lifestyles and personal interests. When the
planned digital distribution platform is completed, we also intend to provide
our subscribers with customizable programming guides that would enable them to
program their favorite channels and also allow parents to restrict their
children's viewing habits. The construction of the planned digital distribution
platform will involve significant capital investment and the use of new
technologies. We cannot assure you that we will be able to complete the
construction of the digital distribution platform on the planned schedule.
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Competition
In areas where our cable television franchises are exclusive, our operating
companies generally face competition only from DTH satellite service providers
and television broadcasters. We have faced the most competition from DTH
providers in France and Sweden. In those areas where our cable television
franchises are non-exclusive, including France, Sweden and Poland, our operating
companies face competition from other cable television service providers, DTH
satellite service providers and television broadcasters. In the programming
business, we compete with other programming suppliers for sales to systems other
than our own.
UPC Telephone Services: Priority Telecom
We believe that our existing customer base and upgraded network give us a
unique opportunity to provide telephone services in Europe. We offer local
telephone services over our cable network, under the brand name Priority
Telecom, in our Austrian, Dutch, French and Norwegian systems. We also have a
traditional telephone network in Hungary. As of December 31, 1999, we had
192,600 telephone lines in service for our customers offering local,
national and international voice services, as well as Data services to our
business customers.
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 and an
excellent starting point for expanding our competitive local exchange carrier
("CLEC") business within the UPC footprint. Priority Telecom has further
expanded it's Pan-European CLEC network via recent acquisitions of networks
in Spain and Norway.
Market Overview & Positioning
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 in markets that have historically been dominated by
incumbent national operators.
Priority Telecom is positioned as UPC's Pan-European CLEC. This position
will be established via both organic growth and acquisitions. Priority Telecom
will offer telephony services to the residential customers and package voice and
IP Data in the small, medium and large business market.
With a substantial amount of telephone-capable fiber optic cable already
deployed in our Western European systems, we believe that Priority Telecom has
an advantage over other new entrants in the CLEC Market. Currently, Priority
Telecom has broadband, coaxial cable access to approximately 1.7 million homes
and 120,000 businesses in ready-for-telephony service areas, with future access
to approximately 5.8 million residential subscribers in its planned telephone
markets.
Implementation
Network and Equipment. Traditional telephone service is carried over
twisted copper pair in the local loop. The cable telephone technology that we
are using allows telephone traffic to be carried over our upgraded network
without requiring the installation of twisted copper pair. This 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. We have
installed telephone switches in our master telecom center in each of the
countries in which we have launched Priority Telecom. We have supply agreements
from multiple suppliers for the rest of the equipment. In new countries Priority
Telecom will utilise alternative local loop solutions such as DSL, fiber and
wireless to connect the customer premises with the regional and/or national
backbone.
Overview of our Priority Telecom Business
Residential Market. We generally price our Priority Telecom offering in
the residential market at a discount compared to services offered by incumbent
telecommunications operators. Because of the relatively high European local
tariff rates, we believe potential customers will be receptive to our telephone
services at this price. In addition to offering competitive pricing, we offer a
full complement of services to telephone subscribers including custom local
access services, "CLASS," including caller ID, call waiting, call forwarding,
call blocking, distinctive ringing and three-way calling. We are also able to
provide voice mail and second lines. The introduction of number portability in
some of our markets, including The Netherlands, Norway and France, provides an
even greater opportunity as potential customers will be able to subscribe to our
service without having to change their existing telephone numbers.
Business Market. In the business market Priority Telecom offers product
packages of traditional voice telephony and IP Data services to the small and
medium sized business customers. For the large segment, tailor-made solutions
are currently offered in the Netherlands and Priority Telecom aims at marketing
these solutions on a Pan-European scale.
Carrier's Carrier Market. Priority Telecom is building a Carrier's Carrier
business through leveraging the existing AORTA backbone and the cable footprint.
UPC's extensive coverage within the local loop and termination ability creates a
strong competitive advantage for Priority Telecom compared to other wholesale
operators.
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
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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.
We believe the residential and business market sectors represent a
significant business opportunity for Priority Telecom. Simple marketing offers
are being used to encourage rapid take-up by overcoming consumer inertia and
increasing brand awareness of our products. The approach includes, for example,
innovative offers and periodic deep discounts. Large and medium-sized business
customers are marketed through a key account management direct sales force
targeting specific industry sectors.
Interconnection Agreements
Each of our operating companies that offers telephone services has entered
into an interconnection agreement with the incumbent national telecommunications
service provider. In addition, certain of these operating companies have also
entered into interconnection agreements with other telecommunications service
providers, providing alternative routes and additional flexibility. Even though
we have secured interconnection arrangements, we may still experience difficulty
operating under them. In our Amsterdam system, for example, capacity
constraints at the interconnection have lowered the quality of our telephone
service, resulting in a higher rate of customer loss than our system has
experienced before. In Austria, while we secured our interconnection
arrangement with the support of the Austrian telecommunications regulator, the
Austrian incumbent telecommunications operator is challenging the arrangement in
the Austrian courts.
Pan-European Backbone
We are developing a pan-European backbone and telecommunications carrier
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 and to leverage UPC's national
assets to lower the termination cost, and thereby create a strong competitive
cost advantage relative to other carriers. In October 1998, we entered into a
contract with Hermes Europe Railtel for the purchase of high speed fiber optic-
based transmission capacity. The first phase is expected to be in place for
international telephone traffic by the first half of 2000.
Traditional Telephone Systems, New Ventures & Acquisitions
In addition to our cable telephone operations, our Monor system has
offered traditional telephone services since December 1994 and as of December
31, 1999, had approximately 66,825 traditional telephone lines in the Budapest
area.
In December of 1999, Priority Telecom acquired a 50.1% stake in
Munditelecom, a Spanish based voice and data company. Priority Telecom plans to
develop a comprehensive range of voice and data services for the ISP and
business markets. The company recently received a B1 telecommunications
infrastructure license and will be building an advanced IP based network
covering all 52 Spanish points of presence over the next 12 months.
To further the development of Priority Telecom's CLEC business in Norway,
the company has acquired 100% of the equity of El Tele Ostfold and Vestfold. The
Norwegien acquisitions add approximately 300 kilometers of fibre network and 125
business customers to Priority Telecom.
Competition
In the provision of telephone services, Priority Telecom and our operating
companies face competition from the incumbent telecommunications operator in
each country. These operators have substantially more experience in providing
telephone services and have greater resources to devote to the provision of
telephone services. In many countries, our operating companies also face
competition from other new telephone service providers like ourselves, including
traditional wireline providers, other cable telephone providers, wireless
telephone providers and indirect access providers.
UPC Internet/Data Services: High Speed Access and chello broadband
We initially launched our broadband internet business in a few of our
operating systems in September 1997. While we directed the system architecture,
each operating system was responsible for negotiating its own backbone
connectivity, and developing its own caching, content and portal. In March 1998,
we formed chello broadband for the purpose of developing a global broadband
internet operation. chello launched its service in April 1999, and provides
high-speed internet access and local portal and integrated broadband content
to our local operating companies and non affiliated operating companies through
a franchise agreement. Under the franchise agreement chello provides our
affiliates and non affiliated local operators with high speed connectivity,
caching, local language broadband portals, and marketing support for a fee based
upon percentage of subscription an installation revenue. In the future the
franchise agreement further provides that the local operator will receive a
percentage of the revenue from chello e-commerce and advertising. The local
operator is responsible for the local network including the upgrade, management
and maintenance, sales and training, customer support and service, installation
and cost of customer premise equipment. During 1999, substantially all of
chello's revenues were subscription based and derived from our local operating
companies. These intercompany revenues have been eliminated in our consolidated
operating results.
chello broadband is a leading international provider of broadband Internet
services. chello broadband has long-term agreements for the distribution of
Internet services to residential and business customers using cable television,
fixed wireless and satellite infrastructure of local operators, including our
operating companies, covering 14.9 million homes in Europe, Australia, New
Zealand and Latin America. chello broadband currently provides its services
through our operating companies in Austria, Belgium, France, The Netherlands,
Norway and Sweden, and through local operators in Australia and New Zealand,
covering a total of approximately 8.3 million homes. With respect to 2.1 million
of these homes located in Australia and New Zealand, chello's agreement with
Austar United, a subsidiary of United and chello broadband's local operator, is
subject to the approval of Austar's shareholders, who are not affiliated with
us.
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chello broadband launched its services in March 1999 and at December 31,
1999, it had approximately 117,000 residential subscribers, as well as
approximately 3,500 business subscribers. chello broadband was voted Best
European Consumer ISP at the European ISP Awards in December 1999. In each of
its existing markets, chello broadband offers high-speed Internet access and
local language portals that integrate multimedia, locally relevant content and
services specially designed for the broadband environment.
Market
There are significant growth opportunities in the Internet market both
within and beyond Europe, and chello broadband's position as a leading provider
of broadband Internet services in Europe gives us an opportunity to participate
in one of the fastest growing and highest value-added Internet segments.
The use of the Internet in Europe has grown substantially in recent years
and while still less widespread than in the U.S., Internet usage in Europe is
expected to increase and ultimately reach levels similar to those in the United
States. Today, however, the total number of Internet users in Europe is
relatively low.
Operations
chello broadband has been designed to be a leading provider of broadband
Internet services to residential customers and small and medium-sized
businesses. chello broadband has taken a comprehensive approach to broadband
services that encompasses technological versatility and excellence across
platforms, compelling content, customer network support with aggressive
marketing and brand-building.
The table below shows selected information for the countries in which
chello broadband currently offers its services at December 31, 1999:
<TABLE>
<CAPTION>
Country Homes in Homes passed Video Upgraded chello Date of
operator's subscribers homes passed subscribers launch of
area service
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Europe - UPC 5,493,650 4,516,230 3,018,175 2,578,524 117,826 April - June
systems June 1999
- -----------------------------------------------------------------------------------------------------------
Europe - 169,000 100,000 68,000 91,000 1,050 June 1999
non- UPC
systems
- -----------------------------------------------------------------------------------------------------------
Other (1) 2,226,000 2,179,000 398,000 2,180,145 Trials Trials
- -----------------------------------------------------------------------------------------------------------
Total 7,888,650 6,795,230 3,484,175 4,849,669 118,876
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) chello broadband's services in Australia are provided through satellite and
fixed wireless distribution technologies. The flow of Internet data from
customers' homes to the Internet is transmitted via telephone lines. The
number of upgraded homes passed in Australia refers to those homes passed
that are able to upstream Internet data via their telephone lines. As of
December 31, 1999 chello broadband's services in Australia and New Zealand
are being tested with a limited number of users prior to full commercial
launch. All data for Australia and New Zealand is as of December 31, 1999.
chello broadband has agreements to launch its services on our networks in
the Czech Republic, Hungary, Poland, and the Slovak Republic, and on those of
United in Chile. At December 31, 1999, these networks had a total of 6.6
million homes in their service areas, 5.0 million homes passed, of which 355,000
were upgraded, and 2.6 million video subscribers. These agreements are for
homes in addition to those in the table above. At December 31, 1999, chello
broadband's total coverage rights included 14.9 million homes in the local
operators' service areas, and 11.9 million homes passed (of which 5.2 million
were upgraded).
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See "Certain Transactions and Relationships - Relationship with chello
broadband."
chello broadband's agreements with local operating companies cover all the
homes in their territory. Therefore, as local operating companies' networks
expand, other than through acquisitions, chello broadband's exclusive rights to
distribute its services expand as well.
Residential Subscribers. chello broadband offers one of the most
compelling consumer Internet experiences currently available in its markets.
Upon installation, each new subscriber's personal computer is configured for
chello broadband's services, which provides easy access to the chello broadband
portals and the Internet. chello broadband offers residential subscribers the
following significant benefits:
. High-speed access;
. Flat fee;
. User friendly, always-on Internet access;
. Higher quality services; and
. Local language portals with compelling broadband content.
chello broadband has developed nine local language portals with the
objective of making them the leading broadband Internet portals in their
markets. Each of these portals brings together locally relevant content with
broadband content and is managed and supported locally by a chello office.
chello broadband plans to offer an expanding variety of multimedia programming,
e-commerce and services specifically designed to take advantage of the speed and
versatility provided by broadband access. Currently, subscribers are able to
listen to music and watch videos, news, and sporting events at near television-
quality.
Business Subscribers. chello broadband provides basic broadband Internet
access to local area networks, or LANs, designed to support between one and
twenty-five personal computers. This service, called Small LAN Connect,
currently supports over 3,500 businesses.
In addition, chello broadband is conducting trials of its service, called
Remote LAN Connect, in Austria and Norway. This service offers, among other
features, enhanced two-way security, Internet access for an unlimited number of
personal computers and enhanced email.
chello broadband Technology
The main technologies designed to deliver content at high-speed include
cable technologies using cable modems, telephone technologies, such as DSL and
emerging fixed wireless technologies. We intend to offer subscribers a number
of new ways to access chello broadband's services, including through television
via digital set-top boxes. This market represents a significant market
opportunity for us.
chello broadband's technology, network and supporting systems play a
central role in the design and delivery of its services. The primary components
of the network used to deliver chello broadband's services are its network
operations center, its backbone infrastructure named AORTA , its master and
regional data centers and our local operating companies' networks. chello
broadband uses its network operations center to monitor the quality of services.
From this center in Amsterdam, which operates 24 hours per day, 7 days per week,
chello broadband can manage AORTA, regional data centers, regional networks,
headend facilities, servers and other components of the network infrastructure.
AORTA allows Internet traffic to be routed or rerouted if parts of the
network are congested or impaired. The core of AORTA connects Amsterdam,
Stockholm, Vienna, Paris, Brussels and London. In addition, Oslo, New York, San
Jose and Sydney are part of the AORTA network. chello broadband signed a
capacity right of use agreement in August 1999 with GTS for a transatlantic
fiber-optic cable link, which is to operate from London and Paris to New York.
This link is planned to be operational by January 2001. chello broadband's
agreement with GTS is for a minimum of 15 years.
chello broadband's master data center in Amsterdam, as well as its regional
and local data centers, act as service hubs for defined areas ranging from major
metropolitan areas to smaller areas of an individual local operating companies'
networks. They provide key services, including email, chat and news, to
subscribers. They
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also provide a cost-efficient infrastructure to cache and multicast data
throughout a region and store local content and subscribers' web pages.
Competition
In the provision of Internet access, services and online content, chello
broadband faces competition from incumbent telecommunications companies and
other telecommunications operators, other cable-based Internet service
providers, non-cable based Internet service providers and Internet portals. The
Internet services offered by these competitors include both traditional dial-up
Internet services and high-speed access services.
Operating Companies
We have operations in 12 countries in Europe and in Israel. While they all
offer a basic video tier, their other services vary. We are currently upgrading
the network in some countries but not in others.
Western Europe and Israel
Austria: Telekabel Group. 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
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 also offers our Priority Telecom cable telephone services in Vienna.
As of December 31, 1999, approximately 51.9% of the homes passed by
Telekabel Group's network subscribed to its basic cable television services.
Telekabel Group's service includes substantially all of the broadcast channels
from Austria and Germany, as well as other popular channels not available by
broadcast. Telekabel Group also offers subscribers an expanded basic tier of
additional programming as well as an impulse pay-per-view service. The pay-per-
view buy rate has grown to more than two movies per expanded basic tier
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 launched Priority Telecom's cable telephone service in
Vienna on a commercial basis in early 1999. As of December 31, 1999, Telekabel
Group had subscribers for approximately 40,275 telephone lines.
Telekabel Group launched an Internet access service in September 1997 and
the chello broadband service in June 1999. Telekabel Group had approximately
42,125 Internet access subscribers as of December 31, 1999. Telekabel Group in
1999 averaged monthly additions of 2.625 customers for its Internet service.
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.
The cities do not own any interest in our Austrian chello broadband businesses.
In connection with the UPC acquisition in December 1997, the City of Vienna
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
the city and Philips and that were assigned by Philips to us. These agreements
have a term until 2022, with an extension option. We have agreed to indemnify
Philips for any liability under Philips' guarantee. Due to its position as a
guarantor,
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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."
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 United to own Telekabel Wien separately
from us. See "Certain Transactions and Relationships."
Belgium: UPC Belgium. UPC Belgium, our 100% owned subsidiary, provides
cable television and communications services in selected areas of Brussels and
Leuven. We estimate that there are at present approximately 152.000 homes under
license in UPC Belgium's franchise areas.
UPC Belgium, which currently has 82.3% penetration in its franchise areas,
plans to increase revenues through the introduction of new services that
currently are not subject to the price regulations. UPC Belgium offers an
expanded basic tier cable television as well as our chello broadband Internet
access service. As UPC Belgium upgrades additional portions of its network to
full two-way capability, it plans to introduce impulse pay-per-view in Brussels,
which was implemented in Leuven in November 1999. UPC Belgium intends to
provide cable telephone services beginning in the first half of 2001.
As of December 31, 1999, UPC Belgium had approximately 125,050 basic
subscribers and 6,425 expanded basic subscribers. UPC Belgium also distributes
three premium channels, two in Brussels and one in Leuven, which are provided by
Canal+.
UPC Belgium began offering internet access services in September 1997 and
introduced the chello broadband service in early 1999. As of December 31, 1999,
UPC Belgium had 5,325 residential, 1,450 student and 650 business Internet
access subscribers.
France: UPC France. We have been constructing and operating cable
television systems in France since 1996. Since March 1999, UPC France offers
cable telephony and internet services as well. During 1999 we acquired several
additional major cable television systems and UPC France is now one of the
largest cable television providers in France. We currently own 92% of UPC
France. As of December 31, 1999, UPC France's systems held franchises covering
an aggregate of 1,265,800 homes, of which approximately 927,000 homes were
passed by activated network. UPC France had an aggregate of 334,600 basic cable
television subscribers as of the same date. UPC France's major operations are
located in suburban Paris, the Marne-la-Vallee area east of Paris, Lyon and in
other towns and cities throughout France.
On February 23, 2000, we acquired Intercomm France Holding S.A.
("Intercomm"), a cable television operator with about 500,000 homes in its
franchise area, 80,000 which are passed by Intercomm's activated cable network.
The purchase price is Euro36 million plus an 8% interest in our combined French
system.
Mediareseaux, UPC France's initial system, has constructed its network with
technology and capacity to offer integrated video, voice and Internet/data
services. We are upgrading the networks of our recently acquired French systems
to be able to offer these services as well. We expect this upgrade to be
completed in 2002. To further expand our French operations, we are pursuing
potential acquisition opportunities and plan to develop these franchises as one
clustered system offering a full package of video, telephone and Internet/data
services.
Most of our French systems offer various tiers of cable television service.
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 0.5 movies per expanded basic tier subscriber per month.
As we integrate our recent acquisitions and complete upgrading their networks,
we intend to offer similar revenue-generating services in these systems as well.
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In June 1998, Mediareseaux obtained a 15 year telephone and network
operator license for an area that includes 1.5 million homes in the eastern
suburbs of Paris. Mediareseaux began offering telephone services in March 1999
within its cable television franchise area. We are planning to launch cable
telephony services in suburban Lyon and Limoges by the end of the second quarter
of 2000.
Mediareseaux also offers chello broadband's Internet access services via
its cable systems, and is carrying out a trial offering of broadband fixed
wireless local loop service in two towns in the eastern suburbs of Paris under a
temporary license. One of our recently acquired systems began offering
Internet/data services at the end of 1997. We intend to launch chello
broadband's internet access service in our systems in the suburban Lyon and
Limoges area in the second quarter of 2000.
UPC France owns between 100% and 97.5% of each of its systems. As a result
of the Intercomm transaction that closed February 2000, our interest in UPC
France is now 92%.
Germany: PrimaCom. Since December 1999, we have purchased shares totaling
approximately 18.2% of PrimaCom AG ("PrimaCom"), which owns and operates cable
television networks in Germany. As of December 31, 1998, PrimaCom reported
subscribers of approximately 877,150 subscribers. Subsequent to December 31,
1999, we increased our interest in Primacom to 24.9%.
The Netherlands: UPC Nederland. Our Dutch systems, with 1,660,150 homes
passed and 1,517,425 basic teir subscribers as of December 31, 1999, are our
largest group of cable television systems. We have had operations in The
Netherlands since we were formed in 1995, but substantially all of our
operations in The Netherlands have come from acquisitions. Our systems are
located in the regions of Brabant, Flevoland, Friesland and Gelderland, and
include A2000, our 516,000-subscriber system located in Amsterdam.
In August 1999, we won a bid to purchase the municipality-owned cable
television network in Haarlem. We expect the Haarlem acquisition to close during
the second quarter of 2000. As of December 31, 1999, this system passed
approximately 70,000 homes and had approximately 66,000 basic cable television
subscribers. In February 2000, we acquired Tebecai, which operates cable
television networks in the eastern regions of the Netherlands. In March 2000, we
acquired K&T Group, which owns and operates cable networks in Rotterdam,
Dordrecht and the surrounding municipalities. These systems had approximately
588,000 basic tier subscribers and 43,000 serviceable businesses as of December
31, 1999. In addition, K&T Group has a glass fibre network covering
approximately 100 kilometers in The Hague area.
We began upgrading a portion of our Dutch networks in 1997 and we expect
that all of our network in The Netherlands will be fully upgraded by the end of
2000. Due to the large number of current subscribers located in four large
clusters in The Netherlands, we have constructed a fiber backbone to
interconnect these region-wide networks. In addition to cable television
services, UPC Nederland offers Internet and telephone services over its upgraded
network.
As of December 31, 1999, our Dutch systems had average cable television
penetration rates of 91.4%. As a result of this high penetration and the rate
regulation of the basic tier in many of UPC Nederland's franchise areas, we have
focused our efforts on increasing revenue per subscriber in these system through
the introduction of new video, telephone and Internet/data services. Many of
our Dutch systems have offered an expanded basic tier as since late 1996. We
launched impulse pay- per-view services in April 1997 in A2000 and in June 1998
in some of our other Dutch systems.
In April 1999, A2000 and the municipality of Amsterdam reached an agreement
on a large scale introduction of digital set-top boxes and a reduction of the
rate regulated basic cable television package to 15 public channels. This
agreement allows A2000 to migrate a number of popular commercial channels to its
expanded basic tier. During the period preceding the introduction of and
migration of channels to its digital platform, A2000 and the municipality of
Amsterdam have agreed to increasing A2000's current 26 channel basic package to
32 channels with an increase in the monthly subscription fee. Once the digital
set-top boxes are introduced, the price for the rate regulated 15 public channel
basic service will be reduced and the price for the expanded basic tier will
increase over
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time until it becomes unregulated in 2001. The agreement requires A2000 to
provide our integrated digital set- top box to customers requesting the expanded
basic tier. Our set-top boxes will enable these customers to receive our chello
broadband Internet service over a computer or a television. In addition, we will
be able to offer subscribers IP telephone services through our set-top boxes in
the future. We expect the introduction of the digital set-top boxes to occur in
the fourth quarter of 2000. A similar agreement has been reached with the
municipality of Haarlem, where the introduction of digital set-top boxes is
planned in the fourth quarter of 2000.
Our Amsterdam system launched its cable telephone service in July 1997.
UPC Nederland launched Priority Telecom cable telephone service in many other
parts of its network in May 1999. We expect to launch these services in 2000 in
some of our more recently acquired systems. As of December 31, 1999, UPC
Nederland had subscribers for approximately 68,200 telephone lines. In
Amsterdam, where it has offered telephone services the longest, approximately 9%
of the homes serviceable subscribe for telephone services.
Some of our Dutch systems had Internet access services as early as 1997.
We launched chello broadband's Internet/data services in some of UPC Nederland's
systems in early 1999. The media launch of chello broadband services in the
remainder of UTH's service areas took place in June 1999. We have been
migrating all existing Internet customers to the chello broadband service. As
of December 31, 1999, UPC Nederland had 58,500 residential and 1,550 business
Internet/data services customers.
Norway: UPC Norge. UPC Norge is Norway's largest cable television operator
with approximately 42% of the total Norwegian cable television market as of
December 31, 1999. UPC Norge's main network is located in Oslo and its other
systems are located primarily in the southeast and along the southwestern coast.
UPC Norge is upgrading its network to two-way capacity. The upgrade, which
began in 1998, is scheduled to be completed in 2002/2003. During 1999, UPC
Norge began offering subscribers chello broadband service and Priority Telecom's
cable telephone service.
Approximately 70.0% of the homes passed by UPC Norge's systems subscribe to
our cable television service. We currently offer four tiers of video services.
Approximately 32% of UPC Norge's subscribers subscribe for one or more higher
tiers of service. Our goals for UPC Norge's cable television business are to
continue to increase its penetration rate, to improve its revenue per subscriber
generally by providing additional programming and services and to increase
average revenue per subscriber in systems in which expanded basic tiers are more
recent additions.
UPC Norge introduced Priority Telecom's cable telephone service in April
1999 in the upgraded portions of its network. As of December 31, 1999, we had
3,225 telephone subscribers in Norway.
UPC Norge launched an Internet access service in March 1998 and introduced
chello broadband service in June 1999. We have migrated all of UPC Norge's
existing Internet access subscribers to chello broadband. As of December 31,
1999, UPC Norge had 3,250 residential and 3 business chello broadband
subscribers.
Sweden: StjarnTVnatetAB ("Stjarn"). In July 1999, we acquired Stjarn.
Stjarn operates cable television systems servicing the greater Stockholm area
and leases a fiber optic network with 770,000 homes and 30,000 businesses in its
franchise area.
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As of December 31, 1999, Stjarn provided analog television services across
its broadband network to approximately 243,000 paying subscribers out of a total
of approximately 421,600 homes passed. Stjarn currently offers six tiers of
programming. Upon upgrade of its network, it plans to offer additional tiers of
programming.
Stjarn launched Internet services in one area in the City of Stockholm in
April 1999 and introduced chello broadband service in November 1999. As of
December 31, 1999, Stjarn offered high speed Internet services to approximately
167,700 connected homes, of which 5,250 homes had at that date subscribed.
Stjarn leases the fiber optic cables it uses to link to its main headend
under agreements with Stokab, a city-controlled entity with exclusive rights to
lay ducts for cables for communications or broadcast services in the City of
Stockholm. The main part of the leased ducting and fiber optic cables is
covered by an agreement which expires in January 2019. Additional fibers are
leased under several short-term agreements, most of which have three year terms
but some of which have ten year terms.
Israel: Tevel Israel International Communications Ltd. 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. In April 1998,
Tevel acquired 100% of Gvanim Cable Television Ltd. and has since fully
integrated Gvanim's operations with its own. The Gvanim acquisition increased
franchise area coverage to approximately 40% of the total homes in Israel. We
currently own 46.6% of Tevel.
Tevel is upgrading all of its systems to be able to provide additional
cable television services, as well as cable telephone and Internet/data
services. Should liberalization occur, Tevel may consider launching its own
telephone and Internet/data services. See "Regulation-Israel."
Tevel offers basic subscribers approximately 40 channels of programming,
including a wide range of entertainment, news, sports, performing arts and
educational channels. Five pay-per-view channels are also available in all of
Tevel's areas other than the Gvanim franchise areas. Currently, over [30%] of
Tevel's subscribers purchase at least one pay-per-view offering per month.
Tevel has applied for a license to provide pay-per-view services in Gvanim's
franchise areas. The Israeli Communications Ministry has indicated that it
intends to change a number of terms of Tevel's pay-per-view license, and has
offered Gvanim a pay-per-view license on terms incorporating these changes.
Tevel is opposed to these term changes and is negotiating with the
Communications Ministry over the terms of the extension of its pay-per-view
license and Gvanim's pay-per-view license. Tevel's current pay-per-view license
has been extended until March 2000.
In addition to its cable operations, Tevel owns 50% of Globkol
Communications Ltd. ("Globkol"), a telecommunications equipment company that
designs, installs and maintains switching systems for businesses. As of December
31, 1999, Globkol served approximately 1,350 sites with a total of approximately
98,900 outlets. Tevel also owns 45% of Netvision, one of Israel's leading
Internet service providers and has the right to increase its interest to 50%.
Tevel, Gvanim and the other Israeli cable television operators own a
programming company, ICP Israel Cable Programming Company Limited, that supplies
much of their programming. ICP is considered a "restrictive arrangement" under
Israeli Restrictive Trade Practices law and is regulated by an arrangement that
was to expire in June 1999. The arrangement has been extended temporarily until
February 1, 2000. See "Regulation--Israel."
In November 1999, Tevel agreed to acquire 35% of Golden Channels, an
Israeli system with approximately 330,000 subscribers as of November, 1999.
This acquisition is subject to regulatory approvals and there is no assurance
this acquisition will close. In December 1999, Tevel and the other cable
operators in Israel filed an application with the Israeli courts for the merger
of all of the companies. We are not certain whether we will consent to such
merger or, even if we do consent, whether this merger will be consummated.
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We indirectly own 46.6% of Tevel. An Israeli corporation owned by DIC
Communication and Technology Ltd. and PEC Israel Economic Corporation, which we
call the "Discount Group," owns 48.4% of Tevel and a private Israeli investor
holds the remaining 5% of Tevel.
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 shareholder's 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. If a third party sale
does not occur within six months, 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. We and the Discount Group
have agreed not to exercise this forced buyout 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--Debt Facilities."
Central and Eastern Europe
Czech Republic: KabelNet and Kabel Plus. KabelNet, our Czech Republic
subsidiary, provides cable and "wireless" cable television services in the
cities of Prague and Brno, the Czech Republic's second largest city. In October
1999, we acquired 94.6% of Kabel Plus, the leading provider of cable television
services in the Czech Republic. Combined, these systems passed about 736,450
homes and served about 374,325 television subscribers in the Czech Republic as
of December 31, 1999. Approximately 12% of these are served by our wireless
MMDS network.
We offer a number of tiers of programming services in the Czech Republic.
We have no current plans to launch telephone or Internet/data services in our
Czech systems.
Hungary: UPC Magyarorszag. We have owned and operated systems in Hungary
for nearly a decade. In June 1998, we combined our Hungarian operations with
Kabeltel, Hungary's second largest operator of cable television systems,
creating Telekabel Hungary, in which we retain a 79.25% interest. Telekabel
Hungary's operating system, UPC Magyarorszag, passed about 655,250 homes and
served about 518,550 television subscribers as of December 31, 1999.
We are rebuilding our Budapest network to be able to provide new services.
As of December 31,1999, approximately 68,970 homes were already served by the
rebuilt network. Approximately 75.0% of all subscribers passed by our upgraded
network subscribe to our expanded basic tier package.
In March 2000, we acquired the remaining 20.75% of the ordinary share
capital of Telekabel Hungary which we did not already own.
Hungary: Monor. Monor, one of our Hungarian operating companies, has
offered traditional telephone services since December 1994. Monor has the
exclusive, local-loop telephone concession for the region of Monor, Hungary with
a term through 2002. Monor has 85,000 homes in its franchise area. We have an
economic ownership interest in Monor of approximately 97.14% and a voting
interest of slightly less than 75%.
Poland: @Entertainment, Inc. In August 1999 we acquired @Entertainment,
which owns and operates the largest cable television system in Poland.
@Entertainment's cable subscribers are located in regional clusters encompassing
eight of the ten largest cities in Poland. @Entertainment expanded its
distribution capacity with the launch of its DTH broadcasting service for
Poland, targeted at homes outside of its cable network coverage area.
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As of December 31, 1999, we had 1,023,800 traditional cable subscribers and
254,075 D-DTH subscribers. D-DTH subscribers receive Wizja TV, our multi-channel
Polish-language DTH service, the first such service available in Poland. We
are also trying to sell Wizja-TV programming to third party cable systems in
Poland.
The portions of @Entertainment's cable television networks currently being
constructed are being constructed with the flexibility and capacity to be cost-
effectively reconfigured to offer an array of interactive and integrated
entertainment, telecommunications and information services. We intend to
upgrade selected portions of @Entertainment existing cable to meet similar
standards. The Company has applied for the data licence for the territory of
Poland and plans to start providing internet services during year 2000.
@Entertainment has been able to avoid constructing its own underground
conduits in certain areas by entering into a series of agreements with TPSA (the
Polish national telephone company) which permit @Entertainment to use TPSA's
infrastructure for an indefinite period or for fixed periods up to 20 years.
Over 80% of @Entertainment's cable television plant has been constructed using
pre-existing conduits from TPSA. A substantial portion of these contracts to
use TPSA conduit permits termination by TPSA without penalty upon breaches of
specified regulations. Any termination by TPSA of such contracts could result
in @Entertainment losing its permits, the termination of agreements with co-op
authorities and programmers, and an inability to service customers with respect
to the areas where its networks utilize the conduits that were the subject of
such TPSA contracts. In addition, some conduit agreements with TPSA provide
that cables can be installed in the conduits only for the use of cable
television. If @Entertainment uses the cables for a purpose other than cable
television, such as data transmission, telephone, or Internet access, such use
could be considered a violation of the terms of certain conduit agreements,
unless this use is expressly authorized by TPSA. There is no guarantee that
TPSA would give its approval to permit other uses of the conduits.
@Entertainment's DTH service is encoded and transmitted, or "uplinked,"
from its Maidstone, U.K. facility to geosynchronous satellites that receive,
convert and amplify the digital signals and retransmit them to earth in a manner
that allows individual subscribers to receive and be billed for the particular
programming services to which they subscribe. @Entertainment has an eight-year
contract with British Telecommunications for the provision and maintenance of
its uplink equipment at Maidstone. @Entertainment leases transponders on Astra
satellites 1E and 1F.
@Entertainment offers cable subscribers two tiers of service. Some areas
are offered a package of up to 70 channels. @Entertainment's DTH subscribers
currently receive @Entertainment's Wizja TV programming, which consists of
approximately 25 channels. For an additional monthly charge, certain of the
Company's cable networks currently offer two premium television services - the
HBO Poland service (a Polish-language premium movie channel owned in part by
Home Box Office) and, since September 18, 1999, Wizja Sport, a Polish-language
premium sport channel -to customers on a monthly basis in certain Company's
cable systems. The Company plans to create additional pay-per-view channels that
will also be offered to cable customers for an additional charge.
Romania. We are currently involved in the operation of seven cable
companies in Romania. 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. Our Romanian systems offer subscribers two of three
different tiers of programming. We currently have plans to launch telephone or
Internet/data services in the Romanian systems.
We recently entered into a joint venture with the owners of two Romanian
cable television companies (collectively, "AST") to which our and AST's Romanian
assets were contributed. We hold a 70% interest in the joint venture and the
former owners of AST hold the remaining 30%. Together, the joint ventures
systems have more than 250,000 subscribers.
Slovak Republic: UPC Slovensko s.r.o. We entered the Slovak market in 1995
and in June, 1999 we completed the acquisition of additional cable systems in
Bratislava, the capital of the Slovak Republic, and several other cities. This
acquisition made us the largest cable operator in the Slovak Republic. We offer
subscribers three
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tiers of cable television service. We plan to introduce internet services in
Bratislava in 2000 and in other Slovak cities by 2003. We intend to introduce
telephone services in all systems by early 2003.
Other Systems
Malta: Melita. Melita, of which we own 50%, operates an exclusive
franchise network in Malta. Melita currently offers general cable television
services and is upgrading its system to be able to provide Internet access and
other enhanced services. Pending litigation and recent legislation may,
however, affect our ability to offer Internet/data services in Malta.
We currently own 50% of Melita. Melita Cable Holdings owns the remaining
50%.
New Businesses
UPC Wireless Services: Priority Wireless
In July of 1999, we created a new wireless subsidiary, which we have
branded Priority Wireless. Priority Wireless' purpose is to exploit pending
wireless opportunities across Europe as a means of distributing UPC products
via wireless technology. During the first half of 1999, we conducted two trials,
which confirmed that "wireless local loop" ("WLL") technology is an effective
access medium for delivering telephony and Internet/data services. The trials
were conducted in France and the Netherlands.
In 1998, Priority Wireless obtained a 3.5 GHz national WLL license in
Norway and after the 1999 trial launched commercial services in Oslo, Norway in
January 2000. In March 2000, UPC acquired 26 GHz spectrum in Norway as a result
of the acquisition of ElTele Ostfold and ElTele Vestfold. In March 2000, UPC was
awarded a national 3.5 GHz license in Spain were it is part of a consortium
called ALO' 2000. The consortium partners include RSL Com LTD, Dragados SA, and
Hidroelectrica Del Cantabrico SA. Also in March 2000, in an auction, UPC won a
national 3.5 GHz license in Switzerland and regional 26 GHz licenses in Geneva
and Zurich. There are additional regional 26 GHz auctions occurring in
Switzerland through April 2000. UPC has submitted applications for spectrum in
France and Finland and is registered to participate in the WLL auction in
Austria, starting April 10, 2000. Throughout the next 18 months additional WLL
spectrum is being offered. UPC plans to participate in these offerings as they
unfold.
UPC, through Priority Wireless, is exploring opportunities in mobile
telephony, including 3rd Generation/Universal Mobile Telephone System
("3G/UMTS") and Mobile Virtual Network Operator ("MVNO").
E-Ventures Fund
UPC, together with chello broadband and United, announced their intention
in March 2000, to form an E-ventures fund. The venture will be funded equally by
the three parties and will source investment ideas primarily from the Internet
and advanced technology sectors from the United/UPC global network. UPC intends
to contribute its investment in Sorrento Networks Inc. of USD16.5 million as
the first key investment in the fund. In March 2000, UPC invested in Sorrento
Series A Convertible Preferred Stock, with the UPC investment representing 33%
of the Convertible Preferred Stock sold by Sorrento. Based in California,
Sorrento Networks is a subsidiary of Osicom Technologies Inc., a NASDAQ traded
company. Sorrento is a developer of metro optical networking systems used in
both the interoffice and access networks. The company's systems offer an all-
optical end-to-end solution that improves bandwidth utilisation, reduces network
costs and complexity and provides a scalable, efficient and dynamically
manageable platform to meet rapidly growing and changing bandwidth demands.
Central Europe DTH
During the first quarter of 2000, we began an initiative to leverage off of
our Polish DTH and programming businesses to other countries in Central Europe,
including the Czech Republic, Slovakia and Hungary. We believe there is a
significant demand for multi-channel television in these markets, which is not
being met by cable television. Further, we believe that we can obtain operating
efficiencies by leveraging off of our Polish DTH personnel, facilities and
satellite distribution assets. We have budgeted approximately 62.0 million in
2000 for development and the launching of this business which is expected in the
fourth quarter of 2000.
SBS Tender Offer
We own approximately 23.5% of the outstanding stock of SBS. On March 9,
2000 we announced our intention to commence a tender offer to acquire all the
shares of SBS that we do not already own. SBS owns and operates television and
radio broadcasting stations in Scandinavia and other European markets. SBS
currently owns and operates television stations that broadcast into Norway,
Sweden, Denmark, Flemish Belgium and the Netherlands, and together with two
European partners, operates the first national private television network in
Hungary. Additionally, SBS owns a minority interest in a national television
network in Italy, operates a television station in Slovenia under the terms of a
management and funding agreement and owns 50% of a Swiss company which in March
1999 was awarded a national terrestrial broadcasting license to broadcast in
Switzerland. SBS also owns and operates radio stations, which broadcast in
Denmark, Sweden and Finland.
The supervisory boards of both companies have approved the transaction. We
have agreed to initiate an exchange offer to acquire SBS's shares at a per share
price of USD40 in cash plus 0.57144 of a share of our ordinary shares A, subject
to adjustment. We will adjust the stock portion of the purchase price under
certain circumstances so that SBS shareholders will receive not less than
USD77.50 and not more than USD86.00 for each SBS share exchanged, based on our
average closing share price prevailing on the trading days ending shortly prior
to making the exchange offer. We intend that all shares not purchased in the
exchange offer will be converted into the right to receive the same cash and
stock consideration as provided in the exchange offer, in a second step
transaction following consummation of the exchange offer. This transaction is
subject to a number of conditions, including regulatory approval.
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Other Information
Employees
As of December 31, 1999, we, together with our consolidated subsidiaries,
had approximately 6,631 employees. Certain of our operating subsidiaries,
including our Austrian, Dutch and Norwegian systems, are parties to collective
bargaining agreements with some of their respective employees. We believe that
our relations with our employees are generally good.
Regulation
The provision of video, telephone, Internet/data and broadcasting networks
and services in the countries in which we operate is regulated. 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 ("EU"). Adverse regulatory developments could
subject us to a number of risks. These regulations could limit our growth plans,
limit our revenues, and limit the number and types of services we offer in
different markets. In addition, regulation may impose certain obligations on our
systems that subject them to competitive pressure, including pricing
restrictions, interconnection obligations and open-network provision
obligations. Failure to comply with current or future regulation could expose us
to various penalties.
Set forth below is an overview of the types of regulation that affects our
video, telephone and Internet/data services as well as a summary of the
regulatory environment in the EU and the countries in which we operate our major
systems.
Video Services
--------------
In the provision of video services, our operating companies are generally
required to either obtain licenses or permits from or notify or register with
the relevant regulatory authorities. In some countries, including France and
Israel, we pay annual franchise fees, based on the amount of our revenues.
In most countries where we operate, we are required to transmit to
subscribers certain "must carry" channels, which generally consist of public
national and local channels. Certain countries have adopted additional
programming requirements, for example, in the Netherlands and Israel. In The
Netherlands, applicable statutes require cable operators to transmit at least 15
television channels, including "must carry" channels, to all subscribers and,
pursuant to agreements with certain municipalities, we are obligated to transmit
between 20 and 30 channels in our basic tier. In Israel, cable television
providers must obtain an authorization from the regulatory authority to add or
remove channels from their cable programming offerings and must spend at least
15 percent of their programming expenses on local programming.
The regulatory authorities in many countries where we operate also impose
pricing restrictions. Generally, basic tier price increases must be approved by
the relevant local or national authority. In certain countries, price
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increases will only be approved if the increase is justified by an increase in
costs associated with providing the service or if the increase is less than or
equal to the increase in the consumer price index.
Telephone
The liberalization of the telecommunications market in much of Europe
allowed new entrants like us to enter the telephone services market. The
regulatory situation in some markets in which we operate, including the Czech
Republic, Israel and Romania, currently precludes us from offering telephone
service. Generally, our operating companies are required to obtain licenses to
offer telephone services, although, for example, in Norway, providers without
significant market power need only register with the appropriate regulatory
authority. Our operating companies have, to date, not been subject to telephone
rate regulation but would become subject to such regulation in a number of
jurisdictions upon becoming a significant market power. In Austria, although not
subject to rate regulation, we must notify the regulatory authority of our
tariff structure and any subsequent price increases.
Incumbent telephone providers in each EU market are required to offer new
entrants into the telephone market interconnection with their networks.
Interconnection must be offered on a non-discriminatory basis and in accordance
with certain principles set forth in the relevant EU directive, including cost-
based pricing. In some countries, including Austria, the Netherlands and Norway,
we have had to seek the intervention of the regulatory authority in
interconnection agreement negotiations with the incumbent operators. Following
regulatory intervention in Austria, the incumbent operator brought an action in
the Austrian courts seeking to revise certain terms of its interconnection
agreements with a number of other telephone service providers. This action is
still pending before the Austrian Supreme Administrative Court.
Internet/Data
-------------
Our chello broadband subsidiary and most of our operating companies must
comply with both EU regulation and with relevant domestic law in the provision
of Internet access services and on-line content. In several countries,
including Norway and Hungary, the provision of Internet/data services does not
require any sort of license or notification to a regulatory body. Other
countries, including Austria, Belgium and The Netherlands, require that
providers of these services register with or notify the relevant regulatory
authority of the services they provide and, in some cases, the prices charged to
subscribers for such services. Our operating companies that provide Internet
services must comply with both Internet-specific and general legislation
concerning data protection, content provider liability and electronic commerce.
As regulation in this area develops, it will likely have a significant impact on
the provision of Internet services by our operating companies.
Broadcasting
In addition to national laws which implement the EU directives on
broadcasting, various other types of national broadcasting regulations apply to
SBS and @Entertainment's Wizja TV. Over-the-air, terrestrial television and
radio broadcasters operate pursuant to licenses granted by national or local
regulatory authorities that allow use of certain radio frequencies in a
specified geographic area, generally for a limited duration which can be
renewed. Broadcasters operate subject to various regulatory conditions, such as
limitations on advertising, program content and ownership.
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Competition Law and Other Matters
EU directives and national consumer protection and competition laws in our
Western European and certain other 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.
European Union
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United
Kingdom 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. 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. The
Czech Republic, Hungary, Malta, Poland, Romania and the Slovak Republic, which
are in the process of negotiations of their membership into the EU, started
adjusting their regulatory system to EU requirements. As a result, most of the
markets in which we operate or have pending acquisitions have been significantly
affected by regulation initiated at the EU level.
On November 10, 1999 the European Commission released a report proposing
new EU policies for telecommunications regulation and requested comments on its
proposals. The proposed regulatory framework would attempt, among other things,
to decrease national variations in regulations and licensing systems and further
increase market competition. These policies would seek to harmonize licensing
procedures, reduce administrative fees, ease access and interconnection, and
reduce the regulatory burden for telecommunications companies. The European
Commission is also proposing to use competition laws rather than regulation to
prevent dominant carriers from abusing their market power. The European
Commission is proposing that communications networks and services be assigned by
general authorizations (with specific authorizations for assignment of radio
spectrum), and that the EU harmonize spectrum allocation and spectrum policy
decisions. The proposals include facilitating transfers of radio spectrum.
Video Services
Conditional Access. EU member states 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. Generally, broadcasts emanating from and intended for
reception within a country have to respect the laws of that country. EU
member states are required to allow broadcast signals of broadcasters in other
member states to be freely transmitted within their territory so long as the
broadcaster complies with the law of the originating member state. An EU
directive also establishes quotas for the transmission of European-produced
programming and programs made by European producers who are independent of
broadcasters.
Another major EU directive for broadcasting, requires member states to
permit a satellite broadcaster to obtain the necessary copyright license for its
programs in just one country (generally, the country in which the broadcaster is
established), rather than obtaining copyright licenses in each country in which
the broadcast is received.
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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. Liberalization measures have been adopted
under the EU Treaty's competition rules and harmonization measures based on the
principle that special and exclusive rights should be abolished and that public
telecommunications networks have to be made accessible on the basis of
objective, transparent, public and non-discriminatory conditions. Many measures
apply only to providers of public telecommunications networks or services having
significant market power in a particular market. The exclusive rights of
incumbent operators in the EU to provide telecommunications services were
gradually removed so that competing operators and service providers would be
entitled to offer all telecommunications services other than public voice
telephone. The incumbent telecommunications 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 a
directive that required member states to remove existing restrictions on the use
of cable television networks to provide telecommunications services. As a result
of these directives, 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, subject to
obtaining the necessary licenses and authorizations.
EU telecommunications operators that have exclusive rights to provide cable
television network infrastructure in a given area and achieve an annual turnover
in the relevant telecommunications market of more than Euro50 million must
account separately for their telecommunications services and any cable
television services. In The Netherlands and Belgium, 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.
In June 1999, the European Commission adopted a directive requiring member
states to enact legislation directing certain telecommunications operators to
separate their cable television and telecommunications operations into distinct
legal entities. This directive is intended to aid the development of the cable
television sector and to encourage competition and innovation in local
telecommunications and high speed Internet access. The directive includes
competition safeguards to deter anticompetitive cross-subsidies or
discrimination by incumbent telecommunications operators as they enter into
cable television or broadband services.
Interconnection. An EU directive sets forth the general framework for
interconnection, including general obligations for telecommunications operators
to allow interconnection with their networks. The directive requires member
states to impose obligations on public telecommunications network operators to
negotiate interconnection agreements on a non-discriminatory basis. Public
telecommunications network operators with significant market power (which,
although it may vary, is generally presumed when an operator has 25% or more of
the relevant market) are subject to additional obligations. They must offer
interconnection without discriminating between operators that offer similar
services, and their interconnection charges must follow the principles of
transparency and be based on the actual cost of providing the interconnection
and carriage of telephone traffic. The directive also contains provisions on
collocation of facilities, number portability with certain exceptions,
supplementary charges to contribute to the costs of universal service
obligations and other interconnection standards. 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 reasonable terms in order to provide their
services.
Licensing. EU member states are required to adopt national legislation so
that providers of telecommunications services generally 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 and procedures must be objective, transparent and non-
discriminatory. Member states may issue individual licenses in certain
situations. For example, the provision of public voice telephone services and
the establishment or provision of public telecommunication networks may be
subject to individual licenses. In addition,
25
<PAGE>
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. License fees can only include
administrative costs except in the case of scarce resources where additional
fees are allowed.
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.
Austria
Video Services. The city of Vienna's approval is required for changes in
subscriber rates for basic tier service.
Telephone Services. 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. These licenses
are granted for an unlimited period of time.
In November 1998, Telekabel Wien entered into an interconnection agreement
with TA, the incumbent operator. Difficulty and delay in negotiations and
agreement led Telekabel Wien to seek the intervention of the Austrian
telecommunications regulator, which determined the principal terms of the
agreement. TA brought an action in the Austrian courts against some of the
major carriers to revise the terms of the interconnection arrangement. The
Supreme Constitutional Court ruled in March 1999 that the TA's constitutionally
guaranteed rights were not infringed. However, the court left open the issue of
whether the decree issued by the telecommunications regulator was otherwise
lawfully issued. The case is now pending before the Austrian Supreme
Administrative Court.
Recently, the TA brought an action before the Austrian Supreme
Administrative Court against a decision of the telecommunications regulator,
which determined the principal terms of granting Telekabel Wien direct access to
telephone customers. If the court decides in favor of TA, the telecommunications
regulator will have to make a new decision and lay down new conditions for the
direct access to the telephone customers. This may also lead to the payment of
additional costs by Telekabel Wien for the direct access, even for past periods.
Although there are no voice telephone pricing regulations currently
applicable to Telekabel Wien, the Telekom Control Commission must be notified of
the tariff structure and any subsequent rate increases. In addition, if
Telekabel Wien 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.
Belgium
Video Services. A cable operator needs to obtain a governmental
authorization from the appropriate regional authorities to operate a cable
television system. 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. Cable television operators are
required to transmit particular local, national and other channels as part of
their basic tier.
Telephone Services. UPC Belgium holds a permanent license to build and
operate a public telecommunications network and a license to offer voice
services.
26
<PAGE>
France
Video Services. Cable television operators must obtain licenses granted by
the Conseil Superieur de l'Audiovisuel and must also enter into agreements with
local authorities covering public service delegation and/or public domain
occupancy. Some of UPC France's agreements with local authorities require the
local authorities' approval for a change of basic rates. Cable television
operators are required to transmit particular channels as part of their basic
tier service. Various other national laws also restrict the content of
programming distributed by cable television operators.
Telephone Services. Mediareseaux holds licenses granted by the Minister of
Telecommunications for a public telecommunications network and voice telephony
services in three French departments in the Paris region. Mediareseaux has
applied for a nation-wide license. Mediareseaux was granted temporary licenses
in December 1998 and April 1999 to conduct experimental business in the field of
wireless local loop in the Champs sur Marne area. UPC France's other operating
companies do not hold any telecommunications licenses.
The Netherlands
Video Services. Operators in The Netherlands do not require a license for
the installation, maintenance or operation of a cable network. Network
operators need only register with the Dutch Independent Post and
Telecommunications Authority ("OPTA"). Cable television network providers must
transmit to all 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. Our Dutch operating companies often purchased their cable
television networks from the local municipalities. Pursuant to the terms of the
agreements with the municipalities, the Dutch operating companies were obligated
to continue to provide basic tier services of between 20 and 30 television
channels, including the 15 required under the media laws.
In April 1999, A2000 and the municipality of Amsterdam reached an agreement
on a large-scale introduction of digital decoders and a reduction of the basic
cable television package to 15 channels. The agreement allows A2000 to migrate a
number of popular commercial channels to its expanded basic tier. Once the
digital decoders are introduced the price for the rate regulated 15 public
channel basic fee will be reduced and the price for the expanded basic tier will
increase over time until it becomes unregulated in 2001. The agreement will
initially affect approximately 390,000 customers in the greater Amsterdam area.
Negotiations with the remaining municipalities are in process.
Telephone Services. Until recently, the fixed telecommunications
infrastructure was a statutory monopoly of KPN. Cable television networks may
now be used for the provision of all telecommunications services. Number
portability was introduced in The Netherlands in 1999.
UPC Netherlands has entered into a total of three interconnection
agreements with KPN, WorldCom and Enertel networks. In a decision of November
29, 1999, OPTA ruled that the temporary tariffs (based on KPN's expected costs)
that KPN can charge for interconnection for the period between July 1, 1999 and
July 1, 2000 will be higher than the temporary tariffs that KPN was allowed to
charge for the previous period. The costs for Priority Telecom for
interconnection with KPN are therefore likely to rise. In its decision of
December 16, 1999, OPTA ruled that the temporary interconnection tariffs that it
set for the period of July 1, 1998 to July 1, 1999 will not be corrected
pursuant to calculations based upon KPN's actual costs over that period.
OPTA has therefore decided to consider these temporary interconnection tariffs
as the definitive tariffs (although on the basis of the calculation that OPTA
made, the tariffs for this period should be higher, it decided not to allow a
raise since that would have a negative effect on the position of new entrants in
the market). In the event that this decision of OPTA is challenged and the
definitive tariffs are consequently determined on the basis of KPN's actual
costs as calculated by OPTA, Priority Telecom may have to reimburse KPN on the
basis of the difference between the temporary and the definitive tariff.
27
<PAGE>
While Priority Telecom's telephone service is not currently subject to
price regulation, the prices of its competitor, KPN, are. OPTA indicated that
during 1999 KPN should reduce its end-user tariffs in accordance with principles
of cost orientation as set forth by OPTA. The fact that KPN's end-user tariffs
for all of its basic telephone services (with the exception of international
calls but including ISDN) must be cost orientated may have a negative effect on
Priority Telecom's ability to compete.
Norway
Video Services. 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. 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. UPC
Norge obtained in 1998 a three-year programming license to offer pay- per-view
programming and some other services. At the expiration of this license, we
expect to renew the license or to have authorization to engage in such
activities without a license.
Telephone Services. For telephone operators and service providers without
significant market power, as is currently the case with UPC Norge, no license is
required to offer voice telephone services. Such providers need only register
with the Norwegian Post and Telecommunications Authority.
UPC Norge has entered into an interconnection agreement with Telenor.
Mediation proceedings before the Norwegian Post and Telecommunications Authority
between UPC Norge and Telenor concluded in July 1999. The mediation related to
certain changes UPC Norge that wished to make to its current interconnection
agreement with Telenor. As a result of the mediation an amendment protocol was
added to the interconnection agreement. According to this amendment protocol,
UPC Norge and Telenor have agreed that the current interconnection agreement
will remain in force until a new interconnection agreement has been negotiated.
Negotiation of the new interconnection agreement commenced in September 1999.
Sweden
Video Services. Apart from certain limited rules governing program
content, the Swedish cable television industry is fully deregulated. No license
is required to operate cable television services in Sweden. Cable television
operators are presently required to transmit three or four "must carry"
channels.
Telephone Services. Stjarn has a license to provide telephone services to
a fixed termination point and has entered into an interconnection agreement with
Telia, the Swedish incumbant telephone provider.
Israel
Video Services. 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 beginning towards
the end of 2000. We expect that these reforms will include opening the multi-
channel television business to competition by granting licenses to direct to
home satellite 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, the regulatory authorities may eliminate franchise exclusivity and
permit other operators to apply for cable television licenses to compete in the
cable television market.
Pursuant to its franchise agreements, Tevel must provide within its basic
tier five tape-delivered channels subtitled in Hebrew. Tevel and other Israeli
cable operators own a company that supplies this programming. This ownership is
considered a "restrictive arrangement" under Israeli competition law and is
regulated by the Restrictive Trade Practices Tribunal. These cable operators
have received various challenges on these arrangements from competitors and the
tribunal is considering actions against these arrangements.
28
<PAGE>
Cable operators must obtain authorization to add or remove channels from
their service from the Ministry of Communications. Tevel currently is required
to provide three "must-carry" off-air channels. Its current arrangement
currently prohibits "tiering" of video services. The Communications Ministry
made a preliminary determination approving "tiering" of cable television
services upon the earlier of DTH satellite service providers achieving 250,000
subscribers (approximately 100,000 subscribers from the Tevel franchise areas)
or a period of 9 months from the first day of commercial broadcast of DTH
service. If adopted, the ministry's determination further provides that cable
television operators must sell certain previously exclusive channels to DTH
providers prior to the introduction of tiering.
Restrictive Trade Practices Matters. On November 8, 1999, the Restrictive
Trade Practices Tribunal announced its determination that all Israeli cable
television operating companies, including Tevel and Gvanim, were monopolies in
their respective franchise areas in the field of supplying multi-channel pay
television. Tevel and Gvanim intend to contest this declaration, and they
believe the other cable television operators will do likewise. The declaration
would subject Tevel to the provisions of the Israel Anti-trust law applicable to
monopolies. In addition, the Commissioner announced that he is considering (i)
declaring Tevel and Gvanim monopolies in the fields of wide-band infrastructure
in their respective franchise areas and (ii) declaring all of the cable
companies monopolies in the field of content purchased for multi-channel
television use.
On November 30, 1999, Tevel was notified by the Restrictive Trade Practices
Authority of the Authority's anti-trust investigation in connection with Tevel's
provision of multi-channel television services to hotels and kibbutzim within
its franchise areas.
Telephone Services. As part of the proposed liberalization of the
telecommunications market, Tevel and Gvanim expect to be permitted to provide
Internet/data and voice telephone services in their franchise areas, and to
interconnect with Bezeq on non-discriminatory terms with cost-based rates.
There may be limits on a cable television system's ownership, operation or
marketing with a provider of telecommunications services.
Czech Republic
Video Services. Cable television operators in the Czech Republic must
obtain permits to establish and operate cable television networks. In addition,
cable television operators must either obtain a license to broadcast television
programming over the network or register to distribute television programming
over the network, depending on the services provided and distribution
technologies used.
Telephone. In the Czech Republic, SPT TELECOM currently has exclusive
rights for the provision of international and long-distance services, including
local telephone services outside of delineated local networks. The
liberalization of the telephone market in the Czech Republic is expected to
begin on January 1, 2001, with full liberalization in place by December 31,
2002.
Hungary
Video Services. Cable operators in Hungary are not granted exclusive
franchises; however, all cable operators must be properly registered with the
appropriate government agency and must meet certain technical licensing
requirements. Cable operators are required to carry certain "must carry"
channels in their basic tier. A single cable operator may not provide service
to homes exceeding in the aggregate one-sixth of the Hungarian population.
Hungarian regulatory authorities are currently investigating whether Telekabel
Hungary is in compliance with this rule. We expect the investigation to be
concluded by early 2000.
Telephone Services. MATAV and other local telephony providers, including
Monor, have a monopoly in local voice telephony services in their respective
service areas until 2002. Recent legislation restricts MATAV and other local
telephony providers, including Monor, from acquiring additional cable assets.
Poland
Video Services. Cable television operators in Poland are required to
obtain permits to install and operate cable television systems and must register
certain programming that they transmit over their networks.
29
<PAGE>
@Entertainment's subsidiaries have registered most of the programming that they
transmit on their cable networks, except programming transmitted on networks for
which they do not have permits.
Most of the Wizja proprietary channels and all channels on the Wizja
platform are currently licensed in the United Kingdom by the Independent
Television Commission as satellite television services. As such, they are then
retransmitted under the European Convention on Transfrontier Broadcasting to
Poland and then distributed via cable and DTH in Poland. As its regulatory
regime develops, Poland may seek to regulate the reception of DTH signals.
Poland's regulatory environment is undergoing constant change. A new draft
Telecommunications Law is currently under discussion in the Polish Parliament.
We do not know how such change will impact our business.
Telephone Services. @Entertainment will be required to obtain additional
permits from the Minister of Communications to offer other telecommunications
services such as Internet access or broadband transmission services.
Foreign Ownership Restrictions. Cable television permits may only be
issued to and held by Polish citizens, or companies in which foreign persons
hold no more than 49% of the share capital, ownership interests and voting
rights. In addition, a majority of the management and supervisory board of any
cable television operator holding permits must be comprised of Polish citizens
residing in Poland. Programming may be broadcast in Poland only by Polish
entities in which foreign persons hold no more than 33% of the share capital,
ownership interest and voting rights. The majority of the management and
supervisory boards of any company holding a broadcasting license must be
comprised of Polish citizens residing in Poland. We believe that the ownership
structure of @Entertainment and its subsidiaries comply with Poland's regulatory
restrictions on foreign ownership.
Anti-Monopoly Act Matters. Many of the programming agreements that
@Entertainment has entered into for its cable networks and its DTH service
contain exclusivity clauses which restrict or prohibit the provider of such
programming from providing such programming to other cable or DTH operators in
Poland. Although such exclusivity clauses are not specifically prohibited under
the Anti-Monopoly Act, such agreements may be found unlawful, and therefore
unenforceable, if they restrict or hinder competition or otherwise involve the
abuse of a dominant position.
The Anti-Monopoly Office has issued four decisions against subsidiaries of
@Entertainment in various local markets deciding the relevant subsidiary had
achieved a dominant position and abused that dominant position in the respective
market in which it operates. These decisions have been based on one or more of
the following actions:
. a lease operating arrangement of one of our Polish operating
subsidiaries;
. moving certain satellite channels to a new frequency without termination
of agreements with subscribers whose television sets are not equipped to
receive the new frequency;
. increasing rates without providing subscribers a detailed basis for the
price increases;
. changing the programming line-up without sufficient notice to
subscribers;
. offering extended basic tier services in certain forms; and
. certain rate increases and penalty charges.
One of these decisions has been overturned by the Anti-Monopoly court and the
other three are currently being appealed.
United Kingdom
The Independent Television Commission ("ITC") regulates almost all
television services provided from the United Kingdom. The ITC currently
licenses most of @Entertainment's channels, including all DTH channels, as
satellite television services. @Entertainment's licenses place several
conditions on @Entertainment's provision of services, including program content,
program sponsorship and advertising.
30
<PAGE>
Item 2. 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.
Item 3. 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.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
31
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
Our ordinary shares A trade on the Amsterdam Stock Exchange ("AEX") under
the symbol "UPC" and ADSs representing ordinary shares A trade on the Nasdaq
National Market under the symbol "UPCOY." Both began trading on February 12,
1999, at the time of our initial public offering. The following table shows the
range of high and low sales prices reported on the AEX and Nasdaq:
<TABLE>
<CAPTION>
AEX NASDAQ
-------------------- --------------------
High Low High Low
------- -------- -------- ---------
(in Euros) (in US Dollars)
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
First Quarter (from February 12, 1999)... 12.75 9.82 13.81 10.85
Second Quarter........................... 20.88 12.40 21.71 13.13
Third Quarter............................ 23.12 17.67 23.50 18.79
Fourth Quarter........................... 42.33 19.08 43.49 20.17
</TABLE>
As of March 24, 2000, there were approximately 24 holders of record of
our ADSs. We generally do not know who the owners of our ordinary shares A are
since they are not held in bearer form.
We have never paid cash dividends on our ordinary shares.
In March 2000, at an extraordinary general meeting of shareholders, the
shareholders approved the amendment of UPC's Articles of Association to (i)
split each ordinary share A, priority share, preference share A and preference
share B (as of December 31, 1999, with a nominal value of Euro2.00 each) into
three shares with a nominal value of Euro1.00 each, (ii) split each ordinary
share B (as of December 31, 1999, with a nominal value of Euro0.02 each) into
three shares with a nominal value of Euro0.01 each and (iii) pay up an amount of
Euro145.2 million on account of the share premium reserve of the Company. All
share and per share amounts have been retroactively restated to reflect the
share split from 3:1.
32
<PAGE>
Item 6. Selected Financial Data
-----------------------
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the years ended
December 31, 1999, 1998, 1997 and 1996 and for the six months ended December 31,
1995 have been derived from our audited consolidated financial statements, as
restated to include Monor Communications Group, Inc. and Tara Television Limited
for all periods in which their operations were part of United's consolidated
results. 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 United and
Philips, the cable television properties contributed by Philips are deemed to be
our predecessor. On December 11, 1997, United 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 United's basis on December 11, 1997, the financial
information for the years ended December 31, 1999 and 1998 is presented on a
"post-acquisition" basis. We adopted the Euro reporting currency effective
December 31,1999. We have retroactively restated financial information for all
periods presented using the exchange rate fixed on January 1, 1999 of Euro1.0 to
2.20371 Dutch Guilders. 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".
<TABLE>
<CAPTION>
UPC Predecessor Interest
-------------------------------------------------------- --------------------------
Six Months Six Months
Year Ended December 31, Ended Ended
-------------------------------------------------------- December 31, June 30,
1999 1998 1997 1996 1995 1995
----------- ----------- ----------- ----------- ----------- -----------
(Euros, in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Service and other revenue...... 447,501 185,582 153,040 111,257 45,459 41,339
Operating expense.............. (293,778) (62,830) (53,777) (37,409) (14,887) (10,437)
Selling, general & administrative
expense...................... (466,260) (218,587) (54,030) (36,836) (15,255) (10,709)
Depreciation and amoritization. (266,070) (85,150) (60,302) (36,226) (15,417) (9,575)
----------- ----------- ----------- ----------- ----------- -----------
Net operating income (loss).... (578,607) (180,985) (15,069) 786 (100) 10,618
Interest income................ 28,064 3,357 2,955 1,251 2,906 -
Interest expense............... (186,408) (47,355) (32,100) (17,459) (9,018) -
Gain on sale of assets......... 1,501 - - - - -
Provision for loss on investment
related costs................ - (2,827) (8,571) - - -
Foreign exchange gain (loss) and
other expense................ (22,561) 1,221 (18,634) (9,620) (1,532) -
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) before income
taxes and other items........ (758,011) (226,589) (71,419) (25,042) (7,744) 10,618
Shares in results of affiliated
companies, net............... (29,760) (28,962) (11,552) (13,936) (14,410) (1,044)
Minority interests in subsidiaries 1,651 523 69 (1,002) (87) -
Income tax benefit (expense)... 1,822 (551) 748 (231) 70 -
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) ............. (784,298) (255,579) (82,154) (40,211) (22,171) 9,574
=========== =========== =========== =========== =========== ===========
Basic and diluted loss per ordinary
share........................ (2.08) (1.03) (0.30) (0.14) (0.08) n/a
=========== =========== =========== =========== ===========
Weighted-average number of
ordinary shares outstanding 377,969,829 247,915,834 275,421,933 261,187,767 261,187,767 n/a
=========== =========== =========== =========== ===========
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Predecessor
UPC Interest
--------------------------------------------------------- -----------
Six Months
Year Ended December 31, Ended
--------------------------------------------------------- June 30,
1999 1998 1997 1996 1995 1995
---------- ----------- ----------- ---------- ---------- ----------
(Euros in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Selected Balance Sheet Data
Non-restricted cash and cash equivalents..... 1,025,460 13,419 45,443 19,807 56,221 182
Other current assets......................... 311,202 61,735 38,762 37,784 78,362 4,538
Investments in affiliated companies 242,847 223,737 187,706 118,195 122,822 2,360
Property, plant and equipment................ 1,908,414 273,628 220,075 188,768 126,053 87,126
Intangible assets............................ 2,611,413 308,585 313,129 122,705 94,964 998
Total assets............................. 6,802,272 938,317 869,309 488,518 478,781 100,013
Short-term debt.............................. 213,532 159,664 116,855 204,152 201,207 -
Other current liabilities.................... 565,207 110,956 84,150 54,748 42,008 60,035
Long-term debt............................... 3,903,410 533,078 438,397 125,153 107,156 -
Total liabilities........................ 4,770,177 960,208 665,779 389,370 352,817 60,035
Total shareholders' equity (deficit)..... 2,020,200 (33,659) 199,575 97,081 125,329 39,343
</TABLE>
34
<PAGE>
Item 7. 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. These forward-
looking statements may include statements concerning our plans, objectives and
future economic prospects, expectations, beliefs, future plans and strategies,
anticipated events or trends and similar expressions concerning matters that are
not historical facts. These forward-looking statements involve both known and
unanticipated risks, uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to be materially
different from what we say or imply with the forward-looking statements. These
factors include, among other things, changes in television viewing preferences
and habits by our subscribers and potential subscribers, their acceptance of new
technology, programming alternatives and new video services we may offer. They
also include our ability to complete announced transactions and to manage and
grow our newer telephone and Internet/data services. These forward-looking
statements apply only as of the time of this report and we have no obligation or
plans to provide updates or revisions to these forward-looking statements or any
other changes in events or circumstances on which these forward-looking
statements are based. The following discussion and analysis of financial
condition and results of operations covers the years ended December 31, 1999,
December 31, 1998 and December 31, 1997, as restated to include Monor
Communications Group, Inc., Tara Television Limited, and Ibercom, Inc. for all
periods in which their operations were part of United's consolidated results,
and should be read together with our consolidated financial statements and
related notes included elsewhere herein. These consolidated financial
statements provide additional information regarding our financial activities and
condition.
Introduction
We own and operate broadband communications networks in 12 countries in
Europe and in Israel. We provide communications services in many European
countries through our business lines: cable television, telephone, DTH and
programming, and Internet/data services. Our subscriber base is the largest of
any group of broadband communications networks operated across Europe. We intend
to continue to increase our presence in the European market through acquisitions
as the European telecommunications market consolidates, and to implement our
branded package of video, voice and Internet/data product offerings in systems
we acquire.
UPC commenced its present business in July 1995. Most of our operating
systems have provided video services for a long time. During late 1997, we
introduced Internet/data services as a product offering in our consolidated
systems. During 1998, we began the development of several other new businesses
including chello broadband, Priority Telecom and UPCtv. During 1998, the
Internet/data service business and telephone business were developed at both
local country operating companies and at the corporate pan-European level.
35
<PAGE>
History of UPC
Since formation, we have developed largely through acquisitions. The most
recent acquisitions have resulted in significant growth in our consolidated
revenues and expenditures. During 1998, significant transactions included our
acquisition in January 1998, of 100% of the Combivisie cable television systems
in the region surrounding our KTE system in The Netherlands for a purchase price
of 82.0 million. Effective January 1, 1998, we combined the Combivisie and KTE
systems to form CNBH, which we consolidated through July 1998. In August 1998,
we and NUON combined all of our Dutch 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.
As a result of the creation of UTH, from August 1, 1998 through our acquisition
of NUON's 49% interest in UTH in January 1999, we did not consolidate the
results of CNBH and accounted for UTH using the equity method of accounting.
In June 1998, we acquired from Time Warner Entertainment Company L.P. 50%
of Kabelkom, the Hungarian cable television system holding company, increasing
our existing 50% ownership to 100%. The purchase price was approximately USD27.5
million (26.3 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.
During 1999, we have continued to grow through acquisitions. The following
table summarizes our larger acquisitions during 1999.
36
<PAGE>
<TABLE>
<CAPTION>
Ownership
Interest Closing Purchase
Operating Companies Acquired Location Date Price
- ------------------- --------- -------- ------- --------
<S> <C> <C> <C> <C>
UTH (1)........................ 49% The Netherlands February 1999 235.1
Gelrevision.................... 100% The Netherlands June 1999 106.1
SBS............................ 13.3% pan-European July/August 1999 93.0
Stjarn......................... 100% Sweden July 1999 371.1
Videopole...................... 100% France August 1999 126.8
Time Warner Cable France....... 100% France August 1999 80.3
@Entertainment................. 100% Poland August 1999 750.7
A2000 (2)...................... 50% The Netherlands September 1999 201.8
Kabel Plus..................... 94.6% Czech/Slovak Republics October 1999 141.9
Primacom AG.................... 18.2% Germany December 1999 230.4
</TABLE>
(1) We acquired the 49% of UTH that we did not already own.
(2) We acquired the 50% of A2000 that we did not already own.
We have continued to make acquisitions during 2000. In February 2000, we
closed the acquisition of Intercomm France Holding S.A., for approximately 36.0
million, plus an 8% interest in UPC France. In February 2000, we acquired an
additional 10.2% of SBS for 162.5 million, increasing our ownership in SBS to
23.5%. In March 2000, we announced our intention to commence a tender offer to
acquire all of the outstanding shares of SBS that we do not already own. We have
agreed to initiate an exchange offer to acquire SBS's shares at a per share
price of $40 in cash plus 0.57144 of a share of our ordinary shares A, subject
to adjustment. We expect the SBS transaction to close in the third quarter of
2000. In March 2000, we closed the acquisition of K&T Group, a cable system in
the Netherlands, for a purchase price of approximately 1,175.0 million. We have
also increased our investment in Primacom AG to 24.9%.
Adjusted EBITDA
Management generally considers Adjusted EBITDA to be a helpful way to
measure the performance of cable television operations and communications
companies. Adjusted EBITDA represents earnings before net interest expense,
income tax expense, depreciation, amortization, stock-based compensation
charges, management fees, minority interest, share in results of affiliated
companies (net), currency exchange gains (losses) and other non-operating income
(expense) items. 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.
37
<PAGE>
The introduction of telephone services and Internet/data services had a
significant negative impact on operating income (loss) and Adjusted EBITDA
during 1999. We expected this negative impact due to the high costs associated
with obtaining subscribers, branding, and launching these new services against
the incumbent operator. This negative impact is expected to decline. We intend
for these new businesses to be Adjusted EBITDA positive after two to three years
following introduction of the service, but there can be no assurance this will
occur.
Stock based compensation expense results from our stock option and phantom
stock option plans, including the plans of our subsidiary chello. Prior to our
initial public offering, our stock option plan required variable plan
accounting. Under variable plan accounting, increases in the fair market value
of our shares result in compensation charges that are expensed for vested
options. Decreases in fair market value would result in compensation credits. A
compensation charge is generally a non-cash expense. Following our initial
public offering, our stock option plan no longer requires variable plan
accounting, however, our phantom stock option plan and the chello plans continue
to require variable plan accounting.
We currently classify our business into five segments, comprised of 1)
cable television, 2) telephone (Priority Telecom and UPC affiliates), 3)
Internet/data (chello and UPC affiliates), 4) programming and DTH and 5)
corporate and other. The following table presents an overview of our revenue and
adjusted EBITDA by segment for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------------
1999 1998 1997
-------------- -------------- ---------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
(Euros, in thousands)
<S> <C> <C> <C>
Revenue:
Cable.................................................. 363,348 171,446 145,409
Telephone.............................................. 40,273 241 -
Internet/data.......................................... 25,055 4,295 347
Programming and DTH.................................... 11,370 611 45
Other.................................................. 7,455 8,989 7,239
---------- ------------ -----------
447,501 185,582 153,040
========== ============ ===========
Adjusted EBITDA:
Cable.................................................. 116,509 76,600 60,155
Telephone.............................................. (42,099) (5,249) -
Internet/data.......................................... (76,267) (11,281) 175
Programming and DTH.................................... (76,565) (4,570) (5,233)
Other.................................................. (41,405) (4,933) (7,679)
---------- ------------ -----------
(119,827) 50,567 47,418
========== ============ ===========
</TABLE>
Overview of Our Activities
To date, our primary source of revenue has been video entertainment
services. For the years ended December 31, 1999, December 31, 1998 and December
31, 1997, our video services accounted for approximately 81.2%, 92.4% and 95.0%,
respectively, of our consolidated revenues. For the same periods, our telephone
services accounted for about 9.0%, 0.1% and 0%, respectively, of our
consolidated revenue, our Internet/data service accounted for about 5.6%, 2.3%
and 0.2%, respectively, and our DTH and programming revenues accounted for about
2.5%, 0.3% and 0%, respectively.
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. 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.
We believe that our new services will continue to have a negative impact on
our operating income and EBITDA due to the one time costs associated with
obtaining a customer. We have defined these costs as "customer acquisition
costs" and have begun to track these costs. Customer acquisition costs consist
of sales commissions and call-for-action type advertising.
38
<PAGE>
Cable Television
Our operating systems generally offer a range of video service subscription
packages including a basic tier, which typically includes 26 to 32 channels, and
an expanded basic tier, which typically 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,
. subscriber growth from both well established and developing systems, and
. increases in revenue per subscriber from basic rate increases and the
introduction of expanded basic tiers and pay-per-view services.
Pricing
We usually charge a one-time installation fee when we connect video
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.
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.
Results of Operations - Cable Television
The following table sets forth information from, or derived from, our
consolidated statements of operations for the years ended December 31, 1999,
1998 and 1997.
39
<PAGE>
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
(Euros, in thousands)
<S> <C> <C> <C>
Service and other revenue........................................ 363,348 171,446 145,409
Operating expense................................................ (143,131) (55,718) (50,616)
Selling, general and administrative expense...................... (103,708) (39,128) (34,638)
------------- ------------- -----------
116,509 76,600 60,155
Adjustments:
Stock-based compensation expense................................. - - -
------------- ------------- -----------
Adjusted EBITDA.................................................. 116,509 76,600 60,155
============= ============= ===========
As a percentage of revenue:
Operating expense................................................ -39.49% -32.50% -34.81%
============= ============= ===========
Selling, general and administrative expense...................... -28.54% -22.82% -23.82%
============= ============= ===========
Adjusted EBITDA.................................................. 32.06% 44.68% 41.37%
============= ============= ===========
</TABLE>
Revenue - Cable Television
During the year ended December 31, 1999, our cable television revenue
increased 191.9 million to 363.3 million from 171.4 million for the year ended
December 31, 1998, a 112.0 % increase. The increase in cable television revenue
resulted primarily from our acquisitions in 1999, which are included in our
consolidated results of operations from their respective dates of acquisition.
The increase in cable television revenue attributable to acquisitions made
during 1999 totaled 160.8 million, or 83.7% of the total increase. Of this
increase, acquisitions in the Netherlands represents 59.3%, acquisitions in
France represent 12.7%, the acquisition in Poland represents 15.8% and the
acquisition in Sweden represents 7.8%. The remaining increase in cable
television revenue of approximately 16.3% came from subscriber growth, increased
revenue per subscriber in Austria, Norway, our existing system in France, and
our systems in Eastern Europe and the inclusion of a full year of operations in
1999 for acquisitions completed in 1998.
During the year ended December 31, 1998, our cable television revenue
increased 26.0 million to 171.4 million from 145.4 million for the year ended
December 31, 1997, a 17.9 % increase. The increase in cable television revenue
resulted primarily from the acquisition of Combivisie in January 1998 which was
consolidated through July 31, 1998 and the consolidation of Telekabel Hungary
effective July 1, 1998. Of the 26.0 million, approximately 21.6% was
attributable to Combivisie and 48.5% was attributable to Telekabel Hungary. The
balance of the increase in cable television revenue came from subscriber growth
and in revenue per subscriber in Austria, Norway, our existing system in France,
and our systems in Eastern Europe.
Operating Expense - Cable Television
During the year ended December 31, 1999, our cable television operating
expense increased 87.4 million to 143.1 million from 55.7 million for the year
ended December 31, 1998, a 156.9% increase. The increase in cable television
operating expense primarily relates to our acquisitions in 1999, which are
included in our consolidated results of operations from their respective dates
of acquisition. The increase in cable television operating expense attributable
to acquisitions made during 1999 totaled 64.5 million, or 73.8% of the increase.
Of this increase, acquisitions in the Netherlands represents 50.8%, acquisitions
in France represent 19.7%, the acquisition in Poland represents 18.4% and the
acquisition in Sweden represents 7.0%. The remaining increase in cable
television operating expense came from subscriber growth and development costs
incurred in our systems in Eastern Europe.
As a percentage of revenue, operating expense increased 6.9% from 32.5% for
the year ended December 31, 1998 to 39.4% for the year ended December 31, 1999.
This 21.2% increase is primarily due to higher operating costs as a percentage
of revenue for systems we acquired during 1999. As a percentage of revenue,
operating expenses in our new acquisitions was approximately 38.3%. We expect
to reduce this percentage in future years through revenue growth and operating
efficiencies.
40
<PAGE>
During the year ended December 31, 1998, our cable television operating
expense increased 5.1 million to 55.7 million from 50.6 million for the year
ended December 31, 1997, a 10.1% increase. The majority of this increase was
attributable to the acquisitions of Telekabel Hungary and Combivisie. The
remaining increase comprised direct costs related to subscriber growth and
development costs incurred in France and Eastern Europe.
As a percentage of revenue, operating expense decreased 2.3% from 34.8% for
the year ended December 31, 1998 to 32.5% for the year ended December 31, 1999.
This 6.6% decrease is primarily attributable to our acquisition of Combivisie,
which was consolidated in our results of operations from January 1998 through
July 1998.
Selling, General and Administrative Expense - Cable Television
During the year ended December 31, 1999, our cable television SG&A expense
increased 64.6 million to 103.7 million from 39.1 million for the year ended
December 31, 1998, a 165.0% increase. The increase in cable television SG&A
expense primarily relates to our acquisitions in 1999, which are included in our
consolidated results of operations from their respective dates of acquisition.
The increase in cable television SG&A expense attributable to acquisitions made
during 1999 totaled 56.9 million, or 88.1% of the total increase. Of this
increase, acquisitions in the Netherlands represents 48.3%, acquisitions in
France represent 14.8%, the acquisition in Poland represents 24.4% and the
acquisition in Sweden represents 6.0%. The increase in cable television SG&A
related to 1999 acquisitions was partially offset by decreased cable television
SG&A expense in our existing systems, as these systems reached a more developed
stage.
As a percentage of revenue, SG&A expense increased 5.7% from 22.8% for the
year ended December 31, 1998 to 28.5% for the year ended December 31, 1999.
This 25.0% increase is primarily due to higher SG&A expense as a percentage of
revenue for systems we acquired during 1999. As a percentage of revenue, SG&A
expense in our new acquisitions was approximately 33.7%. We expect to reduce
this percentage in future years through revenue growth and operating
efficiencies.
During the year ended December 31, 1998, our cable television SG&A expense
increased 4.5 million to 39.1 million from 34.6 million for the year ended
December 31, 1997, a 13.0% increase. The majority of this increase was
attributable to the acquisitions of Telekabel Hungary and Combivisie.
As a percentage of revenue, SG&A expense decreased 1.0% from 23.8% for the
year ended December 31, 1998 to 22.8% for the year ended December 31, 1999.
This 4.2% decrease is primarily attributable to our acquisition of Combivisie,
which was consolidated in our results of operations from January 1998 through
July 1998.
Telephone
We began to offer cable telephone services in July 1997, through our equity
investment in A2000. The service was launched under the brand name Nedpoint,
now rebranded Priority Telecom. We currently offer local cable telephone
services, under the brand name Priority Telecom, in our Austrian, Dutch, French
and Norwegian systems. Priority Telecom launched its service on a trial basis
in Vienna in November 1998 and in February 1999 launched its business and
resedential service. Our Priority Telecom service was officially launched in an
area of UPC France in March 1999, UPC Norge in April 1999, and a part of UPC
Nederland's service area in May 1999. We also provide national and
international long distance voice telephone services. In addition to our cable
telephone operations, our Monor system offers traditional telephone services.
Our operating systems offer a full complement of telephone services,
including caller ID, call waiting, call forwarding, call blocking, distinctive
ringing and three-way calling. Additionally, we have begun to offer business
services, including dedicated leased lines, LAN inteconnection services and
cable ISDN.
Pricing
In order to achieve high-growth from early market entry, we price our
telephone service at a discount compared to services offered by incumbent
telecommunications operators. Initially, we will also waive or substantially
discount installation fees.
Revenue from residential telephone consists of a flat monthly line rental
and a usage charge based upon minutes. Other telephone revenue includes IP data
services to the small and medium sized business customers, carrier select
revenue, as well as lease line and other business revenues.
41
<PAGE>
Costs of Operations
Our telephone cost of operations include interconnect costs, number
portability fees, network operations, customer operations and customer care.
Interconnect costs are variable based upon usage as determined through
negotiated interconnect agreements.
Selling, general and administrative expenses includes branding, marketing
and customer acquisition costs, personnel related costs, such as stock-based
compensation expense, legal and accounting, human resources, office facilities
and other overhead costs. Customer acquisition costs consist of sales
commissions and call-for-action type advertising.
Results of Operations - Telephone
The following table sets forth information from, or derived from, our
consolidated statements of operations for the years ended December 31, 1999,
1998 and 1997.
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------
1999 1998 1997
------------------- ------------------ ---------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
(Euros, in thousands)
<S> <C> <C> <C>
Service and other revenue...................... 40,273 241 -
Operating expense.............................. (37,172) (621) -
Selling, general and administrative expense.... (60,673) (8,216) -
------------------- ------------------ --------------
(57,572) (8,596) -
Adjustments:
Stock-based compensation expense............... 15,473 3,347 -
------------------- ------------------ --------------
Adjusted EBITDA................................ (42,099) (5,249) -
=================== ================== ==============
As a percentage of revenue:
Operating expense.............................. -92.30% -257.68% 0.00%
=================== ================== ==============
Selling, general and administrative expense.... -150.65% -3409.13% 0.00%
=================== ================== ==============
Adjusted EBITDA................................ -104.53% -2178.01% 0.00%
=================== ================== ==============
</TABLE>
Revenue - Telephone
During the year ended December 31, 1999, our telephone revenue increased
40.1 million to 40.3 million from 0.2 million for the year ended December 31,
1998. During 1999, we launched local telephone services, under the brand name
Priority Telecom, in our Austrian, Dutch, French and Norwegian systems. In
addition, A2000, which we consolidated effective September 1, 1999, had an
existing telephone service from July 1997.
During the year ended December 31, 1998, our telephone revenue was limited
to revenue from trial launches in Austria and the Netherlands. We had no
telephone revenue during the year ended December 31, 1997.
Operating Expense - Telephone
During the year ended December 31, 1999, our telephone operating expense
increased 36.6 million to 37.2 million from 0.6 million for the year ended
December 31, 1998. During 1999, we launched local telephone services, under the
brand name Priority Telecom, in our Austrian, Dutch, French and Norwegian
systems. In addition, A2000, which we consolidated effective September 1, 1999,
had an existing telephone service from July 1997.
42
<PAGE>
During the year ended December 31, 1998, our telephone operating expense
was limited to activities from trial launches in Austria and the Netherlands. We
had no telephone operating expense during the year ended December 31, 1997.
Selling, General and Administrative Expense - Telephone
During the year ended December 31, 1999, our telephone SG&A expense
increased 52.5 million to 60.7 million from 8.2 million for the year ended
December 31, 1998. Telephone SG&A expense for the year ended December 31, 1999
increased primarily due to the launch during 1999 of local telephone services,
under the brand name Priority Telecom, in our Austrian, Dutch, French and
Norwegian systems. The increase in telephone SG&A is also attributable to stock-
based compensation expense, which was 15.5 million for the year ended December
31, 1999, compared to 3.3 million for the year ended December 31, 1998. In
addition, during 1999 we continued to incur costs related to the development of
the Priority Telecom brand.
During the year ended December 31, 1998, our telephone SG&A expense was
limited to activities from trial launches in Austria and the Netherlands, and
development activities in Norway and France and personnel expenses, including
stock-based compensation expense of 3.3 million. Also, during 1998 we incurred
costs related to the development of the Priority Telecom brand. We had no
telephone SG&A expense during the year ended December 31, 1997.
Internet/Data
Services
We are in the early stages of executing our Internet/data business, and the
profitability of both the internet as a mass market delivery vehicle and our
business is unproven. Our expansion plans contemplate geographic coverage across
several continents, with locally tailored content and products and services in
multiple languages. We operate our internet/data business internationally
through chello broadband and locally through our operating companies. Chello
launched its service in April 1999, and provides high-speed internet access and
local portal and integrated broadband content to our local operating companies
and non-affiliated operating companies through a franchise agreement. Under the
franchise agreement chello provides our affiliates and non-affiliated local
operators with high speed connectivity, caching, local language broadband
portals, and marketing support for a fee based upon a percentage of subscription
and installation revenue. In the future the franchise agreement further provides
that the local operator will receive a percentage of the revenue from chello
generated e-commerce and advertising. The local operator is responsible for the
local network including the upgrade, management and maintenance, sales and
training, customer support and service, installation and cost of customer
premise equipment. During 1999, substantially all of chello's revenues were
subscription based and derived from our local operating companies. These
intercompany revenues have been eliminated in our consolidated operating
results. We believe we have an opportunity to grow non-affiliated revenue
through the chello service in future years. We cannot predict whether our
products and services, including broadband internet services in general, will
become accepted or profitable in these markets.
We have commercially launched or trial launched services in eight markets,
five of which are our subsidiaries. In these markets, we offer high-speed
internet access and local language portals that integrate multi-media, locally
relevant content and services specially designed for the broadband environment.
Pricing
To date, virtually all of our revenues have been derived from monthly
subscription fees of which chello receives approximately 40% for its services.
Most local operators have chosen to waive installation charges. In the future,
we expect to generate revenues from advertising and e-commerce as we develop our
portals and our digital set-top box services. Currently, our services are
offered to residential subscribers at flat subscription fees ranging from 27 to
40 per month, including VAT. Our flat fee is designed to be generally lower than
the costs associated with dial-up internet access, including the access fees and
phone charges with dial-up access. For business subscribers which receive
services other than our standard broadband internet access services, we
generally agree the pricing with local operators on a case by case basis,
depending on the size and capacity requirements of the businesses.
Cost of Operations
Our operating expenses consist primarily of leased-line and network
development and management costs associated with AORTA and our network
generally. Additional costs of operations, includes portal design and
development, local connectivity costs, and help desk and customer care costs.
Stock-based compensation expenses related to personnel directly working in
operations are also a part of our operating expense.
Selling, general and administrative expenses include branding, marketing,
customer acquisition costs, personnel-related costs, including stock-based
compensation expenses, legal and accounting, office facilities and other
overhead. Customer acquisiton costs include commissions and call-for-action type
advertising.
Results of Operations - Internet/Data
The following table sets forth information from, or derived from, our
consolidated statements of operations for the years ended December 31, 1999,
1998 and 1997.
43
<PAGE>
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------------
1999 1998 1997
------------------- ----------------- ----------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
(Euros, in thousands)
<S> <C> <C> <C>
Service and other revenue.................... 25,055 4,295 347
Operating expense............................ (61,269) (3,473) (172)
Selling, general and administrative expense.. (115,902) (17,047) -
------------------- ----------------- ----------------
(152,116) (16,225) 175
Adjustments:
Stock-based compensation expense............. 75,849 4,944 -
------------------- ----------------- ----------------
Adjusted EBITDA.............................. (76,267) (11,281) 175
=================== ================= ================
As a percentage of revenue:
Operating expense............................ -244.54% -80.86% -49.57%
=================== ================= ================
Selling, general and administrative expense.. -462.61% -396.90% 0.00%
=================== ================= ================
Adjusted EBITDA.............................. -304.41% -262.65% 50.43%
=================== ================= ================
</TABLE>
Revenue - Internet/Data
During the year ended December 31, 1999, our internet/data revenue
increased 20.8 million to 25.1 million from 4.3 million for the year ended
December 31, 1998. The increase is primarily due to the launch of residential
and business cable-modem high speed Internet access services, branded chello
broadband in 1999. During the second quarter of 1999, we launched chello
broadband, on the upgraded portion of our networks in Austria, Belgium, France,
the Netherlands (with the exception of A2000) and Norway. We launched chello
broadband in A2000 and Sweden in the fourth quarter of 1999. Internet/data
revenue from 1998 primarily relates to revenue from Austria, Belgium and Norway,
which provided Internet access service from 1997.
In general, chello receives 40% of subscription-based revenue for its
service from the local operator. Intercompany revenues are eliminated in our
consolidated operating results.
During the year ended December 31, 1998, our Internet/data revenue
increased 4.0 million to 4.3 million from 0.3 million for the year ended
December 31, 1997. Internet/data revenue from 1998 and 1997 primarily relates to
revenue from Austria, Belgium and Norway, which provided Internet access service
from 1997.
Operating Expense - Internet/data
During the year ended December 31, 1999, our Internet/data operating
expense increased 57.8 million to 61.3 million from 3.5 million for the year
ended December 31, 1998. The increase is primarily due to the launch of
residential and business cable-modem high speed Internet access services,
branded as of chello broadband in 1999. During the second quarter of 1999 we
launched chello broadband, on the upgraded portion of our networks in Austria,
Belgium, France, the Netherlands (with the exception of A2000) and Norway. We
launched chello broadband in A2000 and Sweden in the fourth quarter of 1999.
Included in the Internet/data operating expense for the year ended December 31,
1999 is 13.5 million of stock-based compensation expense related to chello
broadband's phantom stock option plan, compared to nil for the year ended
December 31, 1998. Internet/data operating expense in 1998 primarily relates to
operating expense from Austria, Belgium and Norway, which provided Internet
access service from 1997. In addition we incurred substantial start-up costs
from the expansion of the chello business in Australia and New Zealand through
trial launches which occurred during the fourth quarter.
During the year ended December 31, 1998, our Internet/data operating
expense increased 3.3 million to 3.5 million from 0.2 million for the year ended
December 31, 1997. Internet/data operating expense for the years ended December
31, 1998 and 1997 primarily relates to operating expense from Austria, Belgium
and Norway, which provided Internet access service from 1997.
44
<PAGE>
Selling, General and Administrative Expense - Internet/data
During the year ended December 31, 1999, our Internet/data SG&A expense
increased 98.9 million to 115.9 million from 17.0 million for the year ended
December 31, 1998. Included in the Internet/data SG&A expense for the year
ended December 31, 1999 is 62.3 million of stock-based compensation expense,
compared to 4.9 million for the year ended December 31, 1998. The increase is
also attributable to the launch of residential and business cable-modem high
speed Internet access services, branded as of chello broadband in 1999. During
the second quarter of 1999 we launched chello broadband, on the upgraded portion
of our networks in Austria, Belgium, France, the Netherlands (with the exception
of A2000) and Norway. We launched chello broadband in A2000 and Sweden in the
fourth quarter of 1999.
During the year ended December 31, 1998, our Internet/data SG&A expense
increased 17.0 million to 17.0 million from nil for the year ended December 31,
1997. The increase in Internet/data SG&A expense during the year ended December
31, 1998 primarily relates to increased development costs and start-up costs
associated with the launch of chello broadband, in addition to expenses related
to the further development of Internet/data services.
Programming and DTH
Our consolidated programming and DTH business has been created through
internal development and through acquisitions. Historically, we have been and
are involved in several country-specific programming ventures, including those
dedicated to creating channels for Spain, Israel and Malta. We have developed
and launched six channels of various genres since May 1999 and we are
constructing a pan-European digital distribution platform that will enable
digital distribution of our new channels and other signals to our upgraded
networks. Through the acquisition of @Entertainment in August 1999, we have
obtained a DTH platform serving the Polish market place, in addition to a
Polish-language programming under the brand name Wizja TV. Both directly and
through other joint ventures, Wizja TV produces television programming. We
distribute our programming packages to third parties, as well as to affiliates.
Subsequent to our acquisition of @Entertainment, we began to restructure
the Polish DTH and programming business by separating them into distinct
business lines. We have incurred significant start-up and restructuring costs in
this endeavor. We believe that the DTH business will start to become EBITDA
positive before subscriber acquisition costs during the second quarter of 2000.
However, there can be no assurance that this will occur.
We expect to incur substantial operating losses related to our programming
and DTH businesses for the next two years, while we develop and expand our
subscriber base. We are currently negotiating with two major cable associations
in Poland in order to expand our distribution to other cable television
providers.
Pricing
For our programming channels, including UPCtv and some Wizja TV
channels, we charge cable operators on a per-subscriber fee basis.
For our DTH services, we generally charge a one-time installation fee when
we connect the subscriber, a monthly subscription fee for a basic service and
additional monthly subscription fees for premium programming, which includes a
movie channel and a sports channel. For the period from the date of acquisition
of @Entertainment, August 6, 1999, to November 7, 1999, we sold our DTH
reception systems to our customers at a price below cost due to promotional
incentives. Subsequent to November 7, 1999 we have retained ownership of these
systems.
Costs of Operations
Programming and DTH operating costs include the costs of programming
rights, production costs, and distribution costs, including transponder fees and
operating costs. A significant portion of these costs are fixed in nature
through contracts commitments. For the period from the date of acquisition of
@Entertainment, August 6, 1999, to November 7, 1999, we sold our DTH reception
systems to our customers at a price below cost due to promotional incentives.
Subsequent to November 7, 1999, we have retained ownership of these systems.
Selling, general and administrative expenses include marketing and
subscriber acquisition costs, legal and accounting, office facilities and other
overhead costs.
Results of Operations - Programming and DTH
The following table sets forth information from, or derived from, our
consolidated statements of operations for the years ended December 31, 1999,
1998 and 1997.
45
<PAGE>
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
(Euros, in thousands)
<S> <C> <C> <C>
Service and other revenue......................................... 11,370 611 45
Operating expense................................................. (51,254) (2,120) (2,990)
Selling, general and administrative expense....................... (36,681) (3,061) (2,288)
---------------- ---------------- ----------------
(76,565) (4,570) (5,233)
Adjustments:
Stock-based compensation expense.................................. - - -
---------------- ---------------- ----------------
Adjusted EBITDA................................................... (76,565) (4,570) (5,233)
================ ================ ================
As a percentage of revenue:
Operating expense................................................. -450.78% -346.97% -6644.44%
================ ================ ================
Selling, general and administrative expense....................... -322.61% -500.98% -5084.44%
================ ================ ================
Adjusted EBITDA................................................... -673.39% -747.95% -11628.89%
================ ================ ================
</TABLE>
Revenue - Programming and DTH
During the year ended December 31, 1999, our programming and DTH revenue
increased 10.8 million to 11.4 million from 0.6 million for the year ended
December 31, 1998. The increase is primarily due to our acquisition of
@Entertainment, which we began consolidating in August 1999. Programming and
DTH revenue from @Entertainment for the five months ended December 31, 1999 was
10.3 million. The balance of the increase in programming and DTH revenue for the
year ended December 31, 1999 relates to programming revenue from Tara and UPCtv.
We had no DTH revenue prior to the acquisition of @Entertainment.
During the year ended December 31, 1998, programming revenue increased 0.6
million compared to programming revenue for the year ended December 31, 1997.
The increase in programming revenue related to increased revenue from Tara and
UPCtv.
Operating Expense - Programming and DTH
During the year ended December 31, 1999, our programming and DTH operating
expense increased 49.1 million to 51.3 million from 2.1 million for the year
ended December 31, 1998. The increase is primarily due to our acquisition of
@Entertainment, which we began consolidating in August 1999. Programming and
DTH operating expense from @Entertainment for the five months ended December
31, 1999 was 47.5 million. During the five months ended December 31, 1999,
@Entertainment had non-recurring costs related to selling its DTH reception
systems through November 7, 1999, totaling 8.3 million. @Entertainment also
experienced increased programming costs. The balance of the increase in
programming and DTH operating costs for the year ended December 31, 1999 relates
to operating expense from from Tara and UPCtv. We had no DTH operating expense
prior to the acquisition of @Entertainment.
During the year ended December 31, 1998, programming operating expense
decreased 0.9 million compared to programming operating expense for the year
ended December 31, 1997. The decrease in programming expense relates to
decreased operating expense from Tara and UPCtv.
SG&A Expense - Programming and DTH
During the year ended December 31, 1999, SG&A expense for our programming
and DTH business expense increased 36.7 million to 35.1 million from 3.1 million
for the year ended December 31, 1998. The increase is primarily due to our
acquisition of @Entertainment, which we began consolidating in August 1999.
@Entertainment's SG&A expense for programming and DTH for the five months ended
December 31, 1999 was 29.9 million. The remaining increase in SG&A expense for
programming and DTH for the year ended
46
<PAGE>
December 31, 1999 relates to development activity from UPCtv, as well as
increased SG&A expense from Tara. We had no SG&A expense from DTH prior to the
acquisition of @Entertainment.
During the year ended December 31, 1998, programming SG&A expense increased
0.8 million to 3.1 million for the year ended December 31, 1998 from 2.3 million
for the year ended December 31, 1997. The increase in programming SG&A expense
relates to increased SG&A expense from Tara and UPCtv.
Results of Operations - Corporate and Other
The following table sets forth information from, or derived from, our
consolidated statements of operations for the years ended December 31, 1999,
1998 and 1997.
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------
1999 1998 1997
------------------ ----------------- -----------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
(Euros, in thousands)
<S> <C> <C> <C>
Service and other revenue...................... 7,455 8,989 7,239
Operating expense.............................. (951) (898) -
Selling, general and administrative expense.... (149,297) (151,135) (17,104)
----------------- ----------------- ----------------
(142,793) (143,044) (9,865)
Adjustments:
Stock-based compensation expense............... 101,388 138,111 2,186
----------------- ----------------- ----------------
Adjusted EBITDA................................ (41,405) (4,933) (7,679)
================= ================= ================
As a percentage of revenue:
Operating expense.............................. -12.76% -9.99% 0.00%
================= ================= ================
Selling, general and administrative expense.... -2,002.39% -1,681.33% -236.28%
================= ================= ================
Adjusted EBITDA................................ -555.31% -54.88% -106.08%
================= ================= ================
</TABLE>
Revenue - Corporate and Other
During the year ended December 31, 1999, our corporate and other revenue
decreased 1.5 million to 7.5 million from 9.0 million for the year ended
December 31, 1998. Corporate and other revenue is mainly related to management
fees which we receive from certain of our non-consolidated investments. The
decrease in corporate and other revenue during 1999 is primarily due to the
consolidation of UTH effective February 1, 1999 and A2000 effective September 1,
1999.
During the year ended December 31, 1998, our corporate and other revenue
increased 1.8 million to 9.0 million from 7.2 million for the year ended
December 31, 1998. The increase in corporate and other revenue is primarily
related to management fees we received from UTH.
Operating Expense - Corporate and Other
During the year ended December 31, 1999, our corporate and other operating
expense increased 0.1 million to 1.0 million from 0.9 million for the year ended
December 31, 1998.
During the year ended December 31, 1998, our corporate and other operating
expense increased 0.9 million from nil for the year ended December 31, 1997.
47
<PAGE>
Selling, General and Administrative Expense - Corporate and Other
During the year ended December 31, 1999, our corporate and other SG&A
expense decreased 1.8 million to 149.3 million from 151.1 million for the year
ended December 31, 1998, a 1.2% decrease. During 1999, we incurred an increase
in development costs, such as costs related to the development of our digital
set top box, as well as costs incurred for the pan-European branding of the UPC
identity. Increased systems' costs related to the planning and preparation for
implementing pan-European financial and customer care systems were incurred
during the year ended December 31, 1999, as well as costs incurred for the year
2000 readiness of existing systems. We also incurred costs in 1999 related to
the development of our regulatory office, as well as additional staffing costs
for communications, legal, finance, treasury, investor relations and corporate
development. These increases in corporate and other SG&A expenses were offset by
a decrease in the stock-based compensation cost for the year ended December 31,
1999.
During the year ended December 31, 1998, our corporate and other SG&A
expense increased 134.0 million to 151.1 million from 17.1 million for the year
ended December 31, 1997, an 783.6% increase. The increase in corporate and other
SG&A expense primarily relates to stock-based compensation expense of 138.1
million for the year ended December 31, 1998, compared to 2.2 million stock-
based compensation expense for the year ended December 31, 1997.
Depreciation and Amortization
During the year ended December 31, 1999, our depreciation and amortization
expense increased 180.9 million to 266.1 million from 85.2 million for the year
ended December 31, 1997, a 212.3% increase. Of this increase, 82.4 million
relates to increased amortization expense for goodwill created in connection
with acquisitions completed during 1999. Amortization related to acquisitions
made in the Netherlands and Poland represents 41.4% and 31.3%, respectively.
Depreciation expense also increased due to the acquisitions made during 1999
which we have consolidated, as well as additional depreciation expense on
capital expenditures to upgrade the network in our Western European systems and
new-build for developing systems.
During the year ended December 31, 1998, our depreciation and amortization
expense increased 24.9 million to 85.2 million from 60.3 million for the year
ended December 31, 1997, a 41.3% increase. 11.9 million of this increase is
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.
Interest Income
During the year ended December 31, 1999, interest income increased 24.7
million to 28.1 million from 3.4 million, a 726.5% increase. During 1999, we
earned interest income on the cash received from our initial public offering in
February 1999, our debt offerings in July 1999 and October 1999, and our
secondary equity offering in October 1999.
During the year ended December 31, 1998, interest income increased 0.4
million to 3.4 million from 3.0 million for the year ended December 31, 1997, a
13.3% increase.
Interest Expense
During the year ended December 31, 1999, interest expense increased 139.0
million to 186.4 million from 47.4 million during the same period in 1998, a
293.2% increase. This increase was primarily due to our offering of senior
notes and senior discount notes in July 1999 and October 1999. In addition,
interest expense related to the @Entertainment senior discount notes is
consolidated in our results effective August 1, 1999. See "-- Liquidity and
Capital Resources".
During the year ended December 31, 1998, interest expense increased 15.3
million to 47.4 million from 32.1 million during the same period in 1997, a
47.7% 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".
48
<PAGE>
Provision for Loss on Investment Related Costs
The provision for loss on investment-related costs totaled nil, 2.8 million
and 8.6 million for the years ended December 31, 1999, 1998 and 1997,
respectively. During 1998, Tara wrote-off its deferred development costs.
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.
Foreign Exchange Gain (Loss) and Other Expense
Foreign exchange gain (loss) and other expense reflected a loss of 22.6
million for year ended December 31, 1999 as compared to a gain of 1.2 million
for the same period in 1998. The foreign exchange loss during 1999 was due
primarily to our dollar denominated senior discount notes, as the U.S. dollar
strengthened against the Euro at the end of 1999.
Foreign exchange gain (loss) and other expense reflected a gain of 1.2
million for year ended December 31, 1998 as compared to a loss of 18.7 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
1998 as compared to 1997. Subsequent to December 31, 1998, we repaid a
significant portion of our remaining U.S. dollar-denominated indebtedness with
proceeds from our initial public offering.
Share in Results of Affiliated Companies, Net
The table below sets forth our share in results of affiliated companies for
the applicable periods.
<TABLE>
<CAPTION>
For The Years Ended December 31,
--------------------------------------
1999 1998 1997
---------- ----------- ------------
(Euros, in thousands)
<S> <C> <C> <C>
A2000 ........................................... (15,622) (12,085) (11,552)
UTH.............................................. (1,339) (10,337) -
Hungary (Kabelkom, programming and
cable television).......................... (38) (3,617) 2,011
UII Partnership (Israel, Ireland, Malta) (1)..... - (302) 4,805
Tevel (1)........................................ (7,836) - -
Melita (1)....................................... (641) - -
Monor ........................................... 1,520 (1,988) (4,371)
Xtra Music....................................... (2,346) - -
SBS.............................................. (5,183) - -
IPS.............................................. 2,290 (153) (2,354)
Other ........................................... (565) (480) (91)
---------- ------- -------
Total............................................ (29,760) (28,962) (11,552)
========== ======= =======
</TABLE>
(1) Historically, we held our interests in Israel, Ireland and Malta in UII, a
general partnership. In November 1998, we acquired our partner's interest in
Tevel and Melita and sold our interest in PHL.
For the year ended December 31, 1999, our share in net losses of affiliated
companies increased to 29.8 million from 29.0 million for the year ended
December 31, 1998, a 2.8% increase. The increase was primarily due to increased
losses from A2000, Tevel, and Xtra Music for the year ended December 31, 1999.
We also recognized losses on our 13.3% investment in SBS, which we acquired in
July/August of 1999, including our amortization of excess basis. These
increases were partially offset by the consolidation of UTH effective February
1, 1999, when our ownership increased to 100%, sale of our Hungarian programming
and cable
49
<PAGE>
television investment in the first quarter of 1999, as well as gains from Monor
and IPS and other for the year ended December 31, 1999.
For the year ended December 31, 1998, our share in net losses of affiliated
companies increased to 29.0 million from 11.6 million for the year ended
December 31, 1997, a 150.0% increase. A substantial portion of the increase in
share in net losses was attributable to additional amortization of goodwill
related to the new basis of accounting established in the step acquisition of us
by United, which was allocated to A2000, Kabelkom, and UII. A2000 also had
increased losses as it began to introduce telephone services during this period.
The loss in the UII Partnership resulted from additional amortization as
discussed above, in addition to losses incurred by Tevel during the last quarter
of the year of which our share increased from 23.3% to 46.6%. These losses
resulted from goodwill amortization and financing expense related to Tevel's
acquisition of Gvanim Cable Television Ltd.
Statements of Cash Flows
We had cash and cash equivalents of 1,025.5 million as of December 31,
1999, an of increase of 1,012.0 million from 13.4 million as of December 31,
1998. Cash and cash equivalents as of December 31, 1998 represents a decrease of
32.0 million from 45.4 million as of December 31, 1997.
<TABLE>
<CAPTION>
For The Years Ended December 31,
------------------------------------------
1999 1998 1997
----------- -------------- ---------
(Euros, in thousands)
<S> <C> <C> <C>
Cash flows from operating activities................... (111,710) 33,126 60,095
Cash flows from investing activities................... (2,872,645) (278,325) (182,574)
Cash flows from financing activities................... 3,996,582 214,145 148,151
Effect of exchange rates on cash....................... (186) (970) (32)
----------- -------------- ---------
Net increase (decrease) in cash and cash equivalents... 1,012,041 (32,024) 25,640
Cash and cash equivalents at beginning of period....... 13,419 45,443 19,803
----------- -------------- ---------
Cash and cash equivalents at end of period............. 1,025,460 13,419 45,443
=========== ============== =========
</TABLE>
Cash Flows from Operating Activities
During the year ended December 31, 1999, net cash flow from operating
activities decreased 144.8 million to a use of 111.7 million from a source of
33.1 million for the comparable period in 1998, a 437.5% decrease. This
decrease was primarily related to increased cash needs for working capital
related to entities acquired during 1999, and start-up costs for Internet/data
and telephony and development activities.
During the year ended December 31, 1998, net cash flow from operating
activities decreased 27.0 million to 33.1 million from 60.1 million for the
comparable period in 1997, a 44.9% decrease. This decrease was primarily
related to increased cash needs for working capital.
Cash Flows from Investing Activities
We used approximately 2,872.6 million of cash in investing activities
during the year ended December 31, 1999, compared to 278.3 million for the year
ended December 31, 1998. During the year ended December 31, 1999, cash was used
principally for acquisitions, including UTH, for 223.0 million, net of cash
acquired, GelreVision for 106.0 million, net of cash acquired, Stjarn for 274.1
million, net of cash acquired, @Entertainment for 692.6 million, net of cash
acquired, A2000 for 213.6 million, net of cash acquired and other acquisitions
totaling 418.0 million, net of cash acquired. Capital expenditures for property,
plant and equipment represented 583.3 million. During the year ended December
31, 1999, we had a net increase in restricted cash of 3.4 million from the
release of 13.7 million of restricted cash upon pay-off of the bridge bank
facility and the escrow of 17.1 million related to the RVC facility for the
acquisition of Time Warner Cable France. During this period we made a net
investment in affiliates of 120.2 million, including our acquisitions of
interests in SBS for 94.8 with direct costs incurred. We also acquired shares in
Primacom AG for 226.4 million and made a net investment in @ Entertainment bonds
of 28.7 million. We received proceeds from the sale of our Hungarian programming
assets of 16.6 million.
50
<PAGE>
We used approximately 278.3 million of cash in investing activities during
the year ended December 31, 1998, compared to 182.6 million for the year ended
December 31, 1997. During the year ended December 31, 1998, cash was used
principally for new acquisitions including the acquisitions of Combivisie for
82.0 million, net of cash acquired and other acquisitions for 13.3 million, net
of cash acquired. Capital expenditures for property, plant and equipment,
including other tangible assets such as system upgrade and new-build activities,
represents 127.8 million. Also during 1998 we acquired an additional 23.3% and
25% interest in Tevel and Melita, respectively, for approximately 77.2 million,
acquired the remaining minority interest in Janco Multicom and sold our
investment in PHL. Both the acquisition of the minority interest in Janco
Multicom, through the release of escrowed funds, and the sale of PHL provided
funds to us which offset our other investing activities.
During the year ended December 31, 1997, cash was used for the acquisition
of Janco and other acquisitions, which represented 58.0 million, net of cash
acquired, and a cash-funded letter of credit to purchase the remaining interest
in Janco Multicom, which represented 21.3 million. Capital expenditures for
property, plant and equipment, including other tangible assets such as system
upgrade and new-build activities, represents 66.1 million. During 1997 we also
acquired United stock, which represents 30.3 million. Other uses of cash include
an increase in restricted cash of 10.8 million and net investments in affiliates
of 1.8 million, which was partially offset by sale of an affiliated company for
5.0 million.
Cash Flows from Financing Activities
We had 3,996.6 million of cash flows from financing activities during the
year ended December 31, 1999. Principal sources of cash include net proceeds
from our initial public offering in February 1999 of 1,206.8 million, gross
proceeds from our offerings in July 1999 and October 1999 of senior notes and
senior discount notes of 2,393.5 million and net proceeds from our secondary
equity offering in October 1999 of 851.5 million. Additional sources of cash
were from long-term and short-term borrowings of 723.9 million and 13.1 million,
respectively. Long-term borrowings include borrowings under the UPC Senior
Revolving Credit Facility of 50.0 million, borrowings under the New Telekabel
Facility of 245.0 million, borrowings under the Mediareseaux Facility of 30.5
million, borrowings under the UPC Senior Credit Facility of 357.5 million and
other borrowings of 54.1 million. Concurrent with the initial public offering,
DIC exercised its option to acquire our shares for proceeds of 40.7 million,
which we used to pay 39.8 million of the DIC Loan. We used proceeds from the
initial public offering to pay 281.3 million of the UPC Senior Revolving Credit
Facility, 50.0 million of the UPC Bridge Bank Facility and 71.4 million of the
United Loan. As part of the acquisition of UTH in February 1999, we also paid a
loan to NUON of 15.0 million. In March 1999, UTH paid off its existing credit
facility of 281.3 million with proceeds from the New Telekabel Facility and
funding from UPC. In July 1999, we paid off the UPC Senior Revolving Credit
Facility of 207.8 million with proceeds from the UPC Senior Credit Facility. In
connection with our acquisition, @Entertainment was required to offer to
repurchase any notes which note holders tendered. @Entertainment repurchased
140.3 million of its notes. We paid down other long-term and short-term loans of
54.2 million, including 18.9 million for the Telekabel Hungary Bridge Facility.
We used proceeds from the sale of our programming assets in Hungary to pay the
Time Warner Note totaling 16.5 million. During the year ended December 31, 1999,
we incurred deferred financing costs of 75.2 million.
We had 214.1 million of cash flows from financing activities during the
year ended December 31, 1998, as compared to 148.2 million for the year ended
December 31, 1997. Principal sources of cash during that period included gross
proceeds from long-term debt, which represented 240.3 million, including
additional borrowings from our senior revolving credit facility and CNBH's major
facility, a loan from our primary partners in the Israeli operating system of
77.2 million and borrowings from United, which represented 79.9 million. We
repaid long-term and short-term borrowings of approximately 114.6 million during
the same period, including 59.5 million of our bridge bank facility and 29.5
million under a KTE bank facility.
Cash flows from financing activities during the year ended December 31,
1997 were 148.2 million. Principal sources of cash from financing activities
during that period included gross proceeds of 636.2 million from short-term and
long-term debt, including 401.1 million under our senior revolving credit
facility, 114.6 million under our bridge bank facility, bank loans and other
obligations of 29.5 million in The Netherlands and other sources primarily
related to the acquisition of Janco and the refinancing of Norkabel, which
represented 91.1 million. During the same period, we repaid approximately 266.8
million of short-term borrowings, including Dutch credit facilities of 174.6
million, short-term debt assumed in the acquisition of Norkabel of 62.8 million,
other short-term credit arrangements of 10.0 million and other long-term debt of
11.23 million. In December 1997, we also repaid 77.3 million of the pay-in-kind
convertible notes and purchased 132.8 million of ordinary shares from Philips as
part of the acquisition of UPC.
51
<PAGE>
Consolidated Capital Expenditures
Since 1995, we have been 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 recently entered into agreements with Philips and General Instruments
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. A2000 has
agreed with the City of Amsterdam to deploy during the year 2000, a significant
number of digital set-top boxes to our existing customers who elect to take our
expanded tier service.
In addition to the network infrastructure and related equipment and capital
resources described above, development of our newer businesses, chello
broadband, Priority Telecom, including CLEC, our digital distribution platform
and DTH, including expansion into Central Europe, requires 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 year ended December 31, 2000 we have budgeted 1,800 million
for capital expenditures, including capital expenditures for several of our new
acquisitions.
Liquidity and Capital Resources
Historically, we have financed our operations and acquisitions primarily
from:
. cash contributed by United upon our formation,
. debt financed at the UPC corporate level and project debt financed at
the operating company level,
. equity raised in our initial public offering and secondary offering,
debt raised in our July 1999, October 1999 and January 2000 offering of
senior notes and senior discount notes, and
. operating cash flow.
We have both well-established and developing systems. In general, we have
used the cash contributed by United upon formation and debt and equity raised 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. Well-established
systems generally have stable positive cable cash flows that are used to
partially offset funding necessary for new product offerings, including
telephony and Internet/data. 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.
We and our consolidated and unconsolidated affiliates had the following
principal long-term and short-term debt facilities outstanding as of December
31, 1999. Debt denominated in currencies other than Euros has been translated to
Euros for the outstanding balance at of December 31, 1999. Several of the debt
facilities listed below have financial covenants and other restrictions which
could limit access to funds. See our notes to consolidated financial statements
for additional detail.
52
<PAGE>
<TABLE>
<CAPTION>
Facility Size or Outstanding
Final Principal At December 31,
Description (Borrower) Maturity Interest Rate Amount 1999
--------------------- -------- ------------- ------ ----
<S> <C> <C> <C> <C>
(in millions) (in millions Euro)
UPC and Consolidated Subsidiaries:
Long-Term Debt
Senior Notes 2007 EURIBOR + 4.80% and 9.92% Euro190.7 190.7
2007 10.875% Euro100.0 100.0
2009 EURIBOR + 4.80% and 9.92% Euro240.2 238.4
2009 11.25% Euro101.0 100.3
2009 EURIBOR + 4.15% and 8.54% Euro754.7 754.7
2009 10.875% Euro300.0 300.0
Senior Discount Notes 2009 12.50% USD735.0 (2) 419.1
2009 13.375% USD478.0(2) 254.2
2009 13.375% Euro191.0(2) 102.2
PCI Notes 2003 9.875% per annum USD130.0(2) 16.4
@Entertainment 1998 Senior Discount Notes 2008 14.5% per annum USD224.2(2) 115.3
@Entertainment 1999 Senior Discount Notes 2009 14.5% per annum USD235.5(2) 140.9
@Entertainment 1999 Series C 2008 7% per annum on USD36.0(2) 11.8
Senior Discount Notes principal at maturity
UPC Senior Credit Facility 2006 EURIBOR/LIBOR + 0.75% to Euro1,000.0 357.5
2.0% per annum
New TeleKabel Facility 2007 EURIBOR + 0.75% to 2.0% per Euro340.0 255.3
annum
CNBH Facility 2008 AIBOR + 0.6% to 1.6% per NLG274.0 121.6
annum
A2000 Group Facilities (1) 2005-2006 AIBOR + 0.7/0.75% or a fixed NLG458.0 207.8
rate advance + 0.7/0.75%
Mediareseaux Facility 2007 LIBOR + 0.75% to 2.0% FFR680.0 44.9
RCF Credit Facility Dec 2005 PIBOR +1.5% FFR252.4 31.7
Rhone Vision Cable Facility June 2002 LIBOR + 1% FFR680.0 61.0
Videopole Facility 2006 6.60% per annum FFR65.0 7.7
DIC Loan 2000 8.0% per annum + 6.0% of USD45.0 39.1
principal amount at maturity
Monor Facility 2006 6.66% / 7.79% USD42.0 33.3
Short-Term Debt
Stjarn Facilities March 2000 NBU + 0.60% / STIBOR + 1.25% SEK521.0 39.1
Stjarn Seller's Note August 2000 8.0% per annum USD 100.0 99.4
A2000 Working Capital Facility (1) 2000 4.85% per annum NLG52.0 20.5
Unconsolidated Affliates:
Tevel Facilities 2007-2010 Fixed rate ranging from NIS977.5 205.8
-5.5% 6.00%
Melita Facility 2007 6.75% - 7.50% Lm14.0 27.5
</TABLE>
(1) Subsequent to December 31, 1999 A2000 replaced these facilities by a new
credit facility. See Note 15.
(2) At maturity.
53
<PAGE>
Restrictions under our July and October Indentures
Our activities are restricted by the covenants of our indentures dated July
30, October 29, 1999 and January 20, 2000, under which senior notes and senior
discount notes were issued. Among other things, our indentures place certain
limitations on its ability, and the ability of its subsidiaries, to borrow
money, issue capital stock, pay dividends in stock or repurchase stock, make
investments, create certain liens, engage in certain transactions with
affiliates, and sell certain assets or merge with or into other companies.
Under the terms of our July and October indentures, if we raise additional
equity, UPC will be permitted to incur additional debt.
Restrictions under United Indentures
As a subsidiary of United, our activities are restricted by the covenants
in United's indenture dated February 5, 1998 and April 29, 1999. The United
indentures generally limit the additional amount of debt that we or our
subsidiaries or controlled affiliates may borrow, or preferred shares that we or
they may issue.
Sources of Capital
We had approximately 1,025.5 million of unrestricted cash and cash
equivalents on hand as of December 31, 1999. In addition, we had additional
borrowing capacity at the corporate and project debt level. In 1999 we raised
over Euro 5.0 billion from a combination of banks, bonds, and equity markets. We
intend to continue accessing these sources of capital, as well as other less
traditional sources including vendor financing, equity partners, and leasing
structures.
On January 20, 2000, we closed an offering of our 11 1/2% senior notes due
2010, our 11 1/4% senior notes due 2010 and our 13 3/4% senior discount notes
due 2010. The offering generated gross proceeds of approximately USD1.6 billion
(Euro1.6 billion). Proceeds from the bond offering will be used for working
capital and other general corporate purposes, including future acquisitions of
businesses and other possible investments, including our acquisition of K&T
Group.
Certain Dutch Property Tax Issues
One of our Dutch systems was assessed for a transfer tax on
immovable property in the amount of 0.8 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, being 6% of the value attributable to our
systems at the date of transfer. Because we own 100% of UPC Nederland, any tax
liabilities assessed against our Dutch 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 the Dutch
tax authorities with us against such tax assessments. We cannot assure that such
lobbying would be successful. In October 1999, the Dutch tax authorities issued
an assessment on the 1995 tax return of one of our subsidiaries. The assessment,
on a taxable amount of approximately 36.3 million, resulted in a tax payable of
approximately 12.7 million. The Dutch tax authorities indicated that this
assessment was issued to reserve the rights of the Dutch tax authorities pending
expiration of time under the statute of limitations. The assessment does not
express an opinion of the Dutch tax authorities on the taxes due and is still
subject to discussion. We filed an appeal against the assessment, to defend our
tax filing position, if necessary.
54
<PAGE>
Inflation and Foreign Currency Exchange 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 DTH and 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. Historically, we and our operating companies have not hedged our
exposure to foreign currency exchange rate operating 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. In connection with our offerings of senior notes in July 1999,
October 1999 and January 2000 we entered into cross-currency swap agreements,
exchanging dollar denominated notes for Euro denominated notes.
The functional currency for our operations generally is the applicable
local currency for each operating company. We have consolidated operations in
countries outside of the European Monetary Union including Norway, Sweden,
Poland, Ireland, Hungary, Romania, Slovak Republic and operations which report
in US dollars. Assets and liabilities of foreign subsidiaries are translated at
the 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 Euros
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 condensed consolidated statements of cash flows will
not agree to changes in the corresponding balances on the condensed 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.
New Accounting Principles
The Financial Accounting Standards Board ("FASB") 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 this statement, accounting for changes in fair value of a
derivative depends on its intended use and designation. In June 1999, the FASB
approved Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of Effective Date of
FASB Statement No. 133" ("SFAS 137"). SFAS 137 amends the effective date of SFAS
133, which will now be effective for our first quarter 2001. We are currently
assessing the effect of this new standard.
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 ("SAB 101") "Views on Selected Revenue
Recognition Issues" which provides the staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB 101
is effective second quarter of 2000. We have evaluated SAB 101 and believe there
is no effect on our revenue recognition policies currently in place.
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 do not expect the introduction of the Euro to affect materially our
operations. However, we do believe the introduction of the Euro will reduce our
exposure to risk from foreign currency and interest rate fluctuations.
Year 2000 Conversion
Our cable television operation is heavily dependent upon computer systems and
other technological devices with embedded chips. Such computer systems and other
technological devices did not experience any problems related to recognizing
dates of January 2000 and thereafter. In all material respects, our multi-
channel television and telephony systems or programming services continued to
operate during the period December 31, 1999 to March 30, 2000.
Year 2000 Program
In response to possible Year 2000 problems, the Board of Directors of United
established a task force to assess the impact that potential Year
2000 problems might have on company-wide operations, including us and our
operating companies, and to implement necessary changes to address such
problems. The task force reported directly to the United Board. In creating a
program to minimize Year 2000 problems, the task force identified certain
critical operations of our business. These critical operations were identified
as service delivery systems, field and headend devices, customer service and
billing systems and corporate management and administrative operations (e.g.,
cash flow, accounts payable and accounts receivable, payroll and building
operations).
The Task Force established a three-phase program to address potential Year
2000 problems:
(a) 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.
(b) 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.
(c) 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.
The task force completed these Phases on substantially all critical operations
prior to year-end 1999. As a result, we believe all material corporate
operations are in compliance for Year 2000 and do not require material
remediation or replacement. During the period December 31, 1999 to March 30,
2000, our operations continue to function in the ordinary course in all material
respects. We experienced no material business interruptions or material
problems, with respect to our operations arising from Year 2000 issues. We know
of no remaining contingencies.
Third Party Dependencies
Although we believed our largest Year 2000 risk was our dependency upon third-
party products, we experienced no Year 2000 issues as a result of such
dependency. To our knowledge, no further significant contingencies exist based
on our dependency upon third party products. We cannot, however, give any
assurance concerning compliance of our equipment because our responses from
third-party vendors have been limited and cannot be independently verified.
Costs of Compliance
The task force is not able to determine 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 adjustments over the past few years
in improving our systems, primarily for reasons other than Year 2000. Because
these upgrades also resulted in Year 2000 compliance, replacement and
remediation costs have been low. Therefore, the task force's estimate of the
cost of the Year 2000 program at Euro4.0 million remains unchanged. Included in
such costs is approximately Euro2.0 million spent on billing systems for Year
2000. The task force accelerated these expenditures to 1999 to insure Year 2000
compliance; otherwise these costs would have been incurred over approximately
two to three years. Such costs do not, however, include internal costs because
we did not separately track the internal costs incurred for the Year 2000
program. The costs incurred for Year 2000 compliance issues did not have a
material financial impact on the Company. We anticipate no additinal significant
expenditures for the Year 2000 program.
55
<PAGE>
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
Investment Portfolio
As of December 31, 1999, UPC has cash and cash equivalents of approximately
1,025.5 million. UPC has invested this cash in highly liquid instruments which
meet high credit quality standards with original maturities at the date of
purchase of less than three months. These investments will be subject to
interest rate risk and foreign exchange fluctations (with respect to amounts
invested in currencies outside the European Monetary Union), however, the
Company does not expect any material losses with respect to its investment
portfolio.
Impact of Foreign Currency Rate Changes
We are exposed to foreign exchange rate fluctuations related to our
monetary assets and liabilities, including those of our operating subsidiaries,
which are denominated in currencies outside of the European Monetary Union. Our
exposure to foreign exchange rate fluctuations also arises from intercompany
charges.
The tables below provides information about UPC's and its consolidated
subsidiaries' foreign currency exchange risk for cash and debt which is
denominated in foreign currencies outside of the European Monetary Union as of
December 31,1999, including cash flows based on the expected repayment date and
related weighted-average interest rates for debt. The information is presented
in Euro equivalents, which is the Company's reporting currency. The
instruments' actual cash flows are denominated in US Dollars, Polish Zloty and
British Pounds.
<TABLE>
<CAPTION>
Amount Outstanding
as of December 31, 1999
---------------------------
Book Value Fair Value
------------ -----------
<S> <C> <C>
Cash and Cash Equivalents
- -------------------------
US Dollar 28,623 28,623
Polish Zloty 4,388 4,388
British Pound 2,000 2,000
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
Amount Outstanding Expected Repayment
as of December 31, 1999 as of December 31,
---------------------------- ----------------------------------------
Book Value Fair Value 2000 2001 2002 2003 2004
---------- ----------- ------ ----- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Dollar Denominated Facilities
DIC Loan 39,121 39,121 39,121 - - - -
8.0% per annum + 6.0% of
principal at maturity
Stjarn Seller's Note 99,378 99,378 99,378 - - - -
8.0% per annum
UPC USD Senior Discount Notes, 2009 419,123 412,691 - - - - -
12.5 % per annum
UPC USD Senior Discount Notes, 2009 254,195 270,765 - - - - -
13.375 % per annum
PCI Notes 16,355 16,355 - - - 16,355 -
9.875% per annum
@Entertainment 115,263 115,263 - - - - -
1998 Senior Discount Notes
14.5% per annum
@Entertainment 140,925 140,925 - - - - -
1999 Senior Discount Notes
14.5% per annum
@Entertainment 11,767 11,767 - - - - -
1999 Series C Senior Discount Notes
7.0% per annum on the principal
amount at maturity
Monor Facility 33,280 33,280 33,280 - - - -
6.6% per annum
</TABLE>
Historically, we and our operating companies have not executed hedge
transactions to reduce the Company's exposure to foreign currency exchange rate
risk related to our. 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. In connection with our
offering of senior notes in July 1999 and October 1999, we entered into cross-
currency swap agreements, exchanging dollar denominated notes for Euro
denominated notes.
Interest Rate Sensitivity
The table below provides information about the our financial instruments
that are sensitive to changes in interest rates as of December 31,1999,
including cash flows based on the expected repayment dates and the related
weighted-average interest rates. The information is presented in Euro
equivalents, which is the Company's reporting currency.
57
<PAGE>
<TABLE>
<CAPTION>
Amount Outstanding Expected Repayment
as of December 31, 1999 as of December 31,
--------------------------------------------------------------------------
Book Value Fair Value 2000 2001 2002 2003 2004
---------- ---------- ----- ------ ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Variable Rate Facilities
- ------------------------
UPC Euro Senior Notes, 2009 754,717 771,141 - - - - -
EURIBOR+4.15% and 8.54%,
average rate in 1999 of 7.15% and 8.54%
UPC 10 7/8% USD Senior Notes due 2007 190,658 205,240 - - - - -
EURIBOR+4.8% and 9.92%,
average rate in 1999 of 8.3% and 9.92%
UPC USD Senior Notes due 2009 238,412 260,450 - - - - -
EURIBOR+4.8% and 9.92%,
average rate in 1999 of 8.3% and 9.92%
UPC Senior Credit Facility 357,482 357,482 - - 58,604 73,256 91,569
EURIBOR/LIBOR + 0.75% to 2.0%,
average rate in 1999 of 5.67%
New Telekabel Facility 255,263 255,263 - - 12,750 25,500 51,000
EURIBOR + 0.75% to 2.0%,
average rate in 1999 of 4.9%
CNBH Facility 121,556 121,556 1,029 8,400 15,600 21,600 22,800
AIBOR + 0.6% to 1.6%
average rate in 1999 of 4.5%
Gelrevision Facility 3,345 3,345 3,345 - - - -
EURIBOR+1.5%,
average rate in 1999 of 6.0%
Mediareseaux Facility 44,912 44,912 - 44,912 - - -
LIBOR +0.75% to 2.0%,
average rate in 1999 of 4.88%
RCF Facility 31,654 31,654 31,654 - - - -
PIBOR + 1.5%,
average rate in 1999 of 4.35%
RVC Facility 60,979 60,979 - 60,979 - - -
LIBOR + 1.0%,
average rate in 1999 of 3.72%
A2000 Facility (1) 207,831 207,831 207,831 - - - -
AIBOR + 0.7% to 0.75%, or
fixed rate advance + 0.7% to 0.75%,
average rate in 1999 of 5.9%
</TABLE>
(1) A2000 replaced these facilities by a new credit facility. See Note 9.
58
<PAGE>
<TABLE>
<CAPTION>
Amount Outstanding Expected Repayment
as of December 31, 1999 as of December 31,
------------------------- -----------------------------------------------
Book Value Fair Value 2000 2001 2002 2003 2004
----------- ----------- -------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Facilities
- ---------------------
DIC Loan 39,121 39,121 39,121 - - - -
8.0% per annum + 6.0% of
principal at maturity
Videopole Facility 7,704 7,704 7,704 - - - -
6.60% per annum
UPC Euro Senior Notes, 2009 300,000 303,750 - - - - -
10.875% per annum
UPC USD Senior Discount Notes, 2009 419,123 412,691 - - - - -
12.5 % per annum
UPC USD Senior Discount Notes, 2009 254,195 270,765 - - - - -
13.375 % per annum
UPC Euro Senior Discount Notes, 2009 102,207 106,005 - - - - -
13.375 % per annum
UPC Euro Senior Notes, 2007 100,000 102,000 - - - - -
10.875 % per annum
UPC Euro Senior Notes, 2007 100,267 103,020 - - - - -
11.25 % per annum
PCI Notes 16,355 16,355 - - - 16,355 -
9.875% per annum
@Entertainment 1998 Senior Discount Notes 115,263 147,028 - - - - -
14.5% per annum
@Entertainment 1999 Senior Discount Notes 140,925 145,099 - - - - -
14.5% per annum
@Entertainment 1999 Series C Senior Discount Notes 11,767 11,767 - - - - -
7.0% per annum on the principal
amount at maturity
Stjarn Seller's Note 99,378 99,378 99,378 - - - -
8.0% per annum
Monor Loan DEM 59 & USD 6.3 33,280 33,280 33,280 - - - -
6.66% per annum
</TABLE>
Equity Prices
As of December 31, 1999, we are exposed to equity price fluctuations
related to our investments in United and Primacom stock, which are classified as
an investments available for sale. Changes in the price of the stock are
reflected as unrealized gains (losses) in our statement of shareholders' equity,
until such time as the stock is sold and any unrealized gain (loss) will be
reflected in the statement of operations.
<TABLE>
<CAPTION>
Fair Value as of
Number of Shares December 31, 1999
----------------------------------------------------
(Stated in thousands of Euros, except share amounts)
<S> <C> <C>
United 5,569,240 390,881
Primacom AG 3,599,858 230,441
</TABLE>
59
<PAGE>
As of December 31, 1999, we are also exposed to equity price fluctuations
related to our debt which is convertible into our ordinary shares. The table
below provides information about our convertible debt, including expected cash
flows and related weighted-average interest rates.
<TABLE>
<CAPTION>
Amount Outstanding Expected Repayment
as of December 31, 1999 as of December 31,
------------------------ ------------------
Convertible Debt Book Value Fair Value 2000 2001
- ---------------- ---------- ---------- ------ -------
<S> <C> <C> <C> <C>
DIC Loan 39,121 39,121 39,121 -
8.0% per annum + 6.0% of
principal at maturity
Stjarn Seller's Note 99,378 99,378 99,378 -
8.0% per annum
</TABLE>
Cross-Currency Swap
Concurrent with the closing of our senior notes offering in July 1999, we
entered into a cross-currency swap, swapping the USD800.0 million, 10 7/8% fixed
rate senior notes into fixed and variable rate Euro notes with a notional amount
totaling Euro754.7 million. One half of the Euro notes (Euro377.35 million) have
a fixed interest rate of 8.54% through August 1, 2004, thereafter switching to a
variable interest rate of EURIBOR + 4.15%. The remaining Euro377.35 million have
a variable interest rate of EURIBOR + 4.15% through August 1, 2009. The cross-
currency swap provides the bank with the right to terminate the swap at fair
value commencing August 1, 2004 with the payment of a call premium equal to the
call premium which we would pay to the USD800.0 million senior note holders if
the notes are called on or after August 1, 2004. We accounted for the cross-
currency swap by bifurcating the instrument into two components, (1) the swap of
USD fixed rate debt for Euro variable and fixed rate debt through August 1, 2004
(the earliest call date) and (2) the residual portion of the cross-currency
swap. The swap of USD fixed rate debt for Euro variable and fixed rate debt is
accounted for as a hedge, and accordingly we carry the Euro denominated debt on
the balance sheet and recognize interest expense according to the provisions of
the Euro debt. The residual portion of the cross-currency swap is marked to fair
value at each reporting period through the statement of operations. The fair
value of the Euro debt at December 31, 1999 is equal to the fair value of the
USD800.0 million senior notes adjusted for the fair value of the swap component,
which was a gain of Euro35.8 million at December 31, 1999. The fair value of the
residual portion of the cross-currency swap was a loss of Euro3.6 million at
December 31, 1999.
October 1999 Senior Notes Offering
Concurrent with the closing of our senior notes in October 1999, we entered
into a cross-currency swap, swapping the USD252.0 million, 11 1/4% fixed rate
senior notes into fixed and variable rate Euro notes with a notional amount
totaling Euro240.2 million. One half of the Euro notes (Euro120.1 million) have
a fixed interest rate of 9.92% through November 1, 2004, thereafter switching to
a variable interest rate of EURIBOR + 4.80%. The remaining Euro120.1 million
have a variable interest rate of EURIBOR + 4.80% through November 1, 2009. The
cross-currency swap provides the bank with the right to terminate the swap at
fair value commencing November 1, 2004 with the payment of a call premium equal
to the call premium which we would pay to the USD252.0 million senior note
holders if the notes are called on or after November 1, 2004. We accounted for
the swap as described above. The fair value of the Euro debt at December 31,
1999 is equal to the fair value of the USD252. million senior notes adjusted for
the fair value of the swap component, which was a gain of Euro1.7 million at
December 31, 1999. The fair value of the residual portion of the cross-currency
swap was a gain of Euro0.5 million at December 31, 1999.
January 2000 Senior Notes Offering
In January 2000, we closed a bond offering consisting of four tranches:
USD300.0 million of senior notes due 2010 with a 11 1/2% coupon; USD600.0
million and Euro200.0 million of senior notes due 2010 with a 11 1/4% coupon;
and USD1,000.0 million aggregate principal amount of ten year 13 3/4% senior
discount notes due 2010. The USD300.0 million of senior notes were swapped into
euro notes with a fixed rate below 10%.
60
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The financial statement schedules and separate financial statements of
significant equity investees required by regulation S-X are filed under Item 14
"Exhibits, Financial Statement Schedules and Reports on Form 8-K".
61
<PAGE>
Report of Independent Public Accountants
To the Shareholders of 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, 1999 and December 31, 1998 (post acquisition -
see Note 1) and the related consolidated statements of operations, shareholders'
equity (deficit) and cash flows for the years ended December 31, 1999, December
31, 1998 (post acquisition - see Note 1) and December 31, 1997 (pre-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 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 audit provides 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 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, 1999 and December 31, 1998 (post-
acquisition - see Note 1) and the results of its operations and its cash flows
for the years ended December 31, 1999, December 31, 1998 (post-acquisition - see
Note 1) and December 31, 1997 (pre-acquisition - see Note 1) in conformity with
accounting principles generally accepted in the United States of America.
ARTHUR ANDERSEN
Amstelveen, The Netherlands,
March 28, 2000.
62
<PAGE>
<TABLE>
<CAPTION>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands of Euros, except share and per share amounts)
As of As of
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS:
Current assets
Cash and cash equivalents........................................................................... 1,025,460 13,419
Restricted cash..................................................................................... 17,135 13,733
Subscriber receivables, net of allowance for doubtful accounts of 16,754 and 4,202, respectively.... 59,860 5,847
Costs to be reimbursed by affiliated companies, net of allowance for doubtful accounts of 63
and 0, respectively........................................................................ 10,500 12,378
Other receivables................................................................................... 84,379 11,728
Inventory........................................................................................... 66,403 10,946
Prepaid expenses and other current assets........................................................... 72,925 7,103
--------- -------
Total current assets.............................................................................. 1,336,662 75,154
Other Investments..................................................................................... 623,341 45,876
Investments in and advances to affiliated companies, accounted for under the equity method, net....... 242,847 223,737
Property, plant and equipment, net of accumulated depreciation of 194,205 and 39,800, respectively.... 1,908,414 273,628
Goodwill and other intangible assets, net of accumulated amortization of 133,667 and 17,747,
respectively...................................................................................... 2,611,413 308,585
Deferred financing costs, net of accumulated amortization of 5,937 and 4,215, respectively............ 77,861 9,830
Other assets.......................................................................................... 1,734 1,507
--------- -------
Total assets....................................................................................... 6,802,272 938,317
========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):
Current liabilities
Accounts payable, including related party payables of 2,785 and 7,111, respectively................. 250,858 64,399
Accrued liabilities................................................................................. 273,141 25,793
Subscriber prepayments and deposits................................................................. 41,208 20,764
Short-term debt..................................................................................... 163,241 28,734
Note payable to shareholder......................................................................... - 79,417
Current portion of long-term debt................................................................... 50,291 51,513
--------- -------
Total current liabilities......................................................................... 778,739 270,620
Long-term debt........................................................................................ 3,903,410 533,078
Deferred taxes........................................................................................ 15,961 3,928
Deferred compensation................................................................................. 52,702 148,588
Other long-term liabilities........................................................................... 19,365 3,994
--------- -------
Total liabilities................................................................................. 4,770,177 960,208
--------- -------
Minority interests in subsidiaries.................................................................... 11,895 11,768
Shareholders' equity (deficit) (As adjusted for stock splits, see Note 10)
Priority stock, 1.0 par value,300 shares authorized, 300 and 0 shares issued, respectively........ - -
Ordinary stock, 1.0 par value,600,000,000 shares authorized, 435,604,497 and 276,856,812
shares issued, respectively...................................................................... 435,605 83,057
Additional paid-in capital.......................................................................... 2,371,951 249,797
Deferred compensation............................................................................... (47,425) -
Treasury stock, at cost, 0 and 27,594,405 shares of ordinary stock, respectively.................... - (50,091)
Accumulated deficit................................................................................. (1,114,219) (329,921)
Other cumulative comprehensive income............................................................... 374,288 13,499
--------- -------
Total shareholders' equity (deficit).............................................................. 2,020,200 (33,659)
--------- -------
Total liabilities and shareholders' equity (deficit).............................................. 6,802,272 938,317
========= =======
</TABLE>
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of January 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
The accompanying notes are an integral part of these consolidated financial
statements.
63
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of Euros, except share and per share amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------
1999 1998 1997
----------------- ------------------ -----------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
<S> <C> <C> <C>
Service and other revenue......................................... 447,501 185,582 153,040
Operating expense................................................. (293,778) (62,830) (53,777)
Selling, general and administrative expense....................... (466,260) (218,587) (54,030)
Depreciation and amortization..................................... (266,070) (85,150) (60,302)
----------- -------- -------
Net operating loss.......................................... (578,607) (180,985) (15,069)
Interest income................................................... 28,064 3,357 2,955
Interest expense.................................................. (185,220) (41,888) (19,057)
Interest expense related party.................................... (1,188) (5,467) (13,043)
Gain on sale of assets............................................ 1,501 - -
Provision for loss on investment related costs.................... - (2,827) (8,571)
Foreign exchange gain (loss) and other income (expense), net...... (22,561) 1,221 (18,634)
----------- ----------- -----------
Net loss before income taxes and other items................ (758,011) (226,589) (71,419)
Share in results of affiliated companies, net..................... (29,760) (28,962) (11,552)
Minority interests in subsidiaries................................ 1,651 523 69
Income tax benefit (expense)...................................... 1,822 (551) 748
----------- ----------- -----------
Net loss.................................................... (784,298) (255,579) (82,154)
=========== =========== ===========
Basic and diluted net loss per ordinary share(1).................. (2.08) (1.03) (0.30)
=========== =========== ===========
Weighted-average number of ordinary shares
outstanding(1).................................................. 377,969,829 247,915,834 275,421,933
=========== =========== ===========
</TABLE>
(1) As adjusted for the stock splits. See Note 10.
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of January 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
The accompanying notes are an integral part of these consolidated financial
statements.
64
<PAGE>
PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (DEFICIT)
(Stated in thousands of Euros, except share amounts)
<TABLE>
<CAPTION>
Additional
Priority Stock Ordinary Stock Paid-In Deferred
------------------ ------------------------- ----------- -------------
Shares Amount Shares (2) Amount Capital Compensation
-------- -------- ------------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996 (Pre-Acquisition)....... - - 276,187,767 82,856 75,577
Contribution by United of additional investment
affiliate....................................... - - - - 5,446 -
Gain on sale of stock by subsidiary................. - - - - 1,486 -
Change in cumulative translation adjustments........ - - - - - -
Net loss for the period from January 1, 1997 to
December 10, 1997............................... - - - - - -
Total comprehensive (loss).......................... - - - - - -
-------- -------- ------------- --------- ----------- -------------
Balances, December 10, 1997 (Pre-Acquisition)....... - - 276,187,767 82,856 82,509
Buyout of shareholder's interest.................... - - - - - -
Reissuance of shares upon conversion of PIK........ -
Notes........................................... - - - - (5,571) -
Application of push-down accounting and............ -
step-up in basis................................ - - - - 233,587 -
Elimination of historical accumulated deficit of
UPC attributable to Philips..................... - - - - (70,193) -
Net loss for the period from December 11, 1997
to December 31, 1997........................... - - - - - -
Total comprehensive income (loss)................... - - - - - -
-------- -------- ------------- --------- ----------- -------------
Balances, December 31, 1997 (Post-Acquistion)....... - - 276,187,767 82,856 240,332
Issuance of shares for acquisition of receivable.... - - 669,045 201 973 -
Contribution by United of additional investment
in affiliate.................................... - - - - 3,530 -
Issuance of convertible debt........................ - - - - 4,962 -
Unrealized gain on investment....................... - - - - - -
Gain on sale of investment.......................... - - - - - -
Change in cumulative translation adjustments........ - - - - - -
Net loss............................................ - - - - - -
Total comprehensive income (loss)................... - - - - - -
-------- -------- ------------- --------- ----------- -------------
Balances, December 31, 1998 (Post-Acquisition)...... - - 276,856,812 83,057 249,797 -
======== ======== ============= ========= =========== =============
<CAPTION>
Other
Cumulative
Comprehensive
Treasury Stock Accumulated Income
---------------------------
Shares (2) Amount Deficit (Loss)(1) Total
------------ ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996 (Pre-Acquisition)....... - - (62,382) 1,030 97,081
Contribution by United of additional investment
affiliate....................................... - - - - 5,446
Gain on sale of stock by subsidiary................. - - - - 1,486
Change in cumulative translation adjustments........ - - - (210) (210)
Net loss for the period from January 1, 1997 to
December 10, 1997............................... - - (78,004) - (78,004)
----------
Total comprehensive (loss).......................... - - - - (78,214)
------------ ----------- ------------- -------------- ==========
Balances, December 10, 1997 (Pre-Acquisition)....... - - (140,386) 820 25,799
Buyout of shareholder's interest.................... (73,135,188) (132,759) - - (132,759)
Reissuance of shares upon conversion of PIK
Notes........................................... 45,540,783 82,668 - - 77,097
Application of push-down accounting and
step-up in basis................................ - - - - 233,587
Elimination of historical accumulated deficit of
UPC attributable to Philips..................... - - 70,193 - -
Net loss for the period from December 11, 1997
to December 31, 1997........................... - - (4,149) - (4,149)
----------
Total comprehensive income (loss)................... - - - - (4,149)
------------ ----------- ------------- -------------- ==========
Balances, December 31, 1997 (Post-Acquistion)....... (27,594,405) (50,091) (74,342) 820 199,575
Issuance of shares for acquisition of receivable.... - - - - 1,174
Contribution by United of additional investment
in affiliate.................................... - - - - 3,530
Issuance of convertible debt........................ - - - - 4,962
Unrealized gain on investment....................... - - - 20,068 20,068
Gain on sale of investment.......................... - - - (829) (829)
Change in cumulative translation adjustments........ - - - (6,560) (6,560)
Net loss............................................ - - (255,579) - (255,579)
----------
Total comprehensive income (loss)................... - - - - (242,900)
------------ ----------- ------------- -------------- ==========
Balances, December 31, 1998 (Post-Acquisition)...... (27,594,405) (50,091) (329,921) 13,499 (33,659)
============ =========== ============= ============== ==========
</TABLE>
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of January 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
The accompanying notes are an integral part of these consolidated financial
statements.
65
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(Stated in thousands of Euros, except share amounts)
<TABLE>
<CAPTION>
Priority Stock Ordinary Stock Additional
----------------- --------------------- Paid-In Deferred
Shares Amount Shares (2) Amount Capital Compensation
------ ------ ---------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1998.................. - - 276,856,812 83,057 249,797 -
Change in par value of
ordinary shares.......................... - - - 193,800 (193,800) -
Issuance of priority shares................. 300 - - - - -
Issuance of ordinary shares
in public offering, net of
offering costs........................... - - 106,205,595 106,206 1,050,462 -
Issuance of ordinary shares
in public offering, net of
offering costs........................... - - 45,000,000 45,000 806,457 -
Issuance of convertible debt................ - - - - 13,162 -
Issuance of ordinary shares
upon exercise of DIC
option................................... - - 4,675,962 4,676 36,005 -
Issuance of ordinary
shares for acquisition
of Videopole............................. - - 2,866,128 2,866 58,298 -
Conversion of United Loan to equity......... - - - - 6,559 -
Issuance of warrants........................ - - - - 29,223 -
Change in stock option
plan due to public
offering................................. - - - - 140,717 (14,418)
Deferred compensation
expense related to
stock options, net....................... - - - - 175,071 (154,598)
Amortization of deferred
compensation............................. - - - - - 121,591
Unrealized gain on
investment............................... - - - - - -
Change in cumulative
translation adjustments................. - - - - - -
Net loss................................... - - - - - -
Total comprehensive income (loss).......... - - - - - -
------ ------- ------------ ------- --------- -------
Balances, December 31, 1999.................. 300 - 435,604,497 435,605 2,371,951 (47,425)
====== ======= ============ ======= ========= =======
Cumulative
Comprehensive
Treasury Accumulated Income
--------------------
Shares (2) Amount Deficit (Loss) (1) Total
----------- ------ ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1998.................. (27,594,405) (50,091) (329,921) 13,499 (33,659)
Change in par value of
ordinary shares.......................... - - - - -
Issuance of priority shares................. - - - - -
Issuance of ordinary shares
in public offering, net of
offering costs........................... 27,594,405 50,091 - - 1,206,759
Issuance of ordinary shares
in public offering, net of
offering costs........................... - - - - 851,457
Issuance of convertible debt................ - - - - 13,162
Issuance of ordinary shares
upon exercise of DIC
option................................... - - - - 40,681
Issuance of ordinary
shares for acquisition - - - - 61,164
of Videopole.............................
Conversion of United Loan to equity......... - - - - 6,559
Issuance of warrants........................ - - - - 29,223
Change in stock option
plan due to public
offering................................. - - - - 126,299
Deferred compensation
expense related to
stock options, net....................... - - - - 20,473
Amortization of deferred
compensation............................. - - - - 121,591
Unrealized gain on
investment............................... - - - 351,026 351,026
Change in cumulative
translation adjustments................. - - - 9,763 9,763
Net loss................................... - - (784,298) - (784,298)
---------
Total comprehensive income (loss).......... - - - - (423,509)
----------- ------- ---------- ------- =========
Balances, December 31, 1999.................. - - (1,114,219) 374,288 2,020,200
=========== ======= ========== ======= =========
</TABLE>
(1) As of December 31, 1997, Other Cumulative Comprehensive Income (Loss)
represents foreign currency translation adjustments. As of December 31, 1998,
Other Cumulative Comprehensive Income represents foreign currency translation
adjustments of (5,740) and unrealized gain on investment of 19,239. As of
December 31, 1999, Other Cumulative Comprehensive Income represents foreign
currency translation adjustments of 4,023 and unrealized gain on investment of
370,265.
(2) As adjusted for the stock splits. The change in nominal value is reflected
in the year ended December 31, 1999. See Note 10.
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of January 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
The accompanying notes are an integral part of these consolidated
financial statements.
66
<PAGE>
<TABLE>
<CAPTION>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of Euros)
For the Years Ended December 31,
1999 1998 1997
----------------- ------------------ -----------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................................... (784,298) (255,579) (82,154)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization.............................. 266,070 85,150 60,302
Amortization of deferred financing costs................... 10,463 4,190 291
Accretion of interest...................................... 37,151 - -
Share in results of affiliated companies, net.............. 29,760 28,962 11,552
Compensation expense related to stock options.............. 192,710 146,402 2,186
Minority interests in subsidiaries......................... (1,651) (523) (69)
Exchange rate differences in loans......................... 41,360 (5,742) 19,713
Gain on sale of investment................................. (6,637) (829) -
Loss on repayment of DIC loan.............................. 2,274 - -
Provision for loss on investment related costs............. - 2,827 8,571
Other...................................................... (5,223) 789 444
Changes in assets and liabilities: -
Increase in receivables.................................. (75,185) (8,957) 10,937
Increase in inventories.................................. (26,260) (3,934) (1,011)
Increase in other non-current assets..................... (18,512) (909) (1,154)
Increase in other current liabilities.................... 217,844 35,028 31,561
Increase (decrease) in deferred taxes and other
long-term liabilities................................. 8,424 6,251 (1,074)
-------- -------- --------
Net cash flows from operating activities....................... (111,710) 33,126 60,095
-------- -------- --------
Cash flows from investing activities:
Restricted cash (deposited) released, net...................... (3,409) (3,650) (10,083)
Purchase of parent company's stock............................. - - (30,316)
Investment in securities, net.................................. (255,133) - -
(Investments in and advances to) repayment from ...............
affiliated companies, net.................................. (120,165) (90,903) (1,756)
Capital expenditures........................................... (583,253) (127,820) (66,084)
New acquisitions, net of cash acquired......................... (1,927,333) (95,312) (58,030)
Release to acquire minority interest in subsidiary............. - 21,328 (21,328)
Sale of affiliated companies................................... 16,648 18,032 5,023
-------- -------- --------
Net cash flows from investing activities....................... (2,872,645) (278,325) (182,574)
-------- -------- --------
Cash flows from financing activities:
Proceeds from initial public offering, net..................... 1,206,759 - -
Proceeds from secondary public offering, net................... 851,457 - -
Proceeds from senior notes..................................... 2,393,451 - -
Proceeds from exercise of DIC option........................... 40,681 - -
Proceeds from short-term borrowings............................ 13,118 13,337 118,237
Proceeds from long-term borrowings............................. 723,915 240,336 518,008
Deferred financing costs....................................... (75,154) (4,548) (11,156)
Repayments of long and short-term borrowings................... (1,069,704) (114,645) (266,791)
(Repayments) borrowings on note payable to shareholder......... (71,442) 79,901 -
Dividends paid to minority shareholder......................... - (236) (78)
Redemption of convetible loans................................. - - (77,311)
Purchase shares from shareholder............................... - - (132,758)
Repayments on short-term note.................................. (16,499) - -
--------- -------- --------
Net cash flows from financing activities....................... 3,996,582 214,145 148,151
--------- -------- --------
Effect of exchange rates on cash............................... (186) (970) (32)
--------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,012,041 (32,024) 25,640
Cash and cash equivalents at beginning of period............... 13,419 45,443 19,803
--------- -------- --------
Cash and cash equivalents at end of period..................... 1,025,460 13,419 45,443
========= ======== ========
</TABLE>
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of January 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
The accompanying notes are an integral part of these consolidated
financial statements.
67
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS (2)
(Stated in thousands of Euros)
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------
1999 1998 1997
------------- ------------- ------------
<S> <C> <C> <C>
Non-cash investing and financing activities:
Unrealized gain (loss) on investment.............. 351,026 19,239 -
============ ============== ===========
Issuance of warrants.............................. 29,223 - -
============ ============== ===========
Purchase Money Note Payable to Sellers............ - 16,663
============ ============== ===========
Stjarn Seller's Note.................................. 93,479 - -
============ ============== ===========
Contribution of net assets of Dutch cable systems.....
to new joint venture.............................. - 117,599 -
============ ============== ===========
Conversion of share holder loan to equity............. 6,559 - -
============ ============== ===========
Shares issued for Videopole acquisition............... 61,164 - -
============ ============== ===========
Supplemental cash flow disclosures:
Cash paid for interest............................ (79,979) (27,574) (16,640)
============ ============== ===========
Cash received for interest........................ 26,085 1,606 1,046
============ ============== ===========
Acquisition of 49% of United Telekabel Holding N.V.:
Property, plant and equipment..................... (185,835) - -
Investments in affiliated companies............... (41,439) - -
Goodwill.......................................... (227,190) - -
Long-term liabilities............................. 214,613 - -
Net current liabilities........................... 4,765 - -
------------ -------------- -----------
Total cash paid............................... (235,086) - -
Cash acquired................................. 12,060 - -
------------ -------------- -----------
(223,026) - -
============ ============== ===========
Acquisition of Dutch Cable assets:
Property, plant and equipment and other assets.... - (48,101) -
Goodwill.......................................... - (33,926) -
------------ -------------- -----------
Total cash paid............................... - (82,027) -
============ ============== ===========
Acquisition of 100% of GelreVision:
Property, plant and equipment..................... (47,754) - -
Goodwill.......................................... (65,083) - -
Long-term liabilities............................. 4,094 - -
Net current liabilities........................... 2,592 - -
------------ -------------- -----------
Total cash paid............................... (106,151) - -
Cash acquired................................. 132 - -
------------ -------------- -----------
(106,019) - -
============ ============== ===========
Acquisition of 100% of Stjarn:
Property, plant and equipment..................... (40,356) - -
Goodwill.......................................... (413,264) - -
Long-term liabilities................................. 30,164 - -
Net current liabilities........................... 52,345 - -
------------ -------------- -----------
Total purchase price.................................. (371,111) - -
Seller's Note......................................... 93,479 - -
------------ -------------- -----------
Total cash paid............................... (277,632) - -
Cash acquired................................. 3,545 - -
------------ -------------- -----------
(274,087) - -
============ ============== ===========
</TABLE>
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of January 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
The accompanying notes are an integral part of these consolidated
financial statements.
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONSOLIDATED STATEMENT OF CASH FLOWS (3)
(Stated in thousands of Euros)
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------
1999 1998 1997
-------------- --------------- ------------
<S> <C> <C> <C>
Acquisition of 100% of @ Entertainment, Inc:
Property, plant and equipment.................. (182,495) - -
Goodwill....................................... (917,983) - -
Other assets................................... (19,847) - -
Net current assets............................. (47,665) - -
Long-term liabilities.......................... 417,279 - -
-------------- --------------- ------------
Total cash paid.............................. (750,711) - -
Cash acquired................................ 58,147 - -
-------------- --------------- ------------
(692,564) - -
============== =============== ============
Acquisition of 50% of A2000:
Property, plant and equipment.................. (90,243) - -
Goodwill....................................... (256,469) - -
Net current liabilities........................ 23,429 - -
Long-term liabilities.......................... 121,446 - -
-------------- ---------------- ------------
(201,837) - -
Receivables assumed.......................... (12,211) - -
Total cash paid.............................. (214.048) - -
Cash acquired................................ 487 - -
-------------- ---------------- ------------
(213.561) - -
============== =============== ============
</TABLE>
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of January 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
The accompanying notes are an integral part of these consolidated financial
statements.
68
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(Monetary amounts stated in thousands of Euros,
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, UnitedGlobalCom, Inc. (formely known as United
International Holdings, Inc. ("United")), 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.
On December 11, 1997, United acquired Philips' 50% interest in UPC (the
"UPC Acquisition"), thereby making it an effectively wholly-owned subsidiary of
United (subject to certain employee equity incentive compensation arrangements).
Through its broadband communications networks in 12 countries in Europe and in
Israel, UPC currently offers communication services in many European countries
through its business lines: cable television, telephone, internet/data services
and direct-to-home ("DTH") and programming.
As part of the UPC Acquisition, (i) UPC purchased the 6,338,302 shares of
Class A Common Stock of United held by Philips (30,313), (ii) United purchased
77,097 of the accreted amount of UPC's PIK Notes and redeemed them for
45,540,783 shares of UPC, (iii) UPC repaid to Philips the remaining 77,311
accreted amount of the PIK Notes (154,195), (iv) United purchased 39,364,812
shares of UPC directly from Philips, and (v) UPC repurchased Philips' remaining
equity interest in UPC (73,135,188 shares). The UPC Acquisition was financed
with proceeds from a long-term revolving credit facility through UPC with a
syndicate of banks (138,494), a bridge bank facility through a subsidiary of UPC
USD111,200 (101,647) and a cash investment by United of 148,568. Approximately
217,360 drawn on the Senior Revolving Credit Facility was used to repay existing
debt of UPC in conjunction with the UPC Acquisition.
United'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 United, 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 United. As of December 11, 1997, the proportional net assets of UPC
acquired by United were recorded at fair market value based on the purchase
price paid by United, along with additional basis differences at the United
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 United'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, 1997.
69
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDAzTED FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
UPC's net asset value at December 10, 1997............................................ 19,758
Cash paid to Philips by UPC for 73,135,188 shares in UPC.............................. (132,758)
Conversion by United of PIK notes acquired from Philips at cost to 45,540,783 of
UPC's shares....................................................................... 77,097
--------
UPC's net asset value prior to application of push down accounting.................... (35,903)
United's proportionate share of UPC's net assets at December 10, 1997................. 9,879
United'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)......... 39,265
Cash paid to Philips by United for 39,364,812 shares in UPC........................... 71,443
Conversion by United of PIK notes acquired from Philips at cost to 45,540,783 of
UPC's shares.......................................................................... 77,097
--------
197,684
--------
Total purchase accounting adjustment 233,587
========
The total purchase accounting adjustments were allocated to UPC's underlying assets as
follows:
Property, plant and equipment......................................................... 8,292
Investment in and advances to affiliates.............................................. 58,874
Goodwill.............................................................................. 166,421
--------
Total................................................................................. 233,587
========
</TABLE>
As a result of the UPC Acquisition and the associated push-down of United
basis on December 11, 1997, the consolidated balance sheets as of December 31,
1999 and 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 898 of new basis depreciation and amortization resulting from push-down
accounting as well as approximately 1,831 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.
The following unaudited pro forma consolidated operating results for the
year ended December 31, 1997 give effect to the UPC Acquisition as if it had
occurred at the beginning of the period 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 date. The pro forma adjustments are based upon currently available
information and upon certain assumptions that management believes are
reasonable.
70
<PAGE>
<TABLE>
<CAPTION>
UNITED PAN-EUROPE COMMUNIATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
For the Year Ended
December 31, 1997
-----------------
Historical Pro Forma (1)
---------- -------------
<S> <C> <C>
Service and other revenue......................................... 153,040 153,040
Operating expense................................................. (53,777) (53,777)
Selling, general and administrative expense....................... (54,030) (54,030)
Depreciation and amortization..................................... (60,302) (72,115)
----------- -----------
Net operating income (loss)....................................... (15,069) (26,882)
Interest income................................................... 2,955 2,955
Interest expense.................................................. (19,057) (37,764)
Interest expense, related party .................................. (13,043) -
Provision for loss on investment related costs.................... (8,571) (8,571)
Foreign exchange loss and other expense........................... (18,634) (14,803)
----------- -----------
Net loss before income taxes and other items...................... (71,419) (85,065)
Share in results of affiliated companies, net..................... (11,552) (15,259)
Minority interests in subsidiaries................................ 69 69
Income tax benefit (expense)...................................... 748 748
----------- -----------
Net loss.......................................................... (82,154) (99,507)
=========== ===========
Basic and diluted net loss per ordinary share..................... (0.30) (0.40)
=========== ===========
Weighted-average number of ordinary shares outstanding............ 274,600,143 248,593,362
=========== ===========
</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 Senior Revolving
Credit Facility and the Bridge Bank 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 Bridge
Bank Facility, net of elimination of historical foreign exchange loss on
the PIK Notes.
71
<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, DTH and programming, Internet/data and
telephony operations as of December 31, 1999:
<TABLE>
<S> <C>
Austria:
Telekabel Group ......................................................... 95.0%
Belgium:
UPC Belgium (formerly Radio Public N.V./S.A.)............................ 100.0%
Czech Republic:
KabelNet................................................................. 100.0%
Kabel Plus............................................................... 94.6%
France:
UPC France (1)........................................................... 99.6%
Hungary:
UPC Magyarorszag (formerly Telekabel Hungary) (2)........................ 79.25%
Monor Communications Group, Inc. ("Monor")............................... 97.14%
Ireland:
Tara Televison Limited ("Tara").......................................... 80.0%
Israel:
Tevel Israel International Communications Ltd. ("Tevel")................. 46.6%
Malta:
Melita Cable TV P.L.C. ("Melita")........................................ 50.0%
The Netherlands:
UPC Nederland (formerly United Telekabel Holding N.V.) (3)............... 100.0%
Priority Telecom N.V..................................................... 100.0%
chello Broadband N.V. ("chello")......................................... 100.0%
UPC Programming B.V. ("UPCtv")........................................... 100.0%
Norway:
UPC Norge AS ("UPC Norge") (formerly Janco Multicom ).................... 100.0%
Poland:
@Entertainment, Inc. ("@Entertainment").................................. 100.0%
Romania:
Eurosat.................................................................. 51.0%
Multicanal Holdings...................................................... 100.0%
Control Cable Ventures................................................... 100.0%
Diplomatic International, srl............................................ 100.0%
Selektronic.............................................................. 100.0%
Slovak Republic:
Trnavatel................................................................ 95.0%
Kabeltel................................................................. 100.0%
UPC Slovensko s r.o. (formerly SKT spol s r.o.).......................... 100.0%
Spain:
Iberian Programming Services ("IPS")..................................... 50.0%
Sweden:
StjarnTVnatet AB ("Stjarn").............................................. 100.0%
United Kingdom:
Xtra Music Ltd........................................................... 41.0%
Other:
SBS Broadcasting SA ("SBS").............................................. 13.3%
PrimaCom................................................................. 18.2%
</TABLE>
(1) The minority shareholder holds warrants giving it the right to purchase
for a nominal amount new shares corresponding to 4.6% of UPC France's
share capital. Accordingly, UPC has a 95% economic interest in UPC
France. Our investment in RCF, Time Warner Cable France and Videopole is
held through UPC France. Subsequent to December 31, 1999, UPC's interest
decreased to 92%. See Note 15.
(2) Subsequent to December 31, 1999, UPC's interest increased to 100%. See
Note 15.
(3) Our investments in GelreVision and A2000 are held through UPC Nederland.
72
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
2. Summary of Significant Accounting Policies
Change in Reporting Currency to the Euro
Effective December 31, 1999, UPC changed its reporting currency to the
Euro. Prior to December 31, 1999, UPC's reporting currency was the Dutch
guilder. As of January 1, 1999, the exchange rate between the Dutch guilder and
the Euro was fixed at 2.20371 Dutch guilders to 1 Euro. UPC has restated its
prior year consolidated financial statements by retroactively applying the fixed
exchange rate of 2.20371 to the Dutch guilder amount previously reported. The
comparative financial statements reported in Euros depict the same trends as
would have been presented if UPC had continued to present its financial
statements in Dutch guilders. The consolidated financial statements of UPC for
periods prior to January 1, 1999 will not be comparable to the financial
statements of other companies that report in Euros and restated the amounts from
a currency other than the Dutch guilder.
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.
In February 1999 and December 1998, UPC acquired telephony and programming
assets from United through the issuance of new shares (see Note 3). As the
acquisitions were between entities under common control, the transactions were
accounted for at historical cost, similar to pooling of interests accounting.
It is generally accepted that, consistent with a pooling-of-interests
accounting, prior period financial statements of the transferee are restated for
all periods in which the transferred operations were part of parent's
consolidated financial statements. Accordingly, we have restated all periods
presented as if UPC had acquired the telephony and programming assets from
United as of the date of United's initial investment.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
UPC and all subsidiaries where it exercises a controlling financial interest
through the ownership of a majority voting interest, except for UTH for the
period from August 1, 1998 through January 30, 1999, 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 the Company's assessment
of probable loss related to overdue accounts receivable. 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.
73
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
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.
Marketable Equity Securities
The Company classifies its investments in marketable equity securities 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. As of December 31, 1999, the Company accounted for its
13.3% investment in SBS under the equity method based on its influence through
board representation. Subsequent to December 31, 1999, the Company increased its
investment in SBS to 23.5%. See Note 15.
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
DTH............................................... 5 years
Office equipment, furniture and fixtures.......... 3 - 8 years
Building 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
74
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
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 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.
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
In accordance with Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees", stock-based compensation is recognized using the
intrinsic value method for the Company's stock option plan and that of its
subsidiary, chello, which results in compensation expense for the difference
between the grant price and the fair market value at each new measurement date.
In addition both the Company and chello have stock-based compensation plans
which are equivalent to stock appreciation rights. Accordingly, variable plan
accounting is used, recognizing compensation expense and deferred compensation
based on the difference between the grant price and the fair market value at
each financial statement date. The Company has adopted the disclosure
requirements of Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation." See Note 10.
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 carry
forwards 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
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.
75
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Basic and Diluted Loss Per Share
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 Euros 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.
On January 1, 1999, eleven of the fifteen member countries of the European
Union fixed their conversion rates between their existing sovereign currencies
and the Euro, eliminating the foreign exchange rate fluctuation exposure of UPC
related to its operating subsidiaries in the eleven countries (includes UPC's
subsidiaries in The Netherlands, Austria, Belgium, France and Spain). UPC's
investments in countries outside the eleven countries which have adopted the
Euro include Norway, Sweden, Poland, Hungary, Romania, Slovak Republic, Czech
Republic, Ireland, Israel, Malta and operations which report in US Dollars.
New Accounting Principles
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. In June 1999, the FASB approved
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and hedging activities-Deferral of the Effective Date of FASB
Statement No. 133" ("SFAS 137"). SFAS 137 amends the effective date of SFAS
133, which will now be effective for our first quarter 2001. The Company is
currently assessing the effect of this new standard.
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 ("SAB 101") "Views on Selected Revenue
Recognition Issues" which provides the staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB 101
is effective second quarter of 2000. The Company has evaluated SAB 101 and
believes there is no effect on the revenue recognition policies currently in
place.
76
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
3. Acquisitions and Dispositions
Combivisie
Effective January 1, 1998, UPC acquired certain assets, including The
Netherlands cable systems of Stichting Combivisie Regio (''Combivisie''), for
82,026. The purchase was funded with a 27,227 draw on the Senior Revolving
Credit Facility and 54,799 of bank financing. Details of the net assets
acquired were as follows:
<TABLE>
<S> <C>
Property, plant and equipment and other assets......... 48,101
Goodwill............................................... 33,926
------
Total cash paid...................................... 82,027
======
</TABLE>
The following unaudited pro forma condensed consolidated operating results
for the year ended December 31, 1997 give effect to the acquisition of
Combivisie as if it had occurred at the beginning of the period 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
December 31, 1997
-------------------------------
Historical Pro Forma
-------------- --------------
<S> <C> <C>
Service and other revenue......... 153,040 166,187
=========== ===========
Net loss.......................... (82,154) (80,384)
=========== ===========
Basic and diluted net loss per
ordinary share................. (0.30) (0.30)
=========== ===========
Weighted-average number of
ordinary shares outstanding.... 275,421,933 275,421,933
=========== ===========
</TABLE>
Telekabel Hungary
On June 29, 1998, UPC acquired Time Warner Entertainment Company's ("TWE")
interest in its Hungarian multi-channel television system assets for USD9,500
(8,794) in cash and a non-interest bearing promissory note in the amount of
USD18,000 (16,663) (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. In March 1999, Time Warner exercised their option
to acquire UPC's interest in the programming assets and TV Max.
United Telekabel Holding N.V.
On August 6, 1998, UPC merged its Dutch cable television systems with those
of NUON, forming a new company, United Telekabel Holding N.V. ("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 held 51% of UTH. The agreement provided UPC with a
call option to acquire an additional interest in UTH and NUON a put option to
require UPC to purchase part of NUON's interest in UTH. The UTH shareholder
agreement provided for essentially joint governance by NUON and UPC on almost
all significant participating and protective type rights, accordingly, because
of joint governance on most significant operating decisions, UPC accounted for
its investment in UTH using the equity method of accounting.
77
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
On February 17, 1999, the Company acquired the remaining 49% of UTH from
NUON (the "NUON Transaction") for 235.1 million. In addition, UPC repaid NUON
and assumed from NUON a 15.1 million subordinated loan, including accrued
interest, dated December 23, 1998, owed by UTH to NUON. The purchase of NUON's
interest and payment of the loan were funded with proceeds from UPC's initial
public offering. Effective February 1, 1999, UPC began consolidating its
investment in UTH. Details of the net assets acquired, based on preliminary
purchase price allocations using information currently available, were as
follows:
<TABLE>
<S> <C>
Property, plant and equipment ........ 185,835
Investments in affiliated companies... 41,439
Goodwill.............................. 227,190
Long-term liabilities................. (214,613)
Net current liabilities............... (4,765)
-----------
Total cash paid....... 235,086
===========
</TABLE>
The following unaudited pro forma condensed consolidated operating results
for the years ended December 31, 1999 and 1998 give effect to the UTH
Transaction and the NUON Transaction as if they both 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 transactions 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, 1999 December 31, 1998
----------------------------- -----------------------------
Historical Pro Forma Historical Pro Forma
------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Service and other revenue.................... 447,501 456,506 185,582 241,587
=========== =========== ============ ===========
Net loss..................................... (784,298) (789,099) (255,579) (273,466)
=========== =========== ============ ===========
Weighted-average number of
ordinary shares outstanding.............. 377,971,563 381,313,555 247,915,834 256,448,573
=========== =========== ============ ===========
Basic and diluted net loss
per ordinary share...................... (2.08) (2.07) (1.03) (1.07)
=========== =========== ============ ===========
</TABLE>
UII
In November 1998, the Company (i) acquired from TINTA its indirect 23.3%
and 25% interests in the Tevel and Melita systems for USD91.5 million (77.8
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 769,062 shares of United held by
UPC, and (iii) sold the 5% interest in Princes Holdings, together with its
existing 20% interest, to TINTA for USD20.5 million (17.4 million). The net
payment of USD71.0 million (60.4 million) to TINTA (USD68.0 million (57.8
million) after closing adjustments) was funded with the proceeds of a USD90.0
million (76.5 million) promissory note made by a subsidiary of the Company to
its primary partners in the Tevel system. See Note 9 - DIC Loan.
Purchase of Certain Telephony and Programming Assets from United
In December 1998, in exchange for 18,991,020 newly-issued ordinary shares
of UPC (as adjusted for UPC's 3:1 stock split in March 2000), United sold to UPC
their:
. 44.75% economic interest in Monor, a traditional telephony and cable
television system in the Monor region of Hungary;
78
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
. 75% interest in Tara, a company providing Irish programming to the U.K.
markets.
In February 1999, in exchange for 14,865,792 newly-issued ordinary shares,
United sold to the Company their approximately 33.5% interest in IPS, a group of
programming entities focusing on the Spanish and Portuguese-speaking markets.
Because these transactions represented an exchange between entities under
common control, the Company has restated its financial statements for all
periods in which the operations of Monor, Tara and IPS were part of United's
consolidated financial statements. See Note 2.
In May 1999, the Company acquired a further 16.5% interest in IPS from
an unaffiliated party for approximately USD7.6 million (7.1 million), increasing
its ownership to 50%.
Acquisition of SKT spol s r.o.
In June 1999, UPC completed the acquisition of SKT spol s r.o., which
operates a cable television system in Bratislava, the capital of the Slovak
Republic. The purchase price was USD43.25 million (41.2 million) and was
accounted for under purchase accounting.
Acquisition of GelreVision
In June 1999, UPC acquired, through UPC Nederland, 100% of the GelreVision
multi-channel television systems in The Netherlands. The Company paid 106.2
million for GelreVision. These systems are contiguous to UPC's A2000 and
TeleKabel Beheer operations. The acquisition was accounted for under purchase
accounting.
Effective June 1, 1999, UPC began consolidating its investment in
GelreVision. Details of the net assets acquired, based on preliminary purchase
price allocations using information currently available, were as follows:
<TABLE>
<S> <C>
Property, plant and equipment ................... 47,754
Goodwill......................................... 65,083
Long-term liabilities............................ (4,094)
Net current liabilities.......................... (2,592)
--------
Total cash paid.................. 106,151
========
</TABLE>
The following unaudited pro forma condensed consolidated results for the
years ended December 31, 1999 and 1998 give effect to the acquisition of
GelreVision 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, 1999 December 31, 1998
--------------------------- ---------------------------
Historical Pro Forma Historical Pro Forma
-------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Service and other revenue..................... 447,050 452,692 185,582 197,641
=========== =========== =========== ===========
Net loss........................................ (784,298) (787,842) (255,579) (264,511)
=========== =========== =========== ===========
Weighted-average number of
ordinary shares outstanding............. 377,969,829 379,480,605 247,915,834 251,768,703
=========== =========== =========== ===========
Basic and diluted net loss
per ordinary share............................ (2.08) (2.08) (1.03) (1.05)
=========== =========== =========== ===========
</TABLE>
79
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Acquisition of Reseaux Cables de France
In June 1999, UPC acquired through UPC France, 95.7% of Reseaux Cables de
France, which operates cable television systems throughout France. The purchase
price was approximately FFR172.0 million (26.2 million) and was accounted for
under purchase accounting. At closing UPC began consolidating RCF, including
its debt, which was 37.7 million.
Acquisition of 13.3% of SBS Broadcasting SA
In July 1999, UPC closed the purchase of approximately 4.8% of SBS for cash
of USD24.3 million (22.7 million). In August 1999, UPC acquired an additional
8.5% of SBS for USD75.9 million (70.2 million), increasing its ownership to
13.3%. UPC's investment in SBS is accounted for under the equity method of
accounting. In February 2000, UPC acquired an additional 10.2% interest in SBS.
In March 2000, UPC announced an offer to tender for the remaining ownership of
SBS. See Note 15.
Acquisition of StjarnTVnatet AB
In July 1999, UPC acquired Stjarn, which operates cable television systems
serving the greater Stockholm area, for a purchase price of USD397.0 million
(371.1 million). USD100.0 million (93.5 million) of the purchase price was paid
in the form of a one year note with interest at 8% per annum and the balance of
the purchase price was paid in cash. Upon maturity of the note, UPC will have
the option to pay the note in either cash or its shares. The Stjarn acquisition
was structured as a purchase of shares of Stjarn's parent holding company, NBS
Nordic Broadband Services AB ("NBS Nordic"). The acquisition was accounted for
under purchase accounting. At closing, effective August 1, 1999, UPC began
consolidating Stjarn, including its debt, which was 78.4 million.
Details of the net assets acquired, based on preliminary purchase price
allocations using information currently available, were as follows:
<TABLE>
<S> <C>
Property, plant and equipment ......... 40,356
Goodwill............................... 413,264
Long-term liabilities.................. .. (30,164)
Net current liabilities................ (52,345)
-----------
Total purchase price................ 371,111
Seller's note....................... (93,479)
-----------
Total cash paid..................... 277,632
===========
</TABLE>
The following unaudited pro forma condensed consolidated results for the
years ended December 31, 1999 and 1998 give effect to the acquisition of Stjarn
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.
NBS Nordic acquired Stjarn on May 6, 1998. As NBS Nordic had no substantial
operations of its own prior to the acquisition of Stjarn, Stjarn is deemed to be
the predecessor to NBS Nordic. The pro forma condensed consolidated results for
the years ended December 31, 1998 include Stjarn, as if NBS Nordic had acquired
Stjarn on January 1, 1998.
80
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
------------------------- ------------------------
Historical Pro Forma Historical Pro Forma
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Service and other revenue......... 447,501 465,227 185,582 214,243
=========== =========== =========== ===========
Net loss.......................... (784,298) (827,897) (255,579) (313,742)
=========== =========== =========== ===========
Weighted-average number of
ordinary shares outstanding... 377,969,829 377,969,829 247,915,834 247,915,834
=========== =========== =========== ===========
Basic and diluted net loss
per ordinary share........... (2.08) (2.19) (1.03) (1.27)
=========== =========== =========== ===========
</TABLE>
Acquisition of @Entertainment
In August 1999, UPC acquired 100% of @Entertainment for USD807.0 million
(750.7 million). The @Entertainment acquisition was accounted for under
purchase accounting. At closing UPC began consolidating @Entertainment,
including its debt, which was 419.3 million.
Effective August 1, 1999, UPC began consolidating its investment in
@Entertainment. Details of the net assets acquired, based on preliminary
purchase price allocations using information currently available, were as
follows:
<TABLE>
<S> <C>
Property, plant and equipment .............. 182,495
Goodwill.................................... 917,983
Other assets................................ 19,847
Net current assets.......................... 47,665
Long-term liabilities....................... (417,279)
---------
Total cash paid............. 750,711
=========
</TABLE>
The following unaudited pro forma condensed consolidated results for the
years ended December 31, 1999 and 1998 give effect to the acquisition of
@Entertainment 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, 1999 December 31, 1998
----------------------------- ---------------------------
Historical Pro Forma Historical Pro Forma
------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Service and other revenue............ 447,501 490,933 185,582 241,471
=========== =========== =========== ===========
Net loss............................. (784,298) (961,956) (255,579) (455,122)
=========== =========== =========== ===========
Weighted-average number of
ordinary shares outstanding...... 377,969,829 377,969,829 247,915,834 247,915,834
=========== =========== =========== ===========
Basic and diluted net loss
per ordinary share.............. (2.08) (2.55) (1.03) (1.84)
=========== =========== =========== ===========
</TABLE>
The consummation of the Company's tender offer of @Entertainment resulted
in a change of control, and as a result, @Entertainment was obligated to offer
to repurchase any @Entertainment senior notes that the note holders put to it at
101% of their principal amount, plus accrued and unpaid interest.
81
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Acquisition of Videopole
In August 1999, UPC acquired, through UPC France, 100% of Videopole, which
operates cable television systems in France. The purchase price of USD135.1
million (126.8 million) was paid half with cash of USD69.9 million (65.6
million) and half with 2,866,128 of UPC's ordinary A shares. The acquisition was
accounted for under purchase accounting. Effective August 1, 1999, UPC began
consolidating its investment in Videopole, including its debt, which was 19.0
million.
Acquisition of Time Warner Cable France
In August 1999, UPC acquired, through UPC France, 100% of Time Warner Cable
France, a company that controls and operates three cable television systems in
the suburbs of Paris and Lyon and in the city of Limoges. The purchase price
was USD71.1 million (66.7 million). Simultaneously with the acquisition of Time
Warner Cable France, UPC acquired an additional 47.62% interest in one of its
operating systems, Rhone Vision Cable, in which Time Warner France had a 49.88%
interest, for 13.6 million, increasing UPC's ownership in this operating system
to 97.5%. The acquisition was accounted for under purchase accounting. Effective
September 1, 1999, UPC began consolidating its investment in Time Warner Cable
France, including its debt, which was 45.7 million.
Acquisition of 50% of A2000
In September 1999, UPC acquired, through UPC Nederland, the remaining 50%
of A2000 that it did not already own for USD229.0 million (214.0 million),
including the assumption of receivables from A2000 of approximately 12.2
million. The acquisition was accounted for under purchase accounting. At closing
UPC began consolidating, A2000 including its debt, which was 237.6 million.
As of September 1, 1999, UPC began consolidating its investment in A2000.
Details of the net assets acquired, based on preliminary purchase price
allocations using information currently available, were as follows:
<TABLE>
<S> <C>
Property, plant and equipment........... 90,243
Goodwill................................ 256,469
Net current liabilities................. (23,429)
Long-term liabilities................... (121,446)
-----------
201,837
Receivables assumed..................... 12,211
-----------
Total cash paid......... 214,048
===========
</TABLE>
The following unaudited pro forma condensed consolidated results for the
year ended December 31, 1999 and 1998 give effect to the acquisition of A2000 as
if it had occurred at the beginning of the periods presented. The following pro
formas reflect UPC's 100% ownership in A2000 for 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.
82
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
------------------------ ------------------------
Historical Pro Forma Historical Pro Forma
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Service and other revenue....... 447,501 494,246 185,582 241,927
=========== ========== ========== ===========
Net loss........................ (784,298) (821,909) (255,579) (276,584)
=========== ========== ========== ===========
Weighted-average number of
ordinary shares outstanding. 377,969,829 377,969,829 247,915,834 247,915,834
=========== =========== =========== ============
Basic and diluted net loss
per ordinary share......... (2.08) (2.17) (1.03) (1.11)
=========== =========== =========== ============
</TABLE>
Acquisition of Kabel Plus
On October 27, 1999, UPC completed the acquisition of a 94.6% interest in
Kabel Plus, which owns and operates cable television systems in the Czech and
Slovak Republics. The purchase price was USD150.0 million (141.9 million). At
closing UPC began consolidating Kabel Plus, including its debt, which was 22.0
million.
Agreement to Acquire Kabel Haarlem B.V.
In August 1999, UPC won a bid to purchase Kabel Haarlem B.V., the
municipality-owned cable television network in Haarlem, for approximately 60.8
million. Kabel Haarlem B.V.'s system is located near Amsterdam. The
acquisition is expected to close during the first quarter of 2000.
Agreement by Tevel to Acquire 35% in Golden Channels
In November 1999, Tevel, a 46.6% investment of UPC, agreed to purchase a
35% economic interest in Golden Channels for USD183.5 million (172.3 million).
Golden Channels is a competitor of Tevel in the Israel market. Its systems,
including Idan, passed approximately 461,347 homes and had approximately 322,945
basic subscribers at December 31, 1998. Close of the acquisition is subject to
regulatory approval and there can be no assurance this acquisition will close.
Acquisition of 48.03% of Monor
In December 1999, UPC acquired an additional 48.03% economic interest in
Monor from its partner, PenneCom B.V., and several small minority shareholders
for approximately USD45.0 million (44.8 million). These transactions increased
UPC's ownership from 49.11% to approximately 97.14%. As of December 31, 1999
Monor is consolidated. Monor's system is located in the Monor region, an area
which borders Budapest in Hungary.
83
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
4. Investments in and Advances to Affiliated Companies, Accounted for Under
the Equity Method
<TABLE>
<CAPTION>
As of December 31, 1999
---------------------------------------------------------------------------------
Investments in Cumulative Cumulative Cumulative
and Advances to Dividends Share in Results of Translation
Affiliated Companies Received Affiliated Companies Adjustments Total
--------------------- ----------- --------------------- ----------- -----
<S> <C> <C> <C> <C> <C>
Tevel................................ 91,126 (5,500) (8,188) 8,179 85,617
Melita................................ 12,699 - 260 669 13,628
Xtra Music............................ 9,120 - (2,830) 465 6,755
IPS................................... 10,065 - 2,137 2,023 14,225
SBS................................... 94,952 - (5,183) 6,685 96,454
Fox Kids Poland....................... 7,171 - - - 7,171
Twoj Styl............................. 10,023 - - - 10,023
Mazowiecki Klub Sportowy Sportow..... 1,669 - - - 1,669
Other, net............................ 7,366 - (62) 1 7,305
---------------- ----------- ------------------- ----------- --------
Total................................. 244,191 (5,500) (13,866) 18,022 242,847
================ ========== =================== ========== =======
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1998
------------------------------------------------------------------------------------
Investments in Cumulative 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 (1)............................ 123,659 - (10,337) - 113,322
Tevel.............................. 86,997 (5,500) (353) (4,339) 76,805
Melita............................. 12,714 - 901 (64) 13,551
Telekabel Hungary..................
Programming (2)................ 11,074 - (3,505) (357) 7,212
Monor.............................. 9,692 - (2,231) (6,732) 729
Xtra Music......................... 4,809 - (484) - 4,325
IPS................................ 4,728 - (153) 1,141 5,716
Other, net......................... 2,073 - 4 - 2,077
-------------------- ---------- ------------------- ----------- ----------
Total.............................. 255,746 (5,500) (16,158) (10,351) 223,737
==================== ========== =================== =========== ==========
</TABLE>
(1) In February 1999, the Company acquired the remaining 49% of UTH and began
consolidating UTH as of February 1, 1999. See Note 3.
(2) Represents the Company's remaining investment in Telekabel Hungary
Programming after the transaction with TWE. In March 1999, UPC sold the
remaining investment in Telekabel Hungary Programming.
84
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
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, 1999 As of December 31, 1998
---------------------------- --------------------------
Basis Accumulated Basis Accumulated
Difference Amortization Difference Amortization
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
UTH................................... - - 1,262 (28)
Tevel (1)............................. 81,500 (7,898) 69,164 (2,874)
Melita (1)............................ 11,600 (1,234) 11,062 (387)
Telekabel Hungary Programming (2)..... - - 6,543 (259)
Monor................................. - - 759 (59)
Xtra Music............................ 5,477 (244) 3,075 (63)
IPS................................... 11,867 (518) 1,900 (73)
SBS................................... 108,401 (2,810) - -
------- ------- ------ ------
Total............................ 218,845 (12,704) 93,765 (3,743)
======= ======= ====== ======
</TABLE>
(1) In November 1998 the Company acquired from TINTA its interests in Tevel and
Melita, and sold its interest in Princes Holdings. See Note 3.
(2) 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>
For the
One Month
Ended
January 31,
1999
------------
<S> <C>
Revenue................................... 9,005
Costs..................................... (5,731)
Depreciation and amortization............. (3,742)
------------
Net operating loss................... (468)
Share in results of affiliated companies.. (2,279)
Financial charges and other............... (2,164)
Income tax (provision) benefit............ 110
------------
Net loss............................. (4,801)
============
</TABLE>
85
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Summary financial information for Tevel is as follows:
<TABLE>
<CAPTION>
As of
December 31,
1998
------------
<S> <C>
Cash......................................................... 27
Tangible fixed assets........................................ 53,751
Other assets................................................. 202,866
---------
Total assets............................................. 256,644
=========
Current liabilities.......................................... 19,138
Notes payable................................................ 9,259
Long-term debt............................................... 193,585
Other long-term liabilities.................................. 12,097
Shareholders' value.......................................... 22,565
---------
Total liabilities and shareholders' value............... 256,644
=========
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenue....................................................... 92,418 84,902
Costs......................................................... (36,492) (41,520)
Depreciation and amortization................................. (21,771) (14,007)
-------- --------
Net operating income..................................... 34,155 29,375
Financial charges, including related party interest...........
expense, and foreign exchange results........................ (29,309) (3,607)
Income taxes and other items.................................. 7,417 (2,607)
Share in results of affiliated companies...................... (5,633) 23
-------- --------
Net income .............................................. 6,630 23,184
======== ========
</TABLE>
86
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Summary financial information for A2000 is as follows:
<TABLE>
<CAPTION>
As of
July 31,
1998 (1)
-------------
<S> <C>
Liquid assets.................................................... 1,060
Other current assets............................................. 24,131
Financial fixed assets........................................... 288
Tangible fixed assets............................................ 154,823
Intangible fixed assets.......................................... 53,454
-------------
Total assets................................................. 233,756
=============
Current liabilities.............................................. 40,101
Provisions....................................................... 684
Long-term debt................................................... 217,362
Shareholders' value.............................................. (24,391)
-------------
Total liabilities and shareholders' value................... 233,756
=============
</TABLE>
<TABLE>
<CAPTION>
For the For the
Seven Months Year
Ended Ended
July 31, December 31,
1998 (1) 1997
------------- ---------------
<S> <C> <C>
Revenue.................................................. 31,614 46,036
Costs.................................................... (23,746) (30,715)
Depreciation and amortization............................ (16,388) (23,073)
------------- ---------------
Net operating loss.................................. (8,520) (7,752)
Financial charges and other.............................. (6,179) (7,601)
Income tax (provision) benefit........................... - 4,459
------------- ---------------
Net income ......................................... (14,699) (10,894)
============= ===============
</TABLE>
(1) Effective August 6, 1998, A2000 was contributed to UTH as part of the UTH
Transaction.
5. Other Investments
Marketable equity securities of parent, at fair value
As a result of the UPC Acquisition, a subsidiary of UPC acquired 6,338,302
United's Class A common shares, valued at fair market value of 30,317 as of
December 11, 1997. In November 1998, UPC used 769,062 shares to acquire an
additional 5% interest in each of Tara and PHL. Accordingly, unrealized gains
recorded in equity totaling approximately 829, were reversed out of equity and
recorded as a realized gain in the consolidated statement of operations. As of
December 31, 1999, the fair value of the remaining 5,569,240 shares was 390,881,
resulting in an unrealized gain of 364,272 as of December 31, 1999.
In September 1999, UPC agreed to form a joint venture with Microsoft and
Liberty Media Corporation. UPC will contribute its 9.8 million Class A common
shares of United that it owns and the other parties will contribute 4.9 million
Class B common shares of United. UPC will have a 50% interest in the new joint
venture and Liberty and Microsoft will share the other 50% and a USD287.0
million (269.6 million) redeemable preferred
87
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
interest in the joint venture to balance out the parties' ownership interests.
UPC, together with Liberty and Microsoft, will evaluate content and distribution
opportunities in Europe. Formation of the joint venture is still pending.
Marketable equity securities of Primacom AG, at fair value
In December 1999, UPC purchased an approximately 18.2% interest in PrimaCom
AG, which owns and operates cable television networks in Germany. The purchase
price for this interest was approximately 226.5 million. As of December 31,
1999, the fair value of the 18.2% interest was 230.5 million, resulting in an
unrealized gain of 4.0 million for the year ended December 31, 1999. Subsequent
to December 31, 1999, UPC increased its interest in PrimaCom AG. See Note 15.
6. Property, Plant and Equipment
<TABLE>
<CAPTION>
As of December 31,
--------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Cable distribution networks.................. 1,523,871 211,501
Subscriber premises equipment and converters. 152,713 61,046
MMDS distribution facilities................. 7,997 6,295
DTH.......................................... 70,775 -
Office equipment, furniture and fixtures..... 71,712 16,016
Buildings and leasehold improvements......... 143,868 5,788
Other........................................ 131,683 12,782
--------------- ---------------
2,102,619 313,428
Accumulated depreciation............ (194,205) (39,800)
--------------- ---------------
Net property, plant and equipment... 1,908,414 273,628
</TABLE> =============== ===============
7. Goodwill and Other Intangible Assets
<TABLE>
<CAPTION>
As of December 31,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
@Entertainment................................ 929,956 -
UPC Nederland................................. 758,962 -
Stjarn........................................ 427,927 -
Telekabel Group............................... 176,694 176,753
Mediareseaux.................................. 117,054 -
UPC Norge..................................... 84,874 75,098
Telekabel Hungary............................. 54,725 44,211
UPC .......................................... 29,223 -
UPC Belgium................................... 20,863 19,145
UPC Slovensko s r.o........................... 22,883 -
Kabel Plus.................................... 84,799 -
Monor......................................... 24,268 -
Other......................................... 12,852 11,125
-------------- -------------
2,745,080 326,332
Accumulated amortization................ (133,667) (17,747)
-------------- -------------
Net goodwill and other intangible assets 2,611,413 308,585
</TABLE> ============== =============
88
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
8. Short-Term Debt
Time Warner Note
Short-term debt as of December 31, 1998 includes the USD18.0 million (15.4
million) non-interest bearing Time Warner Note. Subsequent to December 31, 1998,
the Time Warner Note was cancelled as Time Warner exercised its option to
acquire our 50% interest in HBO Hungary and 100% interest in TV Max.
Telekabel Hungary Facility
In October 1998, Telekabel Hungary entered into a DM65.6 million (33.5
million) six-month secured bridge facility. As of December 31, 1998, the amount
outstanding under this facility totaled DM33.1 million (16.9 million). The
facility was repaid in 1999.
Stjarn Facilities
In December 1998, Stjarn's parent company, which UPC acquired in July 1999,
entered into a SEK521.0 million (59.1 million) loan agreement to refinance
certain debt. The loan consists of a facility A, a medium term loan in the
amount of SEK371.0 million (42.1 million), and a facility B, a short term loan
in the amount of SEK150.0 million (17.0 million). These facilities are secured
by pledges of shares in Stjarn's parent company's subsidary and bears interest
at the rate of STIBOR plus between 0.75% and 1.25%. Originally, the A facility
was to be repaid in eleven semi-annual installments of between SEK41.0 million
(4.7 million) and SEK25.0 million (2.8 million) beginning in May 1999 until
November 2004. The B facility has been fully repaid and replaced by a revolving
credit facility in the amount of SEK150.0 million (17.0 million). The commitment
fee for the revolving facility amounts to 0.30% and is based on the committed
credit amount. Interest on utilized funds amounts to NBU + 0.60% units. The
interest period is three months. The A facility restricts Stjarn's ability to
encumber its present or future assets and to enter into sale-leaseback
agreements. As a result of our acquisition of Stjarn, both the A facility and
the revolving facility will mature on March 31, 2000. UPC is currently in
negotiations to extend this to June 30, 2000.
Stjarn Seller's Note
In connection with the acquisition of Stjarn in July 1999, UPC paid
USD100.0 million (99.4 million) in the form of a one year note ("Stjarn Seller's
Note") with interest at 8% per annum. Upon maturity of the note, UPC will have
the option to pay the note in either cash or UPC shares.
89
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
9. Long-Term Debt
<TABLE>
<CAPTION>
As of December 31,
--------------------
1999 1998
--------- ----------
<S> <C> <C>
UPC Euro Senior Notes due 2009..................... 754,717 -
UPC Euro Senior Notes due 2009..................... 300,000 -
UPC USD Senior Discount Notes due 2009............. 419,123 -
UPC 13.375% USD Senior Discount Notes due 2009..... 254,195 -
UPC 13.375% EURO Senior Discount Notes due 2009 102,207 -
UPC 10 7/8% USD Senior Notes due 2007.............. 190,658 -
UPC 10 7/8% Euro Senior Notes due 2007............. 100,000 -
UPC USD Senior Notes due 2009...................... 238,412 -
UPC 11 1/4% EURO Senior Notes due 2009............. 100,267 -
UPC Senior Credit Facility......................... 357,482 -
UPC Senior Revolving Credit Facility............... - 439,267
UPC Bridge Bank Facility........................... - 51,513
PCI Notes.......................................... 16,355 -
@Entertainment 1998 Senior Discount Notes.......... 115,263 -
@Entertainment 1999 Senior Discount Notes.......... 140,925 -
@Entertainment 1999 Series C Senior Discount Notes. 11,767 -
New Telekabel Facility............................. 255,263 -
CNBH Facility...................................... 121,556 -
A2000 Facilities................................... 207,831 -
Mediareseaux Facility.............................. 44,912 18,307
RCF Facility....................................... 31,654 -
Rhone Vision Cable Credit Facility................. 60,979 -
Videopole Facility................................. 7,704 -
Monor.............................................. 33,280 -
Bank and other loans............................... 89,151 75,504
---------- ----------
3,953,701 584,591
Less current portion...................... (50,291) (51,513)
---------- ----------
Total..................................... 3,903,410 533,078
========== ==========
</TABLE>
UPC October 1999 Senior Notes Offering
In October 1999, UPC closed a private placement bond offering consisting of
six tranches: USD252 million and Euro101.0 million of 11 1/4% senior notes due
2009; USD200.0 million and Euro100.0 million of of 10 7/8% senior notes due 2007
and USD478.0 million and Euro191.0 million aggregate principal amount at
maturity of 13 3/8% senior discount notes due 2009. The senior discount notes
were sold at 52.306% of the face amount, yielding gross proceeds of USD250.0
million and Euro100.0 million. The senior discount notes will accrue, but not
pay, interest until November 2004. UPC has entered into cross-currency swaps,
swapping the USD252.0 million, 11 1/4% coupon into fixed and variable rate Euro
notes with a notional amount totaling Euro240.2 million, and swapping the
USD200.0 million, 10 7/8% coupon into fixed and variable rate Euro notes with a
notional amount totaling Euro190.7 million. Of the Euro240.2 million senior
notes, Euro120.1 million have a fixed interest rate of 9.92% through November 1,
2004, thereafter switching to a variable rate of EURIBOR + 4.80%. The remaining
Euro120.1 million have a variable interest rate of EURIBOR + 4.80%. Of the
Euro190.7 million senior notes, Euro95.35 million have a fixed interest rate of
9.92% through November 1, 2004, thereafter switching to a variable rate of
EURIBOR + 4.80%. The remaining Euro95.35 million have a variable interest of
EURIBOR + 4.80%.
UPC July 1999 Senior Notes Offering
In July 1999, UPC completed an offering of USD800.0 million 10.875% senior
notes due 2009, Euro300.0 million 10.875% senior notes due 2009 and USD735.0
million 12.5% senior discount notes due 2009. Interest payments on the senior
notes will be due semi-annually, commencing February 1, 2000. The senior
discount notes were sold at 54.521% of the face amount, yielding gross proceeds
of USD400.7 million. The senior discount notes will accrue, but not pay,
interest until February 2005. In order to minimize our currency and interest
rate exposure, the USD800.0 million 10.875% senior notes have been swapped into
senior Euro notes totaling
90
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Euro754.7 million. Of the senior Euro notes, Euro377.35 million have a fixed
interest rate of 8.54% through August 1, 2004, thereafter switching to a
variable rate of EURIBOR + 4.15%, for an initial rate of 7.093%. The remaining
Euro377.35 million have a variable interest rate of EURIBOR + 4.15%.
In December 1999, UPC completed a registered exchange offering for its USD
and Euro senior notes and USD senior discount notes initially sold under Rule
144A in July 1999 as a private placement.
PCI Notes
Poland Communications, Inc. ("PCI"), @Entertainment's major operating
subsidiary sold USD130.0 million (129.2 million) (aggregate principal amount of
senior notes ("PCI Notes")), in October 1996. The PCI Notes bear interest at 9
7/8%, payable on May 1 and November 1 of each year. The PCI Notes mature on
November 1, 2003.
The indenture governing the PCI Notes contains covenants limiting, among
other things, @Entertainment's ability to incur additional indebtedness, make
certain payments and distributions, including dividends, issue and sell capital
stock of @Entertainment's subsidiaries, create certain liens, enter into
transactions with its affiliates, invest in non-controlled entities, guarantee
indebtedness by subsidiaries, purchase the notes upon a change of control, pay
dividends and make other payments affecting @Entertainment's subsidiaries,
effect certain consolidations, mergers, and sale of assets and pursue certain
lines of business, and change in its ownership.
Pursuant to the terms of the PCI indenture and upon the change of control,
@Entertainment was required and has offered to repurchase all of the PCI Notes
as a result of UPC's acquisition of @Entertainment. Pursuant to the repurchase
offer, which expired on November 2, 1999, PCI has purchased USD113.2 million
aggregate principal amount of PCI Notes for an aggregate price of USD114.4
million. PCI may seek to repurchase additional PCI notes from time to time.
@Entertainment 1998 Senior Discount Notes
In July 1998, @Entertainment sold 252,000 units, each consisting of 14 1/2%
senior discount notes due 2008 and warrants entitling the warrant holders to
purchase 1,824,514 shares of @Entertainment common stock, generating
approximately USD125.1 million (124.3 million) gross proceeds. In connection
with the acquisition of @Entertainment, UPC acquired all of the existing
warrants. The senior discount notes are unsubordinated and unsecured obligations
of @Entertainment. The senior discount notes will accrete, but not pay, interest
until January 2004. Subsequent to the initial private placement of these notes,
@Entertainment made a registered offer to exchange these notes for its 1998
senior discount notes ("1998 Senior Discount Notes"). The 1998 Senior Discount
Notes have the same terms as the notes for which they were exchanged (except for
certain registration rights), were issued under the same indenture, and are
treated as one series with such notes.
@Entertainment offered to repurchase these notes pursuant to the terms of
the @Entertainment indenture. Pursuant to the repurchase offer, which expired on
November 2, 1999, @Entertainment purchased USD49.1 million (48.8 million)
aggregate principal amount at maturity of @Entertainment 1998 Senior Discount
Notes.
The indenture governing the 1998 Senior Discount Notes has covenants
substantially similar to the PCI indenture.
@Entertainment 1999 Senior Discount Notes
In January 1999, @Entertainment sold 256,800 units consisting of 14 1/2%
senior discount notes due 2009 and warrants to purchase 1,813,665 shares of
@Entertainment's common stock, yielding gross proceeds of approximately USD100.0
million (99.4 million). In connection with the acquisition of @Entertainment,
UPC acquired all of the existing warrants. The senior discount notes will
accrete, but not pay, interest until August 2004. Subsequent to the initial
private placement of these notes, @Entertainment made a registered offer to
exchange these notes for its 1999 senior discount notes ("1999 Senior Discount
Notes"). The 1999 Senior Discount Notes have the same terms as the notes for
which they were exchanged (except for certain registration rights), were issued
under the same indenture, and are treated as one series with such notes.
91
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
@Entertainment offered to repurchase these notes pursuant to the terms of
the @Entertainment indenture. Pursuant to the repurchase offer, which expired on
November 2, 1999, @Entertainment purchased 1999 Senior Discount Notes described
above for an aggregate price of USD26.5 million (26.3 million).
The indenture governing the 1999 Senior Discount Notes has covenants
substantially similar to the PCI indenture.
@Entertainment 1999 Series C Senior Discount Notes
On January 20, 1999, @Entertainment sold USD36.0 million (35.8 million)
7.0% series C senior discount notes ("Series C Senior Discount Notes"),
generating approximately USD9.8 million (9.7 million) of gross proceeds. The
Series C Senior Discount Notes are senior unsecured obligations of
@Entertainment. The senior discount notes will accrete, but not pay, interest
until January 2004.
The indenture governing the Series C Senior Discount Notes has covenants
substantially similar to the PCI indenture.
UPC Senior Credit Facility
On July 27, 1999, a newly formed subsidiary of UPC, UPC Facility B.V.,
Telekabel Wien and UPC Norge, as borrowers, and a syndicate of banks executed a
Loan and Note Issuance Agreement for a Euro1.0 billion multi-currency senior
secured credit facility (the "UPC Senior Credit Facility").
The UPC Senior Credit Facility matures on July 27, 2006 and is comprised of
two tranches. Tranche A is a 750.0 million reducing revolving credit facility.
Tranche B is a 250.0 million term loan facility. The Senior Credit Facility
bears interest at the EURIBOR (for borrowings in Euro) and at the London
Interbank Offered Rate ("LIBOR") (for all other borrowings) plus a margin of
between 0.75% and 2.0% (which margin is at least 1.5% for the first six months
following closing) plus an additional cost of funding calculation. In addition
to repaying the UPC Senior Revolving Credit Facility, proceeds from the UPC
Senior Credit Facility are to be used for general corporate purposes, inter
alia, to fund certain acquisitions, and certain permitted distributions,
including the payment of interest on funds downstreamed from the proceeds of
high yield issues and capital expenditures. Borrowings under the UPC Senior
Credit Facility are limited by financial ratio tests. The UPC Senior Credit
Facility contains provisions that require its immediate repayment, at the option
of the majority banks, if (1) UPC ceases to own more than 50% of, or loses its
ability to exercise control over, UPC Facility B.V., or (2) United ceases to own
more than 50% and loses its ability to control UPC. In addition, the UPC Senior
Credit Facility limits UPC Facility B.V.'s and its subsidiaries' ability to make
acquisitions funded by loan proceeds with the UPC Senior Credit Facility to
400.0 million over the life of the UPC Senior Credit Facility, with a further
limitation on new Eastern European acquisitions. Furthermore, the UPC Senior
Credit Facility contains certain financial covenants and restrictions on UPC
Facility B.V. and most subsidiaries' ability to make dividends or other payments
to UPC, incur indebtedness, dispose of assets, merge and enter into affiliate
transactions. Net proceeds of certain disposals (including sales by UPC of less
than 50% of its current interest in UPC Facility B.V.) are required to be used
to repay the UPC Senior Credit Facility. The UPC Senior Credit Facility does,
however, permit UPC Facility B.V. to upstream payments to UPC after April 1,
2002 for the purpose of servicing interest on the UPC Notes due 2009, if UPC
Facility B.V.'s ratio of senior debt to annualised net operating cash flow is
less than or equal to 4.5:1.0.
The UPC Senior Credit Facility is secured by, among other things, pledges
of the shares of UPC Facility B.V., UPC Norge, UPC Belgium, Cable-Network
Austria Holding B.V. ("CNAH"), Stipdon and Telekabel Hungary. UPC Facility B.V.,
UPC Belgium, CNAH, Stipdon and Telekabel Hungary are guarantors under the UPC
Senior Credit Facility. The collateral and guarantees under the UPC Senior
Credit Facility also secure UPC's liability under any currency and/or interest
rate hedging arrangements entered into in connection with the UPC Notes due
2009, although only Euro100.0 million of the indebtedness represented by such
arrangements is pari passu with the indebtedness under the UPC Senior Credit
Facility.
New TeleKabel Facility
In March 1999, TeleKabel Beheer, a subsidiary of UPC Nederland, replaced
their existing 313.1 million facility with a senior facility and additional
shareholder loans. The senior facility
92
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
consists of a 340.0 million revolving facility to N.V. Telekabel that will
convert to a term facility on December 31, 2001. Of this facility 5.0 million is
in the form of an overdraft facility that is available until December 31, 2007.
Repayment takes place from 2002 to 2007. This facility was used, among other
things, to repay a portion of the NUON facility and for capital expenditures.
The facility bears interest at EURIBOR plus margin between 0.75% and 2.00% based
on leverage multiples tied to N.V. Telekabel's net operating income plus an
additional cost of funding calculator. The facility is secured by, among other
things, a pledge over the shares in N.V. Telekabel and by pledges over shares in
its subsidiaries as well as assets pledges. The facility restricts N.V.
Telekabel's ability to incur additional debt. This facility generally restricts
the payment of dividends and distributions, unless, among other things, we
achieve certain financial ratios. This facility also restricts the amount of
management fees that can be paid to us. The facility is immediately due and
payable if TeleKabel Beheer ceases to own 100% of N.V. TeleKabel or if we cease
to own directly or indirectly more than 50% of TeleKabel Beheer.
CNBH Facility
In February 1998, CNBH, a subsidiary of UPC Nederland, entered into a
secured 113.4 million ten-year term facility with a syndicate of banks led by
Rabobank. In August 1998, this facility was increased to 120.7 million. Most of
the proceeds were used to repay in full a Combivisie bridge facility entered
into in connection with the acquisition of Combivisie and a KTE bank facility.
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 repayment of its facility. The facility restricts the
payment of dividends and distributions and limits the amount of payments to UPC
under our general services agreement. In January 1999, this facility was
increased to 124.3 million. In connection with this facility, UPC entered into a
project support agreement providing, among other things, for UPC to retain
majority ownership of CNBH. In connection with this facility, CNBH also entered
into a 2.3 million ten-year term working capital facility.
A2000 Facilities
In January 1996, A2000, a subsidiary of UPC Nederland, and its wholly-owned
subsidiary Kabeltelevisie Amsterdam entered into bank facilities of 40.8 million
and 170.2 million, respectively. In October 1996, A2000 Hilversum, a wholly-
owned subsidiary of A2000, entered into a bank facility of 20.4 million. These
facilities have between 9 and 10 year terms and interest rates of AIBOR + 0.75%
or AIBOR + 0.7% or fixed-rate (fixed prior to each advance) increased by 0.7% or
0.75% per annum. The facilities also restrict the borrowers from incurring
additional indebtedness and from paying dividends and distributions, subject to
certain exceptions. The A2000 facilities are secured by mortgages and pledges,
including pledges on Kabeltelevisie Amsterdam and A2000 Hilversum and assets.
Subsequent to December 31,1999, A2000 replaced these facilities with a new
facility (see Note 15). In connection with the refinancing, UPC placed 220.0
million cash on deposit with a bank as of December 31, 1999.
Mediareseaux Facility
In July 1998, Mediareseaux, a subsidiary of UPC France, entered into an
103.6 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 18.3 million of this facility for acquisitions. 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 3.0
million overdraft facility, subject to the same terms and conditions as this
facility except for the availability for the tests which are 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. UPC
France is currently negotiating the refinancing of this facility.
93
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
RCF Credit Facility
In 1990, RCF, a subsidiary of UPC France which was acquired in July 1999,
and six of its subsidiaries entered into a 24.4 million credit facility with a
consortium of banks to finance working capital and operations. In 1995 this
facility was amended and extended to 38.5 million to refinance three further
credit facilities entered into by other subsidiaries of RCF. The loan bears an
interest rate of PIBOR (the French interbank offer rate) + 1.5%, payable in
arrears quarterly. The loan has to be repaid in yearly installments of 5.3
million beginning at the end of 1999 until December 31, 2005. Subject to certain
exceptions, the loan restricts RCF and certain of its subsidiaries from
incurring certain additional indebtedness, from having liens on or disposing of
certain assets, from merging or consolidating and from dividend payments. UPC
France is currently negotiating the refinancing of this facility.
Rhone Vision Cable Credit Facility
In July 1996, Rhone Vision Cable, a subsidiary of UPC France, which was
acquired in August 1999, entered into a 103.6 million credit facility to finance
construction and installation of Rhone Vision Cable networks. The facility bears
interest of LIBOR plus 1%, payable quarterly. The repayment of the facility
commences on June 30, 2002, or either on the June 30/th/ or December 31/st/
occurring at least six months after network completion. The facility is secured
by pledges of all the shares and certain assets of Rhone Vision Cable and by a
guarantee given by the Department du Rhone (for up to 50% of any sum due under
the facility). The facility restricts Rhone Vision Cable's ability to secure
additional financing, incur additional debt or transfer shares. Under certain
circumstances, the lenders are entitled to set up a company as successor of
Rhone Vision Cable's position. UPC France is currently negotiating the
refinancing of this facility.
Videopole Credit Facility
In October 1999, Videopole, a subsidiary of UPC France, which was acquired
in August 1999, entered into a 9.9 million credit facility with the Comptoir de
Entrepreneurs to finance the extension of existing network and working capital
operations. The facility must be repaid by December 31, 2000. The facility bears
interest of EURIBOR plus 1.25%. UPC France is currently negotiating the
refinancing of this facility.
DIC Loan
In November 1998, a subsidiary of DIC loaned UPC USD90.0 million (89.4
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 UPC's pledge of its
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, UPC granted the Discount Group, its partner
in the Israeli system, an option to acquire USD90.0 million (89.4 million), plus
accrued interest, of ordinary shares A at a price equal to 90.0% of the initial
public offering price, and, if this option is exercised, another option to
acquire USD45.0 million (44.7 million), plus accrued interest, of ordinary
shares A at a price equal to the 30 day average closing price of our ordinary
shares A on the Stock Market of Amsterdam Exchanges, or the initial public
offering price, whichever is higher. At UPC's initial public offering, DIC
exercised the first option and acquired 4,675,962 ordinary shares A. We repaid
USD45.0 million (44.7 million) of the loan, plus accrued interest, with proceeds
from the option exercise. The other option is exercisable until September 30,
2000.
Monor Facility
In September 1997, Monor entered into a USD42.0 million (41.7 million) term
loan facility with a syndicate of banks led by Credit Lyonnasis. The proceeds of
Monor 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 entered into an interest rate swap
agreement with Credit Lyonnais swapping the floating rate to a fixed rate of
6.66% for German marks and 7.79% for U.S. dollars. Monor's
94
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
facility is secured by a pledge over the shares of Monor and it assets. This
facility limits Monor's ability to encumber its assets, incur indebtedness and
pay dividends.
UPC Senior Revolving Credit Facility
In October 1997, UPC and Norkabel as borrowers entered into a 499,158
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
Telekabel Group also became borrowers under the Senior Revolving Credit
Facility. In July 1999, the outstanding debt under this facility was refinanced
with the new UPC Senior Credit Facility.
Bridge Bank Facility
In connection with the UPC Acquisition, the Company entered into the
consolidated USD125.0 million term Bridge Bank Facility with a syndicate of
banks. In February 1999, UPC repaid the Bridge Bank Facility.
Debt Maturities
The maturities of the Company's long-term debt are as follows:
<TABLE>
<S> <C>
12 months ended December 31, 2000............... 50,291
12 months ended December 31, 2001............... -
12 months ended December 31, 2002............... 60,979
12 months ended December 31, 2003............... 16,355
12 months ended December 31, 2004............... -
Thereafter...................................... 3,826,076
---------
Total.................................. 3,953,701
=========
</TABLE>
95
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
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>
As of December 31, 1999 As of December 31, 1998
----------------------- -----------------------
Fair Market Fair Market
Book Value Value Book Value Value
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
UPC Euro Senior Notes due 2009...................... 754,717 771,141 - -
UPC Euro Senior Notes due 2009...................... 300,000 303,750 - -
UPC USD Senior Discount Notes due 2009.............. 419,123 412,691 - -
UPC 13.375% USD Senior Discount Notes due 2009...... 254,195 270,765 - -
UPC 13.375% EURO Senior Discount Notes due 2009..... 102,207 106,005 - -
UPC 10 7/8% USD Senior Notes due 2007............... 190,658 205,450 - -
UPC 10 7/8% Euro Senior Notes due 2007.............. 100,000 102,000 - -
UPC USD Senior Notes due 2009....................... 238,412 260,450 - -
UPC 11 1/4% EURO Senior Notes due 2009.............. 100,267 103,020 - -
UPC Senior Credit Facility.......................... 357,482 357,482 - -
UPC Senior Revolving Credit Facility................ - - 439,267 439,267
UPC Bridge Bank Facility............................ - - 51,513 51,513
PCI Notes........................................... 16,355 16,355 - -
@Entertainment 1998 Senior Discount Notes........... 115,263 147,028 - -
@Entertainment 1999 Senior Discount Notes........... 140,925 145,099 - -
@Entertainment 1999 Series C Senior Discount Notes. 11,767 11,767 - -
New Telekabel Facility.............................. 255,263 255,263 - -
CNBH Facility....................................... 121,556 121,556 - -
A2000 Facilities.................................... 207,831 207,831 - -
Mediareseaux Facility............................... 44,912 44,912 18,307 18,307
RCF Facility........................................ 31,654 31,654 - -
Rhone Vision Cable Credit Facility.................. 60,979 60,979 - -
Videopole Facility.................................. 7,704 7,704 - -
Monor............................................... 33,280 33,280 - -
Bank and other loans................................ 89,151 89,152 75,584 75,584
---------- ----------- ---------- -----------
3,953,701 4,065,344 584,671 584,671
Less current portion....................... (50,291) (50,291) (51,593) (51,593)
---------- ----------- ---------- -----------
Total...................................... 3,903,410 4,015,043 533,078 533,078
========== =========== ========== ===========
</TABLE>
10. Shareholders' Equity
In February 1999, the Company's shareholders approved an amendment and
restatement of the Company's Articles of Association to effect a 3:2 stock
split and an increase in the number of authorized ordinary shares to
200,000,000, which was legally effected before the Company's initial public
offering. The Company's shareholders also approved the issuance of 100 priority
shares, which have special approval and other rights, to United. In addition,
the Company's Articles of Association were amended and restated to provide for
the issuance of 49,999,900 preference shares A and 200,000,000 preference shares
B. The par value of all shares was set at Euro 0.30 per share.
In July 1999, at the annual shareholders' meeting, the shareholders
approved the amendment of UPC's Articles of Association to authorize 100 million
ordinary shares B with the right to cast 1 vote per share and to increase the
voting rights of the newly re-named ordinary shares A (formerly the ordinary
shares), the priority shares, the preference shares A and the preference shares
B to 100 votes per share. The shareholders also approved an increase in the
nominal value of each issued and outstanding ordinary share A and each priority
share from Euro0.30 to Euro2.0.
At an extraordinary general meeting of shareholders, the shareholders
approved the amendment of UPC's Articles of Association to (i) split each
ordinary share A, priority share, preference share A AND prferred share B (as of
December 31, 1999, with a nominal value of Euro2.00 each) into three shares with
a nominal value of Euro1.00 each, (ii) split each ordinary share B (as of
December 31, 1999, with a nominal value of Euro0.02 each) into three shares with
a nominal value of Euro.01 each and (iii) pay up an amount of Euro145.2 million
on account of the share premium reserve of the company. All share and per share
amounts in the accompanying consolidated financial statements and notes thereto
have been retroactively restated to reflect the share split from 3:1. The change
in nominal value has been restated in the consolidated statement of
shareholder's equity as if it occurred at the beginning of 1999.
96
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
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.
Initial Public Offering
During February 1999, the Company successfully completed an initial public
offering selling 133.8 million shares on the Amsterdam Stock Exchange and Nasdaq
National Market System and raising gross and net proceeds from the offering of
approximately 1,294.6 million and 1,206.8 million respectively.
Secondary Public Offering of Ordinary Shares A
In October 1999, UPC closed the offering of 45,000,000 of its ordinary
shares A. The price was set at Euro59.75 per share, raising gross and net
proceeds from the offering of approximately 896.2 million and 851.3 million
respectively.
United Indenture
As a subsidiary of United, the Company's activities are restricted by the
covenants in United's indenture dated February 5, 1998 (the ''United
Indenture''). The United 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 United Indenture at the time of the borrowing.
The United Indenture also restricts UPC's ability to make certain asset sales
and certain payments. In connection with the initial public offering, UPC has
agreed with United that it will not take any action during the term of the
United Indenture that would result in a breach of the United Indenture
covenants. The maturity date of the United Indenture is February 2008 and
interest becomes payable in cash in February 2003.
Relationship with Microsoft
On January 25, 1999, UPC and Microsoft Corporation signed a letter of
intent providing for the establishment of a technical services relationship. In
connection with this letter of intent, we have agreed to grant Microsoft
warrants to purchase up to 11,400,000 shares (as adjusted for UPC's 3:1 stock
split in March 2000) or ADSs at Microsoft's option, at an exercise price of
USD9.33. Half of these warrants were to be issued at the earlier of April 25,
1999 and the signing of the first definitive agreement. These warrants are
exercisable after one year from issuance for a period of three years. The other
half of the warrants will be issued upon the signing of the first definitive
agreement. This half of the warrants will vest and become exercisable 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 UPC's initial public offering. The first half of the warrants are for
the right to negotiate to license technology from Microsoft under definitive
agreements to be negotiated in the future. UPC recorded as contract acquisition
rights approximately 29.2 million associated with the first half of the
warrants. Such costs are being amortized over the life of the warrants until a
contract life is determined. The accounting for the cost associated with the
second half of the warrants will depend on the ultimate nature of the
performance criteria giving rise to the earn-out of these warrants when such
criteria are established. These warrants will be
97
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
recorded as such at fair value when it is probable the performance criteria will
be met in accordance with EITF Issue No. 96-18 "Accounting for Equity
Instruments that are issued to Other than Employees, or in Conjunction with
selling Goods or Services."
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 18,000,000 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 initial public offering, any certificates issued to employees who have
exercised their options will be convertible into UPC common stock. United
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 in equal monthly increments
over 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, vesting in equal monthly increments. 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 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.
For purposes of the proforma disclosures presented below, UPC has computed
the fair values of all options granted during the year ended December 31, 1999
using the Black-Scholes single-option pricing model and the following weighted-
average assumptions:
<TABLE>
<S> <C>
Risk-free interest rate..................... 5.76%
Expected life............................... 5 years
Expected volatility......................... 56.82%
Expected dividend yield..................... 0%
</TABLE>
The total fair value of options granted was approximately 38.5 million for
the year ended December 31, 1999. This amount is amortized using the straight-
line method over the vesting period of the options. Cumulative compensation
expense recognized in pro forma net income, with respect to options that are
forfeited prior to vesting, is adjusted as a reduction of pro forma compensation
expense in the period of forfeiture. For the year ended December 31, 1999,
stock-based compensation, net of the effect of forfeitures and net of actual
compensation expense recorded in the statement of operations was 5.9 million.
This stock-based compensation had the following proforma effect on net income
(in thousands):
<TABLE>
<CAPTION>
Net Loss
Net Loss Per Share
---------- ----------
<S> <C> <C>
As reported........................... (784,298) (2.08)
---------- ----------
Pro Froma............................. (790,198) (2.09)
========== ==========
</TABLE>
98
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
A summary of stock option activity for the Plan is as follows:
<TABLE>
<CAPTION>
For the Years Ended december 31,
-----------------------------------------------------------------------------------
1999 1998 1997
-------------------------- ------------------------- -------------------------
Weighted- Weighted- Weighted-
Average Average Average
Number Exercise Price Number Exercise Price Number Exercise Price
---------- -------------- ---------- -------------- ---------- --------------
(Euros) (Euros) (Euros)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period.................................. 12,586,500 1.72 6,724,656 1.59 6,901,251 1.59
Granted during period........................ 4,338,000 14.91 7,029,000 1.83 - -
Cancelled during period...................... (266,565) 3.44 (42,156) 1.59 (176,595) 1.59
Exercised during period...................... (5,702,256) 1.65 (1,125,000) 1.59 - -
---------- ----- ---------- ---- --------- ----
Outstanding at end of period................. 10,955,679 6.94 12,586,500 1.72 6,724,656 1.59
========== ===== ========== ==== ========= ====
Exercisable at end of period (1)............. 4,769,595 3.10 12,586,500 1.72 6,724,656 1.59
========== ===== ========== ==== ========= ====
</TABLE>
(1) Includes certificate rights as well as options.
The combined weighted-average fair values and weighted-average exercise
prices of options granted are as follows:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
------------------------------------ -----------------------------------
Fair Exercise Fair Exercise
Exercise Price Number Value Price Number Value Price
-------------- ---------- ------- -------- ---------- ------- --------
(Euros) (Euros)
<S> <C> <C> <C> <C> <C> <C>
Less than market price........... 375,000 8.94 16.12 - - -
Equal to market price............ 3,963,000 8.95 14.79 7,029,000 1.83 1.83
Greater than market price........ - - - - - -
---------- ------ ------- ---------- ------ -------
Total..................... 4,338,000 8.94 14.91 7,029,000 1.83 1.83
========== ======== ======= ========== ====== =======
</TABLE>
The following table summarizes information about stock options outstanding,
vested and exercisable as of December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ----------------------------
Weighted-Average Weighted- Weighted-
Remaining Average Average
Contractual Life Exercise Exercise
Exercise Price Range (Euros) Number (Years) Price Number Price
- ---------------------------- ----------- ---------------- --------- ----------- ---------
(Euros) (Euros)
<S> <C> <C> <C> <C> <C>
1.59 - 2.05......................... 6,681,039 1.19 1.80 4,211,055 1.78
9.67 - 9.67......................... 1,212,000 3.20 9.67 231,000 9.67
11.26 - 11.40......................... 719,640 3.22 11.40 132,483 11.40
15.67 - 18.17......................... 1,171,500 3.56 17.51 130,188 17.46
20.08 - 20.08......................... 1,171,500 3.78 20.08 63,969 20.08
------------ ---------------- -------- ------------ ---------
10,955,679 2.00 6.94 4,769,595 3.10
============ ================ ======== =========== =========
</TABLE>
99
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
The Plan was accounted for as a variable plan prior to the initial public
offering. Accordingly, compensation expense was 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. Thereafter, the Plan has been
accounted for as a fixed plan. Compensation expense of 6,465, 2,186 and 0 was
recognized for the years ended December 31, 1999, December 31, 1998 and December
31, 1997, respectively.
Phantom Stock Option Plan
In March 1998, the Company adopted a phantom stock option plan (the
"Phantom Plan") which permits the grant of phantom stock rights in up to
7,200,000 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 United Class A Common Stock or (iii) freely tradable
shares of its common 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 tradeable shares of stock instead. 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 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 117.4 million and 23.8 million was recognized for the years ended
December 31, 1999 and December 31, 1998 respectively.
A summary of stock option activity for the Phantom Plan is as follows:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
----------------------------- -----------------------------
Weighted- Weighted-
Average Average
Number Exercise Price Number Exercise Price
------------ -------------- ------------ --------------
(Euros) (Euros)
<S> <C> <C> <C> <C>
Outstanding at beginning of period................... 6,172,500 1.91 -- --
Granted during period................................ 585,000 9.67 6,172,500 1.91
Cancelled during period.............................. (1,540,128) 2.00 -- --
Exercised during period.............................. (1,072,809) 1.89 -- --
--------- ----- --------- -----
Outstanding at end of period......................... 4,144,563 2.98 6,172,500 1.91
========= ===== ========= =====
Vested and exercisable at end of period.............. 1,554,813 2.47 1,411,407 1.84
========= ===== ========= =====
</TABLE>
The combined weighted-average fair values and weighted-average exercise
prices of options are as follows:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
----------------------------------- -----------------------------------
Fair Exercise Fair Exercise
Exercise Price Number Value Price Number Value Price
- -------------- ----------- --------- --------- ----------- --------- ---------
(Euros) (Euros) (Euros) (Euros)
<S> <C> <C> <C> <C> <C> <C>
Equal to market price......................... 585,000 9.67 9.67 2,057,500 1.91 1.91
----------- --------- --------- ----------- --------- ---------
Total.................................... 585,000 9.67 9.67 2,057,500 1.91 1.91
=========== ========= ========= =========== ========= =========
</TABLE>
100
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
The following table summarizes information about stock options outstanding
and exercisable as of December 31, 1999:
<TABLE>
<CAPTION>
Weighted-
Average Number of
Remaining Options
Contractual Life Vested and
Exercise Price (Euros) Number (years) Exercisable
- ------------------ --------------- ------------------- -----------------
<S> <C> <C> <C>
1.82.............. 2,606,778 7.60 1,186,092
2.05.............. 952,785 8.74 245,907
9.67.............. 585,000 9.16 122,814
--------- --------- ---------
4,144,563 8.14 1,554,813
========= ========= =========
</TABLE>
Subsidiary Phantom Stock Option Plan
As of June 1998, the Company adopted a phantom stock option plan (the
"chello Phantom Plan"), which permits the grant of phantom stock rights
of chello, a wholly owned subsidiary of the Company. The rights
are granted at an option price equal to the 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 the option must be exercised, in all cases, not more than ten years
from the effective date of grant. The chello Phantom Plan gives the employee the
right to receive payment equal to the difference between the fair market value
of a share (as defined in the chello Phantom Plan) of chello and the option
price for the portion of the rights vested. The Company, at its sole discretion,
may make the required payment in cash, freely tradable shares of United Class A
Common Stock, the Common stock of UPC, which shall be valued at the closing
price on the day before the date the Company makes payment to the option holder,
or the chello's common shares, if they are publicly traded and freely tradable
ordinary shares. 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 chello's stock instead. As of December 31,
1999, the Company had recorded a cumulative compensation expense of 70,804 for
options granted under the chello Plan.
A summary of stock option activity for the chello Phantom Plan is as
follows:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
--------------------------- ---------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Number Price Number Price
------------ ------------ ------------ ------------
(Euros) (Euros)
<S> <C> <C> <C> <C>
Outstanding at beginning of period................ 570,000 4.54 -- --
Granted during period............................. 235,000 4.54 570,000 4.54
Granted during period............................. 1,309,838 9.08 -- --
Granted during period............................. 355,500 --(1) -- --
Cancelled during period........................... (128,542) 4.71 -- --
Exercised during period........................... (11,667) 4.54 -- --
--------- ----- ------- -----
Outstanding at end of period...................... 2,330,129 7.54(2) 570,000 4.54
========= ===== ======= =====
Vested and exercisable at end of period........... 414,913 6.13(2) 70,625 4.54
========= ===== ======= =====
</TABLE>
(1) Of the total number of options granted to date, the option price in respect
of these options in the initial public offering price ("IPO price").
(2) Excluding the shares discussed in (1) above.
The weighted-average remaining contractual life for these options is 8.93
years as of December 31, 1999 (9.47 years as of December 31, 1998).
The following table summarizes information about options rights outstanding,
vested and exercisable as of December 31, 1999 under the chello Phantom Plan:
For the Year Ended
December 31, 1999
---------------------------------------------
Weighted -
Average Number of
Remaining options
Contractual vested and
Number Life (years) Exercisable
------------ ------------ -----------
Exercise price
(Euros)
4.54 669,791 7.05 267,188
9.08 1,304,838 9.56 144,074
-(1) 355,500 9.96 3,651
--------- ----- -------
2,330,129 8.93 414,913
========= ==== =======
(1) The exercise price is to be determined as follows:
Of the total number of options granted to date, the option price in
respect of these options is the initial public offering ("IPO") price.
The chello 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 69,831 was recognized for the year ended December 31,
1999. The Company's estimate of the fair value of its ordinary stock as of
December 31, 1999 utilized in recording compensation expense and deferred
compensation expense under the chello plan was Euro 85.00 per share. Because the
Company will account for the chello Phantom Plan as a variable plan,
compensation expense will continue to be recognized subsequent to December 31,
1999. For each Euro 1 per share increase in the estimate of the fair value per
share of its ordinary stock as of December 31, 1999, over the Euro 85.00 used to
record stock compensation expense as of December 31, 1999, additional stock
compensation expense totalling approximately Euro 904 would have been recognized
in the statement of operations and deferred compensation expense would have
increased by approximately that amount as of that date.
Subsidiary Stock option plan
In June 1999, The Company adopted a stock plan (the "chello Plan"). Under the
chello Plan, the Company's Supervisory Board's may grant stock options to the
Company's employees at fair market value determined by the Company's Supervisory
Board at the time of grant. All options are exercisable upon grant and for the
period of five years. In order to introduce the element of "vesting" of the
options, the chello Plan provides that even though the options are exercisable
immediately, the shares to be issued or options to be granted are deemed to vest
1/48th per month for a four year period from date to grant. If the employee's
employment terminates, other than in case of death, disability or the like, for
a so-called "urgent reason" under Dutch law or for documented and material non-
performance, all unvested options previously exercised must be resold to the
Company at the original purchase price, and all vested options must be
exercised, within 30 days of the termination date. The Supervisory Board may
alter these vesting schedules at its discretion. The chello plan also provides
that, in case of a change in control, the Company has the right to require a
foundation to acquire all of the options outstanding at the per share value
determined in the transaction giving rise to the change in its control.
For purposes of the pro forma disclosures presented below, the Company has
computed the fair value of all options granted during the year ended December
31, 1998 and the year ended December 31, 1999, using the Black-Scholes single-
option pricing model and the following weighted average assumptions: expected
dividend yield of 0%, expected annual standard volatility of 95%, risk-free
interest rate of 3.41% and expected life of 5 years.
The total fair value of options granted under the chello plan was nil for the
year ended to December 31, 1998 and 3,707 for the ended December 31, 1999. These
pro forma amounts are amortized using the straight-line method over the vesting
period of the options. Cumulative compensation expense recognized in pro forma
net income, with respect to options that are forfeitured prior to vesting, is
adjusted as a reduction of pro forma compensation expense in the period of
forfeiture. For the year ended December 31, 1998 and December 31, 1999,
respectively, pro forma stock-based compensation, net of the effect of the
forfeitures was nil and 726, respectively. The stock-based compensation had the
following proforma effect on net income (in thousands):
Net loss
Net loss Per Share
--------- ---------
As reported (784,298) (2.08)
--------- ---------
Pro Forma (785,024) (2.08)
========= =========
101
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
11. Commitments and Contingencies
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 19,365, 3,656 and 3,114 for the years ended December
31, 1999 and, December 31, 1998 and December 31, 1997 respectively.
The Company has operating lease obligations as follows:
<TABLE>
<S> <C>
12 months ended December 31, 2000............................ 84,392
12 months ended December 31, 2001............................ 84,314
12 months ended December 31, 2002............................ 67,112
12 months ended December 31, 2003............................ 49,883
12 months ended December 31, 2004 and thereafter............. 188,826
-------
Total............................................... 474,527
=======
</TABLE>
Satellite Transponder Capacity
UPC has entered into an agreement for the long term lease of satellite
transponder capacity providing service from Europe to Europe, North America and
South America. The term of the agreement is 156 months, with a minimum
aggregate total cost of approximately USD114.0 million (113.3 million) payable
in monthly installments based on capacity used.
Programming, Broadcast and Exhibition Rights
@Entertainment has entered into long-term programming agreements and
agreements for the purchase of certain exhibition or broadcast rights with a
number of third party content providers for its digital direct-to-home ("DTH")
and cable systems. At December 31, 1999, @Entertainment had an aggregate minimum
commitment in relation to these agreements of approximately USD214.0 million
(212.3 million) over the next seven years, approximating USD55.6 million (55.3
million in 2000, USD51.8 million (51.5 million) in 2001, USD48.1 million (47.8
million) in 2002, USD29.9 million (29.7 million) in 2003 and USD28.6 million
(28.4 million) in 2004 and thereafter.
Purchase Commitments
As of December 31, 1999, @Entertainment had an aggregate minimum commitment
toward the purchase of the DTH reception systems from Philips Business
Electronics B.V. of approximately USD60.8 million (60.4 million) over the next
two years.
Litigation and Claims
From time to time, the Company is subject to various claims and suits
arising out of the ordinary course of business. While the ultimate result of all
such matters is not presently determinable, based upon current knowledge and
facts, management does not expect that their resolution will have a material
adverse effect on the Company's consolidated financial position or results of
operations.
102
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
12. Segment and Geographic Information
The Company's business has historically been derived from its video
entertainment segment. This service has been provided in various European
countries where the Company owns and operates its systems. During 1997, the
Company introduced Internet/data and during 1999 the Company introduced
telephony in several of its systems and began to develop its content and
programming business. In August 1999, the Company acquired @Entertainment,
which has a DTH business.
The Company evaluates performance and allocates resources at the geographic
country level and by business line. The key operating performance criteria used
in this evaluation includes revenue growth and operating income before
depreciation, amortization, stock-based compensation expense and management fees
("Adjusted EBITDA"). Management generally considers Adjusted EBITDA to be a
helpful way to measure the performance of cable television operations and
communications companies. Management believes Adjusted EBITDA helps investors
to assess the cash flow from the Company's operations from period to period and
thus to value its 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. The Company is not entirely free to use
the cash represented by its Adjusted EBITDA as it pleases. Several of the
Company's 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 the Company's use of cash. The
Company's presentation of
103
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
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.
A summary of the segment information by geographic area is as follows:
<TABLE>
<CAPTION>
Revenue for the Year Ended December 31, 1999
------------------------------------------------------------------------------
Cable Internet/ DTH and
Television Telephony Data Programming Other Intercompany Total
----------- -------- -------- ----------- ----- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
The Netherlands:
Corporate...................................... - - - - 6,063 - 6,063
UPCtv.......................................... - - - 1,051 - - 1,051
chello......................................... - - 7,323 - - (7,323) -
Priority Telecom............................... - - - - - - -
Operating companies............................ 110,618 30,275 8,144 - 312 - 149,349
Austria........................................... 79,151 6,920 12,865 - - - 98,936
Belgium........................................... 14,875 - 2,360 - - - 17,235
Czech Republic.................................... 7,075 171 - - 985 - 8,231
Norway............................................ 46,492 345 534 - - - 47,371
Hungary .......................................... 33,270 - 118 - - - 33,388
France............................................ 26,015 2,562 558 - - - 29,135
Poland............................................ 25,375 - - 18,637 - (8,318) 35,694
Sweden............................................ 12,605 - 476 - - - 13,081
Other ............................................ 7,872 - - - 95 - 7,967
------- ------ ------ ------ ----- ------- -------
Total ........................................ 363,348 40,273 32,378 19,688 7,455 (15,641) 447,501
======= ====== ====== ====== ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Revenue for the Year Ended December 31, 1998
------------------------------------------------------------------------------
Cable Internet/ DTH and
Television Telephony Data Programming Other Intercompany Total
---------- -------- -------- ----------- ----- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
The Netherlands:
Corporate....................................... - - - - 7,835 - 7,835
UPCtv........................................... - - - - - - -
Chello.......................................... - - - - - - -
Priority Telecom................................ - - - - - - -
Operating companies............................. 14,923 175 - - - - 15,099
Austria............................................ 76,906 66 3,416 - - - 80,388
Belgium............................................ 14,831 - 706 - 1,154 - 16,691
Czech Republic..................................... 4,043 - - - - - 4,043
Norway............................................. 41,879 - 173 - - - 42,052
Hungary ........................................... 12,572 - - - - - 12,572
France............................................. 3,657 - - - - - 3,657
Poland............................................. - - - - - - -
Sweden............................................. - - - - - - -
Other ............................................. 2,635 - - 611 - - 3,245
------- ---- ----- ----- ----- ----- -------
Total ........................................ 171,446 241 4,295 611 8,989 - 185,582
======= ==== ===== ===== ===== ===== =======
</TABLE>
104
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
Revenue for the Year Ended December 31, 1997
----------------------------------------------------------------------------
Cable Internet/ DTH and
Televising Telephony Data Programming Other Intercompany Total
------------- ----------- ---------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
The Netherlands:
Corporate............. - - - - 4,149 - 4,149
UPCtv................. - - - - - - -
chello................ - - - - - - -
Priority Telecom...... - - - - - - -
Operating companies... 9,276 - 103 - - - 9,379
Austria.................. 73,681 - 187 - - - 73,868
Belgium.................. 14,432 - 57 - 3,090 - 17,579
Czech Republic........... 3,400 - - - - - 3,400
Norway................... 41,534 - - - - - 41,534
Hungary ................. - - - - - - -
France................... 1,146 - - - - - 1,146
Poland................... - - - - - - -
Sweden................... - - - - - - -
Other ................... 1,940 - - 45 - - 1,985
------------- ---------- --------- ------------ --------- ----------- ---------
Total ................. 145,409 - 347 45 7,239 - 153,040
============= ========== ========= ============ ========= =========== =========
</TABLE>
<TABLE>
<CAPTION>
Adjusted EBITDA for the Year Ended December 31, 1999
---------------------------------------------------------------------------
Cable Internet/ DTH and
Televising Telephony Data Programming Other Total
------------ ---------- --------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
The Netherlands:
Corporate............. - - - - (40,273) (40,273)
UPCtv................. - - - (15,694) - (15,694)
chello................ - - (58,278) - - (58,278)
Priority Telecom...... - (5,436) - - - (5,436)
Operating companies... 45,270 (13,260) (4,255) - 1,424 29,179
Austria.................. 42,226 (10,776) 220 - - 31,670
Belgium.................. 3,715 (51) (2,078) - - 1,586
Czech Republic........... (1,061) 51 - - 382 (628)
Norway................... 19,485 (6,720) (4,865) - - 7,900
Hungary ................. 11,029 - (245) - - 10,784
France................... (1,659) (5,586) (2,229) - (63) (9,537)
Poland................... (8,797) - - (60,871) (2,835) (72,503)
Sweden................... 4,305 (127) (3,847) - - 331
Other ................... 1,996 (194) (690) - (40) 1,072
------------ ---------- --------- ------------ --------- ----------
Total ................. 116,509 (42,099) (76,267) (76,565) (41,405) (119,827)
============ ========== ========= ============ ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Adjusted EBITDA for the Year Ended December 31, 1998
---------------------------------------------------------------------------
Cable Internet/
Television Telephony Data Programming Other Total
------------ ----------- --------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
The Netherlands:
Corporate............. - - - - (5,225) (5,225)
UPCtv................. - - - (350) - (350)
chello................ - - (7,194) - - (7,194)
Priority Telecom...... - (1,595) - - - (1,595)
Operating companies... 10,024 48 (49) - - 10,023
Austria.................. 40,767 (1,941) (2,064) - - 36,762
Belgium.................. 6,830 - (947) - 136 6,019
Czech Republic........... (856) - - - - (856)
Norway................... 16,633 (680) (957) - - 14,996
Hungary ................. 4,533 - - - - 4,533
France................... (1,132) (1,081) (91) - - (2,304)
Poland................... - - - - - -
Sweden................... - - - - - -
Other ................... (199) - 21 (4,220) 156 (4,242)
------------ ----------- --------- ------------ --------- ----------
Total ................. 76,600 (5,249) (11,281) (4,570) (4,933) 50,567
============ =========== ========= ============ ========= ==========
</TABLE>
105
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
Adjusted EBITDA for the Year Ended December 31, 1997
---------------------------------------------------------------------------
Cable Internet/ DTH and
Television Telephony Data Programming Other Total
---------- --------- -------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
The Netherlands:
Corporate - - - - (5,538) (5,538)
UPCtv..................................... - - - - -
chello.................................... - - - - - -
Priority Telecom.......................... - - - - - -
Operating companies....................... 5,668 - 103 - - 5,771
Austria................................... 36,518. - 15 - - 36,533
Belgium................................... 5,914. - 56 - 859 6,829
Czech Republic............................ (3,054) - - - - (3,054)
Norway.................................... 16,757 - - - - 16,757
Hungary .................................. - - - - - -
France.................................... (2,103) - - - - (2,103)
Poland.................................... - - - - - -
Sweden.................................... - - - - - -
Other .................................... 455 - - (5,233) (2,999) (7,777)
------ ---- ---- ------ ------ ------
Total .................................. 60,155 - 174 (5,233) (7,678) 47,418
====== ==== ==== ====== ====== ======
</TABLE>
Following is a reconciliation of Adjusted EBITDA to UPC's net loss before
income taxes:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------
1999 1998 1997
--------------------------------------
<S> <C> <C> <C>
Adjusted EBITDA.......................................... (119,827) 50,567 47,419
Depreciation and amortization............................ (266,070) (85,150) (60,302)
Stock-based compensation ................................ (192,710) (146,402) (2,186)
--------- --------- --------
Net operating loss................................. (578,607) (180,985) (15,069)
Interest income.......................................... 28,064 3,357 2,955
Interest expense......................................... (186,408) (47,355) (32,100)
Provision for loss on investment related costs........... - (2,827) (8,571)
Gain on sale of assets................................... 1,501 - -
Foreign exchange gain (loss) and other expense, net...... (22,561) 1,221 (18,634)
--------- --------- --------
Net loss before income taxes and other items....... (758,011) (226,589) (71,419)
Share in results of affiliated companies, net............ (29,760) (28,962) (11,552)
Minority interests in subsidiaries....................... 1,651 523 69
--------- --------- --------
Net loss before income tax benefit (expense)....... (786,120) (255,028) (82,902)
========= ========= ========
</TABLE>
106
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
Investments in Affiliates Long-Lived Assets Capex Total Assets
-------------------------- --------------------- ---------------------- ------------------------
December 31, December 31, December 31, December 31,
-------------------------- --------------------- ---------------------- ------------------------
1999 1998 1999 1998 1999 1998 1999 1998
------------ ------------ ---------- --------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Netherlands:
Corporate.............. 188,930 223,737 31,612 2,346 31,758 5,788 1,932,378 257,413
UPCtv.................. 2,728 - 20,492 - 20,206 25 28,427 48
Chello................. - - 21,482 2,079 25,047 2,082 36,609 3,003
Priority Telecom....... - - 444 14 430 24 4,164 79
Operating companies.... 31,276 - 726,812 - 189,673 11,174 1,526,945 -
Austria.................... - - 178,534 120,542 89,779 39,081 354,120 292,593
Belgium.................... - - 23,042 23,635 8,047 10,162 47,528 49,612
Czech Republic............. 549 - 79,847 7,493 2,373 472 158,812 9,861
Norway..................... - - 99,691 54,319 54,403 23,332 243,451 187,882
Hungary ................... 92 - 111,997 22,974 36,876 6,537 214,108 74,547
France..................... - - 317,467 34,587 67,321 26,009 495,673 43,818
Poland..................... 19,272 - 217,423 - 40,450 - 1,211,373 -
Sweden..................... - - 47,882 - 11,903 - 471,944 -
Other ..................... - - 31,689 5,638 4,987 3,134 76,740 19,461
----------- ----------- ----------- -------- ---------- ---------- ---------- ------------
Total ................... 242,847 223,737 1,908,414 273,627 583,253 127,820 6,802,272 938,317
=========== =========== =========== ======== ========== ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
Depreciation and Amortization
-----------------------------------------
For the Years Ended December 31,
-----------------------------------------
1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
The Netherlands:
Corporate.............. (1,542) (4,301) (1,484)
UPCtv.................. (2,435) - -
chello................. (3,678) - -
Priority Telecom....... (1,401) (10) -
Operating companies.... (86,664) (6,259) (3,799)
Austria.................... (40,035) (35,069) (22,774)
Belgium.................... (9,157) (9,296) (6,467)
Czech Republic............. (3,837) (3,495) (2,483)
Norway..................... (30,873) (20,564) (21,647)
Hungary ................... (7,999) (3,052) -
France..................... (21,071) (1,874) (643)
Poland..................... (37,731) - -
Sweden..................... (14,189) - -
Other ..................... (5,458) (1,230) (1,005)
------------ ------------ -------------
Total ................... (266,070) (85,150) (60,302)
============ ============ =============
</TABLE>
107
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
13. Income Taxes
To the extent UPC qualifies as a Dutch holding company, it 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.
108
<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,
-------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
Deferred Tax Assets:
Tax net operating loss carryforward...................... 275,470 62,183
Stock-based compensation................................. 35,888 6,188
Accrued interest......................................... 14,330 --
Foreign currency effects................................. 22,969 --
Other.................................................... 14,183 365
--------------- --------------
Total deferred tax assets........................... 362,840 68,736
Valuation allowance...................................... (354,236) (61,508)
--------------- --------------
Deferred tax assets, net of valuation allowance..... 8,604 7,228
--------------- --------------
Deferred Tax Liabilities:
Intangible assets........................................ (18,565) (5,019)
Property, plant and equipment, net....................... (6,000) (6,137)
--------------- --------------
Total deferred tax liabilities...................... (24,565) (11,156)
--------------- --------------
Deferred tax liabilities, net....................... (15,961) (3,928)
=============== ==============
</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 Years Ended December 31,
-----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Expected income tax benefit at the
Dutch statutory rate of 35%............... (265,304) (79,306) (24,996)
Tax effect of permanent and other
differences:
Change in valuation allowance........... 244,910 23,357 12,466
Non-deductible expenses................. 65,162 53,512 8,886
International rate differences.......... 783 1,597 1,467
Provision on investment................. -- 989 3,000
Capitalized costs....................... (47,063) -- --
Other................................... (310) (700) (75)
---------- ---------- ----------
Total income tax benefit..... (1,822) (551) 748
========== ========== ==========
</TABLE>
The benefit of tax loss carry forwards arise primarily in The Netherlands,
Czech Republic, Poland and Austria. The benefit of the tax loss carry forwards
of Poland and Czech Republic aggregating to 99,598 as of December 31, 1999 will
expire during the years 2000 - 2004. The benefit of the tax loss carry forwards
of The Netherlands and Austria, aggregating to 186,645 as of December 31, 1999
have no expiration date.
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 has been 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.
109
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
14. Related Party
Agreement with United
In February 1999, United and the Company became parties to a Management
Service Agreement (the "United Service Agreement"), with an initial term through
2009, pursuant to which United 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
United Service Agreement, the Company will pay United a fixed amount each month.
After the first year of the United Service Agreement, the fixed amount may be
adjusted from time to time by United to allocate corporate level expenses among
United's operating companies, including UPC, taking into account the relative
size of the operating companies and their estimated use of United resources. In
addition, UPC will continue to reimburse United for costs incurred by United
which are directly attributable to UPC. The United Service Agreement also
specifies the basis upon which United may second certain of its employees to
UPC. The Company generally is responsible for all costs incurred by United with
respect to any seconded employee's employment and severance.
Historically, UPC has been self sufficient from a corporate operations
perspective and required nominal assistance from its shareholders, Philips and
United, and solely from United subsequent to December 11, 1997. United and
Philips did not allocate any indirect overhead type costs to the Company from
inception through December 11, 1997 and United did not allocate any such costs
subsequent to December 11, 1997 through December 31, 1998. The only costs
historically charged to UPC were direct costs incurred by Philips and United on
UPC's behalf. Such costs were charged at cost. In connection with the
Company's initial public offering, United and the Company executed the United
Service Agreement which will provide for a fixed allocation in addition to
direct out-of-pocket reimbursements.
Related Party Payables
The Company classifies any unpaid invoices related to seconded employee
expenses or other expenses incurred by United 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, 1999
and 1998, the receivable from employees, including accrued interest totaled
12,115 and 8,702, respectively.
Note Payable to Shareholder
UPC entered into two promissory notes with United of USD100.0 million
(March 1998) and USD20.0 million (July 1998). UPC has borrowed USD70.0 million
and USD16.0 million, respectively, under these two notes. In 1999, UPC repaid
USD60.0 million (54.5 million) of the indebtedness outstanding under the
USD100.0 million note and all of the indebtedness outstanding under the USD20.0
million note with proceeds form the initial public offering. In December 1999,
the remaining balance, 6.8 million, including accrued interest, of the United
loan was converted into equity.
Acquisitions of Interest in PHL and TARA
In November 1998, UPC 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
shares 769,062 of United Class A Common Stock that we acquired as part of the
UPC Acquisition.
110
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Eastern European Transaction
UPC has agreed to sell 3% of its interest in its Eastern European
operations to Nimrod Kovacs for a purchase price based on its investment in
these interest at historical cost plus 12% interest thereon from the time of
investment throught the date of closing. The amount of Mr. Kovak's required
investment is being revised due to the recent Eastern European acquisitions. Mr.
Kovacs is a member of UPC's Board of Management, and UPC's Executive Chairman,
UPC Central Europe.
15. Subsequent Events
January 2000 Offering of Senior Notes and Senior Discount Notes
On January 20, 2000, UPC closed its USD1.6 billion equivalent bond
offering. The offering consists of four tranches: USD600.0 million and 200.0
million of ten year senior notes due 2010 with a 11-1/4% coupon; USD300 million
of ten year senior notes due 2010 with a coupon of 11-1/2%; and USD1,000 million
aggregate principal amount of ten year 13-3/4% senior discount notes due 2010.
The senior discount notes were sold at 51.224% of the face amount yielding gross
proceeds of USD512 million and will accrue but not pay interest until 2005.
Total gross proceeds from the sale of the senior notes and senior discount notes
are approximately USD1.6 billion.
Refinancing of A2000 Facilities
In January 1999, A2000 refinanced its existing bank facilities with a one
year term-loan bridge facility of 231.4 million and a one year revolving credit
bridge facility 49.9 million, subjected to certain availability covenants. The
facilities are secured by mortgages and pledges, including pledges on A2000
holding, Kabeltelevisie Amsterdam and A2000 Hilversum. The borrowers are
restricted from incurring additional indebtedness and from paying dividends and
distributions, subject to certain exceptions. These facilities bear an annual
interest rate of Euribor + 1.0%. The facilities expire in December 2000.
Acquisition of Intercomm France Holding S.A.
In February 2000, UPC aquired Intercomm France Holding S.A. (a wholly owned
subsidiary of Intercomm Holdings, L.L.C.). At the time of closing Intercomm
France is expected to have around 500,000 franchise homes of which 80,000 have
been built out. Over 400,000 of Intercomm's homes are located close to a
number of the properties acquired by UPC in its recent purchase of the Reseaux
Cables de France and Videopole networks, thus facilitating the roll-out of UPC's
triple play strategy in those areas. UPC funded the acquisition with 36.0
million cash and shares in UPC France. Following the transaction, UPC controls
92% of the combined entities with Intercomm Holdings LLC owning the remaining
8%.
Acquisition of Tebecai Cable System
In February 2000, UPC acquired 100% of the shares of Tebecai, a cable
system based in the east of Holland. UPC paid 71.2 million for the shares of
Tebecai, on a debt-free basis. Tebecai owns and operates cable networks in
Zutphen, Doetinchem and the surrounding municipalities. The company has
approximately 78,000 basic cable television subscribers and 2,800 internet
subscribers. Tebecai's network is fully upgraded and 80% two-way capable.
111
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Completion of Stock Split
On March 13, 2000, the shareholders of UPC approved a three for one stock
split. Shareholders of record at the close of business on March 13, 2000 will
be entitled to two additional Class Ordinary A shares for each A share they own
on that date.
Acquisition of ElTele Ostfold and Vestfold Systems
In March 2000, UPC acquired 100% of the equity of ElTele Ostfold and
Vestfold from the energy companies Fredrikstad Energi as, Ostfold Energiverk and
Hafslund. ElTele Ostfold and Vestfold currently have approximately 300
kilometers of fibre and approximately 125 business customers between them and
are among the leading providers of broadband services to business customers in
the Ostfold, Vestfold, Telemark and Buskerud regions of Norway. UPC paid NKR
320.0 million (39.7 million) for the companies.
Completion of MTV Networks Europe
In March 2000, UPCtv and MTV Networks Europe, formed a 50/50 joint venture
partnership which will produce and distribute two new 24-hour music channels
specifically targeted at the Polish marketplace: MTV Polska and VH1 Polska. In
addition, the company will be responsible for creation and distribution of
related MTV and VH1 branded web-sites, and will act as distribution agent in
Poland for MTV Networks Europe's digital channel portfolio, including M2, MTV
Extra, MTV Base and VH1 Classic. Both MTV Polska and VH1 Polska will be
distributed via the UPC-owned Wizja TV DTH and PTK cable platforms and via other
cable operators.
Acquisition of Additional Interest in SBS
In February 2000, UPC acquired an additional 10.2% of SBS for 162.5
million, increasing its ownership to 23.5%.
Tender Offer for SBS
On March 9, 2000, UPC announced its intention to commence a tender offer to
acquire all the shares of SBS that it does not already own. The supervisory
boards of both companies have approved the transaction. UPC has agreed to
initiate an exchange offer to acquire SBS's shares at a per share price of
USD40 in cash plus 0.57144 of a share of UPC's ordinary shares A, subject to
adjustment. UPC will adjust the stock portion of the purchase price under
certain circumstances so that SBS shareholders will receive not less than
USD77.50 and not more than USD86.00 for each SBS share exchanged, based on our
average closing share price prevailing on the trading days ending shortly prior
to making the exchange offer, UPC intends that all shares not purchased in the
exchange offer will be converted into the right to receive the same cash and
stock considerations as provided in the exchange offer, in the second step
transaction following consummation of the exchange offer. This transaction is
subject to a number of conditions, including regulatory approval.
Acquisition of Wireless Licenses
In March 2000, UPC acquired 26 GHz spectrum in Norway as a result of the
acquisition of ElTele Ostfold and ElTele Vestfold. In March 2000, UPC was
awarded a national 3.5 GHz license in Spain where it is was part of a consortium
called ALO' 2000. The consortium partners include RSL Com LTD, Dragados SA, and
Hidroelectrica Del Cantabrico SA. Also in March 2000, in an auction, UPC won a
national 3.5 GHz license in Switzerland and regional 26 GHz licenses in Geneva
and Zurich. There are additional regional 26 GHz auctions occurring in
Switzerland through April 2000. UPC has submitted applications for spectrum in
France and Finland and is registered to participate in the WLL auction in
Austria, starting April 10, 2000. Throughout the next 18 months additional WLL
spectrum is being offered. UPC plans to participate in these offerings as they
unfold.
Formation of E-Ventures Fund
UPC, together with chello broadband and United, announced their intention
in March 2000, to form an E-ventures fund. The venture will be funded equally by
the three parties and will source investment ideas primarily from the Internet
and advanced technology sectors from the United/UPC global network. UPC intends
to contribute its investment in Sorrento Networks Inc. of USD16.5 million as the
first key investment in the fund. In March 2000, UPC invested in Sorrento Series
A Convertible Preferred Stock, with the UPC investment representing 33% of the
Convertible Preferred Stock sold by Sorrento. Based in California, Sorrento
Networks is a subsidiary of Osicom Technologies Inc., a NASDAQ traded company.
Sorrento is a developer of metro optical networking systems used in both the
interoffice and access networks. The company's systems offer an all-optical
end-to-end solution that improves bandwidth utilisation, reduces network costs
and complexity and provides a scalable, efficient and dynamically manageable
platform to meet rapidly growing and changing bandwidth demands.
Acquisition of ENECO Cable System
In March 2000, UPC acquired K&T Group, the cable interests of N.V. ENECO,
for a consideration of 1.2 billion. K&T owns and operates cable networks in
Rotterdam, Dordrecht and the surrounding municipalities, with approximately
610,000 homes passed, 590,000 basic cable television subscribers and has over
6,000 broadband Internet subscribers. K&T's network is substantially upgraded
and, with 85% of the network two-way capable, the company is ready to offer most
of its customers interactive broadband services. In addition, the company has a
glass fibre network covering approximately 100 kilometers in The Hague area. In
total, the cable systems pass over 40,000 potential business customers.
112
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -------------------------------------------------------------------------
Financial Disclosure
--------------------
None.
113
<PAGE>
PART III
Item 10. MANAGEMENT
- -------------------
In March 2000, the shareholders of the Company approved a 3:1 stock split.
All share and per share data have been restated to reflect this stock split. In
November 1999, the shareholders of United approved a 2:1 stock split. All share
and per share amounts have been restated to reflect this stock split.
United currently owns approximately 54.8% of our outstanding ordinary
shares A and all of our outstanding priority shares. Because we are a strategic
holding of United, United is likely to continue to control us for the
foreseeable future. Four of the five members of our Supervisory Board are also
directors, officers or employees of United.
Supervisory Board
Our general affairs and business, as well as our management board, are
supervised by a Supervisory Board, the members of which are proposed by United
as the holder of our priority shares and appointed by the general meeting of
shareholders. Mr. Gene Schneider, United's Chairman and Chief Executive Officer
and the former Chairman of the Supervisory Board, resigned from the Supervisory
Board in February 1999. Pursuant to the rules and procedures of the Supervisory
Board, he became a non-voting advisor to the Supervisory Board and has the right
to attend and participate in the meetings of the Supervisory Board.
The Supervisory Directors are appointed at the general meeting of
shareholders from a list proposed by United as the holder of our priority shares
or through direct appointment by Philips. 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 United have agreed to use our
reasonable best efforts to obtain the release by the City of Vienna of Philips
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 United. The Discount Group has a contractual right
to nominate one director and United has agreed to vote in favor of the Discount
Group's nominee subject to certain conditions. The Discount Group, our partner
in our Israeli system, has not to date exercised its contractual right to
nominate a Supervisory Director. The Discount Group's nomination 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.
The Supervisory Directors and Advisor are:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Michael T. Fries.................................. 37 Chairman of the Supervisory Board
John P. Cole, Jr.................................. 70 Supervisory Director
Richard De Lange.................................. 54 Supervisory Director
Ellen P. Spangler................................. 51 Supervisory Director
Tina M. Wildes.................................... 39 Supervisory Director
Gene W. Schneider................................. 73 Advisor
</TABLE>
Michael T. Fries has been a member of the Supervisory Board since September
1998 and the Chairman since February 1999. Mr. Fries became a director of United
in November 1999 and is President of United and President of United Latin
America, Inc., a wholly-owned subsidiary of United, positions he has held since
September 1998. He is also the Executive Chairman of Austar United
Communications Limited ("Austar United"), United's subsidiary, a position he has
held since June 1999. Mr. Fries also serves as President and Chief Executive
Officer of United Asia/Pacific Communications, Inc., a wholly-owned subsidiary
of United, positions he has held since June 1995 and December 1996,
respectively. In January 2000, Mr. Fries also became a member of the
Supervisory Board of chello broadband, our Internet portal and ISP. In
addition, since September 1998, Mr. Fries has served as the President of United
Latin America, Inc. a wholly owned subsidiary of United. From March 1990 to
June 1995, Mr. Fries served as United's Senior Vice President, Development, in
which capacity he was responsible for managing United's acquisitions and new
business development activities, including United's expansion into the
Asia/Pacific, Latin American and European markets.
John P. Cole Jr. became a member of the Supervisory Board in February 1999
and has been a director of United since March 1998. In January 2000, he also
became a member of chello broadband's Supervisory Board. 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 firm specializing in all
aspects of communications and media law.
114
<PAGE>
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 Philips
organization in The Netherlands (Philips Nederland B.V. and Nederlandse Philips
Bedrijven B.V.). He also serves 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 as President of Philips
Lighting Europe from December 1990 until April 1995.
Ellen P. Spangler became a member of the Supervisory Board in February
1999. Ms. Spangler is the Senior Vice President of Business and Legal Affairs
and Secretary of United, positions she has held since December 1996. Ms.
Spangler is responsible for the legal operations of United. Prior to assuming
her current positions, since February 1991, she served as a Vice President of
United where her responsibilities included business and legal affairs,
programming and assisting on development projects.
Tina M. Wildes became a member of the Supervisory Board in February 1999.
Ms. Wildes has been a director of United since November 1999 and the Senior Vice
President of Operations and Development Oversight since May 1998. In January
2000, she also became a member of the Supervisory Board of chello broadband.
From October 1997 until May 1998, Ms. Wildes served as Senior Vice President of
Programming for United. From 1993 to 1997, she served as Regional Vice
President of United 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 United's European operating companies.
Gene W. Schneider served as a member of the Supervisory Board from July
1995 until February 1999, when he became an advisor to the Supervisory Board.
Mr. Schneider is also the Chairman of the Board of Directors of United, a
position he has held since its inception in May 1989 and was a director of
United International Holdings, a Colorado general partnership, since September
1989 until its dissolution in December 1993. In addition to serving as United's
Chairman, Mr. Schneider has served as United's Chief Executive Officer since
October 1995, and served as United's President from October 1997 until he
relinquished the title in September 1998. Mr. Schneider has served as a
director of Austar United since June 1999. Mr. Schneider served as Chairman of
United Artists, then the third largest multiple system cable operator in the
United States, from May 1989 until its merger with Tele-Communications, Inc. in
November 1991. He was a founder of United Cable in the early 1950s and, as its
Chairman and Chief Executive Officer, helped build United Cable into the eighth-
largest multiple system operator in the United States prior to its merger with
United Artists in 1989. As Chairman of United Cable, he was involved in United
Cable's investment in numerous programming companies such as Discovery and
Turner Broadcasting, and served as a director on the board of Turner
Broadcasting and Chairman of C-SPAN. Mr. Schneider has been active in cable
television affairs and has served on the board of the National Cable Television
Association (the "NCTA") and on numerous committees and special projects thereof
since NCTA's inception in the early 1950s. Mr. Schneider is one of the original
inductees into NCTA's Cable Television Pioneers. Mr. Schneider is the Chairman
of the Board of Advance Display Technologies, Inc. and an advisor to the
Supervisory Board of chello broadband.
The Supervisory Board has an Audit Committee and a Compensation Committee.
The Audit Committee is comprised on Mr. Fries, Mr. Cole and Mr. De Lange. The
Compensation Committee is comprised of Mr. Fries, Ms. Spangler and Ms. Wildes.
Family Relationships
Tina M. Wildes, a member of the Supervisory Board, 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.
115
<PAGE>
Board of Management and Other Key Employees
The members of the Board of Management are:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Mark L. Schneider.......................... 44 Chairman of Board of Management and Chief Executive Officer
John F. Riordan............................ 57 President and Vice Chairman
Charles H.R. Bracken....................... 33 Board of Management Member and Chief Financial Officer
Nimrod J. Kovacs........................... 50 Board of Management Member, Managing Director, Eastern
Europe and Executive Chairman, UPC Central Europe
Anton M. Tuijten........................... 38 Board of Management Member and General Counsel
</TABLE>
Other key employees include:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Scott Bachman........................ 45 Managing Director, Technology and Purchasing
Andrew Barron........................ 34 Managing Director, Media
Jeroen Bergman....................... 32 Managing Director, Video and Marketing
Steven D. Butler..................... 40 Managing Director, UPC Capital Markets and Treasurer
Sudhir Ispahani...................... 39 Managing Director, Operations and Technology, chello broadband
Roger Lynch.......................... 37 President and Chief Executive officer, chello broadband
Shane O'Neill........................ 38 Managing Director, Strategy, Acquisitions and Corporate
Development
Simon Oakes.......................... 41 Managing Director, Programming
Iain Osborne......................... 42 Managing Director, Marketing, Sales and Portal, chello broadband
Ray D. Samuelson..................... 46 Managing Director, Finance and Accounting
</TABLE>
Mark L. Schneider has been our Chief Executive Officer and Chairman of our
Board of Management since April 1997. Mr. Schneider has been a member of the
board of directors of United since 1993 and served as its Executive Vice
President from December 1996 to December 1999. In addition, Mr. Schneider has
been a member of the Supervisory Board and the Chairman of chello broadband
since March 1998. From April 1997 to September 1998, he served as our President
and from May 1996 to December 1996, he served as Chief of Strategic Planning and
Operational Oversight of United. He served as President of United from July
1992 until March 1995 and as Senior Vice President of United from May 1989
until July 1992. Mr. Schneider also worked as a consultant for United from June
1995 to May 1996. Mr. Schneider is a director of Advance Display Technologies,
Inc.
John F. Riordan was appointed as our President in June 1999, and has been a
member of our Board of Management since September 1998. Also in September 1998,
Mr. Riordan was appointed Vice Chairman of the Supervisory Board of chello
broadband, our Internet portal and ISP, overseeing implementation of our
Internet/data services and digital distribution platform. In June 1999, Mr.
Riordan became a director of Austar United. Mr. Riordan has also served as a
director of United since March 1998. From March 1998 to June 1999, he served as
Executive Vice President and from September 1998 to June 1999, he served as
President of Advance Communications for us. From 1992 until November 1998, Mr.
Riordan served as Chief Executive Officer of Princes Holdings Limited, the Irish
multi-channel television operating company of which we owned 20% until its sale
in November 1998.
Charles H. R. Bracken has been Chief Financial Officer since November 1999.
Prior to November 1999, Mr. Bracken served as Managing Director of Strategy,
Acquisitions and Corporate Development from March 1999. Mr. Bracken became a
member of the Board of Management in July 1999 and a member of the Supervisory
Board of chello broadband in March 1999. From 1994, he held a number of
positions at Goldman Sachs International in London, most
116
<PAGE>
recently as Executive Director, Communications, Media and Technology. While at
Goldman Sachs, he was responsible for providing merger and corporate finance
advice to a number of communications companies, including us.
Nimrod J. Kovacs was appointed Executive Chairman, Central Europe in August
1999. He 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 United, including President of United Programming, Inc.
from December 1996 until August 1999, 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.
Anton M. Tuijten joined our company in September 1998 as Vice President of
Legal Services and was appointed our General Counsel in May 1999. Mr. Tuijten
has been a member of our Board of Management since March 2000. Mr. Tuijten has
also served as General Counsel for and a member of the Board of Management of
chello broadband since December 1998. From 1992 until joining us, Mr. Tuijten
was General Counsel and Company Secretary of Unisource, an international
telecommunications company. Prior to that he worked as a Senior Corporate
Lawyer at KPN, the Dutch Telecom Operator.
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.
Andrew Barron became Managing Director of Media in November 1999, a new
position created to oversee the development of our digital media strategy.
Prior to joining us, Mr. Barron served as Executive Vice President of New Media
& Business Development at Walt Disney International Europe, with responsibility
for overseeing Walt Disney's Internet businesses in Europe. Mr. Barron joined
Walt Disney in 1995. Prior to joining Walt Disney, Mr. Barron worked for
McKinsey & Co. as a management consultant specialising in international telecoms
strategy and mergers and acquisitions activity. Mr. Barron has also been a
member of the Supervisory Board of chello broadband since January 2000.
Jeroen Bergman became Managing Director of Video and Marketing in July
1999. Prior to his appointment, Mr. Bergman served as the Commercial Director
at Casema, a subsidiary of France Telecom, and the second largest cable
television operator in The Netherlands after us, a position he had held since
1996. From 1993 to 1996, Mr. Bergman worked for Optus Vision, and its
shareholder Optus Communications, a long distance and mobile communications
operator in Australia, primarily owned by Cable & Wireless Optus Limited.
Steven D. Butler became Managing Director of UPC Capital Markets and
Treasurer in February 1998. Mr. Butler is 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 out Vice
President and Treasurer. Prior to July 1995, Mr. Butler served as Director of
Finance at United from May 1991.
Sudhir Ispahani has served as Chief Technology Officer and Managing
Director of Operations and Technology for chello broadband since March 1999.
His primary responsibility is developing and implementing chello's technology
architecture. Mr. Ispahani joined chello broadband as Corporate Technology
Officer in July 1998 and has been a member of chello broadband's Management
Board since November 1998. Prior to joining chello broadband in July 1998, Mr.
Ispahani spent the nine preceding years with MCI Telecommunications. While at
MCI, Mr. Ispahani's responsibilities included overseeing the design, engineering
and support of MCI's data and voice networks in the U.S.
Roger Lynch has been the President and Chief Executive Officer and Chairman
of the Board of Management of chello broadband since November 1999. Prior to
November 1999, Mr. Lynch served as President and Chief Financial Officer of
chello broadband from July 1999. Prior to joining us, Mr. Lynch spent five
years at Morgan Stanley Dean Witter where he was responsible for the bank's
Internet corporate finance activity in Europe. In addition, Mr. Lynch was
Morgan Stanley Dean Witter's Internet sector specialist and had advised us and
chello broadband during the year preceding his appointment with us.
Shane O'Neill joined us as Managing Director, Strategy, Acquisitions and
Corporate Development in November 1999. Prior to joining us, Mr. O'Neill spent
seven years at Goldman Sachs in the New York, Sydney and London offices. Most
recently, Mr. O'Neill was an Executive Director in the Advisory Group for
Goldman Sachs in London where he worked on a number of mergers and acquisitions
and corporate finance transactions for companies in the communications
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industry, including us. Prior to joining Goldman Sachs, Mr. O'Neill spent four
years at Macquarie Bank in Sydney as well as three years at KPMG in Dublin where
he qualified as a chartered accountant.
Simon Oakes has served as our Managing Director of Programming since March
1998, where he is 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 Maiden
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.
Iain Osborne has been Managing Director of Marketing Communications for
chello broadband since March 1999 and has been a member of the Board of
Management of chello broadband since January 1999. Mr. Osborne's primary
responsibility is to build the chello brand. Mr. Osborne joined us in July 1998
from Yahoo! Inc. where he served as Marketing and Communications Director,
Europe.
Ray D. Samuelson has been our Managing Director of Finance and Accounting
in February 1998, in which he is responsible for all our accounting, reporting,
budgeting 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 served as Vice President of Finance and Administration of
the Cable Operations Division at United. Prior to Mr. Samuelson's appointment
with United, he was employed by US WEST. While with US WEST, from 1990 to 1992,
Mr. Samuelson was seconded to United's and US WEST's Norwegian, Swedish and
Hungarian cable television partnership where he served as the Chief Financial
Officer.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the Section 16(a) of the Securities Exchange Act of 1934, as amended,
our Supervisory Directors, members of our Management Board and certain of our
officers, and persons holding more than ten percent of our ordinary shares A are
required to file forms reporting their beneficial ownership of our ordinary
shares A and subsequent changes in that ownership with the Securities and
Exchange Commission.
Based solely upon a review of copies of such forms filed on Forms 3, 4, and
5, and amendments thereto furnished to us, we believe that during the fiscal
year ended December 31, 1999, our directors, executive officers, and greater
than ten percent beneficial owners complied on a timely basis with all
Section 16(a) filing requirements, except Steve Butler and Ray Samuelson failed
to timely file their Form 3s following our initial public offering.
Item 11. Executive Compensation
- --------------------------------
The following table sets forth the 1999 compensation for our current chief
executive officer and the four other highest compensated executive officers at
fiscal year end 1999. The information in this section reflects compensation
received by the named executive officers for all services performed for us and
our affiliates.
Summary Compensation Table
Annual Compensation (1)
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Awards
---------------
Other Annual Securities All Other
Name and Principal Compensation Underlying Compensation
Position Year Salary(Euro) Bonus (Euro) Options/SARs (Euro)
- ------------------- ---- -------------- --------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Mark L. Schneider (2).... 1997 265,461 -- -- 2,925,000(14) 430(17)
Chief Executive Officer 1998 348,014 -- 105,810(6) 258,419(15) 5,196(18)
1999 390,027 -- 106,858(7) -- 5,765(19)
John F. Riordan.... 1998 281,661 -- 37,555(8) 1,875,000(14) --
President 1999 316,024 -- 177,057(19) 300,000(16) 49,379(20)
Charles H.R. Bracken.... 1999 297,308(3) -- 12,716(10) 750,000(14) 19,812(21)
Chief Financial
Officer
Gene Musselman (4). 1997 59,559 -- -- -- 1,950(22)
Chief Operating Officer, 1998 234,718 67,761 60,948(11) -- 5,392(23)
Telekabel Wien 1999 254,939 1,572,609 52,563(12) 112,500(14) 5,779(24)
Nimrod Kovacs...... 1997 215,824 -- -- -- 4,853(25)
Managing Director, 1998 248,456(5) -- -- -- 5,089(2)
Eastern Europe 1999 280,849 -- 65,179(13) 675,000(14) 5,779(24)
</TABLE>
(1) Compensation amounts for the persons identified for 1999 were converted
from U.S. dollars or British pounds to Euros using the average exchange
rate for the period, or were converted from Dutch guilders to euro using
the fixed rate of 1 Euro to 2.20371 Dutch guilders. For periods prior to
the creation of the Euro, currencies were converted first to Dutch guilders
and then to euro using the fixed rate.
(2) Mr. Schneider was appointed as our Chief Executive Officer in April 1997
and served as United's Executive Vice President until December 1999. The
salary amount shown consisted of the total salary paid to Mr. Schneider for
his duties to us and United. Other compensation consisted of amounts
related to Mr. Schneider's non-U.S. assignment.
(3) Mr. Bracken commenced his employment with us in March 1999. Accordingly,
the salary information above represents only ten months of employment
during 1999.
(4) Mr. Musselman commenced his employment with us in September 1997.
Accordingly, the salary information included above represents only four
months of employment during 1997. Mr. Musselman received a performance-
based bonus for 1998 and 1999.
(5) Mr. Kovacs was appointed as our Managing Director of Eastern Europe in
March 1998. The salary amount shown for 1998 consisted of the total salary
paid to Mr. Kovacs for his duties to us and United.
(6) Includes living expenses, including rent related to foreign assignment
(Euro105,131) and personal use of United's airplane (Euro679).
(7) Includes housing expenses in the amount of Euro102,698.
(8) Includes monthly housing allowance payments.
(9) Consisted of expenses related to housing (Euro29,113) and tax-related
reimbursements (Euro147,944).
(10) Consisted of car allowance payment.
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(11) Consisted of housing allowance payments (Euro40,847), goods and services
allowance (Euro15,407) and moving allowance (Euro4,694).
(12) Consisted of housing allowance (Euro36,000) and a goods and services
allowance (Euro16,563).
(13) Consisted entirely of a relocation allowance payment.
(14) Represents shares underlying options to acquire our Ordinary Shares A.
(15) Includes an option to acquire 8,419 shares of United's Class A Common Stock
and an option to acquire 250,000 shares of chello broadband Ordinary Shares
A.
(16) Includes an option to acquire 300,000 Ordinary Shares A of chello
broadboard.
(17) Consisted entirely of life insurance payment.
(18) Consisted of matching employer contributions under United's 401(k) plan
(Euro4,507) and life insurance payments (Euro689).
(19) Consisted of a matching employer contribution under United's 401(k) plan
(Euro4,507) and life insurance payments (Euro1,258).
(20) Consisted entirely of a pension contribution under our pension plan.
(21) Consisted of matching employer contributions under our pension plan
(Euro 17.977) and health, life and disability insurance payments
(Euro 1.825).
(22) Consisted of matching employer contributions under United's 401(k) plan
(Euro1,787) and life insurance payments (Euro163).
(23) Consisted of a matching employer contribution under United's 401(k) plan
(Euro4,507) and life insurance payments (Euro885).
(24) Consisted of a matching employer contribution under United's 401(k) plan
(Euro4,507) and life insurance payments (Euro1,272).
(25) Consisted of a matching employer contribution under United's 401(k) plan
(Euro4,203) and life insurance payments (Euro650).
(26) Consisted of matching employer contributions under United's 401(k) plan
(Euro4,337) and health and life insurance payments (Euro752).
The following table sets forth information concerning options that were
granted by us to the executive officers listed in the Summary Compensation Table
above during the fiscal year ended December 31, 1999.
Option Grants in Last Fiscal Year (1)
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value at Assumed Annual
Number of Percentage of Rates of Stock Price Appreciation for Option
Securities Total Options Term(2)
Underlying Granted to Exercise --------
Options Employees in Price Expiration
Granted Fiscal Year(3) (Euro/Share) Date 0% (Euro) 5% (Euro) 10% (Euro)
--------- -------------- ------------ ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark L. Schneider
UPC -- -- -- -- -- -- --
United 8,419 0.62% 6.5862(4) 12/17/09 392,136 673,619 1,105,469
chello 250,000 13.44% 9.076 3/26/04 -- 626,856 1,385,187
John F. Riordan
UPC -- -- -- -- -- -- --
chello 300,000 16.13% 9.076 3/26/04 -- 752,226 1,662,224
Charles H.R. Bracken
UPC 750,000 17.42% 9.67(5) 3/25/04 798,041 2,899,123 5,440,882
Gene Musselman
Phantom UPC 112,500 20.83% 9.67 2/12/04 -- 282,090 623,345
Nimrod Kovacs
Phantom UPC -- -- -- -- -- -- --
</TABLE>
(1) Options granted under our Plan and chello's plan are subject to repurchase
rights of equal monthly amounts over the 48 months following the date of
grant. Options granted under our phantom plan and by United vest in 48
equal installments following the date of grant.
(2) The potential realizable value is based on assumed annual rates of stock
price appreciation from our initial public offering, at Euro29.00 (Euro9.67
post-stock split), to the end of the option term. The options gains are net
of option exercise price and do not include the effect of taxes associated
with exercise. The amounts shown are for the assumed rates of appreciation
only, do not constitute projections of future stock performance and may not
necessarily be realized. Actual gains, if any, on exercises depend on
future performance of our shares, United's stock, or the valuation of
chello, as the case may be, continued employment and other factors.
(3) Represents percentage of total options granted to employees under the
respective plans in last fiscal year.
(4) The market value of the shares on the date of grant was Euro17.722.
(5) The market value of the shares on the date of grant was Euro10.8.
The following table sets forth information with respect to the executive
officers listed in the Summary Compensation Table above holding unexercised
options as of December 31, 1999. See "--Stock Option Plans" and "Security
Ownership of Certain Beneficial Owners and Management."
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Aggregated Fiscal Year-end Option Values
<TABLE>
<CAPTION>
Number of
Ordinary Number of Securities
SharesA Underlying Unexercised Value of Unexercise
Acquired on Values Options at Fiscal Year-End In-the-Money Options(1)
Name Exercise Realized (Euro) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark L. Schneider
UPC -- -- 1,950,000 975,000 74,463,060 37,231,530
United 100,000 6,277,554 270,479 30,000 16,587,163 1,800,286
chello -- -- 46,875 203,125 -- --
John F. Riordan
UPC -- -- 1,050,000 525,000 40,095,494 20,047,747
United -- -- 29,167 70,833 1,820,183 4,420,372
chello -- -- 56,250 243,750 -- --
Charles H.R. Bracken
UPC -- -- 140,625 609,375 4,326,206 18,746,895
Gene Musselman
Phantom UPC -- -- 7,813 29,688 721,080 2,739,977
Nimrod Kovacs
Phantom UPC 75,000 1,413,865 375,000 225,000 14,319,819 8,591,892
United 60,000 1,302,402 248,750 21,250 15,024,769 1,278,919
</TABLE>
(1) Calculated in euro based on the following fair market values at year-end:
UPC - Euro39.902; United - Euro66.308; and chello - Euro9.076.
Agreements with Executive Officers
We and Mr. Bracken are parties to an Executive Services Agreement. In
addition, Mr. Schneider has a consulting agreement with United. Our agreement
with Mr. Bracken and United's agreement with Mr. Schneider are discussed below.
Mr. Musselman and Mr. Kovacs have employment agreements with United. We and
United are parties to a Secondment Agreement, pursuant to which Mr. Schneider,
together with all our other U.S. citizen employees, are seconded to us. See
"Certain Transactions and Relationships--Relationship with United and Related
Transactions." Pursuant to the Secondment Agreement, we reimburse United for all
expenses incurred by United in connection with the seconded employees.
Mark L. Schneider. On June 1, 1995, United entered into a Consulting
Agreement (the "Agreement") with Mark L. Schneider, who until that time had
served as United's President. Mr. Schneider's Agreement is for a term ending on
May 31, 2000. Although the Agreement provides that Mr. Schneider will be
available for up to 90 days each calendar year to serve as a consultant, Mr.
Schneider and United have agreed that Mr. Schneider will work full time for
United as our Chief Executive Officer. Until December 1, 1997, Mr. Schneider
received an annual fee of USD 300,000, thereafter United increased such fee to
USD 375,000 and in April 1999 United increased the annual fee to USD 431,200.
In addition, Mr. Schneider receives insurance and other perquisites that are
available to him in his capacity as our Chief Executive Officer or that are
otherwise made available to top executives of United.
All of Mr. Schneider's unvested United stock options vested as of the date
of the Agreement. He will be entitled to receive additional United stock
options during the consulting period, in an amount to be determined by the Board
of United upon the recommendation of the Chairman of United, but shall be
entitled to receive at least options to purchase a number of shares of United
equal to 90% of the average number of shares provided in options granted to
United's Chairman, Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer and Executive Vice President. In June 1995, Mr. Schneider
received stock options to purchase 36,000 shares of United's Class A Common
Stock at an exercise price of USD 15.75 per share. In December 1996, Mr.
Schneider received stock options to purchase 60,000 shares of United's Class A
Common Stock at an exercise price of USD 12.75 per share; however, Mr.
Schneider agreed to cancel 50,000 shares thereof in connection with a grant of
options by us.
The Agreement is terminable by United or by Mr. Schneider. If it is
terminated by Mr. Schneider, benefits will terminate as of the date of
termination. If Mr. Schneider is terminated by United, 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.
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Mr. Schneider has agreed that he will not enter into certain businesses
that would be competitive with United. This Agreement provides for
indemnification of Mr. Schneider by United to the full extent permitted by its
Certificate of Incorporation or Bylaws, any standard indemnity agreement between
United and its officers and directors or by applicable law. Mr. Schneider and
Untied have executed mutual releases.
Charles H.R. Bracken. On March 5, 1999, we entered into an Executive
Service Agreement with Charles H.R. Bracken in connection with Mr. Bracken
becoming our Managing Director of Development, Strategy, and Acquisitions.
Subsequently, Mr. Bracken became a member of the UPC Board of
Management and Chief Financial Officer for UPC. Mr. Bracken's Executive
Services Agreement is for a term expiring March 5, 2003. Under the Executive
Service Agreement, Mr. Bracken's initial base salary was (Pounds)250,000 per
year. Such salary is subject to periodic adjustments. In addition, to his
salary Mr. Bracken received options for 750,000 of our ordinary A shares and
participation in a pension plan. In addition to his salary, UPC provides a car
to Mr. Bracken for his use valued at (Pounds)8,400 per year.
The Executive Services Agreement may be terminated for cause by us. Also,
we may suspend Mr. Bracken's employment for any reason. If his employment is
suspended, Mr. Bracken will be entitled to receive the balance of payments due
under the Executive Service Agreement until such Agreement is terminated. In
the event Mr. Bracken becomes incapacitated, by reason of injury or ill-health
for an aggregate of 130 working days or more in any twelve month period, we
may discontinue future payments under the Agreement, in whole or in part, until
such incapacitation ceases.
Our Stock Option Plans
Equity Stock Option Plan. Under our Equity Stock Option Plan, the
Supervisory Board may grant stock options to our employees. There are
approximately 4.3 million total options outstanding under our stock option plan.
The Board of Management may from time to time increase the number of shares
available for granting under our stock option plan. Options under our stock
option plan will be granted at fair market value (as determined by the
Supervisory Board) at the time of the grant unless determined otherwise by the
Supervisory Board. The ordinary shares A 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. United appoints the board members of the foundation and thus controls
the voting of the foundation's ordinary shares A. Proceeds from the exercise of
these options remain in the foundation. Upon liquidation of the foundation, any
remaining assets revert to United.
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 the option grant. The date of
the 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 other than 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 and 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-diluion protection in the case
of stock splits, stock dividends and the like. Our stock option plan also
provides that, in the case of a 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 1998, we loaned Anton H.E. van Voskuijlen Euro18,378 to enable him to
pay the tax on exercise of stock options. This loan bears no interest. The tax
payable over the imputed interest is added to the loan. Mr. van Voskuijlen's
loan is due upon exercise of his options. Mr. van Voskuijlen served as our
General Counsel from July 1996 until May 1999, when he was appointed Senior Vice
President. He also served as a member of our Board of Management from April 1997
until his resignation in March 2000.
Through December 31, 1998, options to acquire a total of 23,305,500
ordinary shares A have been granted under the Plan. Of these, options
representing 11,762,193 ordinary shares A have been exercised and resold to the
foundation and, therefore, are available for future option grants. Options
representing 369,471 ordinary shares A have been canceled and [options
representing a further 375,000 ordinary shares A have been returned]. The
exercise prices for the options range from Euro1.59 to Euro34.87.
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In March 1998, we granted Mark Schneider options for 2,925,000 ordinary
shares A at an exercise price of Euro1.81513, the price at which shares were
acquired by United and us from Phillips in connection with the purchase in
December 1997.
Phantom Stock Option Plan. Under our phantom stock option plan, the
Supervisory Board has granted certain employees the right to receive an amount
in cash or stock, at the Supervisory Board's option, equal to the difference
between the fair market value of the ordinary shares A and the stated grant
price for a specified number of phantom options. Through December 31, 1999,
options representing 3,845,970 phantom shares remained outstanding, 6,882,471
had been cancelled and had been exercised. The grant prices for the phantom
options range from Euro1.815 to Euro9.67. 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 the grant. Of the outstanding phantom
options, 295,083 were fully vested on December 31, 1999. 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 some cases upon a change of control, all phantom options
outstanding become fully exercisable. Upon exercise of the phantom options, we
may elect to issue such number of ordinary shares A as is equal to the value of
the cash difference in lieu of paying the cash.
Our phantom stock option plan also provides that upon the offering, an
employee holding phantom options may convert these into options for ordinary
shares A 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 ordinary
shares A equal to the value of the cash difference in lieu of paying cash to
such employee.
chello broadband Stock Option Plans
chello broadband has adopted a stock option plan and a phantom stock option
plan. All the shares underlying these stock option plans are held by Stichting
administratie kantoor chello broadband, a stock option foundation, which
administers chello broadband's stock option plans. Proceeds realized by the
foundation upon exercise of the options will be remitted to chello broadband.
Upon completion of an initial public offering by chello broadband, chello
broadband will establish a new stock option plan.
chello broadband Equity Option Plan. Under chello broadband's equity
option plan, the Supervisory Board may grant stock options to chello broadband
employees, on the recommendation of chello broadband's Board of Management and
subject to approval of chello broadband's priority shareholders. To date chello
broadband has granted options for 550,000 ordinary shares under its stock option
plan. Of these, options for 250,000 ordinary shares have been exercised.
Options under chello broadband's equity option plan will be granted at fair
market value (as determined by the Supervisory Board on the recommendation of
the Board of Management) at the time of grant unless determined otherwise by the
Supervisory Board.
All options are exercisable upon grant and for the next five years. Within
five days after the exercise of the option, the employee will receive the number
of shares or depositary certificates, as the case may be, in respect to the
exercised option, against payment in full of the exercise price. If the
employee's employment terminates:
. because of death, permanent disability, retirement or early retirement, any
unexercised options will expire one year from the date of such termination,
or five years after the date of grant, whichever is earlier;
. because of so called "urgent reason" under Dutch law or because of documented
and material non-performance, any certificates issued to the employee upon
exercise of his or her options must be resold to the foundation at the
original purchase price for the options and any unexercised options expire
immediately without notice; or
. for any other reason, any exercised options must be resold to the foundation
at the original purchase price and any unexercised options will expire as
follows:
. if employment terminates during the first month after the date of grant,
all unexercised options expire;
. if employment terminates during the first month after the date of grant,
all unexercised options will be deemed to vest at a rate of one-forty
eighth per month of the total number of options granted for each month the
employee is employed after the first month. All unexercised vested options
will expire at the
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earlier of 30 days after the termination of employment if not exercised,
or five years from the date of grant. All "unvested" options expire
automatically upon termination of employment.
The chello broadband equity option plan contains limited anti-dilution
protection in the case of stock splits, stock dividends and the like. The
chello broadband equity option plan also provides that, in the case of change in
control, the acquiring company has the right to require chello broadband's stock
option foundation to acquire all of the options outstanding at the per share
value determined in the transaction giving rise to the change in control.
In 1999, we granted Mark Schneider options for 250,000 chello broadband
shares. Also during 1999, we granted John Riordan options for 300,000 chello
broadband shares. Both of these grants were at an exercise price of Euro9.076.
In 1999, we loaned Mark Schneider approximately Euro2.3 million to enable
him to exercise chello broadband stock options to acquire chello broadband
shares. The recourse loan is interest free. The tax payable on the imputed
interest is added to the principal amount of the loan. In 1999, we agreed to
loaned Mr. Riordan up to approximately Euro85,000 in connection with the grant
of his chello broadband stock options.
chello broadband Phantom Stock Option Plan. chello broadband's phantom
stock option plan is administered by its Supervisory Board, subject to prior
approval by our Supervisory Board. The exercise price of the options granted
under chello broadband's phantom stock option plan ranges from Euro4.54 to the
initial public offering price of chello broadband's ordinary shares. The
phantom stock options have a four-year vesting period and vest one-forty eighth
each month and may be exercised during the period specified in the option
certificate. All options must be exercised within 90 days after the end of
employment. If such employment continues, all options must be exercised not
more than ten years following the effective date of grant. This plan gives the
employee the right to receive payment equal to the difference between the fair
market value of a share and the exercise price for the portion of the rights
vested. chello broadband, at its sole discretion, may make the required payment
in cash, freely tradeable shares of United's class A common stock or our common
stock, or, if chello broadband's shares are publicly traded, its freely
tradeable ordinary shares. If chello broadband chooses to make a cash payment,
at a time when its stock is publicly traded, employees have the option to
receive an equivalent number of chello broadband's freely tradeable ordinary
shares instead. At December 31, 1999, options representing 2,635,000 phantom
shares had been granted. Of these, options representing 11,667 phantom shares
has been exercised and options representing 60,833 phantom shares had been
cancelled.
chello broadband's phantom stock option plan contains limited anti-dilution
protection in the case of stock splits, stock dividends, and the like. In some
cases of a change of control, including a change of control of us, chello
broadband may choose to acquire immediately all the phantom options outstanding
for a consideration equal to the excess of the fair market value of the share at
that time over the exercise price.
chello broadband's phantom stock option plan also provides that, upon the
pricing of an initial public offering, any of its employees holding phantom
options may convert these into options for ordinary shares A under its stock
option plan. If chello broadband's employee elects not to do so, upon exercise
of the phantom options chello broadband may elect to issue such number of
ordinary shares A equal to the value of the cash difference in lieu of paying
the cash.
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 may also be limited by mandatory provisions of Dutch law, such as in
the case of bankruptcy, and furthermore extends only to actions or omissions not
disclosed in or apparent from the adopted annual accounts. In the event of such
actions or omissions, the members of the Supervisory Board or Board of
Management will be jointly and severally liable to 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 based on reasonable business
judgment.
Our articles of association provide that we must indemnify any person who:
. is or was a member of the Supervisory Board or the Board of Management;
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. was or is a party to or is threatened to be made a party to any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative, or by or in the right of the company to
procure a judgement in its favor by reason of the fact that such person is or
was a member of our Supervisory Board or our Board of Management; and
. acted in good faith in carrying out their duties.
This indemnification will generally 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 otherwise appropriate. Our
articles of association furthermore provide that a majority of the members of
the Supervisory Board (not being parties to the action) 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.
Compensation of Supervisory Board Members
All of the members of the Supervisory Board, other than Mr. De Lange, are
directors or employees of United. None of these members receive additional
compensation for serving on the Supervisory Board.
Compensation of Board of Management Members
The aggregate 1999 salary compensation for the entire Board of Management
is approximately Euro1.77 million. 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 United have concluded a secondment arrangement, pursuant to which
certain U.S. citizens employed by United are seconded to us. See "Certain
Transactions and Relationships--Relationship with United and Related
Transactions." Prior to our initial public offering in February 1999,
compensation for all members of our management who are employees of United was
set by the compensation committee of United and compensation for all of our
other employees was determined by the Supervisory Board. In February 1999, our
Supervisory Board established a compensation committee following the completion
of the initial public offering. The compensation committee is composed of Mr.
Fries, Ms. Spangler and Ms. Wildes, each of whom is a member of the Supervisory
Board. The members of our management who are employees of United, however, will
continue to have their compensation set by United's compensation committee.
None of the members of our compensation committee, the United 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 United.
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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of all classes of securities as of March 18, 2000, 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 our advisor to the Supervisory Board; (3) each of our executive officers;
and (4) all of our Supervisory Directors, advisors and executive officers as a
group. Because Messrs. G. Schneider, Cole, M. Schneider and Riordan are
directors of United, they may be deemed to beneficially own our shares held by
United. They disclaim any beneficial ownership of these shares and this table
does not include those shares. Such share ownership information includes
ordinary shares A that may be acquired within 60 days of March 15, 2000, through
either our options or phantom options. Our phantom options are payable in either
cash or ordinary shares A, at our election. Shares issuable within 60 days upon
exercise of options or phantom options are deemed to be outstanding for the
purpose of computing the percentage ownership and overall voting power of the
persons beneficially owning such securities, but have not been deemed to be
outstanding for the purposes of computing the percentage ownership or overall
voting power of any other person.
<TABLE>
<CAPTION>
Number of Ordinary Percentage of Ordinary
Shares A Shares A (1)
Beneficial Owner --------- ----------------------
- ---------------
<S> <C> <C>
UnitedGlobalCom, Inc.(2)............................................... 239,220,291 54.84
Microsoft Corporation (3).............................................. 30,473,250 6.99
Gene W. Schneider (4).................................................. 466,593 *
Michael T. Fries (5)................................................... 98,217 *
John P. Cole, Jr....................................................... 4,575 *
Richard De Lange....................................................... -- --
Ellen P. Spangler (6).................................................. 46,875 *
Tina Wildes (7)....................................................... 127,090 *
Mark L. Schneider (8).................................................. 2,284,686 *
John F. Riordan (9).................................................... 1,217,724 *
Charles H.R. Bracken (10).............................................. 218,751 *
Anton M. Tuijten (11).................................................. 53,532 *
Nimrod J. Kovacs(12)................................................... 446,688 *
All directors, director nominees and executive officers as a group (11
persons).............................................................. 4,598,263 *
</TABLE>
*Less than 1%.
____________
(1) The figures for the percent of shares are based on 436,229,439 ordinary
shares A outstanding on March 28, 2000 (after elimination of shares held by
subsidiaries).
(2) Includes 7,332,942 ordinary shares A held by the stock option foundation as
of December 31, 1999, the board members of which are appointed by United.
The address of UnitedGlobalCom, Inc. is 4643 South Ulster Street, Suite
1300, Denver, Colorado 80237, U.S.A.
(3) The address of Microsoft Corporation is One Microsoft Way, Redmond,
Washington 98052, U.S.A.
(4) Includes 30,000 ordinary shares A held by the Gene W. Schneider Family
Trust of which Mr. Schneider is a co-trustee and includes 3,000 ordinary
shares A owned by his spouse. Also includes phantom options for 562,500 of
which 433,593 are vested.
(5) Represents 9,153 ordinary shares A owned by Mr. Fries' spouse. Also
includes phantom options for 225,000 shares, of which 89,064 are vested.
(6) Includes currently exercisable options for 45,000 ordinary shares A of
which options for 32,814 ordinary shares A are subject to our repurchase
right which expires March 26, 2003. Also includes phantom options for
45,000 of which 34,689 are vested.
(7) Includes phantom options for 153,000, of which 117,937 are vested.
(8) Includes currently exercisable options for 2,925,000 ordinary shares A of
which options for 670,314 ordinary shares A are subject to our repurchase
right, which expires April 1, 2001. Also includes 30,000 ordinary shares A
held by the Gene W. Schneider Family Trust of which Mr. M. Schneider is a
co-trustee.
(9) Includes currently exercisable options for 459,375 ordinary shares A of
which options for 360,936 ordinary shares A are subject to our repurchase
right, which right expires April 1, 2001. Also includes 3,660 ordinary
shares A owned by Mr. Riordan's spouse.
(10) Mr. Bracken holds currently exercisable options for 750,000 ordinary shares
A of which options for 531,249 ordinary shares A are subject to our
repurchase right, which expires March 15, 2003.
(11) Includes currently exercisable options for 301,500 ordinary shares A, of
which options for 248,439 ordinary shares A are subject to our repurchase
right. Such repurchase right expires for 65,625 shares on September 24,
2002, for 54,688 shares on March 26, 2003 and for 128,126 shares on
September 17, 2003.
(12) Represents phantom options for 600,000 shares of which 445,314 are vested.
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Item 13. CERTAIN TRANSACTIONS AND RELATIONSHIPS
Loans to Executive Officers
In 1999, the chello foundation loaned Mark Schneider approximately Euro2.3
million to enable him to exercise chello broadband stock options to acquire
chello broadband shares. The recourse loan is interest free. The tax payable
on the imputed interest is added to the principal amount of the loan. In 1999,
we agreed to loaned Mr. Riordan up to approximately Euro85,000 in connection
with the grant of his chello broadband stock options. See "Management--Stock
Option Plans."
In October 1999, we agreed to guarantee for a period of 60 days the bridge
loan Mr. M. Schneider obtained in connection with the purchase of his home. Our
guarantee of this Euro7.6 million bridge loan is secured by Mr. M. Schneider's
vested stock options and a right to a first mortgage on his home. If Mr. M.
Schneider defaults on this loan and the guarantee is enforced, we have a power
of attorney which allows us to exercise the relevant number of stock options and
sell the shares in satisfaction of Mr. M. Schneider's obligation. Upon an event
of default, we can also execute a first mortgage. The guarantee has been
extended by us through March 24, 2000.
Eastern European Transaction. We have agreed to sell 3% of our interest in our
Eastern European operations to Nimrod Kovacs for a purchase price based on our
investment in these interests at historical cost plus 12% interest thereon from
the time of investment through the date of closing. The amount of Mr. Kovac's
required investment is being revised due to recent Eastern European
acquisitions. Mr. Kovacs is a member of our Board of Management, and our
Executive Chairman, UPC Central Europe.
Relationship With United and Related Transactions
United is the largest broadband communications provider of video, voice and
data services outside the U.S. With operations in 23 countries, United's
networks reach more than 16 million homes and businesses and serve approximately
8 million voice and video customers. In addition, as of December 31, 1999,
United's telephony business had more than 320,000 telephony access lines and its
high speed Internet access business had more than 120,000 accounts. United's
significant operating subsidiaries include us (51% owned), the largest pan-
European broadband communications company; Austar United Communications (75%
owned), the fasted growing satellite, cable television and telecommunications
provider in Australasia; and VTR Global Com (100% owned) the largest cable
television and competitive telephony provider in Chile.
Control by United. Immediately prior to our initial public offering,
United held effectively all of the voting control over us and held all of our
issued and outstanding ordinary shares A other than approximately 7.7% of such
shares that were registered in the name of the stock option foundation to
support our stock option plan. The foundation currently has the right to shares
totaling 1.6% of our issued and outstanding ordinary shares A. United
appoints the board members of the foundation and thus controls the voting of
these shares. See "Management--Stock Option Plans." United currently owns
approximately 54.8% of our outstanding ordinary shares A and all of our
outstanding priority shares. Because we are a strategic holding of United,
United will continue to control us for the foreseeable future. Four members of
our five-member Supervisory Board are directors, officers or employees of
United.
Transactions with United. As part of the acquisition of UPC, we acquired
approximately 6.34 million shares of United's Class A common stock. We
subsequently sold 769,062 of these shares in exchange for certain interests in
the Irish system and Tara. We currently hold approximately 5.6 million shares
of United's Class A common stock, which currently represents approximately [7%]
of United's outstanding common stock. We plan to contribute these shares to a
new joint venture to which Liberty Media and Microsoft will contribute
approximately 9.8 million shares of United's Class B common stock. The joint
venture will hold approximately 17% of United's common stock. The joint venture
and its members will be bound by voting and standstill agreements with United
and certain of its controlling shareholders.
United has sold to us, in exchange for 18,991,020 of our ordinary shares A,
United's 37.5% voting and 44.75% economic interest in the telephone system
operating in the Monor region of Hungary and its interest in the Tara
programming joint venture. United has also sold to us its interest in the IPS
programming joint venture in exchange for 14,865,792 ordinary shares A.
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Agreements with United. Subject to certain limitations, beginning one year
after the date of our initial public offering, United may require us to file a
registration statement under the Securities Act of 1933 with respect to all or a
portion of our ordinary shares A or ADSs owned by United, 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.
United may 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 our ordinary shares A owned by United on Form S-3 more than once in any
six-month period. United also has the right to have our ordinary shares A that
it owns 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
United rights comparable to those described above with respect to the listing or
qualification of the ordinary shares A held by United on the Stock Market of
Amsterdam Exchanges or on any other exchange and in any other jurisdiction where
we previously have taken action to permit the public sale of our securities.
United incurs certain overhead and other expenses at the corporate level on
behalf of us and its other operating companies. These expenses include costs
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. United also
incurs direct costs for its operating companies such as travel expenses and
salaries for United employees performing services on behalf of its respective
operating companies. We and United are parties to a management services
agreement, with an initial term through 2009, pursuant to which United will
continue to perform these services for us. Under the management services
agreement, we will pay United a fixed amount each month as its portion of such
unallocated expenses. For the year ended December 31, 1999, this fixed amount
was USD300,000 per month. The fixed amount may be adjusted from time to time by
United to allocate these corporate level expenses among United's operating
companies, including us, taking into account the relative size of the operating
companies and their estimated use of United resources. In addition, we will
continue to reimburse United for costs incurred by United that are directly
attributable to us.
We and United are also parties to a secondment agreement that specifies the
basis upon which United may second certain of its employees to us. United'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
United with respect to any seconded employee's employment and severance. United
may terminate a seconded employee's employment if the employee's conduct
constitutes willful misconduct that is materially injurious to United. During
the year ended December 31, 1999, we incurred approximately [euro4.9] million
for costs associated with the seconded employees, which costs were reimbursable
to United.
We have agreed with United that so long as United holds 50% or more of our
outstanding ordinary shares A, (1) United will not pursue any video services,
telephone or Internet access or content business opportunities specifically
directed to the European or Israeli 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 or content business opportunities in Saudi Arabia or in other
markets outside of Europe or the Middle East, unless we have first presented
such business opportunity to United and United has elected not to pursue such
business opportunity. Either party may pursue any business in the United States
and its territories and possessions without regard to activities of the other.
We and United have agreed that we will provide audited financial statements
to United in such form and with respect to such periods as are necessary or
appropriate to permit United to comply with its reporting obligations as a
publicly-traded company and that we will not change our accounting principles
without United's prior consent. We have consented to the public disclosure by
United of all matters deemed necessary or appropriate by United, in its sole
discretion, to satisfy the disclosure obligations of United or any of its
affiliates thereof under the United States federal securities laws or to avoid
potential liability under such laws.
United Indentures. We are restricted by the covenants in United's
indentures dated February 5, 1998 and April 29, 1999. The United indentures
contain covenants that, among other things, limit the ability of United and its
subsidiaries, including us, to:
. incur indebtedness and issue certain preferred stock in amounts exceeding
that permitted based upon financial ratios and other tests;
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. repurchase equity interests from third parties other than United;
. make investments in non-controlled entities;
. enter into agreements restricting our ability to make distributions, loans or
other payments to equity holders;
. create certain liens;
. sell assets or issue equity for consideration other than cash, replacement
assets or permitted investments or fail to invest the cash proceeds of such
sales, in replacement assets or permitted investments within 360 days of the
sale periods; and
. enter into transactions with affiliates of United.
We continue to be controlled by United and restricted by the terms of its
debt securities. We have agreed with United that, for as long as we are subject
to the provisions of United's indentures, as amended or supplemented, or any
other indenture or agreement to which United is a party governing indebtedness
of United that replaces or refinances any indebtedness governed by United's
indentures, as amended or supplemented, we will not take any action that will
result in a breach of United's indentures.
Relationship With Microsoft
We have signed a letter of intent with Microsoft to establish a technical
services relationship and, as part of this, we 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 current service
areas. The particular terms of each joint project will be negotiated by us and
Microsoft. As part of this relationship, we established a technology board to
review technology issues and develop technology specifications and directions.
In addition, we and Microsoft will be preferred suppliers to one another, with
Microsoft having the first opportunity to license technologies to us. We will be
given the opportunity to present and offer our products to Microsoft offices in
Europe. We and Microsoft will also cooperate to advocate mutually-agreed
standards and regulations to the bodies in our service territories who set
technical standards. We will also have the right to license Microsoft software
for the delivery of Internet content services over our networks.
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 definitive agreement with Microsoft, we will grant Microsoft warrants
to purchase up to 11,400,000 ADSs representing ordinary shares A, which would
currently represent approximately 2.6% of our outstanding share capital.
Microsoft will have the option under these warrants to purchase ordinary shares
A instead of ADSs. These warrants can be exercised at a price of USD9.334 per
ordinary share A or ADS. These warrants became exercisable on February 16, 2000
and will expire February 16, 2003. 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 negotiated with respect to the ADSs
or shares to be issued upon exercise of these warrants. In addition, we have
granted Microsoft a preemptive right to purchase up to an aggregate of 10% of
chello broadband n.v.'s aggregate ordinary share capital in any equity offering
at the initial offering price. Following an initial public offering by chello
broadband, Microsoft will be given the right in any subsequent public or private
equity offerings (except when relating to a grant of equity to cable operators
in Europe or to a wholly-owned subsidiary of us) to purchase such number of
ordinary shares as will enable it to maintain up to a 10% interest in chello
broadband's ordinary share capital.
In September 1999, we agreed to form a joint venture with Microsoft and
Liberty Media Corporation to own United securities and to evaluate content and
distribution opportunities in Europe. At formation, Liberty will contribute 9.8
million Class B shares of United and we will contribute the 5.6 million Class
A shares of United that we own. We will have a 50% interest in the new joint
venture and Liberty and Microsoft will share the other 50%. In addition to its
interest in the joint venture, Liberty will receive approximately USD287.0
million redeemable preferred interest in the joint venture to balance out the
parties' ownership positions.
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The Discount Group's Option
In November 1998, a subsidiary of Discount Investment Corporation loaned us
USD90.0 million (the "DIC Loan") to acquire additional interests in our Israeli
operation. In connection with the DIC Loan, we granted an option to the
Discount Group, our partner in our Israeli system and an affiliate of Discount
Investment Corporation, to acquire ordinary shares A at a price equal to the
price in the initial public offering, discounted by a factor of 10%. The
Discount Group exercised its option and we issued 4,675,962 ordinary shares A to
it at the same time as the closing of our initial public offering. The
aggregate purchase price for the shares was equal to the sum of USD45 million,
plus interest thereon at the rate of 8% per annum from November 9, 1998 through
the closing of the exercise of the option. The Discount Group currently owns
about 1.1% of our outstanding ordinary shares A.
In connection with the exercise of the option, we agreed to enter into a
registration rights agreement with the Discount Group and a shareholders'
agreement with the Discount Group and United.
Under the shareholders' agreement, United agreed to vote in favor of one
supervisory board member nominated by the Discount Group for as long as the
Discount Group and its affiliates retain at least the number of ordinary shares
A originally acquired upon the exercise of the option. In addition, the
Discount Group has the right to participate on equal terms in connection with
sales of ordinary shares A by United, including the right to sell the Discount
Group's entire interest in us in connection with a sale by United of a
controlling interest in us. The Discount Group also has the right to negotiate
with United prior to certain sales of ordinary shares A by United. United has a
right of first refusal with respect to a sale of ordinary shares A by the
Discount Group and the right to require that the Discount Group agree to a
merger or sale of all of our shares if proposed by United. In addition, there
are certain limited restrictions on the entities or persons to whom the Discount
Group may transfer its ordinary shares A.
Upon the exercise of its option, the Discount Group received an additional
option to acquire ordinary shares A from us at a price per share equal to the
greater of (1) the price in our initial public offering or (2) the average sale
price of our ordinary shares A on the Stock Market of Amsterdam Exchanges for
the 30-day period immediately preceding the exercise date. The aggregate
purchase price for the ordinary shares A purchased pursuant to the additional
option would be equal to the sum of USD45.0 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 A 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, 2000.
Relationship with chello broadband
We are currently negotiating with chello broadband regarding the terms
under which our operating companies will distribute chello broadband services.
These negotiations will not apply to our operating companies in Malta and
Israel. We expect that our final agreement will include terms relating to non-
competition and a revenue sharing structure for services provided over our
systems.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Index to Financial Statements
<TABLE>
<CAPTION>
Page
Number
---------
UNITED PAN-EUROPE COMMUNICATIONS N.V.
<S> <C>
Independent Auditors' Report.................................................................... 62
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998 (Post-
Acquisition................................................................................... 63
Consolidated Statements of Operations for the Years Ended December 31, 1999 (Post-
Acquisition), December 31, 1998 and December 31, 1997 (Pre-Acquisition)....................... 64
Consolidated Statements of Shareholders' Equity (Deficit) for the Years Ended December 31,
1999 (Post-Acquisition), December 31, 1998 and December 31, 1997 (Pre-Acquisition),........... 65
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999 (Post-
Acquisition), December 31, 1998 and December 31, 1997 (Pre-Acquisition)....................... 67
Notes to Consolidated Financial Statements...................................................... 69
UNITED TELEKABEL HOLDINGS
Report of Independent Accountants............................................................... 144
Consolidated Balance Sheet as of December 31, 1998.............................................. 146
Consolidated Statement of Operations from August 6, 1998 (commencement of operations)
until December 31, 1998....................................................................... 147
Consolidated Statement of Cash Flows from August 6, 1998 (commencement of operations)
until December 31, 1998....................................................................... 148
Notes to Consolidated Financial Statements...................................................... 149
</TABLE>
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(b) Reports on Form 8-K
Date of Report Item Reported Financial Statements Filed
- -------------- ------------- --------------------------
November 2, 1999 Item 5 - @Entertainment and None
Poland Communications,
Inc. repurchase of notes
(c) Exhibits
3.1(a) Amended and Restated Articles of Association of UPC(1)
3.1(b) Amendment to the Articles of Association of UPC dated March 17, 2000 (2)
4.1 Indenture dated as of July 30, 1999, between UPC and Citibank N.A, as
Trustee with respect to 10 7/8% Senior Notes(3)
4.2 Indenture dated as of July 30, 1999, between UPC and Citibank N.A., as
Trustee with respect to 12 1/2% Senior Discount Notes(3)
4.3 Indenture dated as of October 29, 1999, between UPC and Citibank N.A, as
Trustee with respect to 10 7/8% Senior Notes due 2007(4)
4.4 Indenture dated as of October 29, 1999, between UPC and Citibank N.A., as
Trustee with respect to 11 1/4% Senior Notes due 2009(4)
4.5 Indenture dated as of October 29, 1999, between UPC and Citibank N.A., as
Trustee with respect to 13 3/8% Senior Discount Notes due 2009(4)
4.6 Indenture dated as of January 20, 2000, between UPC and Citibank N.A., as
Trustee with respect to 11 1/2% Senior Notes due 2010
4.7 Indenture dated as of January 20, 2000, between UPC and Citibank N.A., as
Trustee with respect to 11 1/4% Senior Notes due 2010
4.8 Indenture dated as of January 20, 2000, between UPC and Citibank N.A., as
Trustee with respect to 13 3/4% Senior Discount Notes due 2010
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. ("Phillips Networks"), Joint Venture,
Inc.("JVI") and UPC(5)
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10.2 Tax Liability Agreement dated October 7, 1997, between UPC, Philips
Media, Philips Coordination Center, Philips Networks, United, and JVI(6)
10.3 Indenture dated as of February 5, 1998, between United International
Holdings, Inc. ("United") and Firstar Bank of Minnesota,
N.A.("Firstar")(7)
10.4 Indenture dated as of April 29, 1999, between United and Firstar(8)
10.5 Form of Master Seconded Employee Services Agreement(9)
10.6 Form of United Registration Rights Agreement(10)
10.7 Form of United Management Services Agreement(9)
10.8 Consulting Agreement dated June 1, 1995, between United and Mark L.
Schneider(10)
10.9 Agreement dated as of February 11, 1999 between United and UPC(11)
10.10 Option Agreement dated November 5, 1998, among UPC, DIC and PEC(6)
10.11 Amendment to Option Agreement dated February 4, 1999, between UPC, DIC
and PEC(9)
10.12 Form of Registration Rights Agreement among UPC, DIC and PEC(6)
10.13 Form of Shareholders Agreement among UPC, DIC and PEC(6)
10.14 United Pan - Europe Communications N.V. Phantom Stock Option Plan, March
20, 1998(6)
10.15 Amended Stock Option Plan dated February 8, 1999, between UPC and
Stichting Administratie Kantoor UPC(11)
10.16 Agreement dated April 2, 1998, for the contribution of the Dutch Cable
Assets of UPC and NUON to UTH(12)
10.17 Share Purchase Agreement dated January 19, 1999, by and between UPC,
Belmarken Holding B.V., NUON, N.V. Kraton and UTH, as amended(10)
10.18 Final Amendment to Share Purchase Agreement dated as of February 17,
1999(13)
10.19 Share Purchase Agreement dated June 23, 1999, between UPC and MediaOne
International B.V.(14)
10.20 Investment Agreement between SBS BROADCASTING SA and Registrant dated
June 29, 1999(3)
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10.21 Exchange Offer Agreement, dated as of March 9, 2000, by and between UPC
and SBS Broadcasting S.A.(15)
10.22 Share Exchange Agreement, dated as of March 9, 2000, by and between UPC
and the shareholders named therein(15)
10.23 Agreement and Plan of Merger among @Entertainment, Inc., United Pan -
Europe Communications N.V. and Bison Acquisition Corp. dated as of June
2, 1999(3)
10.24 Form of Stockholders Agreement dated as of June 2, 1999 among
@Entertainment, Inc., United Pan - Europe Communications N.V., Bison
Acquisition Corp. and the other parties signatory thereto(3)
10.25 Indenture dated as of July 14, 1998, between @Entertainment and Bankers
Trust Company relating to @Entertainment's 14 1/2% Senior Discount Notes
due 2008 and its 14 1/2% Series B Senior Discount Notes due 2008(16)
10.26 Indenture dated as of January 20, 1999, between @Entertainment and
Bankers Trust Company relating to @Entertainment's Series C Senior
Discount Notes due 2008(17)
10.27 Indenture dated as of January 27, 1999, between @Entertainment and
Bankers Trust Company relating to @Entertainment's 14 1/2% Senior
Discount Notes due 2009 and its 14 1/2% Series B Senior Discount Notes
due 2009(17)
10.28 Share Purchase Agreement between the Sellers represented by EQT
Scandinavia Limited and United Pan - Europe Communications N.V.(3)
10.29 Share Purchase Agreement, dated February 2, 2000, among Eneco
Wed-Activiteiten B.V., N.V. Eneco, UPC Nederland N.V., Belmarken Holding
B.V. and UPC(18)
10.30 Loan and Note Issuance Agreement between UPC Facility B.V., Telekabel
Wien and Janco Multicom and Bank of America International Limited, CIBC
World Markets plc, Citibank N.A., MeesPierson N.V., Paribas, The Royal
Bank of Scotland plc, Toronto Dominion Bank Europe Limited, and The
Toronto - Dominion Bank, as Facility Agent and Security Agent(3)
12.1 Computation of Earnings to Fixed Charges
21.1 Subsidiaries of UPC
133
<PAGE>
27.1 Financial Data Schedules
- --------------------
(1) Incorporated by reference from Amendment No. 1 to Form S-1 Registration
Statement filed by UPC on September 23, 1999 (File No. 333-84427).
(2) Incorporated by reference from Form 8-K filed by UPC, dated March 17,
2000 (File No. 000-25365).
(3) Incorporated by reference from Form 8 K filed by UPC, dated July 30, 1999
(File No. 000-25365).
(4) Incorporated by reference from Form 10 Q filed by UPC, for the quarter
ended September 30, 1999 (File No. 000-25365).
(5) Incorporated by reference from Form 8-K filed by United, dated December
11, 1997 (File No. 0-21974).
(6) Incorporated by reference from Form S-1 Registration Statement filed by
UPC on November 24, 1998 (File No. 333-67895).
(7) Incorporated by reference from Form S-4 Registration Statement filed by
United on March 3, 1998 (File No. 333-47).
(8) Incorporated by reference from Form 8-K filed by United, dated April 29,
1999 (File No. 0-21974).
134
<PAGE>
(9) Incorporated by reference from Amendment No. 8 to Form S-1/A Registration
Statement filed by UPC on February 10, 1999 (File No. 333-67895).
(10) Incorporated by reference from Amendment No. 6 to Form S-1/A Registration
Statement filed by UPC on February 4, 1999 (File No. 333-67895).
(11) Incorporated by reference from Form 10 K filed by UPC for the year ended
December 31, 1998 (File No. 000-25365).
(12) Incorporated by reference from Amendment No. 4 to Form S-1/A Registration
Statement filed by UPC on January 25, 1999 (File No. 333-67895).
(13) Incorporated by reference from Form 8 K filed by UPC, dated March 4, 1999
(File No. 000-25365).
(14) Incorporated by reference from Amendment No. 2 to Form S-1 Registration
Statement filed by UPC on September 30, 1999 (File No. 333-84427).
(15) Incorporated by reference from Form 8-K filed by UPC, dated March 9, 2000
(File No. 000-25365).
(16) Incorporated by reference from Amendment No. 1 to Form S-4 filed by
@Entertainment on August 10, 1998 (File No. 333-60659).
(17) Incorporated by reference from Amendment No. 1 to Form S-4 filed by
@Entertainment on May 13, 1999 (File No. 333- 72361).
(18) Incorporated by reference from Form 8-K filed by UPC, dated February 3,
2000 (File No. 000-25365).
(d) Financial Statement Schedules
<TABLE>
<CAPTION>
Page
Number
---------
UNITED PAN-EUROPE COMMUNICATIONS N.V.
<S> <C>
Report of Independent Public Accountants on Schedules........................................... 136
Schedule I - Condensed Financial Information of Registrant (Parent Only)........................ 137
Schedule II - Valuation and Qualifying Accounts................................................. 143
</TABLE>
135
<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 United States of America, the consolidated financial statements of United
Pan-Europe Communications N.V. included in this Form 10-K and have issued our
report thereon dated March 27, 2000. 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,
March 28, 2000
136
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
PARENT ONLY
SCHEDULE I
Condensed Information as to the Financial Condition of Registrant
(Stated in thousands of Euros, except share and per share amounts)
<TABLE>
<CAPTION>
As of As of
December 31, December 31,
1999 1998
------------- ---------------
<S> <C> <C>
ASSETS:
Current assets
Cash and cash equivalents.......................................................... 950,343 3,198
Restricted cash.................................................................... 18,683 --
Related party receivables.......................................................... 780,494 52,472
Other receivables, net............................................................. 13,198 1,057
Other current assets............................................................... 20,540 3,602
---------- -----------
Total current assets........................................................ 1,783,258 60,329
Investments in, loans and other advances to affiliated companies, accounted for
under the equity method, net.................................................... 2,122,955 444,208
Property, plant and equipment, net of accumulated depreciation of 2,075 and 531,
respectively.................................................................... 28,876 446
Goodwill and other intangibles, net of accumulated amortization of 34 and 0,
respectively.................................................................... 275 -
Stocks and bonds..................................................................... 394,558 -
Other investments ................................................................... 230,411 -
Deferred financing costs, net of accumulated amortization of 1,819 and 924,
respectively..................................................................... 49,446 7,087
Other assets......................................................................... 491 295
---------- -----------
Total assets................................................................ 4,610,270 512,365
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):
Current liabilites
Related party accounts payables.................................................... 11,111 3,957
Accrued liabilities................................................................ 98,472 25,821
Note payable to shareholder........................................................ 6,786 54,032
Short-term debt.................................................................... 99,378 15,438
Short-term debt, related party...................................................... 20,421 17,754
---------- -----------
Total current liabilites.................................................... 236,168 117,002
Long-term debt....................................................................... 2,459,579 281,344
Other related-party long-term debt................................................... - -
Loans from affiliated companies...................................................... 37,844 -
Deferred compensation................................................................ (143,434) 147,616
Deferred taxes....................................................................... (87) 62
---------- -----------
Total liabilities........................................................... 2,590,070 546,024
========== ===========
Shareholders' equity (deficit) (As adjusted for stock splits)
Priority stock, 1.0 par value, 300 shares authorized, 300 and 0 shares issued,
respectively...................................................................
Ordinary stock, 1.0 par value, 600,000,000 shares authorized, 435,604,497 and
276,856,812 shares issued, respectively........................................ 435,605 83,057
Additional paid-in capital......................................................... 2,371,951 249,797
Deferred compensation.............................................................. (47,425) -
Treasury stock, at cost 0 and 27,594,405 shares of ordinary stock, respectively.... - (50,091)
Accumulated deficit................................................................ (1,114,219) (329,921)
Other cumulative comprehensive income.............................................. 374,288 13,499
---------- -----------
Total shareholders' equity (deficit)......................................... 2,020,200 (33,659)
---------- -----------
Total liabilities and shareholders' equity (deficit)......................... 4,610,270 512,365
========== ===========
</TABLE>
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of January 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
137
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
PARENT ONLY
SCHEDULE I
Condensed Information as to the Operations of Registrant
(Stated in thousands of Euros, except share and per share amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------------------
1999 1998 1997
-------------------- -------------------- --------------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
<S> <C> <C> <C>
Management fee income from related parties.................. 11,411 4,832 1,401
Corporate general and administrative expense................ (139,705) (146,711) (5,266)
Depreciation and amortization............................... (1,986) (199) (334)
-------------------- -------------------- --------------------
Net operating loss........................................ (130,280) (142,078) (4,199)
Interest income............................................. 22,758 871 1,284
Interest income, related party.............................. 27,869 28,297 20,360
Interest expense............................................ (103,130) (539) (6,872)
Interest expense, related party............................. (1,298) (26,467) (15,139)
Foreign exchange gain (loss) and other
income (expense), net..................................... 15,651 (6,596) (5,838)
-------------------- -------------------- --------------------
Net loss before income taxes and other items.............. (168,430) (146,512) (10,404)
Share in results of affiliated companies, net............... (615,865) (109,067) (72,410)
Income tax benefit (expense)................................ - - 660
-------------------- -------------------- --------------------
Net loss.................................................. (784,298) (255,579) (82,154)
==================== ==================== ====================
Basic and diluted net loss per ordinary share (1)........... (2.08) (1.03) (0.30)
==================== ==================== ====================
Weighted-average number of ordinary shares
outstanding (1)........................................... 377,969,829 247,915,834 275,421,933
==================== ==================== ====================
(1) As adjusted for the stock splits
</TABLE>
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of Jaunary 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
138
<PAGE>
<TABLE>
<CAPTION>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
PARENT ONLY
SCHEDULE I
Condensed Information as to the Cash Flows of the Registrant
(Stated in thousands of Euros)
For the Years Ended December 31,
1999 1998 1997
---------------------- ---------------------- ---------------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash flows (784,298) (255,579) (82,153)
from operating activities:
Depreciation and amortization 1,986 199 334
Amortization of deferred financing costs 10,135 - -
Accretion of interest 30,282 - -
Share in results of affiliated companies, net 615,865 109,067 72,410
Compensation expense related to stock options 101,388 145,429 2,186
Exchange rate gain, net (11,021) 6,596 5,837
Other (3,574) (2,470)
Changes in assets and liabilities: 1,670 - -
Increase in receivables (3,406) (5,585) (2,886)
Decrease (increase) in other
non-current assets (15,802) (698) (661)
Increase in other current liabilities 47,671 9,383 25,861
Decrease in deferred taxes and other - -
long-term liabilities (152) 507 1,045
---------------------- ---------------------- ---------------------
Net cash flows from operating activities (5,682) 5,745 19,503
---------------------- ---------------------- ---------------------
Cash flows from investing activities:
Restricted cash deposited (18,683) - -
Investments in, loans to and advances to
affiliated companies, net (2,830,121) (226,275) (133,652)
Investments in stocks and bonds, net (255,133) - -
Loans repaid by subsidiaries - 79,726 158,937
Capital expenditures (32,086) (2,356) (594)
Dividends received - 4,074 -
Release (deposit) to acquire minority interest
in subsidiary - 21,328 (21,328)
Sale of affiliated companies 16,648 - 5,023
---------------------- ---------------------- ---------------------
Net cash flows from investing activities (3,119,375) (123,503) 8,386
---------------------- ---------------------- ---------------------
Cash flows from financing activities:
Proceeds from initial public offering, net 1,206,910 - -
Proceeds from secondary public offering, net 851,306 - -
Proceeds from senior notes 2,393,451 - -
Proceeds from short-term borrowings 18,225 - 41,482
Proceeds from short-term borrowings, related party - 58,957 103,506
Proceeds from long-term borrowings - 59,454 226,300
Deferred financing costs (51,265) (233) (7,778)
Repayments of long and short-term borrowings (281,355) (16,873) (171,276)
(Repayments) borrowings on note payable
to shareholder (48,561) - -
Dividends paid to minority shareholder - - -
Redemption of convertible loans - - (77,220)
Purchase shares from shareholder - - (132,758)
Repayments on short-term note (16,499) - -
---------------------- ---------------------- ---------------------
Net cash flows from financing activities 4,072,212 101,305 (17,744)
---------------------- ---------------------- ---------------------
Net increase (decrease) in cash and
cash equivalents 947,155 (16,453) 10,145
Cash and cash equivalents at beginning of period 3,198 19,651 9,506
---------------------- ---------------------- ---------------------
Cash and cash equivalents at end of period 950,353 3,198 19,651
====================== ====================== =====================
</TABLE>
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of January 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
139
<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 Euros)
<TABLE>
<CAPTION>
For the Years Ended December 31,
1999 1998 1997
------------------- ----------------- -----------------
(Post-Acquisition) (Post-Acquisition) (Pre-Acquisition)
<S> <C> <C> <C>
Non-cash investing and financing activities:
Issuance of shares upon conversion of United loan 6,786 - -
=================== ================= =================
Issuance of shares upon conversion of PIK Notes - - -
=================== ================= =================
Supplemental cash flow disclosures:
Cash paid for interest (21,542) (7,515) (4,207)
=================== ================= =================
Cash received for interest 25,198 12,492 11,924
=================== ================= =================
</TABLE>
The conversion of Dutch Guilder amounts into Euros related to the financial
information presented prior to the creation of the Euro, was calculated using
the exchange rate as of January 1, 1999, which was 1 Euro to 2.20371 Dutch
Guilders.
140
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTE TO PARENT ONLY
SCHEDULE I
AS OF DECEMBER 31, 1999 AND DECEMBER 31, 1998
(Monetary amounts stated in thousands of Euros,
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. ("United"), 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).
United contributed its interests in multi-channel television systems in Israel,
Ireland, the Czech Republic, Malta, Norway, Hungary, Sweden and Spain. United
also contributed United States dollars 78.2 million in cash (including accrued
interest of USD3.2 million) to UPC and issued to Philips 9,507,453 shares of its
Class A Common Stock having a value of USD50.0 million (at date of closing). In
addition, UPC issued to Philips USD133.6 million of convertible subordinated
pay-in-kind notes (the "PIK Notes"). As a result of this transaction, United and
Philips each owned a 50% economic and voting interest in UPC.
On December 11, 1997, United acquired Philips' 50% interest in UPC (the "UPC
Acquisition"), thereby making it an effectively wholly-owned subsidiary of
United (subject to certain employee equity incentive compensation arrangements)
through its wholly-owned subsidiary United Europe, Inc. ("United"). 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 6,338,302 shares of
Class A Common Stock of United held by Philips (30,313), (ii) United purchased
77,097 of the accreted amount of UPC's PIK Notes and redeemed them for
45,540,783 shares of UPC, (iii) UPC repaid to Philips the remaining 77,311
accreted amount of the PIK Notes (154,195), (iv) United purchased 39,364,812
shares of UPC directly from Philips, and (v) UPC repurchased Philips' remaining
equity interest in UPC (73,135,188 shares). The UPC Acquisition was financed
with proceeds from a long-term revolving credit facility through UPC with a
syndicate of banks (138,494) (the "Senior Revolving Credit Facility"), a bridge
bank facility through a subsidiary of UPC USD111,200 (101,647) and a cash
investment by United of 148,568. Approximately 217,360 drawn on the Senior
Revolving Credit Facility was used to repay existing debt of UPC in conjunction
with the UPC Acquisition.
United'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 United, 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
United. As of December 11, 1997, the proportional net assets of UPC acquired by
United were recorded at fair market value based on the purchase price paid by
United, along with additional basis differences at the United level existing as
of that date. The total purchase accounting adjustments of 233,587 were
allocated to UPC's underlying net assets.
As a result of the UPC Acquisition and the associated push-down of United
basis on December 11, 1997, the condensed information as to financial position
of registrant as of December 31, 1997, 1999, 1998 and 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 898 of new basis depreciation
and amortization resulting from push-down accounting as well as approximately
1,831 of interest expense from purchase related indebtedness which is included
in the
141
<PAGE>
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.
2. Basis of Presentation
In December 1998 and February 1999, UPC acquired telephony and programming
assets from United through the issuance of new shares. As the acquisitions were
between entities under common control, the transactions were accounted for at
historical cost, similar to pooling of interests accounting. It is generally
accepted that, consistent with a pooling-of-interests accounting, prior period
financial statements of the transferee are restated for all periods in which the
transferred operations were part of parent's consolidated financial statements.
Accordingly, we have restated all periods presented as if UPC had acquired the
telephony and programming assets from United as of the date of United's initial
investment.
142
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
(Stated in thousands of Euros)
<TABLE>
<CAPTION>
Additions
-------------------------
Balance at
Beginning of Charged to Balance at End
Period Expense Acquisitions Deductions(1) Of Period
------------ ---------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts receivable:
Year ended December 31, 1999.................. 4,202 4,495 8,751 (693) 16,754
===== ===== ===== ====== ======
Year ended December 31, 1998.................. 2,925 917 512 (152) 4,202
===== ===== ===== ====== ======
Year ended December 31, 1997.................. 2,648 950 246 (919) 2,925
===== ===== ===== ====== ======
Year ended December 31, 1996.................. 2,424 412 379 (567) 2,648
===== ===== ===== ====== ======
Allowance for costs to be reimbursed:
Year ended December 31, 1999.................. -- 63 -- -- 63
===== ===== ===== ====== ======
Year ended December 31, 1998.................. 1,002 49 -- (1,651) --
===== ===== ===== ====== ======
Year ended December 31, 1997.................. 2,096 554 -- (1,648) 1,002
===== ===== ===== ====== ======
Year ended December 31, 1996.................. 2,406 360 -- (670) 2,096
===== ===== ===== ====== ======
Allowance for Investments Affiliated
Companies:
Year ended December 31, 1999.................. -- -- -- -- --
===== ===== ===== ====== ======
Year ended December 31, 1998.................. -- -- -- -- --
===== ===== ===== ====== ======
Year ended December 31, 1997.................. 1,900 -- -- (1,900) --
===== ===== ===== ====== ======
Year ended December 31, 1996.................. 2,245 -- -- (345) 1,900
===== ===== ===== ====== ======
</TABLE>
(1) Represents uncollectible balances written off to the allowance account and
the effect of currency translation adjustment.
143
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Introduction
We have audited the consolidated financial statements of UNITED TELEKABEL
HOLDING N.V., Amsterdam, The Netherlands, for the year 1998 for purpose of
inclusion in the Form 10-K of one of its shareholders. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
Scope
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair
view of the financial position of the company as at December 31, 1998 and of the
result for the period from commencement of operations at August 6, 1998 then
ended in accordance with accounting principles generally accepted in The
Netherlands.
Generally accepted accounting principles in the Netherlands vary in certain
significant respects from generally accepted accounting principles in the United
States of America. Application of generally accepted accounting principles in
the United States of America would have affected total assets, statement of
operations and shareholders' equity as at and for the period from commencement
of operations at August 6, 1998 ended December 31, 1998, to the extent
summarized in Note 18. to the consolidated financial statements.
Amstelveen, The Netherlands
March 19, 1999
144
<PAGE>
UNITED TELEKABEL HOLDING N.V.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS (AUGUST 6, 1998) TO
DECEMBER 31, 1998
145
<PAGE>
UNITED TELEKABEL HOLDING N.V.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
<TABLE>
<CAPTION>
Assets
Fixed assets:
<S> <C>
Intangible fixed assets.............................. 564,438
Tangible fixed assets................................ 847,056
Affiliated companies................................. 206,332
---------
Total fixed assets......................................... 1,617,826
---------
Current assets:
Inventories.......................................... 3,091
Receivables.......................................... 40,638
Cash and cash equivalents............................ 10,475
---------
Total current assets....................................... 54,204
---------
Total assets............................................... 1,672,030
=========
</TABLE>
<TABLE>
<CAPTION>
Shareholders' Equity and Liabilities
<S> <C>
Shareholders' Equity................................. 635,521
Minority interest.................................... 1,104
---------
636,625
Provisions........................................... 42,054
Long-term liabilities................................ 232,727
Current liabilities.................................. 760,624
---------
Total shareholders' equity and liabilities.............. 1,672,030
=========
</TABLE>
146
<PAGE>
UNITED TELEKABEL HOLDING N.V.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
<TABLE>
<S> <C>
Total revenues...................................... 99,122
Direct operating expenses........................ (33,172)
Selling, general and administrative expenses..... (36,096)
Depreciation and amortization.................... (39,490)
--------
Total operating expenses............................ (108,758)
--------
Operating loss................................... (9,636)
Financial income and expense..................... (16,699)
--------
Loss before income taxes............................ (26,335)
Income taxes..................................... 1,212
--------
Loss after taxes.................................... (25,123)
Share in results of affiliated companies......... (24,486)
--------
Group loss.......................................... (49,609)
Minority interest................................ 235
--------
Net loss............................................ (49,374)
========
</TABLE>
147
<PAGE>
UNITED TELEKABEL HOLDING N.V.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss.................................................... (49,374)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation and amortization............................... 39,490
Share in results of affiliated companies, net............... 24,486
Minority interest in subsidiaries........................... (235)
Changes in assets and liabilities:
Decrease in current assets.................................. 40,098
(Decrease) in current liabilities........................... (55,186)
(Decrease) in deferred taxes and other provisions........... (1,132)
--------
Net cash flows from operating activities..................... (1,853)
--------
Cash flows from investing activities:
Capital expenditures........................................ (121,384)
Loan to affiliated companies................................ (7,120)
Acquisitions, net of cash acquired.......................... (12,588)
--------
Net cash flows from investing activities..................... (141,092)
--------
Cash flows from financing activities:
Proceeds from short-term borrowings......................... 120,705
Proceeds from long-term borrowings.......................... 9,621
--------
Net cash flows from financing activities..................... 130,326
--------
Net decrease in cash and cash equivalents................... (12,619)
Cash and cash equivalents at beginning of period............ 100
Cash and cash equivalents contributed....................... 22,994
--------
Cash and cash equivalents at end of period................... 10,475
========
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Supplemental cash-flow disclosures:
Cash paid for interest...................................... (19,470)
========
Non-cash investing activities:
Contribution of Dutch cable systems
Working capital............................................. (73,850)
Affiliated companies........................................ 223,698
Tangible fixed assets....................................... 764,762
Intangible fixed assets..................................... 550,911
Short-term debt............................................. (544,918)
Long-term liabilities....................................... (223,106)
Provisions.................................................. (35,696)
Cash and cash equivalents................................... 22,994
--------
Equity contributed........................................... 684,795
========
</TABLE>
148
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(Monetary amounts stated in thousands of Dutch guilders)
1. Organization and Nature of Operations
United Telekabel Holding N.V. ("UTH" or the "Company"), legally seated in
Almere, The Netherlands, was legally formed in May 1998 and commenced operations
on August 6, 1998. UTH was formed as a joint venture between United Pan-Europe
Communications N.V. ("UPC") and N.V. NUON Energie-Onderneming voor Gelderland,
Friesland en Flevoland ("NUON"). UPC became a 51% shareholder and NUON a 49%
shareholder. UTH was formed for the purpose of offering cable-based
communications through its networks in the Netherlands. UTH currently offers
cable television services and is further developing and upgrading its network to
provide digital video, voice and internet/data services in its Dutch markets.
UTH commenced operations on August 6, 1998 when both shareholders
contributed their interests in Dutch cable television operating companies to
UTH. NUON contributed its interest in N.V. Telekabel Beheer ("Telekabel") and
UPC contributed its interest in Cable Network Brabant Holding B.V. ("CNBH") and
50% of the shares in A2000 Holding N.V. ("A2000"). UTH recorded the assets
contributed at their fair market value. The table below summarizes the opening
balance sheet of UTH, based on the net assets contributed at their fair market
values by NUON and UPC as of August 6, 1998.
<TABLE>
<S> <C>
Cash and cash equivalents contributed................... 23,094
Other current assets.................................... 83,827
Affiliated companies.................................... 223,698
Tangible fixed assets................................... 764,762
Intangible fixed assets................................. 550,911
---------------
Total assets......................................... 1,646,292
===============
Short-term debt......................................... 544,918
Other current liabilities............................... 157,677
Provisions.............................................. 35,696
Long-term liabilities................................... 223,106
Shareholders' equity and liabilities.................... 684,895
---------------
Total shareholders' equity and liabilities........... 1,646,292
===============
</TABLE>
Due to the fact that operations commenced at August 6, 1998, no
comparative financial statements have been presented. Proforma information
(unaudited) is presented in note 19.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the Netherlands for
financial statements. The accounting policies followed in the preparation for
the consolidated financial statements, differ in some respects to those
generally accepted in the United States of America (US GAAP). See note 18.
The preparation of financial statements in conformity with Dutch 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
149
<PAGE>
during the reporting period. Actual results could differ from those estimates.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) have been made which are necessary to present fairly the financial
position of the Company as of December 31, 1998 and the results of its
operations for the period from commencement of operations (August 6, 1998) to
December 31, 1998.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
UTH and its group companies (the "UTH Group"). Group companies are companies or
other legal entities in which UTH has an ownership interest of more than 50% of
the issued share capital or that UTH otherwise controls. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The following chart presents a summary of UTH's significant investments in
multi-channel television, programming and telephony operations as of December
31, 1998:
<TABLE>
<CAPTION>
Name City Percentage Ownership
<S> <C> <C>
Cable Network Brabant Holding BV Eindhoven 100
N.V. Telekabel Beheer Arnhem 100
A2000 Holding N.V. Amsterdam 50 (1)
Uniport Communications B.V. Amsterdam 80
</TABLE>
(1) Not consolidated
Foreign Currencies
Assets and liabilities denominated in foreign currencies are translated into
Dutch guilders at the yearend exchange rate. Transactions in foreign currencies
are translated at the exchange rate in effect at the time of the transaction.
The exchange results are recorded under financial income and expense in the
statement of income.
Balance Sheet
(a) General
-------
Assets and liabilities are stated at face value unless indicated otherwise.
(b) Fixed assets
------------
Intangible fixed 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 and include the development costs
incurred prior to the date a new license was acquired. The license value is
amortized on a straight-line basis over the initial license period, up to a
maximum of 20 years. Deferred financing costs are amounts spent in connection
with financing the UTH Group. The amortization period is the period relating to
the term of the financing. When assets are fully amortized, the costs and
accumulated amortization are removed from the accounts.
Tangible fixed assets
Tangible fixed assets are stated at cost. Additions, replacements,
installation costs and major improvements are capitalized, and costs for normal
repair and maintenance of tangible fixed assets are charged to expense as
incurred. Assets constructed by subsidiaries of UTH 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 tangible fixed assets at acquisition
are as follows:
150
<PAGE>
Networks 7-20 years
Buildings and leasehold improvements 20-33 years
Machinery & Other 3-10 years
Affiliated Companies
For those investments in companies in which UTH'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 UTH 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 fair market
value, is adjusted to recognize UTH's proportionate share of net earnings or
losses of the affiliates, limited to the extent of UTH's investment in and
advances to the affiliates, including any debt guarantees or other contractual
funding commitments. UTH'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.
(c) Receivables
-----------
Receivables are stated at face value, less an allowance for doubtfull
accounts. The allowance for doubtful accounts is based upon 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 or for a maximum of three years.
(d) Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash and investments with original
maturities of less than three months.
(e) Provisions
----------
Deferred tax liabilities arising from temporary differences between the
financial and tax bases of assets and liabilities are included in the
provisions. The principal differences arise in connection with valuation
differences of intangible fixed assets. In calculating the provision, current
tax rates are applied.
UTH 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 carry forwards
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 valuation
allowance if management believes it is more likely than not they will not be
realized.
(f) Fair value of financial instruments
-----------------------------------
SFAS Statement No. 107, "Disclosures about Fair Values of Financial
Instruments" requires the disclosure of estimated fair values for all financial
instruments, both on- and off-balance sheet, for which it is practicable to
estimate fair value. For certain instruments, including cash and cash
equivalents, receivables, current liabilities and certain provisions, it was
assumed that the carrying amount approximated fair value due to the short
maturity of those instruments. For short and long term debt, the carrying value
approximates the fair value since all debt instruments carry a variable interest
rate component except for the convertible loans which carried a fixed interest
rate. For investments in affiliated companies carried at cost, quoted market
prices for the same or similar financial instruments were used to estimate the
fair values. UTH has adopted the principles of this statement in its financial
statements. UTH did not have any material off-balance-sheet financial
instruments as of December 31, 1998.
(g) Recoverability of Tangible and Intangible fixed assets
------------------------------------------------------
UTH 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 loss is recognized when the
estimated
151
<PAGE>
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 the 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.
(h) Concentration of Credit Risk
----------------------------
Financial instruments which potentially subject UTH to concentrations of
credit risk consist principally of trade receivables. Concentrations of credit
risk with respect to trade receivables are limited due to UTH's large number of
customers.
(i) Other Comprehensive Income
--------------------------
UTH 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. As of December 31, 1998, UTH had
no other comprehensive income items.
Income Statement
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.
New Accounting Principles
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting For the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"), 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.
Management believes that the adoption of SOP 98-1 will not have a material
effect on the financial statements.
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. Management is currently assessing the
effect of this new standard.
152
<PAGE>
3. Intangible fixed assets
<TABLE>
<CAPTION>
Licenses and Deferred
Total Goodwill Financing Costs
------------- ----------------------- --------------------
<S> <C> <C> <C>
Value upon contribution........................ 550,911 547,869 3,042
Investments.................................... 30,996 29,745 1,251
Amortization................................... (17,469) (17,149) (320)
------- ------- -----
Book value as of December 31,1998............. 564,438 560,465 3,973
======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
Balance as of December 31, 1998
------------------------------------------------------------
Licenses and Deferred
Total Goodwill Financing Costs
------------- ----------------------- --------------------
<S> <C> <C> <C>
Gross Value.................................... 581,907 577,614 4,293
Amortization................................... (17,469) (17,149) (320)
------- ------- -----
Book value as of December 31,1998............. 564,438 560,465 3,973
======= ======= =====
</TABLE>
4. Tangible fixed assets
<TABLE>
<CAPTION>
Land and Machinery
Total Buildings Network & Other
------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C>
Value upon contribution...................... 764,762 6,025 745,503 13,234
Additions.................................... 104,315 130 102,023 2,162
Depreciation................................. (22,021) (182) (20,005) (1,834)
------- ----- ------- ------
Book value as of December 31,1998........... 847,056 5,973 827,521 13,562
======= ===== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Balance as of December 31, 1998
-----------------------------------------------------------------
Land and Machinery
Total Buildings Network & Other
------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C>
Cost......................................... 869,077 6,155 847,526 15,396
Depreciation................................. (22,021) (182) (20,005) (1,834)
------- ----- ------- ------
Book value as of December 31,1998........... 847,056 5,973 827,521 13,562
======= ===== ======= ======
</TABLE>
5. Affiliated companies
<TABLE>
<CAPTION>
Total Investments Advances
------------- ----------------------- -------------------
<S> <C> <C> <C>
Balance upon contribution...................... 223,698 223,698 --
Additions...................................... 7,120 -- 7,120
Share in result................................ (24,486) (24,486) --
------- ------- -------
Balance as of December 31,1998................ 206,332 199,212 7,120
======= ======= =======
</TABLE>
The investments in affiliated companies as of December 31, 1998 are:
<TABLE>
<CAPTION>
Investments in and Cumulative Share
% Advances to In Results of
Ownership Affiliated Companies Affiliated Companies Total
------------- --------------------- ---------------------- -------------
<S> <C> <C> <C> <C>
A2000.................... 50 229,481 (24,449) 205,032
Interway................. 33 1,337 (37) 1,300
------- ------- -------
Total.................... 230,818 (24,486) 206,332
======= ======= =======
</TABLE>
153
<PAGE>
UTH 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 12 to 15 years:
<TABLE>
<CAPTION>
Accumulated
Basis Difference Amortization
---------------- ----------------
<S> <C> <C>
A2000............................................. 249,236 (8,200)
======= ======
</TABLE>
These differences have been presented as affiliated companies and share in
result of affiliated companies respectively.
Subsequent to year end, UPC provided a letter of support to A2000 stating
that it would continue to provide to A2000 the funding necessary to continue
operations through at least 1999.
Summary financial information for A2000 based on Dutch generally accepted
accounting principles is as follows:
<TABLE>
<CAPTION>
Balance sheet As of December 31,
1998
-----------------------
<S> <C>
Intangible fixed assets............................. 113,361
Tangible fixed assets............................... 356,623
Financial fixed assets.............................. 770
Liquid assets....................................... 369
Other current assets................................ 37,482
-------
Total assets..................................... 508,605
=======
Provisions.......................................... 1,610
Long-term debt...................................... 467,430
Current liabilities................................. 125,813
-------
Total liabilities................................ 594,853
-------
Total shareholders' value........................... (86,248)
=======
Statement of income For the Five Months
Ended December 31,
1998
-------
Revenue............................................. 53,954
Costs............................................... (39,271)
Depreciation and amortization....................... (35,888)
Financial income/charges............................ (11,293)
-------
Net loss......................................... (32,498)
=======
</TABLE>
6. Receivables
Receivables as presented under current assets mature within one year and are
specified as follows:
Trade accounts receivable 22,519
Receivables from affiliated companies 1,654
Prepaid expenses and accrued income 1,447
Other receivables 15,018
------
Total 40,638
======
A major item under "other receivables" is current reclaimable VAT 3,676. As
of December, 1998 the valuation allowance on trade receivables amounted to 538.
154
<PAGE>
7. Cash and cash equivalents
Cash and cash equivalents include demand accounts held in a bank with a
maturity of less than three months.
8. Shareholders' Equity
UTH's issued share capital consists of 100,000 shares with a par value of
NLG 1 each. All issued shares are fully paid-in.
<TABLE>
<CAPTION>
Ordinary Additional Accumulated
Capital Paid-in Capital Deficit Total
--------- ---------------- ----------------- ------------
<S> <C> <C> <C> <C>
Balance at inception...... 100 -- -- 100
Balances upon contribution
of properties to joint
venture, August 6, 1998. -- 684,795 -- 684,795
Net loss.................. -- -- (49,374) (49,374)
--------- ---------------- ----------------- ------------
100 684,795 (49,374) 635,521
========= ================ ================= ============
</TABLE>
9. Provisions
Provisions relate mainly to deferred taxation.
10. Long-term liabilities
Average Amount
Rate of Outstanding
Range of Interest Interest December 31, 1998
----------------- ------------ ------------------
Bank loans 5-7.625% 5.2 235,947
Long-term liabilities at December 31, 1998 will be payable as follows:
Bank Loans
----------
1999 3,220
2000 2,353
2001 8,404
2002 16,948
2003 30,104
Thereafter 174,918
-------
Total 235,947
=======
On February 20, 1998 CNBH secured a 250,000 nine-year term facility, which
was amended in August 1998 to 266,000. The CNBH facility bears interest at the
applicable Amsterdam Interbank Offered Rate ("AIBOR") plus a margin ranging from
0.60% to 1.60% per annum, and is secured by, among other things, an encumbrance
over CNBH's assets and a pledge of the shares of CNBH. The facility is used to
refinance several acquisitions and will furthermore be used for the development
and exploitation of enhanced cable TV services, data services and telephony
services. As of December 31, 1998, 219,000 was outstanding on the facility.
The shares of UTH held by UPC are pledged for a certain loan of UPC.
155
<PAGE>
11. Current Liabilities
The current liabilities relate to short-term debt and other liabilities
which are specified below:
(a) Short-term debt
Long-term debt repayable within one year 3,220
Short-term debt to shareholders 662,403
-------
Total 665,623
-------
Short term debt to shareholders as of December 31, 1998
NUON's contribution to UTH included an existing 690,000-debt facility with an
outstanding balance of approximately 543,000 (as of August 6, 1998). This
facility bears an interest rate of 6.65% over the reporting period up to
November 30, 1998. As of November 30, 1998 this rate was increased with 1.5%. As
of December 31, 1998, approximately 614,000 was outstanding on the facility. The
debt facility is due March 15, 1999, 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 has
negotiated with the lenders to refinance the debt facility (see Note 20.).
Subordinated loans
UTH entered into a subordinated loan agreement with NUON in December 1998 for
an amount of NLG 33.0 million. The interest payable is 5.5% on an annually
basis.This subordinated loan was entered into for purposes of continuing funding
of incurred losses and capital expenditures.UTH entered into a subordinated loan
agreement with UPC in December 1998 for an amount of NLG 15.2 million. The
interest payable is 5.5% on an annually basis. This subordinated loan was
entered into for purposes of continuing funding of incurred losses and capital
expenditures
(b) Other Liabilities
Accounts payable to trade creditors 47,459
Deposits by customers 197
Other short-term liabilities 39,855
Deferred income and accrued expenses 7,490
-------
Total 95,001
-------
Total current liabilities 760,624
=======
12. Information per geographical area
All operations of UTH are in The Netherlands. In addition, substantially all
operations relate to cable television services.
13. Personnel
Labour cost is specified as follows:
Salaries and wages 9,173
Pension costs 538
Social securities 1,911
------
Total 11,622
======
156
<PAGE>
The information about employees by category is as follows:
Operating 160
Other 184
---
Total 344
===
14. Financial income and expenses
Interest income 14
Interest expense (16,713)
-------
Total (16,699)
========
Under interest expense an amount of 11,348 was accounted for as interest
related parties.
15. 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 under certain conditions allows a Dutch company to
exempt any dividend income and capital gains in relation with its participation
in subsidiaries. Capital losses are also exempted, apart from liquidation losses
(under stringent conditions).
For UTH the primary difference between taxable loss and net loss for
financial reporting purposes relates to the amortization of goodwill. 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.
The difference between income tax expense provided in the financial
statements and the expected income tax benefit at statutory rates is reconciled
as follows:
Expected income tax benefit at the Dutch statutory rate of 35% (9,217)
Tax effect of permanent and other differences:
Change in valuation allowance 6,541
Non- deductible expenses 1,464
-------
Total income tax benefit (1,212)
=========
The significant components of the net deferred tax liability are as follows:
<TABLE>
<S> <C>
Deferred Tax Assets:
Tax net operating loss carries forward.................. 20,112
Valuation allowance..................................... (20,112)
--------------
Deferred tax assets, net of valuation allowance...... 0
--------------
Deferred Tax Liabilities:
Intangible assets....................................... 33,438
Tangible fixed assets, net.............................. 962
--------------
Total deferred tax liabilities.......................... 34,400
--------------
Deferred tax liabilities, net........................ 34,000
==============
</TABLE>
The tax loss carry forwards have no expiration date.
16. Related parties transactions
UTH signed management services agreements with both of its shareholders. In
the reporting period an amount of NLG 4,255 has been taken into account as
expenses. In addition UTH delivers service to NUON. These services are rendered
at arms' length prices and made up 8% of the revenues over the reporting period.
As mentioned under Note 11 UTH has a short-term debt payable to NUON as well as
subordinated loans to both NUON and UPC. UPC charged an amount of 988 for
salaries and related costs for employees seconded to UTH Group.
157
<PAGE>
17. Commitments and Guarantees
The UTH Group has entered into various rent and lease agreements for office
space, cars etc. The terms of the agreements call for future minimum payments as
follows:
1999 4,000
2000 3,200
2001 2,100
2002 1,600
2003 1,400
Subsequent to December 31, 1998, UTH provided additional funding to A2000.
In total UTH's share of the funding commitment is $15,000. As of December 31,
1998, UTH had funded $3,750 of its commitment.
18. US GAAP Reconciliation
General
The accounting policies followed in the preparation for the consolidated
financial statements differ in some respects to those generally accepted in the
United States of America (US GAAP).
The differences which have a material effect on net loss and/or
shareholders'equity and/or total assets are as follows:
- The fair market value of licences, goodwill, land and buildings and
networks for US GAAP purposes should be set at historical cost of the
contributor. Consequently, no step-up in asset value is allowed for the
difference between historical cost and the fair market value of the
assets contributed by both UPC and NUON.
- Deferred taxes have been established for the difference between book and
tax basis of contributed assets, if applicable.
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" 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 upon the difference between the financial and
tax bases of assets and liabilities and carryforwards using enacted tax rates in
effect for the year in which the differences are expected to reverse. UTH has
adopted the principles of this statement in its financial statements.
158
<PAGE>
US GAAP information
The calculation of net loss, shareholders' equity and total assets,
substantially in accordance with US GAAP, is as follows:
Net loss as per Consolidated
----------------------------
Statements of income (49,374)
--------------------
Adjustments to reported income (loss):
Amortisation of goodwill 4,082
Share in results of affiliated companies 747
---------
Approximate net loss in accordance with US
=========
GAAP (44,545)
=========
Shareholders'equity as per
--------------------------
Consolidated balance sheets 635,521
---------------------------
Adjustments to reported equity:
Goodwill (152,105)
Affiliated Companies (27,893)
---------
Approximate shareholders'equity
in accordance with US GAAP 455,523
=========
Total assets as per Consolidated
--------------------------------
Balance sheets 1,672,030
--------------
Adjustments to reported assets:
Goodwill (152,105)
Affiliated Companies (27,893)
---------
Approximate total assets in accordance with US
GAAP 1,492,032
=========
19. Proforma information (unaudited)
On August 6, 1998 both shareholders contributed their interests in the Dutch
cable market into UTH. The following pro forma condensed consolidated
information for the year ended December 31, 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 information does not purport to represent
what UTH's result 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, 1997 December 31, 1998
---------------------- ----------------------
<S> <C> <C>
Total revenues........................ 157,836 219,314
Net loss.............................. (47,194) (90,600)
</TABLE>
159
<PAGE>
20. Subsequent events
Subordinated loan
UTH entered into a subordinated loan agreement with UPC in March, 1999 for an
amount of 119,000 million. The interest is payable on an annually basis. This
subordinated loan was entered into for purposes of continuing funding of
incurred losses and capital expenditures.
NUON Share Purchase Agreement
On February 17, 1999, UPC acquired the remaining 49% of UTH. This
transaction completed the purchase by UPC of 100% of UTH. UPC purchased the
interest from NUON for 518,100. In addition, UPC repaid NUON and assumed from
NUON a 33,300 subordinated loan, including accrued interest dated December 31,
1998, owed by UTH to NUON.
Refinancing
Subsequent to December 31, 1998, UTH replaced their existing 690,000 facility
with a senior facility and additional shareholder loans. The senior facility
consists of a Euro 340 million (750,000) revolving facility to N.V. Telekabel
Beheer that will convert to a term facility on December 31, 2001. Euro 5
million 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
facility will bear interest at the Euro Interbank Offered Rate plus a margin
between 0.75% and 2.00% based on the leverage multiples tied to N.V. Telekabel
Beheer's net operating income. The new facility will be secured by, among other
things, a pledge over shares held by the borrower and will restrict N.V.
Telekabel Beheer's ability to incur additional debt.
160
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
United Pan-Europe Communications N.V.
a Dutch Public limited liability company
By: /S/ Charles H.R. Bracken
------------------------------------
Board of Management Member and
Chief Financial Officer
Date: March 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
/S/ Mark L. Schneider
- ---------------------------------
Mark L. Schneider, Chairman of Board of Management and Chief Executive Officer Date: March 28, 2000
/S/ Charles H.R. Bracken
- ---------------------------------
Charles H.R. Bracken, Board of Management Member and Chief Financial Officer Date: March 28, 2000
/S/ Ray D. Samuelson
- ---------------------------------
Ray D. Samuelson, Managing Director, Finance and Accounting Date: March 28, 2000
/S/ Michael T. Fries
- ---------------------------------
Michael T. Fries, Chairman of Supervisory Board and Authorized U.S. Representative Date: March 28, 2000
/S/ Richard De Lange
- ---------------------------------
Richard De Lange, Supervisory Board Member Date: March 28, 2000
/S/ Tina M. Wildes
- ---------------------------------
Tina M. Wildes, Supervisory Board Member Date: March 28, 2000
/S/ Ellen P. Spangler
- ---------------------------------
Ellen P. Spangler, Supervisory Board Member Date: March 28, 2000
/S/ John P. Cole, Jr.
- ---------------------------------
John P. Cole, Jr., Supervisory Board Member Date: March 28, 2000
</TABLE>
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UNITED PAN-EUROPE COMMUNICATIONS N.V.
Issuer
CITIBANK, N.A. (London Branch)
Trustee
______________
Indenture
11 1/2% SENIOR NOTES DUE 2010
Dated as of January 20, 2000
______________
$300,000,000 11 1/2% Senior Notes Due 2010
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...................... 1
SECTION 1.1 Definitions............................................... 1
SECTION 1.2 Compliance Certificates and Opinions...................... 39
SECTION 1.3 Form of Documents Delivered to Trustee.................... 40
SECTION 1.4 Acts of Holders........................................... 41
SECTION 1.5 Notices................................................... 42
SECTION 1.6 Notice to Holders; Waiver................................. 44
SECTION 1.7 Effect of Headings and Table of Contents.................. 45
SECTION 1.8 Successors and Assigns.................................... 45
SECTION 1.9 Separability Clause....................................... 45
SECTION 1.10 Benefits of Indenture..................................... 45
SECTION 1.11 Governing Law............................................. 45
SECTION 1.12 Conflict with Trust Indenture Act......................... 46
SECTION 1.13 Legal Holidays............................................ 46
SECTION 1.14 No Personal Liability of Board Members, Officers,
Employees and Shareholders................................ 46
SECTION 1.15 Independence of Covenants................................. 47
SECTION 1.16 Exhibits.................................................. 47
SECTION 1.17 Counterparts.............................................. 47
SECTION 1.18 Duplicate Originals....................................... 47
SECTION 1.19 Agent for Service; Submission to Jurisdiction; Waiver of
Immunities................................................ 47
SECTION 1.20 Judgment Currency......................................... 48
ARTICLE II
SECURITY FORMS............................................................... 49
SECTION 2.1 Forms Generally........................................... 49
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ARTICLE III
THE SECURITIES................................................................................ 49
SECTION 3.1 Title and Terms............................................................ 49
SECTION 3.2 Denominations.............................................................. 50
SECTION 3.3 Execution, Authentication, Delivery and Dating............................. 51
SECTION 3.4 Temporary Securities....................................................... 54
SECTION 3.5 Registration, Registration of Transfer and Exchange........................ 54
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities........................... 56
SECTION 3.7 Payment of Interest; Interest Rights Preserved............................. 57
SECTION 3.8 Persons Deemed Owners...................................................... 58
SECTION 3.9 Cancellation............................................................... 58
SECTION 3.10 Computation of Interest.................................................... 59
SECTION 3.11 "CUSIP" and/or "ISIN" Numbers.............................................. 59
SECTION 3.12 Book-Entry Provisions for Global Securities, Certificated Securities....... 59
SECTION 3.13 Transfer and Exchange of Securities........................................ 60
SECTION 3.14 Special Transfer Provisions................................................ 67
ARTICLE IV
SATISFACTION AND DISCHARGE.................................................................... 68
SECTION 4.1 Satisfaction and Discharge of Indenture.................................... 68
SECTION 4.2 Application of Trust Money................................................. 70
ARTICLE V
REMEDIES...................................................................................... 70
SECTION 5.1 Events of Default.......................................................... 70
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment......................... 71
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee............ 73
SECTION 5.4 Trustee May File Proofs of Claim........................................... 73
SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities................ 74
SECTION 5.6 Application of Money Collected............................................. 75
SECTION 5.7 Limitation on Suits........................................................ 75
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SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest....... 76
SECTION 5.9 Restoration of Rights and Remedies.............................................. 76
SECTION 5.10 Rights and Remedies Cumulative.................................................. 76
SECTION 5.11 Delay or Omission Not Waiver.................................................... 77
SECTION 5.12 Control by Holders.............................................................. 77
SECTION 5.13 Waiver of Past Defaults......................................................... 77
SECTION 5.14 Waiver of Stay or Extension Laws................................................ 78
ARTICLE VI
THE TRUSTEE........................................................................................ 78
SECTION 6.1 Certain Duties and Responsibilities............................................. 78
SECTION 6.2 Notice of Default............................................................... 79
SECTION 6.3 Certain Rights of Trustee....................................................... 80
SECTION 6.4 Trustee Not Responsible for Issuance of Securities.............................. 81
SECTION 6.5 May Hold Securities............................................................. 82
SECTION 6.6 Money Held in Trust............................................................. 82
SECTION 6.7 Compensation and Reimbursement.................................................. 82
SECTION 6.8 Corporate Trustee Required; Eligibility; Conflicting Interests.................. 83
SECTION 6.9 Resignation and Removal; Appointment of Successor............................... 84
SECTION 6.10 Acceptance of Appointment by Successor.......................................... 85
SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business..................... 86
SECTION 6.12 Trustee Acting in Other Capacities.............................................. 86
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.................................................. 87
SECTION 7.1 Disclosure of Names and Addresses of Holders.................................... 87
SECTION 7.2 Reports by Trustee.............................................................. 87
SECTION 7.3 Reports by Company.............................................................. 87
ARTICLE VIII
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CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE.................................................... 87
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms................................. 87
SECTION 8.2 Successor Substituted................................................................ 89
ARTICLE IX
SUPPLEMENTAL INDENTURES................................................................................. 89
SECTION 9.1 Indentures Without Consent of Holders................................................ 89
SECTION 9.2 Indentures with Consent of Holders................................................... 90
SECTION 9.3 Execution of Indenture............................................................... 91
SECTION 9.4 Effect of Indentures................................................................. 91
SECTION 9.5 Conformity with Trust Indenture Act.................................................. 91
SECTION 9.6 Reference in Securities to Indentures................................................ 92
SECTION 9.7 Notice of Indentures................................................................. 92
ARTICLE X
COVENANTS............................................................................................... 92
SECTION 10.1 Payment of Principal, Premium, if Any, and Interest.................................. 92
SECTION 10.2 Maintenance of Office or Agency...................................................... 93
SECTION 10.3 Money for Security Payments to Be Held in Trust...................................... 94
SECTION 10.4 Corporate Existence.................................................................. 96
SECTION 10.5 Payment of Taxes and Other Claims.................................................... 96
SECTION 10.6 Maintenance of Properties............................................................ 96
SECTION 10.7 Insurance............................................................................ 96
SECTION 10.8 Provision of Financial Statements.................................................... 97
SECTION 10.9 Statement by Officers as to Default.................................................. 97
SECTION 10.10 Purchase of Securities upon Change of Control........................................ 98
SECTION 10.11 Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock... 102
SECTION 10.12 Limitation on Restricted Payments.................................................... 104
SECTION 10.13 Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries......... 107
SECTION 10.14 Limitation on Liens Securing Indebtedness............................................ 109
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SECTION 10.15 Limitation on Issuances of Guarantees by Subsidiaries.......................... 109
SECTION 10.16 Limitation on Sale of Assets and Subsidiary Stock.............................. 110
SECTION 10.17 Limitation on Transactions with Affiliates..................................... 115
SECTION 10.18 Additional Amounts............................................................. 115
SECTION 10.19 Waiver of Stay, Extension or Usury Laws........................................ 118
SECTION 10.20 Limitation on Lines of Business................................................ 118
SECTION 10.21 Limitation on Status as an Investment Company.................................. 118
ARTICLE XI
REDEMPTION OF SECURITIES.......................................................................... 118
SECTION 11.1 Right of Redemption............................................................ 119
SECTION 11.2 Applicability of Article....................................................... 120
SECTION 11.3 Election to Redeem; Notice to Trustee.......................................... 120
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed.............................. 120
SECTION 11.5 Notice of Redemption........................................................... 121
SECTION 11.6 Deposit of Redemption Price.................................................... 122
SECTION 11.7 Securities Payable on Redemption Date.......................................... 122
SECTION 11.8 Securities Redeemed in Part.................................................... 122
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE................................................................ 123
SECTION 12.1 Company's Option to Effect Defeasance or Covenant Defeasance................... 123
SECTION 12.2 Defeasance and Discharge....................................................... 123
SECTION 12.3 Covenant Defeasance............................................................ 124
SECTION 12.4 Conditions to Defeasance or Covenant Defeasance................................ 124
SECTION 12.5 Deposited Money and U.S. Government Securities to Be Held in Trust; Other
Miscellaneous Provisions....................................................... 126
SECTION 12.6 Reinstatement.................................................................. 127
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EXHIBIT A....................................................... A-1
EXHIBIT B....................................................... B-1
EXHIBIT C....................................................... C-1
EXHIBIT D....................................................... D-1
EXHIBIT E....................................................... E-1
EXHIBIT F....................................................... F-2
EXHIBIT G....................................................... G-1
EXHIBIT H....................................................... H-1
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INDENTURE, dated as of January 20, 2000 by and between United Pan-
Europe Communications N.V., a public limited liability company organized and
existing under the laws of The Netherlands (herein called the "Company"), having
its principal office at Fred. Roeskestraat 123, 1076 EE Amsterdam, The
Netherlands, and Citibank, N.A. (London Branch), as Trustee (herein called the
"Trustee"). Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as defined below) of the
Company's 11 1/2% Senior Notes due 2010:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 Definitions. For all purposes of this Indenture,
-----------
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and "self-liquidating
paper," as used in TIA Section 311, shall have the meanings assigned to them in
the rules of the SEC adopted under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with "GAAP" as defined in this section
1.1;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section, paragraph or other subdivision; and
(e) unless otherwise indicated, references to Articles, Sections,
paragraphs or other subdivisions are references to such Articles, Sections,
paragraphs or other subdivisions of this Indenture.
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"Acceleration Notice" has the meaning set forth in Section 5.2.
"Acquired Indebtedness" means Indebtedness (including Disqualified
Capital Stock) of any Person existing at the time such Person becomes a
Subsidiary of the Company, including by designation, or is merged or
consolidated into or with the Company or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of any Person or
all or substantially all the assets of any Person by any other Person, whether
by purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Additional Amounts" has the meaning specified in Section 10.18.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise; provided that with respect to ownership interest in the Company
and its Subsidiaries, a Beneficial Owner of 10% or more of the total voting
power normally entitled to vote in the election of directors, managers or
trustees, as applicable, shall for such purposes be deemed to constitute
control.
"Agent Member" means, with respect to any Depositary, any member of,
or participant in, such Depositary.
"Applicable Procedures" has the meaning set forth in Section
3.13(b)(ii).
"Annualized Consolidated EBITDA" means Consolidated EBITDA for the
Reference Period multiplied by four.
"Asset Acquisition" means (i) an Investment or capital contribution
(by means of transfers of cash or other property to others or payments for
property or services of the account or use of others, or otherwise) by the
Company or any
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Subsidiary in any other Person, or any acquisition or purchase of Capital Stock
of another Person by the Company or any Subsidiary, or (ii) an acquisition by
the Company or any Subsidiary of the property and assets (other than Capital
Stock) of any Person other than the Company or any Subsidiary which constitute
substantially all of a division, operating unit or line of business of such
Person or which is otherwise outside the ordinary course of business.
"Asset Sale" has the meaning set forth in Section 10.16.
"Average Life" means, as of the date of determination, with respect to
any security or instrument, the quotient obtained by dividing (1) the sum of the
products (a) of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (2) the sum of all such principal (or redemption)
payments.
"Beneficial Owner" or "beneficial owner" for purposes of the
definition of "Change of Control" and "Affiliate" has the meaning attributed to
it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue
Date), whether or not applicable, except that a "person" shall be deemed to have
"beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time.
"Board Resolution" means a copy of a resolution certified by a
managing director or other authorized officer, assistant officer or
representative of the Company to have been duly adopted by the Supervisory Board
of the Company and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
and Amsterdam, The Netherlands are authorized or obligated by law or executive
order to close.
"Capital Contribution" means any contribution to the equity of the
Company from a direct or indirect parent of the Company for which no
consideration other than the issuance of Qualified Capital Stock is paid.
"Capitalized Lease Obligation" means, as to any Person, the
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obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any Corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebted ness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that Corporation.
"Cash Equivalent" means:
(1) securities issued or directly and fully guaranteed or insured by (i)
the United States of America or any agency or instrumentality thereof or
(ii) any member of the European Economic Area or Switzerland, or any,
agency or instrumentality thereof provided that such country, agency or
instrumentality has a credit rating at least equal to that of the United
States of America (provided that, in each case, the full faith and credit
of such respective nation is pledged in support thereof), or
(2) time deposits and certificates of deposit and commercial paper issued
by the parent Corporation of any domestic (United States) commercial bank
of recognized standing having capital and surplus in excess of $500,000,000
(or the foreign currency equivalent thereof), or
(3) commercial paper issued by others rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the equivalent
thereof by Moody's Investors Service, Inc.
and in the case of each of (1), (2), and (3) maturing within one year after
the date of acquisition, or
(4) Euro or Dollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months, and overnight bank deposits, in each case with any
domestic (United States) commercial bank (including the Trustee) having
capital and surplus in excess of $500,000,000 (or the foreign currency
equivalent thereof) and a Keefe Bank Watch Rating of "B" or better;
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provided, in the case of (1) through (4), that with respect to any non-
domestic Person, Cash Equivalents shall also mean those investments that
are comparable to clauses (ii) and (iv) above in such Person's country of
organization or country where it conducts business operations.
"Cedelbank" means Cedelbank.
"Certificated Security" means any certificated Security in fully
registered definitive form.
"Change of Control" means any merger or consolidation of the Company
with or into any Person or any sale, transfer or other conveyance, whether
direct or indirect, of all or substantially all of the Company's assets, on a
Consolidated basis, in one transaction or a series of related transactions,
if, immediately after giving effect to such transaction(s), either
(A) any "person" or "group" (other than the Parent or any of the
Principals) is or becomes the "beneficial owner," directly or indirectly, of
more than 35% of the total voting power of all classes of the Company's
securities in the aggregate normally entitled to vote in the election of
directors, managers, or trustees, as applicable, of the transferee(s) or
surviving entity or entities and such "person" or "group" beneficially owns
(after giving effect to such transaction) a greater percent age of the total
voting power than is at that time beneficially owned by Parent and the
Principals (in the aggregate) and none of the Parent nor any of the Principals
has the right or ability by voting power, contract or otherwise to elect or
nominate for elections a majority of the Company's Supervisory Board, or
(B) the Continuing Directors cease for any reason to constitute
a majority of the Supervisory Board of the Company then in office, or
(C) the Company adopts a plan of liquidation (other than a plan
of liquidation as a consequence of which (1) the Parent and the Principals (in
the aggregate) beneficially own at least the same percentage of voting power
after the consummation of such plan as before or otherwise retain the right or
ability, by voting power, to control the Person that acquires the proceeds of
such liquidation and (2) the Person that acquires the substantial majority of
the proceeds of such liquidation shall have assumed by supplemental indenture
the Company's obligations pursuant to this Indenture).
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"Common Stock" of any Person means Capital Stock of the Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of the Person, to shares of Capital Stock of any other class of the Person.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Order" or "Company Request" means a written request or order
signed in the name of the Company by a member of the Company's management board
or its supervisory board, the Chief Executive Officer, the President or a Vice
President, and by the Chief Financial Officer, the Chief Accounting Officer, the
Treasurer, an Assistant Treasurer, the Secretary, an Assistant Secretary or
other authorized representative of the Company and delivered to the Trustee.
"Consolidated Coverage Ratio" of any Person on any date of
determination (the "Transaction Date") means the ratio, on a pro forma basis, of
(a) the aggregate amount of Consolidated EBITDA of such Person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and business permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Fixed Charges of such Person
(exclusive of amounts attributable to operations and businesses permanently
discontinued or disposed of, but only to the extent that the obligations giving
rise to such Consolidated Fixed Charges would no longer be obligations
contributing to such Person's Consolidated Fixed Charges subsequent to the
Transaction Date) during the Reference Period; provided that for purposes of
such calculation, (i) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of the Reference Period, (ii)
transactions giving rise to the need to calculate the Consolidated Coverage
Ratio shall be assumed to have occurred on the first day of the Reference
Period, (iii) the incurrence of any Indebtedness during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date (and
the application of the proceeds therefrom to the extent used to refinance or
retire other Indebtedness) shall be assumed to have occurred on the first day of
such Reference Period, and (iv) the Consolidated Fixed Charges of such Person
attributable to interest on any Indebtedness or dividends on any Disqualified
Capital
6
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Stock bearing a floating interest (or dividend) rate shall be computed on a pro
forma basis as if the average rate in effect from the beginning of the Reference
Period to the Transaction Date had been the applicable rate for the entire
period, unless such person or any of its Subsidiaries is a party to an Interest
Swap or Hedging Obligation (which shall remain in effect for the 12-month period
immediately following the Transaction Date) that has the effect of fixing the
interest rate on the date of computation, in which case such rate (whether
higher or lower) shall be used.
"Consolidated Invested Equity Capital" means, with respect to any
Person as of any date, the sum of the Invested Equity Capital of such Person as
of such date and, without duplication, the Invested Equity Capital of each of
its Subsidiaries as of such date. For purposes of calculating the Consolidated
Invested Equity Capital of any Person as of any date, in order to avoid
duplication, the Invested Equity Capital of a Subsidiary of such Person shall
not include any amounts that would be included in the Consolidated Invested
Equity Capital of any equity owner of such Subsidiary, to the extent that such
amounts were utilized by such equity owner prior to such date to permit the
incurrence of Indebtedness pursuant to clauses 2(iii) and (c)(3) of Section
10.11. For example, if a direct Subsidiary of the Company has Consolidated
Invested Equity Capital of $100 and incurs $225 of such Indebtedness, then a
direct or indirect Subsidiary of such Subsidiary will not be deemed to have any
Invested Equity Capital based on contributions or loans to it by such first
Subsidiary. In addition, the Invested Equity Capital of a Subsidiary of a Person
will never be considered to be greater than the Invested Equity Capital of such
Person, except as a result of contributions of Invested Equity Capital to such
Subsidiary by third parties.
"Consolidation" means, with respect to any Person, the consolidation
of the accounts of the Subsidiaries with those of such Person, all in accordance
with GAAP; provided that "Consolidation" will not include consolidation of the
accounts of any Unrestricted Subsidiary with the accounts of such Person. The
term "Consolidated" has a correlative meaning to the foregoing.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the Consolidated Net Income of such Person for such period adjusted to
add thereto (to the extent deducted from net revenues in determining
Consolidated Net Income), without duplication, the sum of
(1) Consolidated income tax expense,
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(2) Consolidated depreciation and amortization expense,
(3) Consolidated Fixed Charges, and
(4) non-cash stock-based compensation,
less the amount of all cash payments made by such Person or any of its
Subsidiaries during such period to the extent such payments relate to non-cash
charges that were added back in determining Consolidated EBITDA for such period
or any prior period; provided that Consolidated income tax expense, depreciation
and amortization of a Subsidiary that is not a Wholly Owned Subsidiary shall
only be added to the extent of the equity interest of such Person in such
Subsidiary.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of:
(a) interest expensed or capitalized, paid, accrued, or scheduled to
be paid or accrued (including, in accordance with the following
sentence, interest attributable to Capitalized Lease Obligations)
of such Person and its Consolidated Subsidiaries during such
period, including (1) original issue discount and non-cash
interest payments or accruals on any Indebtedness, (2) the
interest portion of all deferred payment obligations, and (3) all
commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings
and currency and Interest Swap and Hedging Obligations, in each
case to the extent attributable to such period,
(b) the amount of dividends accrued or payable (or guaranteed) by
such Person or any of its Consolidated Subsidiaries in respect of
Preferred Stock (other than by Subsidiaries of such Person to
such Person or such Person's Wholly Owned Subsidiaries).
For purposes of this definition, (x) interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
in good faith by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such Person or a
Subsidiary of such Person of an obligation of another Person shall be deemed to
be the interest expense
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attributable to the Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any Person for any
period, the net income (or loss) of such Person and its Consolidated
Subsidiaries (determined on a Consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing such
net income (or loss) and without duplication):
(a) all gains (but not losses) which are either extraordinary (as
determined in accordance with GAAP) or are nonrecurring (including any
gain from the sale or other disposition of assets outside the ordinary
course of business or from the issuance or sale of any capital stock),
(b) the net income, if positive, of any Person, other than a
Consolidated Subsidiary, in which such Person or any of its
Consolidated Subsidiaries has an interest, except to the extent of the
amount of any dividends or distributions actually paid in cash to such
Person or a Consolidated Subsidiary of such Person during such period,
but in any case not in excess of such Person's pro rata equity
interest share of such Person's net income for such period,
(c) the net income or loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition, and
(d) the net income, if positive, of any such Person's Consolidated
Subsidiaries to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by
operation of the terms of its charter or bylaws or any other
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Consolidated Subsidiary
other than this Indenture.
"Consolidated Subsidiary" means, for any Person, each Subsidiary
(excluding all Unrestricted Subsidiaries) of such Person (whether now existing
or hereafter created or acquired) the financial statements of which are
Consolidated for financial statement reporting purposes with the financial
statements of such Person in accordance with GAAP.
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"Consolidated Tangible Assets" of any Person means the total amount of
assets less applicable reserves and other properly deductible items which under
GAAP would be calculated on a Consolidated balance sheet of the Person and its
Subsidiaries after deducting all goodwill, trademarks, patents, unamortized debt
discount and expense and other like intangibles, which, in each case under GAAP,
would be included on such Consolidated balance sheet.
"Continuing Director" means during any period of 12 consecutive months
after the Issue Date, individuals who at the beginning of any such 12-month
period constituted the Supervisory Board of the Company (together with any new
supervisory directors whose election by the shareholders was from a list of
candidates drawn up by the holder or holders of the Company's priority shares
and new supervisory directors designated in or provided for in an agreement
regarding the merger, consolidation or sale, transfer or other conveyance, of
all or substantially all of the assets of the Company or the Parent, if such
agreement was approved by a vote of such majority of supervisory directors).
"Corporate Trust Office" means the principal corporate trust office of
the Trustee, at which at any particular time its corporate trust business shall
be administered, which office at the date of execution of this Indenture is
located at 11 Old Jewry, London EC2R 8DU, except that, with respect to
presentation of Securities for payment or for registration of transfer or
exchange, such term shall mean the office or agency of the Trustee at which, at
any particular time, its corporate agency business shall be conducted.
"Corporation" includes Corporations, associations, companies and
business trusts.
"Credit Agreement" means the loan and note issuance agreement dated
July 27, 1999 between certain Subsidiaries of the Company and Bank of American
International Limited, CIBC World Markets plc, Citibank, N.A., MeesPierson N.V.,
Paribas, The Royal Bank of Scotland plc, Toronto Dominion Bank Europe Limited
and The Toronto Dominion Bank, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as such agreement and/or related documents may be amended, restated,
supplemented, renewed, replaced or otherwise modified from time to time whether
or not with the same agent, trustee, representative lenders or Holders, and,
subject to the proviso to the next succeeding sentence, irrespective of any
changes in the terms and conditions thereof. Without limiting the generality of
the foregoing, the term "Credit
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Agreement" shall include agreements in respect of Interest Swap and Hedging
Obligations with lenders party to the Credit Agreement and shall also include
any amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to any Credit Agreement and all refundings,
refinancings and replacements of any Credit Agreement, including any agreement:
(1) extending the maturity of any Indebtedness incurred thereunder
or contemplated thereby,
(2) adding or deleting borrowers or guarantors thereunder, so long as
borrowers and guarantors may include one or more of the Company and
its Subsidiaries and their respective successors and assigns,
(3) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder; provided that on the date such
Indebtedness is incurred it would not be prohibited by Section 10.11;
or
(4) otherwise altering the terms and conditions thereof in a manner
not prohibited by the other terms of this Indenture.
"CT Corporation System" has the meaning specified in Section 1.19.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" has the meaning specified Section 3.12.
"Disqualified Capital Stock" means (a) except as set forth in clause
(b), with respect to any Person, Equity Interests of such Person that, by its
terms or by the terms of any security into which it is convertible, exercisable
or exchangeable, is, or upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the option
of the holder thereof) by such Person or any of its Subsidiaries, in whole or in
part, on or prior to 91 days following the Stated Maturity of the Securities and
(b) with respect to any Subsidiary of the Company, any Equity Interests of such
Subsidiary other than (i) any common equity with no economic preference,
privileges, or redemption or repayment
11
<PAGE>
provisions or (ii) preferred stock convertible into such common equity of such
Subsidiary with no payment of dividends or liquidation preference due or payable
thereon on or prior to 91 days following the Stated Maturity of the Securities.
"Dollars" or "$" or "U.S. Dollars" means the lawful currency of the
United States of America and, in relation to any amount to be advanced or paid
under this Indenture or the Securities, funds having immediate value.
"DTC" means the Depository Trust Company, its nominees and successors.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such Person's
equity, and shall in any event include any Capital Stock issued by, or
partnership, participation or membership interests in, such Person.
"Equity Offering" means (i) an underwritten public offering or
floatation of ordinary shares of the Company which has been registered under the
Securities Act, or admitted to listing on the Amsterdam Stock Exchange or its
equivalent in any other European Union jurisdiction, in any case resulting in
Net Cash Proceeds to the Company of at least $100,000,000 (or its foreign
currency equivalent), or (ii) a sale of Qualified Capital Stock of the Company
to any Person which is (or a controlled Affiliate of a Person which is), engaged
principally in a Related Business, resulting in Net Cash Proceeds to the Company
of at least $100,000,000 (or its foreign currency equivalent); provided,
however, that a sale of Qualified Capital Stock of the Company to any subsidiary
of the Company or any Person that is a controlled Affiliate of the Company shall
not be an Equity Offering.
"Euro" or "Euro Symbol" means the currency adopted by those countries
participating in the third stage of European monetary union.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"European Economic Area" means the member nations of the European
Economic Area pursuant to the Oporto Agreement on the European Economic Area
dated May 2, 1992 as amended.
"European Union" means the member nations to the third stage of
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economic and monetary union pursuant to the treaty of Rome establishing the
European Community, as amended by the Treaty on European Union, signed at
Maastricht on February 7, 1992.
"Event of Default" has the meaning set forth under Section 5.1.
"Event of Loss" means, with respect to any property or asset, any (1)
loss, destruction or damage of such property or asset or (2) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended (or any successor act), and the rules and regulations
thereunder (or respective successors thereto).
"Exchange Offer" means the exchange registered with the SEC to
exchange Initial Securities for Exchange Securities pursuant to the terms of the
Registration Rights Agreement.
"Exchange Registration Statement" means an Exchange Registration
Statement as defined in the Registration Rights Agreement.
"Exchange Securities" means the Securities to be issued pursuant to
this Indenture in connection with the offer to exchange Securities for Initial
Securities that may be made by the Company pursuant to the Registration Rights
Agreement.
"Exempted Affiliate Transaction" means (i) Restricted Payments
comprised of pro rata dividends paid in cash on any class of Equity Interests
and made in compliance with this Indenture, (ii) transactions, at arms-length
and as so set forth in a Board Resolution, between or among holders of any
Equity Interest of any Subsidiary of the Company and such Subsidiary, so long as
such holder is not otherwise an Affiliate of the Company, (iii) transactions
between or among the Company, and its Subsidiaries, (iv) the Company or any of
its Subsidiaries entering into or performing any employment agreement, stock
option agreement or other agreement relating to the terms of employment,
compensation or termination of employment in the ordinary course of business of
the Company or such Subsidiary, (v) any contract, agreement, arrangement or
transaction with any Affiliate in effect as of the Issue Date and any amendment,
waiver, variation or other modification in
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<PAGE>
respect of any such contract, agreement, arrangement or transaction so long as
such amendment, waiver, variation or other modification is not disadvantageous
to the Company and its Subsidiaries in any material respect, (vi) Restricted
Payments and Investments permitted under Section 10.12, (vii) transactions with
customers, clients, suppliers, or purchasers or sellers of goods or services, in
each case in the ordinary course of business and otherwise in compliance with
the terms of this Indenture which are fair to the Company and its Subsidiaries,
in the reasonable determination of the Company or Subsidiary, as the case may
be, or are on terms no less favorable to the Company or the Subsidiary than
those that could be obtained in a comparable arm's length transaction with an
entity that is not an Affiliate or Principal and is in the best interests of the
Company or the Subsidiary, and (viii) transactions with respect to network
capacity or dark or lit communications fiber capacity or telecommunications
conduit between the Company or any Subsidiary and any Unrestricted Subsidiary or
other Affiliate and joint sales and marketing pursuant to an agreement or
agreements between the Company or any Subsidiary and any Unrestricted Subsidiary
or other Affiliate, provided that in the case of this clause (viii), such
agreements are on terms that are no less favorable to the Company or the
Subsidiary than those that could be obtained in an arm's-length transaction with
an entity that is not an Affiliate or Principal and are in the best interests of
the Company and the Subsidiary entered into in the ordinary course of business.
"Existing Agreements" means (i) any and all instruments, as in effect
on the Issue Date, between the Company or any of its Subsidiaries and a
commercial lending institution or institutions, which makes borrowing of funds
available to the Company or any such Subsidiary from such institution or
institutions and (ii) any replacements of the instruments in clause (i) entered
into by the respective Subsidiary that was party to the instrument so replaced
or their respective successors and a commercial lending institution or
institutions for an amount up to the maximum amount of the instrument so
replaced.
"Existing Indebtedness" means the Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, reduced to the extent such amounts are repaid.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the
United States Code, as amended from time to time.
"GAAP" means United States generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles
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Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"Global Security" means a Regulation S Global Security (or
Unrestricted Global Security) or a Restricted Global Security.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as verb has a corresponding meaning.
"Guarantor" is defined to mean any Person obligated under a Guarantee.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" of any Person means, without duplication,
(a) all liabilities and obligations, contingent or otherwise, of such
Person, to the extent such liabilities and obligations would appear as
a liability upon the Consolidated balance sheet of such Person in
accordance with GAAP, (1) in respect of borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (2) evidenced by bonds, notes,
debentures or similar instruments, (3) representing the balance
deferred and unpaid of the purchase price of any property or services,
15
<PAGE>
except (other than accounts payable or other obligations to trade
creditors which have remained unpaid for greater than 90 days past
their original due date) those incurred in the ordinary course of its
business that would constitute ordinarily a trade payable to trade
creditors;
(b) all liabilities and obligations, contingent or otherwise, of such
Person (1) evidenced by bankers' acceptances or similar instruments
issued or accepted by banks, (2) relating to any Capitalized Lease
Obligation, or (3) evidenced by a letter of credit or a reimbursement
obligation of such Person with respect to any letter of credit (other
than obligations with respect to letters of credit securing
obligations (other than obligations described in (a)(1) through (3)
above) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon);
(c) all net obligations of such Person under Interest Swap and
Hedging Obligations;
(d) all liabilities and obligations of others of the kinds described
in the preceding clauses (a), (b) or (c) that such Person has
guaranteed or provided credit support or that is otherwise its legal
liability or which are secured by any assets or property of such
Person;
(e) any and all deferrals, renewals, extensions, refinancing and
refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described
in any of the preceding clauses (a), (b), (c) or (d), or this clause
(e), whether or not between or among the same parties; and
(f) all Disqualified Capital Stock of such Person (measured at the
greater of its voluntary or involuntary maximum fixed repurchase
price, plus accrued and unpaid dividends).
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were
purchased on any date on which Indebtedness shall be required to be
16
<PAGE>
determined pursuant to this Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value to be determined in good faith
by the Supervisory Board of the Company.
The amount of any Indebtedness outstanding as of any date shall be (1)
the accreted value thereof, in the case of any Indebtedness issued
with original issue discount, but the accretion of original issue
discount in accordance with the original terms of Indebtedness issued
with an original issue discount will not be deemed to be an incurrence
and (2) the principal amount thereof, excluding any interest thereon,
in the case of any other Indebtedness.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Purchasers" means, with respect to the Initial Securities
issued pursuant to this Indenture on the Issue Date, each of Donaldson, Lufkin &
Jenrette International and the other Initial Purchasers named as such in the
Offering Circular
"Initial Securities" means the $300,000,000 11 1/2% Senior Notes due
2010 issued under this Indenture on the Issue Date.
"Institutional Accredited Investor" means an institutional "Accredited
Investor," as defined in Regulation D of the Securities Act.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Adjustment Event" has the meaning set forth in Section
3.1.
"Interest Swap and Hedging Obligation" means any obligation of any
Person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such Person
is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate
17
<PAGE>
of interest on a stated notional amount in exchange for periodic payments made
by such Person calculated by applying a fixed or floating rate of interest on
the same notional amount.
"Invested Equity Capital" means, with respect to any Person as of any
date, without duplication, the sum of (i) the total dollar amount contributed in
cash plus the value of all property contributed (valued at fair market value at
the time of contribution, determined in good faith by the Supervisory Board) to
such Person since the date of its creation in the form of common equity, plus,
(ii) the total dollar amount contributed in cash plus the value of all property
contributed (valued at fair market value at the time of contribution, determined
in good faith by the Supervisory Board) to such Person since the date of
creation by the holders of its common equity (and their Affiliates) in
consideration of the issuance of preferred equity or Indebted ness, on a basis
that is substantially proportionate to their common equity interests (with any
disproportionately large equity interests received by the Company or a
Subsidiary relative to their respective contributions being ignored for this
purpose), plus, (iii) the total dollar amount contributed in cash plus the value
of all property contributed (valued at fair market value at the time of
contribution, determined in good faith by the Supervisory Board) to such Person
since the date of its creation by the Company or a Wholly Owned Subsidiary of
the Company in consideration of the issuance of preferred equity or
Indebtedness, and less (iv) the value of all interest, returns in respect of
Indebtedness, dividends and other distributions (in whatever form and however
designated, valued at fair market value as determined in good faith by the
Supervisory Board) made by such Person since the date of its creation to the
holders of its common equity (and their Affiliates); provided that in no event
shall the aggregate amount of interest, dividends and other distributions made
to any holder of common equity of a Person (or its Affiliates) operate to reduce
the Invested Equity Capital of such Person by more than the total contributions
to such Person (per clauses (i) through (iii) above) by such equity holder (and
its Affiliates).
"Investment" by any Person in any other Person means (without
duplication):
(a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services,
securities or otherwise) of capital stock, bonds, notes, debentures,
partnership or other ownership interests or other securities,
including any options or warrants, of such other Person or any
agreement to
18
<PAGE>
make any such acquisition;
(b) the making by such Person of any deposit with, or advance, loan
or other extension of credit to, such other Person (including the
purchase of property from another Person subject to an understanding
or agreement, contingent or otherwise, to resell such property to such
other Person) or any commitment to make any such advance, loan or
extension (but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business);
(c) other than guarantees of Indebtedness of the Company or to the
extent permitted by Section 10.11, the entering into by such Person of
any guarantee of, or other credit support or contingent obligation
with respect to, Indebtedness or other liability of such other Person;
(d) the making of any capital contribution by such Person to such
other Person; and
(e) the designation by the Supervisory Board of the Company of any
Person to be an Unrestricted Subsidiary.
The Company shall be deemed to make an Investment in an amount equal
to the fair market value of the net assets of any Subsidiary (or, if
neither the Company nor any of its Subsidiaries has theretofore made
an Investment in such subsidiary, in an amount equal to the
Investments being made), at the time that such Subsidiary is
designated an Unrestricted Subsidiary, and any property transferred to
an Unrestricted Subsidiary from the Company or a Subsidiary of the
Company shall be deemed an Investment valued at its fair market value
at the time of such transfer. Investments shall be measured by the
fair market value attributed to the Investment at the time made or re
turned, as applicable.
"Issue Date" means the date of first issuance of the Initial
Securities hereunder.
"Leverage Ratio" on any date of determination (the "Transaction Date")
for any Person means the ratio, on a pro forma basis, of (a) the aggregate
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amount of Indebtedness of such Person and its Subsidiaries on a Consolidated
basis to (b) the aggregate amount of Annualized Consolidated EBITDA of such
Person attributable to continuing operations and business (exclusive of amounts
attributable to operations and businesses permanently discontinued or disposed
of); provided that for purposes of calculating Annualized Consolidated EBITDA
for this definition,
(1) acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the
Transaction Date shall be assumed to have occurred on the first
day of the Reference Period,
(2) transactions giving rise to the need to calculate the Leverage
Ratio shall be assumed to have occurred on the first day of the
Reference Period,
(3) the incurrence of any Indebtedness or issuance of any
Disqualified Capital Stock during the Reference Period or
subsequent to the Reference Period and on or prior to the
Transaction Date (and the application of the proceeds therefrom
to the extent used to refinance or retire other Indebtedness)
shall be assumed to have occurred on the first day of the
Reference Period, and
(4) the Consolidated Fixed Charges of such Person attributable to
interest on any Indebtedness or dividends on any Disqualified
Capital Stock bearing a floating interest (or dividend) rate
shall be computed on a pro forma basis as if the average rate in
effect from the beginning of the Reference Period to the
Transaction Date had been the applicable rate for the entire
period, unless such Person or any of its Subsidiaries is a party
to an Interest Swap or Hedging Obligation (which shall remain in
effect for the 12-month period immediately following the
Transaction Date) that has the effect of fixing the interest rate
on the date of computation, in which case such rate (whether
higher or lower) shall be used.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or
20
<PAGE>
with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired. For purposes of this definition,
the sale, lease, conveyance, or other transfer by the Company or any Subsidiary
of the Company, in the ordinary course of its business and not constituting a
security interest in assets serving as collateral for any of their respective
obligations, including the granting of indefeasible rights of use or equivalent
arrangements with respect to, network capacity, communications fiber capacity or
conduit, shall not be a Lien.
"Liquidated Damages" means all liquidated damages then owing pursuant
to the Registration Rights Agreement.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or otherwise.
"Net Cash Proceeds" means the aggregate amount of cash or Cash
Equivalents received by the Company in the case of a sale, or Capital
Contribution in respect, of Qualified Capital Stock and by the Company and its
Subsidiaries in respect of an Asset Sale, plus, in the case of an issuance of
Qualified Capital Stock upon any exercise, exchange or conversion of securities
(including options, warrants, rights and convertible or exchangeable debt) of
the Company that were issued for cash on or after July 30, 1999, the amount of
cash originally received by the Company upon the issuance of such securities
(including options, warrants, rights and convertible or exchangeable debt) less,
in each case, the sum of all payments, fees, commissions and (in the case of
Asset Sales, reasonable and customary) expenses (including, without limitation,
the fees and expenses of legal counsel and investment banking fees and expenses)
incurred in connection with such Asset Sale or sale of Qualified Capital Stock,
and, in the case of an Asset Sale only, less the amount (estimated reasonably
and in good faith by the Company) of income, franchise, sales and other
applicable taxes required to be paid by the Company or any of its respective
Subsidiaries in connection with such Asset Sale in the taxable year that such
sale is consummated or in the immediately succeeding taxable year, the
computation of which shall take into account the reduction in tax liability
resulting from any available operating losses and net operating loss carryovers,
tax credits and tax credit carryforwards, and similar tax attributes.
"New Acquisitions" means the acquisition by the Company or its
subsidiaries of @Entertainment, Inc., A2000 Holding N.V., Time Warner Cable
21
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France S.A., Reseaux Cables de France S.A., Videopole S.A., Kabel Plus, a.s.,
SBS Broadcasting S.A., GelreVision N.V., SKT spol. s.r.o. and NBS Broadband
Services AB, all substantially as described in the Offering Circular (and each
such Person's respective subsidiaries).
"Non-Recourse Indebtedness" means Indebtedness of a Person to the
extent that under the terms thereof and pursuant to applicable law, no personal
recourse could be had against the Company or its Subsidiaries (giving effect to
the designations of such Person as an Unrestricted Subsidiary) for the Payment
of the principal of or interest or premium or other amounts with respect to such
Indebted ness or for any claim based on such Indebtedness and that enforcement
of obligations on such Indebtedness is limited solely to recourse against
interests in specified assets.
"Obligation" means any principal, premium or interest payment, or
monetary penalty, or damages, due by the Company under the terms of the
Securities or this Indenture, including any Liquidated Damages due pursuant to
the terms of the Registration Rights Agreement.
"Offering" means the offering of the Securities by the Company.
"Offering Circular" means the offering memorandum, dated January 14,
2000, pursuant to which the Securities were offered and sold.
"Officers' Certificate" means a certificate signed by a member of the
Company's management board or its Supervisory Board, the Chief Executive Officer
or a Vice President, and by the Chief Financial Officer, the Chief Accounting
Officer, the Treasurer, an Assistant Treasurer, the Secretary, an Assistant
Secretary or other authorized representative of the Company and delivered to the
Trustee in the form substantially similar to Exhibit E attached hereto, which
shall comply with the Indenture, except in the case of an authentication order
pursuant to Section 3.3, which must only be signed by one of the above noted
persons.
"Opinion of Counsel" means an opinion of counsel in the form
substantially similar to Exhibit F attached hereto, who may be counsel to the
Company, including an employee of the Company.
"Other Senior Notes" means the Company's $600,000,000 11 1/4% Senior
Notes due 2010, its (Euro) 200,000,000 11 1/4% Senior Notes due 2010 and
its
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$1,000,000,000 13 3/4% Senior Discount Notes due 2010 pursuant to the Other
Senior Notes Indenture.
"Other Senior Notes Indenture" means one or more Indentures, dated as
of January 20, 2000, between the Company and Citibank, N.A. as trustee, pursuant
to which any of the Other Senior Notes were issued.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption U.S. Dollars in the necessary amount have been theretofore
deposited with the Trustee or any Paying Agent (other than the Company) in
trust or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Securities;
provided that, if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture;
(iii) Securities, except to the extent provided in Sections 12.2
and 12.3, with respect to which the Company has effected Defeasance and/or
Covenant Defeasance as provided in Article Twelve; and
(iv) Securities which have been paid pursuant to Section 3.6 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands the Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the
23
<PAGE>
calculations required by TIA Section 313, Securities owned by the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in making such calculation or
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which any Responsible Officer of the Trustee
knows to be so owned shall be so disregarded. Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor.
"Parent" means UnitedGlobalCom, Inc. and its successor(s).
"Parent Stock Instrument" means either (a) Indebtedness (including
Disqualified Capital Stock) and Qualified Capital Stock of the Company that is
convertible or exchangeable into, at the option of the Company or any holder
thereof, or secured by, or whose value to the holder thereof is dependent upon
any shares of Parent's Capital Stock that were owned by the Company or any of
its Subsidiaries as of July 30, 1999; provided that such Indebtedness and
Capital Stock of the Company shall have been issued in consideration of cash,
the net proceeds of which shall have been received by the Company or (b) the
Class A Common Stock of Parent owned by the Company or any of its Subsidiaries
as of July 30, 1999 or any like number of shares of Class B Common Stock of
Parent issued in exchange for the shares of the Class A Common Stock of Parent
held as of July 30, 1999.
"Participants" means institutions that have accounts with DTC or its
nominee and with respect to the Regulation S Global Securities, institutions
that have accounts with Euroclear or Cedelbank or their respective nominees.
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and premium, if
any) or interest on any Securities on behalf of the Company.
"Payment Date" means any date on which a payment of principal,
premium, if any, interest (or Liquidated Damages, if any) is due to be paid on
any of the Securities.
"Permitted Indebtedness" means that:
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<PAGE>
(a) the Company may incur Indebtedness evidenced by the Securities
and issued pursuant to this Indenture and Indebtedness evidenced by
the Other Senior Notes and issued pursuant to the Other Senior Notes
Indenture up to the amounts being issued on the original Issue Date;
(b) the Company may incur Refinancing Indebtedness with respect to
any Indebtedness (including Disqualified Capital Stock), described in
clause (a) or this clause (b) of this definition or incurred pursuant
to clause (1)(ii) of Section 10.11, and any Subsidiary may incur
Refinancing Indebtedness (including Disqualified Capital Stock),
described in this clause (b) or clause (2)(c) of Section 10.11 and the
Company and its Subsidiaries may incur Refinancing Indebtedness with
respect to Indebtedness which is outstanding on the Issue Date (after
giving effect to the New Acquisitions) (less the amount of any such
Existing Indebtedness repaid on or after the Issue Date or which was
refinanced pursuant to this clause (b));
(c) the Company and its Subsidiaries may incur Indebtedness solely in
respect of bankers acceptances, letters of credit and performance and
surety bonds and completion guarantees (to the extent that such
incurrence does not result in the incurrence of any obligation to
repay any obligation relating to borrowed money of others), all in the
ordinary course of business in accordance with customary industry
practices, in amounts and for the purposes customary in the Company's
industry;
(d) the Company may incur Indebtedness to any Subsidiary, and any
Subsidiary may incur Indebtedness to any other Subsidiary or to the
Company; provided that in the case of Indebtedness of the Company,
such obligations shall be unsecured and subordinated in all respects
to the Company's obligations pursuant to the Securities and the Other
Senior Notes and any event that causes such Subsidiary no longer to be
a Subsidiary (including by designation to be an Unrestricted
Subsidiary) shall be deemed to be a new incurrence of such
Indebtedness, if then outstanding, subject to Section 10.11;
(e) the Company and its Subsidiaries may incur Interest Swap and
Hedging Obligations that are incurred for the purpose of fixing or
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hedging interest rate or currency risk with respect to any fixed or
floating rate Indebtedness that is permitted by this Indenture to be
outstanding or any receivable or liability the payment of which is
determined by reference to a foreign currency; provided that the
notional amount of any such Interest Swap and Hedging Obligation does
not exceed the principal amount of Indebtedness to which such Interest
Swap and Hedging Obligation relates;
(f) the Company and its Subsidiaries may guarantee Indebtedness
of any of the Company's Subsidiaries, provided that the incurrence of
such Indebtedness by such Subsidiary is permitted under this
Indenture; and
(g) Subsidiaries of the Company may issue preferred stock or
Indebtedness to the holders (or their Affiliates) of the common equity
of such Subsidiary on a basis that is substantially proportionate to
their common equity interests (with any disproportionately large
equity interests received by the Company or a Subsidiary of the
Company relative to their respective contributions being ignored for
this purpose).
"Permitted Investment" means:
(a) Cash Equivalents;
(b) intercompany Indebtedness to the extent permitted under clause
(d) of the definition of "Permitted Indebtedness";
(c) an Investment by the Company or a Subsidiary of the Company in a
Person engaged primarily in a Related Business if as a result of such
Investment such Person becomes a Subsidiary of the Company or is
merged with or into the Company or a Subsidiary of the Company, so
long as the surviving entity is the Company or a Subsidiary of the
Company;
(d) an Investment in any Subsidiary of the Company;
(e) other Investments in any Person or Persons engaged primarily in a
Related Business with respect to which the Company maintains
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the power to influence or participate in the management of such Person
by virtue of representation on such Person's board or directors or
through a contractual relationship with such Person or its holders of
Capital Stock;
(f) other Investments in any Person or Persons engaged primarily in a
Related Business with respect to which the Supervisory Board of the
Company or of the relevant Subsidiary determines in its good faith
reasonable judgement that the Company or any of its Subsidiaries will
receive as a result of such Investment commensurate network services
benefits (including by becoming a customer, client, supplier,
purchaser or seller of goods or services of or to such Person or
Persons) from the arrangements entered into as a result of such
Investment;
(g) other Investments in any Person or Persons engaged primarily in a
Related Business; provided that, after giving pro forma effect to each
such Investment, the amount of all such Investments made solely in
reliance upon this clause (g) on and after July 30, 1999 that are
Outstanding at any time does not exceed in the aggregate $100,000,000
(or the foreign currency equivalent thereof measured on the date of
the making of such Investment), plus, unless such amounts shall have
been credited under clause (3) of Section 10.12 and utilized to make a
Restricted Payment, (w) the amount of the Net Cash Proceeds to the
Company from the sale of Qualified Capital Stock (other than (i) to a
Subsidiary of the Company, and (ii) to the extent applied in a
Qualified Exchange), (x) an amount equal to 50% of the Net Cash
Proceeds from Special Character Asset Sales, (y) an amount equal to
the Net Cash Proceeds to the Company or any of its Subsidiaries of any
sale of securities constituting a Parent Stock Instrument (other than
(i) to a Subsidiary of the Company, and (ii) to the extent applied in
connection with a Qualified Exchange) and (z) the amount of
Investments made pursuant to this clause (g) after July 30, 1999 that
are returned to the Company or any Subsidiary on or prior to the date
of any such calculation, which amount shall be the lesser of (i) the
amount of the cash invested plus the value of all noncash investments
(valued at the fair market value at the time of the Investment,
determined in the good faith reasonable judgment of the Company or the
relevant Subsidiary) and (ii) the amount of the Net
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Cash Proceeds received plus the value of noncash proceeds received
(valued at the fair market value at the time of the return of such
Investment, deter mined in the good faith reasonable judgment of the
Company or the relevant Subsidiary);
(h) Investments made in the ordinary course of business as partial or
full payment for constructing a network relating principally to a
Related Business of the Company or any Subsidiary;
(i) Investments solely in the form and consisting of Capital Stock of
the Company (other than Disqualified Capital Stock);
(j) any Investment acquired by the Company or any of its restricted
Subsidiaries (a) in exchange for any other Investment or accounts
receivable held by the Company or any such restricted Subsidiary in
connection with or as a result of a bankruptcy, workout,
reorganization or recapitalization of the issuer of such other
investment or accounts receivable or (b) as a result of a foreclosure
by the Company or any of its restricted Subsidiaries with respect to
any secured Investment or other transfer of title with respect to any
secured Investment in default;
(k) an Investment in prepaid expenses and lease, utility and workers'
compensation, performance and other similar deposits in the ordinary
course of business;
(l) loans, advances, or extensions of credit to employees, officers,
directors made in the ordinary course of business;
(m) the net obligations of any counterparty under Interest Swap and
Hedging Obligations obtained in conformity with industry practices;
(n) Investments made on or after July 30, 1999 in SBS Broadcasting
S.A. not to exceed the amounts required to be made by the Company
pursuant to the Investment Agreement by and between, SBS Broadcasting
S.A., the Company and United International Holdings Inc., dated June
29, 1999, relating to the acquisition by the Company of Equity
Interests in SBS Broadcasting S.A.; and
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(o) Investments made on or after July 30, 1999 directly or
indirectly, in ARA Cable Services Inc. or ARA Programming &
Distribution Ltd. of Saudi Arabia, not to exceed $75,000,000.
"Permitted Lien" means:
(a) Liens existing on the Issue Date;
(b) Liens securing the Securities and the Other Senior Notes;
(c) Liens securing Indebtedness, or any agreement (including any
Equity Interest) relating to any property, asset, or business
acquired, of a Person existing at the time such Person becomes a
Subsidiary (including by designation) or is merged with or into the
Company or a Subsidiary or Liens securing Indebtedness incurred in
connection with an Acquisition, provided that such Liens were in
existence prior to the date of such acquisition, merger or
consolidation, were not incurred in anticipation thereof, and do not
extend to any other assets than those of the Person (or its
businesses) being acquired (or so designated);
(d) leases or subleases granted to other Persons in the ordinary
course of business not materially interfering with the conduct of the
business of the Company or any of its Subsidiaries or materially
detracting from the value of the relative assets of the Company or any
Subsidiary;
(e) Liens arising from precautionary Uniform Commercial Code
financing statement filings regarding operating leases entered into by
the Company or any of its Subsidiaries in the ordinary course of
business;
(f) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more
adverse to the Holders of the Securities than the terms of the Liens
securing such refinanced Indebtedness, provided that the Indebtedness
secured is not increased and the Lien is not extended to any
additional assets or property that would not have been security for
the Indebtedness refinanced;
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(g) Liens securing Indebtedness incurred under the Credit Agreement
and other Indebtedness solely of Subsidiaries of the Company incurred
in accordance with the terms of this Indenture;
(h) Liens in favor of the Company or Liens on assets of Subsidiaries
of the Company in favor of other such Subsidiaries;
(i) Liens securing Refinancing Indebtedness that complies with the
definition of "Refinancing Indebtedness";
(j) Liens securing Acquired Indebtedness and Indebtedness assumed in
acquiring Related Assets, provided that such Liens were not put in
place in contemplation of the incurrence by the Company or its
Subsidiaries of such Indebtedness, such Liens do not extend to any
property or assets of the Company or any of its Subsidiaries other
than those acquired in connection therewith, and the Investment that
is the subject of such acquisition is a Permitted Investment;
(k) statutory liens of carriers, warehousemen, mechanics,
materialmen, landlords, repairmen or other like Liens arising by
operation of law in the ordinary course of business, provided that (1)
the underlying obligations are not overdue for a period of more than
30 days, or (2) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; and
(l) Liens not otherwise permitted by this Indenture in an amount not
to exceed 5% of the Company's Consolidated Tangible Assets.
"Person" means any Corporation, individual, limited liability company,
joint stock company, joint venture, partnership, limited liability partnership,
unincorporated association, governmental regulatory entity, country, state or
political subdivision thereof, trust, municipally or other entity.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same Indebtedness as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for a
mutilated
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security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same Indebtedness as the mutilated, lost, destroyed or stolen
Security.
"Preferred Stock" means any Equity Interest of any class or classes of
a Person (however designated) which is preferred as to payments of dividends, or
as to distributions upon any liquidation or dissolution, over Equity Interests
of any other class of such Person.
"Principals" means Albert M. Carollo, Lawrence F. DeGeorge, Lawrence
J. DeGeorge, Curtis Rochelle, Marian Rochelle, Rochelle Investments, Ltd. (so
long as it is controlled by Curtis or Marian Rochelle), Gene W. Schneider, G.
Schneider Holdings, Co. and The Gene W. Schneider Family Trust (so long as each
is controlled by Gene W. Schneider or trustees appointed by him), Janet S.
Schneider and Mark L. Schneider, and with respect to any such Person means: (A)
any controlling stockholder or 80% (or more) owned Subsidiary of such Person, or
with respect to each individual Person, (i) family partnerships, Corporations or
other entities holding Equity Interests in the Company, the transferee(s) or the
surviving entities or entities solely for the benefit of such Person or any of
the Persons listed in (iii) such Person's children, grandchildren,
stepchildren, step grandchildren and their spouses, (iv) heirs, legatees and
devisees, and (v) trusts solely for the benefit of any of the foregoing; or (B)
any trust Corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Person and/or such other Persons
referred to in the immediately preceding clause (A).
"Pro Forma" or "pro forma" shall have the meaning set forth in
Regulation S-X of the Securities Act, unless otherwise specifically stated
herein.
"Purchase Money Indebtedness" of any Person means any Indebted ness
of such Person to any seller or other Person incurred solely to finance the
acquisition (including in the case of a Capitalized Lease Obligation, the
lease), construction, installation or improvement of any after acquired real or
personal tangible property which, in the reasonable good faith judgment of the
Supervisory Board of the Company, is directly related to a Related Business.
"Qualified Capital Stock" means any Capital Stock of the Company that
is not Disqualified Capital Stock.
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"Qualified Exchange" means:
(a) any legal defeasance, redemption, retirement, repurchase or other
acquisition of Capital Stock, or Indebtedness of the Company issued on
or after July 30, 1999 with the Net Cash Proceeds received by the
Company from the substantially concurrent sale of its Qualified
Capital Stock or, to the extent used to retire Indebtedness (other
than Disqualified Capital Stock) of the Company issued on or after
July 30, 1999, Subordinated Indebtedness of the Company,
(b) any exchange of Qualified Capital Stock of the Company for any
Capital Stock or Indebtedness of the Company issued on or after July
30, 1999, or
(c) any issuance of Subordinated Indebtedness of the Company in
exchange for Indebtedness (other than Disqualified Capital Stock) of
the Company issued on or after July 30, 1999.
"Qualified Institutional Buyer" or "QIB" has the meaning specified in
Rule 144A.
"Redemption Date," when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Reference Period" with regard to any Person means the full fiscal
quarter ended immediately preceding any date upon which any determination is to
be made pursuant to the terms of the Securities or this Indenture, for which
Consolidated financial statements of the Company are available.
"Refinancing Indebtedness" means Indebtedness (including Disqualified
Capital Stock) (a) issued in exchange for, or the proceeds from the issuance and
sale of which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or in part,
or (b) constituting an amendment, modification or supplement to, or a deferral
or renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness
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(including Disqualified Capital Stock and Refinancing Indebtedness) in a
principal amount (or, if issued with an original issue discount, an original
accreted value, determined in accordance with GAAP) or, in the case of
Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
with the Refinancing and the amount of any premium paid in connection with such
Refinancing in accordance with the terms of the documents governing the
Indebtedness (including Disqualified Capital Stock and Refinancing Indebtedness)
refinanced without giving effect to any modification thereof made in connection
with or in contemplation of such refinancing) the lesser of (1) the principal
amount or, in the case of Disqualified Capital Stock, liquidation preference, of
the Indebtedness (including Disqualified Capital Stock and Refinancing
Indebtedness) so Refinanced and (2) if such Indebtedness being Refinanced was
issued with an original issue discount, the accreted value thereof (as
determined in accordance with GAAP) at the time of such Refinancing; provided
that (A) such Refinancing Indebtedness shall only be used to refinance
Outstanding Indebtedness (including Disqualified Capital Stock) of such Person
issuing such Refinancing Indebtedness (except that the Company may refinance
Outstanding Indebtedness of a Subsidiary), (B) such Refinancing Indebtedness
shall (x) not have an Average Life shorter than the Indebtedness (including
Disqualified Capital Stock) to be so refinanced at the time of such Refinancing
and (y) in all respects, be no less contractually subordinated or junior, if
applicable, to the rights of Holders of the Securities than was the Indebtedness
(including Disqualified Capital Stock) to be refinanced, (C) such Refinancing
Indebtedness shall have a final stated maturity or redemption date, as
applicable, no earlier than the final stated maturity or redemption date, as
applicable, of the Indebtedness (including Disqualified Capital Stock) to be so
refinanced, and (D) such Refinancing Indebtedness shall be secured (if secured)
in a manner no more adverse to the Holders of the Securities than the terms of
the Liens (if any) securing such refinanced Indebtedness, including, without
limitation, the amount of Indebtedness secured shall not be increased.
"Registrar" means an office or agency of the Company in London, where
Securities may be presented for registration of transfer or exchange.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the date hereof, between the Initial Purchasers and the Company.
"Registration Statement" means the Registration Statement as defined
in the Registration Rights Agreement.
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"Regular Record Date" for the interest payable on any Interest Payment
Date means January 15 or July 15 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" has the meaning specified in Section
3.3.
"Related Assets" means all assets, rights, contractual or otherwise,
and properties, whether tangible or intangible, used or intended for use in
connection with a Related Business; provided that Related Assets shall not
include any Equity Interests or indebtedness of, or interests in, any Person.
"Related Business" means the business of constructing, creating,
developing, marketing or operating one or more cable, telephone or
communications systems, including, without limitation, any system for
transmitting, or providing service or product for the transmission of, voice,
video or data through transmission facilities, Internet service providers or any
business reasonably related to any of the foregoing and any business conducted
by the Company or any Subsidiary of the Company on the Issue Date; provided that
the determination of what constitutes a Related Business shall be made in good
faith by the Supervisory Board of the Company.
"Related Business Acquisition" means an Asset Acquisition of (i)
properties or assets to be used in a Related Business, of any Person that
becomes a restricted Subsidiary as a result of such Asset Acquisition or (iii)
of the Capital Stock of any Person that becomes an Unrestricted Subsidiary as a
result of such Asset Acquisition, but only if such Asset Acquisition would be
permitted pursuant to Section 10.12 or as a Permitted Investment; provided that,
in the case of clauses (ii) and (iii), such Person's assets and properties
consist principally of properties or assets that will be used in a Related
Business.
"Replacement Assets" means property or assets that will be used in a
Related Business of the Company or any Subsidiary and Equity Interests of a
Person that becomes a Subsidiary of the Company.
"Responsible Officer" shall mean, when used with respect to the
Trustee, any officer within the corporate trust department of the Trustee,
including
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any vice-president, assistant vice president, assistant secretary, assistant
treasurer, trust officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any corporate trust mater is
referred because of such person's knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of this Indenture.
"Restricted Global Security" has the meaning specified in Section 3.3.
"Restricted Investment" means, in one or a series of related
transactions, any Investment, other than other Permitted Investments.
"Restricted Payment" means, with respect to any Person:
(a) the declaration or payment of any dividend or other distribution
in respect of Equity Interests of such Person or any parent or
Subsidiary of such Person,
(b) any payment on account of the purchase, redemption or other
acquisition or retirement for value of Equity Interests of such Person
or any Subsidiary or parent of such Person,
(c) other than with the proceeds from the substantially concurrent
sale of, or in exchange for, Refinancing Indebtedness, any purchase,
redemption, or other acquisition or retirement for value of, any
payment in respect of any amendment of the terms of or any defeasance
of, any Subordinated Indebtedness, directly or indirectly, by such
Person or a parent or Subsidiary of such Person prior to the scheduled
maturity, any scheduled repayment of principal, or scheduled sinking
fund payment, as the case may be, of such Indebtedness and
(d) any Restricted Investment by such Person;
provided, however, that the term "Restricted Payment" does not include (1) any
dividend, distribution or other payment on or with respect to Equity Interests
of a Person or the parent of such Person to the extent payable solely in shares
of Qualified Capital Stock of such Person, or (2) any dividend, distribution or
other payment to the Company or any of its Subsidiaries by the Company or any of
its Subsidiaries, or
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(3) any payment on account of the exchange of shares of Common Stock of Parent
for a like number of substantially identical (except with regard to voting
rights) shares of Common Stock of Parent, or (4) payments to or for the account
of the Stichting Administratiekantor UPC (the "Foundation") or its successors of
amounts related to taxes payable upon the grant of options to certain employees
in shares of the Company held by the Foundation, provided that, for purposes of
this clause (4), neither the Company nor any of its Subsidiaries shall be liable
to any Person in respect of such amounts, other than for the payment of such
amounts actually received or to be received by it, to the Foundation.
"Restricted Period" means the period through and including the 40/th/
day after the later of the commencement of the Offering and the Issue Date of
the Initial Securities.
"Restricted Securities" means Restricted Global Securities and
Regulation S Global Securities.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the United States Securities and Exchange Commission.
"Securities" means, collectively, the "Securities" issued under this
Indenture, including the Initial Securities and the Exchange Securities.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" shall have the meaning provided under
Regulation S-X of the Securities Act, as in effect on the Issue Date.
"Special Character Asset Sale" means any Asset Sale solely consisting
of assets and property or interests therein comprising its interests in chello
broad band, UPCtv or Priority Telecom determined by the Company in its good
faith
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reasonable judgment.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity," when used with respect to any Security, means the
date specified in any Security as the fixed date on which the final payment of
principal and interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company that is
subordinated in right of payment by its terms or the terms of any document or
instrument relating thereto to the Securities, in any respect or when used in
the definitions of Restricted Payment or Qualified Exchange has a final stated
maturity on (except for the Securities) or after the Stated Maturity.
"Subsidiary," with respect to any Person, means (1) a Corporation a
majority of whose Equity Interests with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, (2) any other Person (other than a
Corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or indirectly,
at the date of determination thereof has majority ownership interest, or (3) a
partnership in which such Person or a Subsidiary of such Person is, at the time,
a general partner and in which such Person, directly or indirectly, at the date
of determination thereof has a majority ownership interest. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be a Subsidiary of the Company
or of any Subsidiary of the Company. Unless the context requires otherwise,
Subsidiary means each direct and indirect Subsidiary of the Company.
"Supervisory Board" means, with respect to any Person, the supervisory
board of directors of such Person or any committee of the supervisory board of
directors of such Person authorized, with respect to any particular matter, to
exercise the power of the supervisory board of directors of such Person.
"Tax" or "Taxes" means any and all present or future taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, and all liabilities
with respect thereto, together with any penalties, interest, or additions
thereto.
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"Tax Event" means that as a result of any change in or amendment to
the laws, treaties or regulations of any Taxing Authority (or any official or
administrative pronouncement or action or judicial decision) interpreting or
applying such laws, treaties or regulations where such change or amendment is
proposed and becomes effective on or after the Issue Date, in making any payment
due or to become due under the Securities, the Company is or would be required
on the next succeeding payment date to pay Additional Amounts and the payment of
such Additional Amounts cannot be avoided by the use of any reasonable measures
available to the Company.
"Taxing Authority" means any nation or government or any political
subdivision thereof or any agency or instrumentality therein and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force at the date as of which this Indenture was executed, except as
provided in Section 9.5.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Global Security" has the meaning set forth in Section
3.3(d).
"Unrestricted Securities" means an Unrestricted Global Security and
all other Securities that are not Restricted Securities, including Exchange
Securities.
"Unrestricted Subsidiary" means any subsidiary of the Company that
does not own any Equity Interest of, or own or hold any Lien on any property of,
the Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the
Supervisory Board of the Company); provided that such Subsidiary at the time of
such designation (a) has no Indebtedness other than Non-Recourse Indebtedness;
(b) is not party to any agreement, contract, arrangement or understanding with
the Company or any Subsidiary of the Company, unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such
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Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Subsidiaries. The Supervisory Board of the Company may designate any
Unrestricted Subsidiary to be a Subsidiary, pro vided that (1) no Default or
Event of Default is existing or will occur as a consequence thereof and (2)
immediately after giving effect to such designation, on a pro forma basis, the
Company could incur at least $1.00 (or its foreign currency equivalent) of
Indebtedness pursuant to the Debt Incurrence Ratio of Section 10.11. Each such
designation shall be evidenced by filing with the Trustee a certified copy of
the resolution giving effect to such designation and an Officer's Certificate
certifying that such designation complied with the foregoing conditions.
"U.S. Government Obligations" means direct non-callable obligations
of, or noncallable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests
of which (other than directors' qualifying shares) are owned by the Company or
one or more Wholly Owned Subsidiaries of the Company.
SECTION 1.2 Compliance Certificates and Opinions. Upon any
------------------------------------
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenant compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional
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certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 10.9(a)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual
, such condition or covenant has been complied with.
SECTION 1.3 Form of Documents Delivered to Trustee. In any case
--------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual
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matters is in the possession of the Company, unless such counsel knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be Consolidated (with
proper identification of each matter covered therein) and form one instrument.
SECTION 1.4 Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held by any
Person, and the date of holding the same, shall be proved by the Security
Register.
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(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 1.5 Notices. Any notice or communication shall be
-------
sufficiently given if in writing and delivered in person, by facsimile and
confirmed by overnight courier, or mailed by first-class mail addressed as
follows:
if to the Company:
United Pan-Europe Communications N.V.
P.O. Box 74763
1070 BT Amsterdam
The Netherlands
Attention: General Counsel and Treasurer
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Facsimile: 31 20 778 9841
Telephone: 31 20 778 9840
with a copy to:
Holme, Roberts & Owen LLP
Heathcoat House
20 Savile Row
London W1X 1AE
England
Attention: Paul G. Thompson
Facsimile: 44 171 287 9344
Telephone: 44 171 494 5600
if to the Trustee or Paying Agent:
Citibank, N.A.
5 Carmelite Street
London EC4Y 0PA
copies of notices to the Trustee should also go to:
Citibank, N.A.
11 Old Jewry
London EC2R 8DU
Attention: Global Agency and Trust Services
Facsimile: 44 171 508 3879
Telephone: 44 171 508 3815
if to the Luxembourg Paying and Transfer Agent:
Banque International a Luxembourg
69 route d'Esch
Luxembourg L-2953
c/o the Trustee
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The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to a
Holder including any notice delivered in connection with TIA Section 310(b), TIA
Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed to
him at his address as set forth on the Security Register and shall be
sufficiently given to him if so mailed within the time prescribed. To the extent
required by the TIA, any notice or communication shall also be mailed to any
Person described in TIA Section 313(c).
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, if a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 1.6 Notice to Holders; Waiver. Where this Indenture provides
-------------------------
for notice of any event to Holders by the Company or the Trustee, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each Holder affected by such
event, at the address of such Holder as it appears in the Security Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. As long as the Securities are listed on the
Luxembourg Stock Exchange and notice is required by the rules of the Luxembourg
Stock Exchange, such notice shall be sufficiently given by publication of such
notice to Holders of the Securities in English will be in a leading newspaper
having general circulation in Luxembourg (which is expected to be the Luxembourg
Wort) or, if such publication is not practicable, in one other leading English
language daily newspaper with general circulation in Europe, such newspaper
being published on each business day in morning editions, whether or not it
shall be published in Saturday, Sunday or holiday editions. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice. Where this Indenture provides for notice in any manner, such notice
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may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 1.7 Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 1.8 Successors and Assigns. All covenants and agreements in
----------------------
this Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.9 Separability Clause. In case any provision in this
-------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.10 Benefits of Indenture. Nothing in this Indenture or in
---------------------
the Securities, express or implied, shall give to any Person, other than the
parties hereto, any Paying Agent, any Security Registrar and their successors
hereunder and the Holders any legal or equitable right, remedy or claim under
this Indenture.
SECTION 1.11 Governing Law. This Indenture and the Securities shall
-------------
be governed by and construed in accordance with the law of the State of New York
including without limitation Section 5-1401 and 5-1402 of the New York General
Obligation Law and New York Civil Practice Laws and Rules 327(b), as applied to
contracts made and performed within the State of New York, without regard to
conflicts of law. The Company hereby irrevocably submits to the jurisdiction of
any New York State court sitting in the borough of Manhattan in the city of New
York or any federal court sitting in the borough of Manhattan in the city of New
York in respect of any suit, action or proceeding arising out of or relating to
45
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this Indenture and the Securities, and irrevocably accepts for itself and in
respect of its property, generally and unconditionally, jurisdiction of the
aforesaid courts. The Company irrevocably waives, to the fullest extent they may
effectively do so under applicable law, trial by jury and any objection which
they may now or hereafter have to the laying of the venue of any such suit,
action or proceeding bought in any such court and any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of the Trustee or any
Holder to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
SECTION 1.12 Conflict with Trust Indenture Act. Prior to the issuance
---------------------------------
of the Exchange Securities or the effectiveness of the Shelf Registration
Statement, the Trust Indenture Act shall apply as a matter of contract to this
Indenture for purposes of interpretation, construction and defining the rights
and obligations hereunder. Upon the issuance of the Exchange Securities or the
effectiveness of the Shelf Registration Statement, this Indenture shall be
subject to the provisions of the Trust Indenture Act that are required to be
part of this Indenture and shall, to the extent applicable, be governed by such
provisions. If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such provision or requirement of the Trust Indenture Act shall
control.
If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or excluded,
as the case may be.
SECTION 1.13 Legal Holidays. In any case where any Interest Payment
--------------
Date, Redemption Date, or Stated Maturity or Maturity of any Security shall not
be a Business Day at a place of payment, then (notwithstanding any other
provision of this Indenture or of the Securities) payment of principal of (or
premium, if any) or interest need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date or at the Stated Maturity or
Maturity; provided that no interest shall accrue solely by virtue of such delay
for the period from and after such Interest Payment Date, Redemption Date,
Stated Maturity or Maturity, as the case may be.
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SECTION 1.14 No Personal Liability of Board Members, Officers,
-------------------------------------------------
Employees and Shareholders. No board member, director, officer, employee,
- --------------------------
agent, authorized representative, incorporator or shareholder of the Company, as
such, shall have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation, solely by reason of its status as
a board member, director, officer, employee, agent, authorized representative,
incorporator or shareholder of the Company. By accepting a Security, the Trustee
on behalf of each Holder waives and releases all such liability (but only such
liability). The waiver and release are part of the consideration for issuance of
the Securities.
SECTION 1.15 Independence of Covenants. All covenants and agreements
-------------------------
in this Indenture shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or be otherwise within the limitations
of, another covenant shall not avoid the occurrence of a Default if such action
is taken or condition exists.
SECTION 1.16 Exhibits. All exhibits attached hereto are by this
--------
reference made a part hereof with the same effect as if herein set forth in
full.
SECTION 1.17 Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
SECTION 1.18 Duplicate Originals. The parties may sign any number of
-------------------
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
SECTION 1.19 Agent for Service; Submission to Jurisdiction; Waiver of
--------------------------------------------------------
Immunities. By the execution and delivery of this Indenture, the Company (i)
- ----------
acknowledges that it has, by separate written instruments, designated and
appointed CT Corporation System, 1633 Broadway, New York, NY 10019 ("CT
Corporation System") (and any successor entity), as its authorized agent upon
which process may be served in any suit or proceeding arising out of or relating
to this Indenture that may be instituted in any federal or state court in the
Borough of Manhattan, City of New York, State of New York or brought under
federal or state securities laws, and represent and warrant that CT Corporation
System has accepted
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such designation, (ii) submits to the jurisdiction of any such court in any such
suit or proceeding and (iii) agrees that service of process upon CT Corporation
System and written notice of said service to the Company, in accordance with
Section 1.5 shall be deemed in every respect effective service of process upon
the Company in any such suit or proceeding. The Company further agrees to take
any and all action, including the execution and filing of any and all such
documents and instruments, as may be necessary to continue such designation and
appointment of CT Corporation System in full force and effect for as long as any
of the Securities remain Outstanding (subject to the limitation set forth in
clause (i)); provided, however, that the Company may, and to the extent CT
Corporation System ceases to be able to be served on the basis contemplated
herein shall, by written notice to the Trustee, designate such additional or
alternative agent for service of process under this Section 1.19 that (i)
maintains an office located in the Borough of Manhattan City of New York, State
of New York, and (ii) is either (x) United States counsel for the Company or (y)
a corporate service company which acts as agent for service of process for other
persons in the ordinary course of its business. Such written notice shall
identify the name of such agent for service of process and the address of the
office of such agent for service of process in the Borough of Manhattan, City of
New York, State of New York.
To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court of (i) any jurisdiction in which the Company owns
or leases property or assets, (ii) the United States or the State of New York or
(iii) the Netherlands or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property and assets or this
Agreement or any of the Notes or actions to enforce judgments in respect of any
thereof, the Company hereby irrevocably waives such immunity in respect of its
obligations under the above-referenced documents, to the extent permitted by
law.
SECTION 1.20 Judgment Currency. The Company hereby agrees to
-----------------
indemnify the Trustee, its directors, its officers and each person, if any, who
controls the Trustee within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act against any loss incurred by such person as a
result of any judgment or order being given or made against the Company for any
U.S. Dollar amount due under this Agreement and such judgment or order being
expressed and paid in a currency (the "Judgment Currency") other than U.S.
Dollars and 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
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order and (ii) the spot rate of exchange in The City of New York at which such
party on the date of payment of such judgment or order is able to purchase
United States Dollars with the amount of the Judgment Currency actually received
by such party. The foregoing indemnity shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "spot rate of
exchange" shall include any premiums and costs of exchange payable in connection
with the purchase of, or conversion into, United States Dollars.
ARTICLE II
SECURITY FORMS
SECTION 2.1 Forms Generally. The Securities and the Trustee's
---------------
certificate of authentication with respect thereto shall be in substantially the
form set forth in Exhibit A hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or system on which the Securities may
be listed or eligible for trading or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of the Securities. Any portion of the text of any Security may be set
forth on the reverse thereof, with an appropriate reference thereto on the face
of the Security.
The Certificated Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner permitted by
the rules of any securities exchange or system on which the Securities may be
listed or eligible for trading, all as determined by the managing directors,
officers and authorized representatives of the Company executing such
Securities, as evidenced by their execution of such Securities.
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ARTICLE III
THE SECURITIES
SECTION 3.1 Title and Terms. The aggregate principal amount of
---------------
Securities which may be authenticated and delivered under this Indenture is
initially limited to $300,000,000, except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Securities pursuant to Section 3.4, 3.5, 3.6, 9.6, 10.10, 10.16 or 11.8.
The Initial Securities shall be known and designated as the
"$300,000,000 11 1/2% Senior Notes due 2010" and the Exchange Securities shall
be known as the "$300,000,000 11 1/2% Series B Senior Notes". The final Stated
Maturity of the Securities shall be February 1, 2005 2010. Except as set forth
in the next paragraph of this Section 3.1, interest on the Securities will
accrue at a rate of 11 1/2% per annum from January 20, 2000 or from the most
recent Interest Payment Date to which cash interest has been paid or duly
provided for, and will be payable semiannually in arrears on February 1 and
August 1 of each year, commencing August 1, 2000 to the Holders of record on the
immediately preceding Regular Record Date. Interest on the Securities will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
In the event that, at any time prior to 180 days following the Issue
Date, the Company (x) issues or sells, or (y) offers or negotiates to issue or
sell, for cash, any debt securities (other than debt securities convertible or
exchangeable into Capital Stock of the Company) to Qualified Institutional
Buyers who, as a regular part of their business, purchase debt securities
comparable to the Securities or the Other Senior Notes (any of the events
described in (x) or (y) at any time during such 180 day period, an "Interest
Rate Adjustment Event"), the interest rate otherwise applicable to the
Securities shall, on and after the date of such Interest Rate Adjustment Event,
be increased by 25 basis points such that on and after the date of such Interest
Rate Adjustment Event, interest on the Securities will accrue at a rate of 11
3/4% per annum. Any amounts owing as a result of such increase shall be paid to
the Holders of record as of the Regular Record Date next following any such
Interest Rate Adjustment Event, on the immediately following Interest Payment
Date, and thereafter will be payable semiannually in arrears on February 1 and
August 1 of each year to the Holders of record on the immediately preceding
Regular Record Date.
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Promptly following the occurrence of an Interest Rate Adjustment
Event, the Company shall give notice of the occurrence thereof to the Trustee,
to the Paying Agent and to each Holder of Securities in the manner provided for
in Section 1.6. Such notice shall include the amount to be paid to the Holders
of record as of such Regular Record Date on the next following Interest Payment
Date.
Principal of, premium, if any, and interest on the Securities will be
payable, and the Securities may be exchanged or transferred, at the office or
agency of the Company in The City of New York and in London, which, unless
otherwise provided by the Company, will be the offices of the Trustee. At the
option of the Company, interest may be paid by check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Security
Register.
The Securities shall be redeemable as provided in Article Eleven.
At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and certain
Events of Default thereunder may be defeased as provided in Article Twelve.
The Securities will be general, senior, unsecured obligations of the
Company, ranking pari passu in right of payment with each other.
SECTION 3.2 Denominations. The Securities (including any Global
-------------
Security) shall be issuable only in registered form without coupons and only in
denominations of US$1,000 or any integral multiple of US$1,000 above such
amount. The Securities shall not be issuable in bearer form. No service charge
shall be made for any registration of transfer or exchange of Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
SECTION 3.3 Execution, Authentication, Delivery and Dating.
----------------------------------------------
(a) The Securities shall be executed on behalf of the Company by its
Chief Executive Officer, its President, a Vice President or a managing director
(being an executive officer of the Company with due authority granted by the
management board of the Company to execute Securities) of the Company. The
signature of any of these officers or directors on the Securities may be manual
or facsimile signatures of the present or any future such authorized officer or
director and may be imprinted or otherwise reproduced on the Securities.
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Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers or directors of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities. In addition, any
Security may be signed on behalf of the Company by such Persons as, at the
actual date of the execution of such Security, shall be the proper officers or
directors of the Company, although at the date of such Security or of the
execution of this Indenture any such Person was not such officer or director.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
Each Security shall be dated the date of its authentication. No
Security shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security a certificate
of authentication substantially in the form provided for herein duly executed by
the Trustee by manual signature of an authorized signatory, and such certificate
upon any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and is entitled to
the benefits of this Indenture.
On the Issue Date the Trustee shall authenticate Initial Securities
for original issue in the aggregate principal amount not to exceed $300,000,000,
upon a written order of the Company in the form of an Officer's Certificate.
Such order shall specify the amount of the Initial Securities to be
authenticated and the date on which the original issue of Initial Securities is
to be authenticated. In addition, the Trustee shall authenticate Exchange
Securities for original issue in the aggregate principal amount of up to
$300,000,000 upon a written order of the Company in the form of an Officer's
Certificate, provided that such Exchange Securities shall be issuable only upon
the valid surrender for cancellation of Initial Securities of a like aggregate
principal amount in accordance with the Registration Rights Agreement. The
Officer's Certificate shall specify the amount of Exchange Securities to be
authenticated and the date on which the Exchange Securities are to be
authenticated. Upon the written order of the Company in the form of an Officer's
Certificate, the Trustee shall authenticate Securities in substitution of
Securities originally issued to
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reflect any name change of the Company.
(b) The terms and provisions contained in the form of Securities
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
(c) Restricted Global Securities. (i) The Initial Securities offered
----------------------------
and sold in reliance on Rule 144A shall be issued in the form of one or more
global securities (the "Restricted Global Security") in definitive, fully
registered form without interest coupons, with such applicable legends as are
provided for in Exhibit A hereto, except as otherwise permitted herein.
(ii) Each Restricted Global Security shall be registered in the
name of DTC or its nominee and deposited with the Trustee, at its Corporate
Trust Office, as custodian for DTC, duly executed by the Company and
authenticated by the Trustee as herein after provided. The aggregate
principal amount of a Restricted Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee,
as custodian for DTC, in connection with a corresponding decrease or
increase in the aggregate principal amount of a Security that is a
Regulation S Global Security (as defined below) or a Security that is an
Unrestricted Global Security (as defined below), as hereinafter provided.
(d) Regulation S Global Securities. (i) Initial Securities offered
------------------------------
and sold in reliance on Regulation S shall be initially issued in the form of
one or more Global Securities in definitive, fully registered form without
interest coupons, with such applicable legends as are provided for in Exhibit A
hereto, except as otherwise permitted herein. Until such time as the Restricted
Period shall have terminated, such Global Securities shall be referred to herein
as the "Regulation S Global Security." After such time as the Restricted Period
shall have terminated, such Regulation S Global Securities shall be referred to
herein, as the "Unrestricted Global Securities."
(ii) Each Regulation S Global Security and Unrestricted Global
Security shall be registered in the name of DTC or its nominee and
deposited with the Trustee, at its Corporate Trust Office, as custodian for
DTC, duly executed by the Company and
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authenticated by the Trustee as hereinafter provided, for credit to the
respective accounts at DTC of the depositaries for Euroclear or Cedelbank.
The aggregate principal amount of each Regulation S Global Security (or
Unrestricted Global Security) may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian
for DTC, in connection with a corresponding decrease or increase in the
aggregate principal amount of a Restricted Global Security, as hereinafter
provided.
(e) The Exchange Securities which are issued in exchange for Initial
Securities shall be issued initially in the form of one or more permanent Global
Securities in definitive, fully registered form without interest coupons,
substantially in the form set forth in Exhibit A, deposited with the Trustee, as
custodian for DTC, and shall bear the applicable legends relating to Global
Securities set forth in Exhibit A that are required to appear on such
Securities. Exchange Securities shall constitute Unrestricted Securities.
(f) In case the Company, pursuant to Article Eight, shall be
Consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
SECTION 3.4 Temporary Securities. Pending the preparation of
--------------------
54
<PAGE>
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 10.2,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 3.5 Registration, Registration of Transfer and Exchange. The
---------------------------------------------------
Company shall cause to be kept at the Corporate Trust Office of the Trustee a
register (the register maintained in such office and in any other office or
agency designated pursuant to Section 10.2 being herein sometimes referred to as
the "Security Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities and
of transfers and exchange of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as security registrar (the "Security Registrar") for the purpose of registering
Securities and transfers and exchanges of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 10.2, the Company
shall execute, the Trustee shall authenticate and deliver, and the Security
Registrar shall register, if the requirements, of such transfer are met, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount.
55
<PAGE>
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like currency and aggregate
principal amount (including an exchange of Initial Securities for Exchange
Securities), upon surrender of the Securities to be exchanged at such office
or agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, the Trustee shall authenticate and deliver, and the Security
Registrar shall register, the Securities which the Holder making the exchange is
entitled to receive, provided that no exchange of Initial Securities for
Exchange Securities shall occur until an Exchange Registration Statement shall
have been declared effective by the SEC (confirmed in an Officer's Certificate)
and that the Initial Securities to be exchanged for the Exchange Securities
shall be cancelled by the Trustee.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Security Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.4, 9.6, 10.10, 10.16 or 11.8 not involving
any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the selection of Securities to be redeemed under Section 11.4 and
ending at the close of business on the day of such mailing of the relevant
notice of redemption or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities. If
------------------------------------------------
56
<PAGE>
(i) any mutilated Security is surrendered to the Trustee or (ii) the Company and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Security, and there is delivered to the Company and the Trustee
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon Company Order the Trustee shall authenticate and deliver, in exchange
for any such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount, bearing a number
not contemporaneously Outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 3.6 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7 Payment of Interest; Interest Rights Preserved. Interest
----------------------------------------------
on any Security which is payable, and is punctually paid or duly provided for,
on any Interest Payment Date shall be paid to the Person in whose name such
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest at the office or agency of
the Company maintained for such purpose pursuant to Section 10.2; provided,
however, that each installment of interest may at the Company's option be paid
(i) by mailing a check for such interest, payable to or upon the written order
of the Person entitled thereto pursuant to Section 3.8, to the address of such
Person as it appears in the Security
57
<PAGE>
Register, or (ii) by wire transfer of such interest in immediately available
funds to an account located in the United States maintained by the DTC.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease to
be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
must be paid by the Company, at its election in each case, as provided in
paragraph (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of U.S. Dollars equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such U.S. Dollars, when deposited to be held in trust for the benefit
of the Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less than 10
days prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date, and in the name
and at the expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be given in the
manner provided for in Section 1.6, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so given, such Defaulted Interest shall
be paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following
paragraph(2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange or system on which the Securities may be listed or eligible for
trading, and
58
<PAGE>
upon such notice as may be required by such exchange or system, if, after
written notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8 Persons Deemed Owners. Prior to the due presentment of
---------------------
a Security for registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name such Security
is registered as the owner of such Security for the purpose of receiving payment
of principal of (and premium, if any) and (subject to Sections 3.5 and 3.7)
interest on such Security and for all other purposes whatsoever, whether or not
such Security be overdue, and none of the Company, the Trustee or any agent of
the Company or the Trustee shall be affected by notice to the contrary.
SECTION 3.9 Cancellation. All Securities surrendered for payment,
------------
redemption, registration of transfer or exchange shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver to
the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold, and all Securities so delivered shall be promptly
cancelled by the Trustee. If the Company shall so acquire any of the Securities,
however, such acquisition shall not operate as a redemption or satisfaction of
the Indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of by the Trustee in accordance
with its customary procedures and certification of their disposal delivered to
the Company unless by Company Order the Company shall direct that cancelled
Securities be returned to it.
SECTION 3.10 Computation of Interest. Interest on the Securities
-----------------------
shall be computed on the basis of a 360-day year comprised of twelve 30-day
59
<PAGE>
months.
SECTION 3.11 "CUSIP" and/or "ISIN" Numbers. The Company in issuing
-----------------------------
the Securities may use a "CUSIP" and/or "ISIN" number (if then generally in
use), and if so, the Trustee shall use "CUSIP" and/or "ISIN" numbers in notices
of redemption or exchange as a convenience to Holders; provided, however, that
any such notice may state that no representation is made as to the correctness
or accuracy of such numbers either as printed in the notice or on the
Securities, and that reliance may be placed only on the other identification
numbers printed on the Securities. The Company shall promptly notify the Trustee
in writing of any change in the "CUSIP" or "ISIN" numbers of the Securities.
SECTION 3.12 Book-Entry Provisions for Global Securities, Certificated
---------------------------------------------------------
Securities.
- ----------
Except as indicated below in this Section 3.12, the Securities shall
be represented only by Global Securities. The Global Securities shall be
deposited with a Depositary for such Securities (and shall be registered in the
name of such Depositary or its nominee). The Depositary for the Securities shall
be DTC unless the Company appoints a successor Depositary by delivery of a
Company Order to the Trustee specifying such successor Depositary.
All payments on a Global Security will be made to DTC or its nominee,
as the case may be, as the registered owner and Holder of such Global Security.
The Company will be fully discharged by payment to or to the order of such
Depositary from any responsibility or liability in respect of each amount so
paid. Upon receipt of any such payment in respect of a Global Security, DTC
will credit Participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global
Security as shown on the records of DTC.
Unless and until it is exchanged in whole or in part for Certificated
Securities, a Global Security may not be transferred except as a whole by the
relevant Depositary or nominee thereof to another nominee of the Depositary or
to a successor of the Depositary or a nominee of such successor.
Owners of beneficial interests in Global Securities shall be entitled
or required, as the case may be, but only under the circumstances described in
this Section 3.12, to receive physical delivery of Certificated Securities.
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<PAGE>
Interests in a Global Security shall be exchangeable or transferable,
as the case may be, for Certificated Securities if (i) DTC notifies the Company
that it is unwilling or unable to continue as Depositary for such Global
Security, or DTC ceases to be a "Clearing Agency" registered under the United
States Securities Exchange Act of 1934, and a successor depositary is not
appointed by the Company within one hundred and twenty (120) days or (ii) in the
case of any Global Security, an Event of Default has occurred and is continuing
with respect thereto and the owner of a beneficial interest therein requests
such exchange or transfer. Upon the occurrence of any of the events described
in the preceding sentence, the Company shall cause the appropriate Certificated
Securities to be delivered to the owners of beneficial interests in the Global
Securities or the Participants in DTC, Euroclear or Cedelbank through which such
owners hold their beneficial interest. Certificated Securities shall be
exchangeable or transferable for interests in other Certificated Securities as
described herein.
SECTION 3.13 Transfer and Exchange of Securities.
-----------------------------------
(a) Obligations with Respect to Transfers and Exchanges of Securities.
-----------------------------------------------------------------
Upon surrender for registration of transfer of any Security of a series to the
appropriate Registrar, and subject to the other provisions of this Section 3.13,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of such series of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, and subject to the other provisions of
this Section 3.13, Securities of any series may be exchanged for other
Securities of such series of any authorized denominations and of a like
aggregate principal amount, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for exchange,
and subject to the other provisions of this Section 3.13, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Indebtedness, and subject to the other provisions of this Section 3.13, entitled
to the same benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
61
<PAGE>
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company or the appropriate Registrar and be duly executed by
the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or governmental charge payable in connection with any
registration of transfer or exchange of Securities.
(b) Transfer and Exchange of Global Securities. Notwithstanding any
------------------------------------------
provisions of this Indenture or the Securities, transfers of a Global Security,
in whole or in part, transfers and exchanges of interests therein of the kinds
described in clauses (ii), (iii) and (iv) below and exchange of interests in
Global Securities or of other Securities as described in clause (v) below, shall
be made only in accordance with this Section 3.13(b). Transfers and exchanges
subject to this Section 3.13 shall also be subject to the other provisions of
this Indenture that are not inconsistent with this Section 3.13.
(i) General. A Global Security may not be transferred,
-------
in whole or in part, to any Person other than DTC or a nominee
thereof or a successor to DTC or its nominee, and no such
transfer to any such other Person may be registered; provided
that this clause (i) shall not prohibit any transfer of a
Security that is issued in exchange for a Global Security but is
not itself a Global Security. No transfer of a Security of any
series to any Person shall be effective under this Indenture or
the Securities of such series unless and until such Security has
been registered in the name of such Person. Nothing in this
Section 3.13(b)(i) shall prohibit or render ineffective any
transfer of a beneficial interest in a Global Security effected
in accordance with the other provisions of this Section 3.13(b).
(ii) Restricted Global Security to Regulation S Global
-------------------------------------------------
Security. If the Holder of a beneficial interest in a Restricted
--------
Global Security of any series wishes at any time to transfer such
interest to a Person who wishes to take delivery thereof in the
form of a beneficial interest in a Regulation S Global Security
of such series, such transfer may be effected, subject to the
rules and procedures of
62
<PAGE>
DTC, Euroclear and Cedelbank, in each case to the extent
applicable (the "Applicable Procedures"), only in accordance with
the provisions of this Section 3.13(b)(ii). Upon receipt by the
Registrar of (A) written instructions given in accordance with
the Applicable Procedures from an Agent Member directing the
Registrar, to credit or cause to be credited to a specified Agent
Member's account a beneficial interest in a Regulation S Global
Security in a principal amount equal to that of the beneficial
interest in a Restricted Global Security to be so transferred;
(B) a written order given in accordance with the Applicable
Procedures containing information regarding the account of the
Agent Member to be credited with, and the account of the Agent
Member to be debited for, such beneficial interest; and (C) a
certificate in substantially the form set forth in Exhibit B
given by the Holder of such beneficial interest, the principal
amount of a Restricted Global Security shall be reduced, and the
principal amount of a Regulation S Global Security shall be
increased, by the principal amount of the beneficial interest in
a Restricted Global Security to be so transferred, in each case
by means of an appropriate adjustment on the records of the
Registrar, and the Registrar shall instruct DTC or its authorized
representative to make a corresponding adjustment to its records
and to credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest in a
Regulation S Global Security having a principal amount equal to
the amount so transferred.
(iii) Restricted Global Security to Unrestricted Global
-------------------------------------------------
Security. If the Holder of a beneficial interest in a Restricted
--------
Global Security of any series wishes at any time to transfer such
interest to a Person who wishes to take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Security
of such series, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with this Section
3.13(b)(iii). Upon receipt by the Registrar, of (A) written
instructions given in accordance with the Applicable Procedures
from an Agent Member directing the Registrar to credit or cause
to be credited to a specified Agent Member's account a beneficial
interest in an Unrestricted Global Security in a principal amount
equal to that of the beneficial interest in a Restricted Global
Security to be so transferred, (B) a written order given in
accordance with the Applicable Procedures containing information
63
<PAGE>
regarding the account of the Agent Member to be credited with,
and the account of the Agent Member to be debited for, such
beneficial interest, and (C) a certificate in substantially the
form set forth in Exhibit C given by the Holder of such
beneficial interest, the principal amount of the Restricted
Global Security shall be reduced, and the principal amount of an
Unrestricted Global Security shall be increased, by the principal
amount of the beneficial interest in a Restricted Global Security
to be so transferred, in each case by means of an appropriate
adjustment on the records of the Registrar and the Registrar
shall instruct DTC or its authorized representative to make a
corresponding adjustment to its records and to credit or cause to
be credited to the account of the Person specified in such
instructions a beneficial interest in an Unrestricted Global
Security having a principal amount equal to the amount so
transferred.
(iv) Regulation S Global Security or Unrestricted
--------------------------------------------
Global Security to Restricted Global Security. If the Holder of a
---------------------------------------------
beneficial interest in a Regulation S Global Security of any
series or an Unrestricted Global Security of any series wishes at
any time to transfer such interest to a Person who wishes to take
delivery thereof in the form of a beneficial interest in a
Restricted Global Security of such series, such transfer may be
effected, subject to the Applicable Procedures, only in
accordance with this Section 3.13(b)(iv). Upon receipt by the
Registrar of (A) written instructions given in accordance with
the Applicable Procedures from an Agent Member directing the
Registrar to credit or cause to be credited to a specified Agent
Member's account a beneficial interest in a Restricted Global
Security in a principal amount equal to that of the beneficial
interest in a Regulation S Global Security or an Unrestricted
Global Security to be so transferred, (B) a written order given
in accordance with the Applicable Procedures containing
information regarding the account of the Agent Member to be
credited with, and the account of the Agent Member to be debited
for, such beneficial interest, and (C) with respect to a transfer
of a beneficial interest in a Regulation S Global Security (but
not an Unrestricted Global Security) to a Person whom the
transferor reasonably believes is a QIB, a certificate in
substantially the form set forth in Exhibit D given by the Holder
of such beneficial interest, the principal amount of a Restricted
Global Security shall be increased, and the principal amount of a
Regulation
64
<PAGE>
S Global Security or an Unrestricted Global Security shall be
reduced, by the principal amount of the beneficial interest in a
Restricted Global Security to be so transferred, in each case by
means of an appropriate adjustment on the records of the
Registrar and the Registrar shall instruct DTC or its authorized
representative to make a corresponding adjustment to its records
and to credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest in
the Restricted Global Security having a principal amount equal to
the amount so transferred.
(v) Exchanges of Global Security for Non-Global
-------------------------------------------
Security. In the event that a Global Security or any portion
--------
thereof is exchanged for Securities other than Global Securities,
such other Securities may in turn be exchanged (on transfer or
otherwise) for Securities that are not Global Securities or for
beneficial interests in a Global Security (if any is then
Outstanding) only in accordance with such procedures, which shall
be substantially consistent with the provisions of clauses (i)
through (iv) above and (vi) below (including the certification
requirements intended to insure that transfers and exchanges of
beneficial interests in a Global Security comply with Rule 144A,
Rule 144 or Regulation S, as the case may be) and any Applicable
Procedures, as may be from time to time adopted by the Company
and the Trustee.
(vi) Interest in Regulation S Global Security to be
----------------------------------------------
Held Through Euroclear or Cedelbank. Until the termination of the
-----------------------------------
Restricted Period with respect thereto, interests in a Regulation
S Global Security may be held only through Agent Members acting
for and on behalf of Euroclear and Cedelbank, provided that this
clause (vi) shall not prohibit any transfer in accordance with
Section 3.13(b)(iv) hereof.
(c) Legends. Each Restricted Security and Global Security issued
-------
hereunder shall, upon issuance, bear the legends set forth in Exhibit A hereto
that are required to be applied to such a Security and such required legends
shall not be removed from such Security except as provided in the next sentence
or Section 3.13(e). The legend required for a Restricted Security may be
removed from a Security if there is delivered to the Company and the appropriate
Registrar such satisfactory evidence, which may include an opinion of
independent counsel licensed
65
<PAGE>
to practice law in the State of New York, as may be reasonably required by the
Company that neither such legend nor the restrictions on transfer set forth
therein are required to ensure that transfers of such Security will not violate
the registration requirements of the Securities Act. Upon provision of such
satisfactory evidence, the Trustee, at the direction of the Company, shall
authenticate and deliver in exchange for such Security another security or
securities having an equal aggregate principal amount that does not bear such
legend. If such a legend required for a Restricted Security has been removed
from a Security as provided above, it shall not be a Restricted Security and no
other Security issued in exchange for all or any part of such Security shall
bear such legend, unless the Company has reasonable cause to believe that such
other security is a "restricted security" within the meaning of Rule 144 and
instructs the Trustee in writing to cause a legend to appear thereon.
(d) Global Securities. The provisions of clauses (i), (ii), (iii),
-----------------
and (iv) below shall apply only to Global Securities;
(i) General. Each Global Security authenticated under
-------
this Indenture shall be registered in the name of the appropriate
Depositary or a nominee thereof and delivered to such Depositary
or a nominee thereof or custodian therefor.
(ii) Transfer to Persons other than Depositary.
-----------------------------------------
Notwithstanding any other provision in this Indenture or the
Securities, no Global Security may be exchanged in whole or in
part for Securities registered, and no transfer of a Global
Security in whole or in part may be registered, in the name of
any person other than the appropriate Depositary or a nominee
thereof unless (A) DTC notifies the Company that it is unwilling
or unable to continue as Depositary for such Global Security, or
DTC ceases to be a "Clearing Agency" registered under the United
States Securities Exchange Act of 1934, and a successor
depositary is not appointed by the Company within one hundred and
twenty (120) days or (B) an Event of Default has occurred and is
continuing with respect thereto and the owner of a beneficial
interest therein requests such exchange or transfer. Any Global
Security exchanged pursuant to clause (A) above shall be so
exchanged in whole and not in part and any Global Security
exchanged pursuant to clause (B) above may be exchanged in whole or
from time to time in part as directed by DTC. Any Security issued
in exchange for a Global Security or any portion thereof shall be
a
66
<PAGE>
Global Security, provided that any such Security so issued that
is registered in the name of a Person other than the appropriate
Depositary or a nominee thereof shall not be a Global Security.
(iii) Global Security to Certificated Security.
----------------------------------------
Securities issued in exchange for a Global Security or any
portion thereof pursuant to clause (ii) above shall be issued in
definitive, fully registered form without interest coupons, shall
have an aggregate principal amount equal to that of such Global
Security or portion thereof to be so exchanged, shall be
registered in such names and be in such authorized denominations
as the appropriate Depositary shall designate and shall bear any
legends required hereunder. Any Global Security to be exchanged
in whole shall be surrendered by the appropriate Depositary to
the Security Registrar. With regard to any Global Security to be
exchanged in part, either such Global Security shall be so
surrendered for exchange or, in the case of a Global Security, if
the Trustee is acting as custodian for DTC or its nominee with
respect to such Global Security or, the principal amount thereof
shall be reduced, by an amount equal to the portion thereof to be
so exchanged, by means of an appropriate adjustment made on the
records of the Trustee, as Authenticating Agent. Upon any such
surrender or adjust adjustment, the Trustee shall authenticate
and deliver the Security issuable on such exchange to or upon the
order of the Depositary or an authorized representative thereof.
(iv) In the event of the occurrence of any of the
events specified in clause (ii) above, the Company will promptly
make available to the Trustee a supply of Certificated Securities
in definitive, fully registered form, without interest coupons,
sufficient to meet the Trustee's requirements hereunder.
(v) No Rights of Agent Members in Global Security. No
---------------------------------------------
Agent Member of any Depositary nor any other Persons on whose
behalf Agent Members may act shall have any rights under the
Indenture with respect to any Global Security, or under any
Global Security, and each Depositary or its nominee, as the case
may be, may be treated by the Company, the Trustee and any agent
of the Company or the Trustee as the absolute owner and Holder of
such Global Security for all purposes whatsoever. Notwithstanding
the foregoing,
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nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by
the applicable Depositary or such nominee, as the case may be, or
impair, as between DTC, Euroclear and Cedelbank, their respective
Agent Members and any other person on whose behalf an Agent
Member may act, the operation of customary practices of such
Persons governing the exercise of the rights of a Holder of any
Security.
SECTION 3.14 Special Transfer Provisions.
---------------------------
(a) Transfers to Institutional Accredited Investors. If Securities
-----------------------------------------------
are being transferred to an Institutional Accredited Investor, the Securities
shall be accompanied by delivery of a transferee certificate for Institutional
Accredited Investors substantially in the form of Exhibit G hereto and an
opinion of counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act.
(b) Other Transfers. If a Holder proposes to transfer a Security
---------------
pursuant to any exemption from the registration requirements of the Securities
Act other than as provided for above, the Security Registrar shall only register
such transfer or exchange if such transferor delivers to the Security Registrar
and the Trustee an Opinion of Counsel satisfactory to the Company and the
Security Registrar that such transfer is in compliance with the Securities Act
and the terms of this Indenture; provided that the Company may, based upon the
opinion of its counsel, instruct the Security Registrar by a Company Order not
to register such transfer in any case where the proposed transferee is not a
QIB, an Institutional Accredited Investor or a non-U.S. Person.
(c) General. By its acceptance of any Security bearing Legends, each
-------
Holder of such a Security acknowledges the restrictions on transfer of such
Security set forth in this Indenture and in the Legends and agrees that it will
transfer such Security only as provided in this Indenture.
The Security Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.12 or this Section
3.14 for a period of two years, after which time such letters, notices and other
written communications shall at the written request of the Company be delivered
to the Company. The Company shall have the right to inspect and make copies of
all such
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letters, notices or other written communications at any reasonable time upon the
giving of reasonable prior written notice to the Security Registrar.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall upon Company Request cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of Securities expressly provided
for herein or pursuant hereto) and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture when
(1) either
(a) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.6 and (ii) Securities
for whose payment U.S. Dollars have theretofore been deposited in trust
with the Trustee or any Paying Agent or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust
as provided in Section 10.3) have been delivered to the Trustee for
cancellation; or
(b) (i) all such Securities not theretofore delivered to the Trustee
for cancellation have become due and payable, or (ii) the Company has given
irrevocable and unconditional notice of redemption for all of the
Outstanding Securities within 60 days of such notice pursuant to the
redemption provisions of this Indenture,
and the Company, in the case of (i) or (ii) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose an amount sufficient to pay and discharge the
entire Indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and accrued
interest (and Liquidated Damages, if any,) to the date of such deposit;
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(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
(3) the Company has delivered irrevocable instructions to the Trustee
to apply the deposited U.S. Dollars toward the payment of the Securities at
Maturity or the Redemption Date, as the case may be, which must be within 60
days thereof;
(4) the Holders of the Securities have a valid, perfected, exclusive
security interest in such trust; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7 and, if U.S. Dollars
shall have been deposited with the Trustee pursuant to clause(1)(b) of this
Section 4.1, the obligations of the Trustee under Section 4.2 and the last
paragraph of Section 10.3 shall survive.
SECTION 4.2 Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default. "Event of Default," wherever used
-----------------
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herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest (or Liquidated Damages, if
any) on any Security when it becomes due and payable, and continuance of such
default for a period of 30 days;
(2) default in the payment of the principal of (or premium, if any,
on) any Security as and when the same becomes payable at its Maturity, or upon
redemption, by acceleration or otherwise, including, without limitation, payment
of the Change of Control Purchase Price or the Asset Sale Offer Price, or
otherwise on Securities validly tendered and not properly withdrawn pursuant to
a Change of Control Offer or Asset Sale Offer, as applicable; or
(3) failure to perform any other covenant or agreement of the Company
under this Indenture or Securities and, except for the provisions under Section
10.10, 10.16, Article Eight and Section 10.12, continued for 30 days after
written notice to the Company by the Trustee or to the Company and the Trustee
by Holders of at least 25% in aggregate principal amount of the Outstanding
Securities;
(4) a default in Indebtedness of the Company or any of its
Subsidiaries with an aggregate amount Outstanding in excess of $50,000,000 (or
its foreign currency equivalent) (a) resulting from the failure to pay principal
at maturity or otherwise at end of any applicable grace period for such payment
pursuant to the original terms of such Indebtedness or (b) as a result of which
the maturity of such Indebtedness has been accelerated prior to its stated
maturity; or
(5) the rendering of a final judgment or final judgments not covered
by insurance in an amount in excess of $50,000,000 (or its foreign currency
equivalent) at any one time against the Company or any of its Subsidiaries by a
court or courts of competent jurisdiction, which judgment or judgments remain
unbonded, undischarged or unstayed for a period of 60 days after the date on
which the right to appeal all such judgments has expired; or
(6) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
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arrangement, adjustment or composition of or in respect of the Company or any
Significant Subsidiary or any other applicable federal, state or foreign law, or
appointing a receiver, liquidator, assignee, trustee or sequestrator (or other
similar official) of the Company or any Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or
(7) the institution by the Company or any Significant Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the U.S. Federal Bankruptcy Code or any other applicable federal, state or
foreign law, or the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee or sequestrator (or
other similar official) of the Company or any Significant Subsidiary or of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the admission by it in writing of its inability to pay
its Indebtedness generally as they become due.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. If
--------------------------------------------------
an Event of Default (other than an Event of Default specified in Section 5.1(6)
or 5.1 (7) relating to the Company) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities may declare the principal and accrued interest (and
Liquidated Damages, if any) of all the Securities to be due and payable
immediately by a notice in writing to the Company (and to the Trustee if given
by Holders) (an "Acceleration Notice"), and upon any such declaration such
principal, accrued interest (and Liquidated Damages, if any) shall become
immediately due and payable. If an Event of Default specified in Section 5.1(6)
or 5.1(7) relating to the Company occurs and is continuing, then the principal
and accrued interest (and Liquidated Damages, if any) of all the Securities
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article Five, the Holders of a
majority in principal amount of the Outstanding Securities, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if
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(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Outstanding Securities,
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Securities which has become due otherwise than by such declaration
of acceleration, and interest on such unpaid principal at the rate borne by the
Securities,
(C) to the extent that payment of such interest is lawful,
interest on overdue interest at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and
(2) all existing Events of Default, other than the non-payment of
amounts of principal, (or premium, if any,) and interest on the Securities which
have become due solely by such declaration of acceleration, and except a Default
with respect to any provision requiring a supermajority approval to amend, which
Default may only be waived by such a supermajority, have been cured or waived as
provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee. The Company covenants that if
- -------
(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof, the Company will, upon demand
of the Trustee, pay to the Trustee for the benefit of the Holders of such
Securities the whole amount then due and payable on such Securities for
principal (and premium, if any) and interest, and interest on any overdue
principal (and
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premium, if any) and, to the extent that payment of such interest shall be
legally enforceable, upon any overdue installment of interest, at the rate borne
by the Securities, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4 Trustee May File Proofs of Claim. In case of the
--------------------------------
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Securities shall then be
due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal, premium, if any, or interest) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest (and Liquidated
Damages, if any) owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and
counsel) and of the Holders allowed in
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such judicial proceeding, and
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute the same;
and any custodian, receiver, assignee, trustee, liquidator or sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 5.5 Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities. All rights of action and claims under this Indenture or the
- ----------
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.6 Application of Money Collected. Any money collected by
------------------------------
the Trustee pursuant to this Article Five shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 6.7;
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SECOND: To the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest (and Liquidated Damages, if any) on the
Securities in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if any)
and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 5.7 Limitation on Suits. No Holder of any Securities shall
-------------------
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(1) the Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) the Trustee is indemnified and/or secured (whether by payment in
advance or otherwise) to its reasonable satisfaction;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority or
more in aggregate principal amount of the Outstanding Securities; it being
understood and intended that no one or more Holders shall have any right in any
manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders, or to
obtain or to seek to obtain priority or preference over any other Holders or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal and ratable benefit of all the Holders.
SECTION 5.8 Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
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Premium and Interest. Notwithstanding any other provision in this Indenture,
- --------------------
the Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment as provided herein (including, if applicable,
Article Twelve) and in such Security of the principal of (and premium, if any)
and (subject to Section 3.7) interest (and Liquidated Damages, if any) on such
Security on the respective Stated Maturities expressed in such Security (or, in
the case of redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 5.9 Restoration of Rights and Remedies. If the Trustee or
----------------------------------
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative. Except as otherwise
------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in the last paragraph of Section 3.6, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Trustee or of any Holder of any Security to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Five or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 5.12 Control by Holders. The Holders of not less than a
------------------
majority in aggregate principal amount of the Outstanding Securities shall have
the
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right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders not consenting
unless it has received indemnity reasonably satisfactory to it.
SECTION 5.13 Waiver of Past Defaults. The Holders of a majority in
-----------------------
aggregate principal amount of the Outstanding Securities may on behalf of the
Holders of all the Securities waive any past Default hereunder and its
consequences, except a Default
(1) in respect of the payment of the principal of (or premium, if
any) or interest (and Liquidated Damages, if any) on any Security, or
(2) in respect of a covenant or provision hereof which cannot be
modified or amended without the approval of a supermajority, which Default may
only be waived by such a supermajority; or
(3) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 5.14 Waiver of Stay or Extension Laws. The Company covenants
--------------------------------
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force,
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which may affect the covenants or the performance of this Indenture; and the
Company (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law and covenants that it shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1 Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and con forming to the requirements of this Indenture; but, in the case
of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or not they reasonably conform
to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own grossly negligent action, its own grossly
negligent failure to act or its own willful misconduct, except that
(1) this paragraph (c) shall not be construed to limit the effect of
paragraph (a) of this Section 6.1;
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(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the Trustee
was grossly negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of
the Holders of the requisite amount of the Outstanding Securities relating to
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or indemnity reasonably satisfactory to it against such
risk or liability is not assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
SECTION 6.2 Notice of Default. Within 60 days after being notified
-----------------
or becoming aware of the occurrence of any Default hereunder, the Trustee shall
transmit, in the manner and to the extent provided in TIA Section 313(c), notice
of such Default hereunder known to any Responsible Officer of the Trustee,
unless such Default shall have been cured or waived; provided, however, that,
except in the case of a Default in the payment of the principal of (or premium,
if any) or interest on any Security, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the with holding of such notice is in the
interest of the Holders.
SECTION 6.3 Certain Rights of Trustee. Subject to Section 6.1 and to
-------------------------
the provisions of TIA Sections 315(a) through 315(d):
(1) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
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debenture, note, other evidence of Indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Supervisory Board of the Company may be sufficiently evidenced by a Board
Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
receive and conclusively rely upon an Officers' Certificate and/or an Opinion of
Counsel;
(4) the Trustee may consult with counsel and other professional
advisers and the written advice of such counsel or advisers or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless the Trustee is indemnified
and/or secured (whether by payment in advance or otherwise) to its reasonable
satisfaction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of Indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, nominees,
custodians, delegates or attorneys and the Trustee shall not be responsible for
supervising the actions of such agent, nominee, custodian, delegate or attorney,
nor
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for any misconduct or negligence on the part of any agent, nominee, custodian,
delegate or attorney appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture; and
(9) the Trustee shall be entitled to assume that there has been no
Event of Default and that the Company has complied with all of its obligations
hereunder, unless a Responsible Officer of the Trustee has knowledge to the
contrary thereof.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not assured to it.
SECTION 6.4 Trustee Not Responsible for Issuance of Securities.
---------------------------------------------------
The Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Securities, except that the Trustee represents that it
is duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder. The Trustee shall not be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 6.5 May Hold Securities. The Trustee, any Paying Agent, any
-------------------
Security Registrar or any other agent of the Company or of the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company
with the same rights it would have if it were not Trustee, Paying Agent,
Security Registrar or such other agent.
SECTION 6.6 Money Held in Trust. Money held by the Trustee in trust
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hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.
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SECTION 6.7 Compensation and Reimbursement. The Company agrees:
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(1) to pay to the Trustee from time to time compensation for all
services rendered by it hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust) as agreed in writing between the Company and the Trustee;
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to the Trustee's gross negligence or bad
faith; and
(3) to indemnify the Trustee and its directors, officers, employees
and agents for, and to hold them harmless against, any loss, liability or
expense (including counsel's fees and expenses) without gross negligence or bad
faith on the part of any of them, arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself or them selves against any claim or liability in connection
with the exercise or performance of any of its or their powers or duties
hereunder.
Upon the occurrence of an Event of Default or a potential Event of
Default or upon the Trustee being required, or considering it necessary, to
undertake duties outside the usual scope of a Trustee, the Trustee will be
entitled to charge additional fees as agreed upon in writing with the Company.
The obligations of the Company under this Section 6.7 to compensate
the Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional Indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture or the earlier resignation or removal of the
Trustee. As security for the performance of such obligations of the Company, the
Trustee shall have a claim prior to the Securities upon all property and funds
held or collected by the Trustee as such.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(6) or (7), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation for such
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services are intended to constitute expenses of administration under any
applicable federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section 6.7 shall survive the termination of
this Indenture or the earlier resignation or removal of the Trustee.
SECTION 6.8 Corporate Trustee Required; Eligibility; Conflicting
----------------------------------------------------
Interests.
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(a) There shall be at all times a Trustee hereunder which shall be
subject to and comply with the provisions of Section 310(a)(1) of the Trust
Indenture Act and shall have a combined capital and surplus of at least
$50,000,000. If such Corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of federal, state, territorial
or District of Columbia supervising or examining authority, then, for the
purposes of this Section 6.8, the combined capital and surplus of such
Corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
6.8, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article Six.
(b) The Trustee shall be subject to and comply with Section 310(b) of
the Trust Indenture Act.
SECTION 6.9 Resignation and Removal; Appointment of Successor.
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(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10.
(b) The Trustee may resign at any time by giving 60 days' written
notice thereof to the Company and without assigning any reason thereto or being
responsible for any costs or expenses occasioned thereby. If the instrument of
acceptance by a successor Trustee required by Section 6.10 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may on behalf of the Company, appoint in its
place a reputable financial institution and the Company shall not unreasonably
object to such appointment or may petition any court of competent jurisdiction
for the appointment
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of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in aggregate principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any Holder
who has been a bona fide Holder of a Security for at least six months (in the
case of Global Securities, as evidenced in writing to the Trustee by the
relevant Depositary or Euroclear or Cedelbank), or
(2) the Trustee shall cease to be eligible under Section 6.8(a) and
shall fail to resign after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six months (in
the case of Global Securities, as evidenced in writing to the Trustee by the
relevant Depositary or Euroclear or Cedelbank), or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i)the Company, by a Board Resolution, may
remove the Trustee or (ii)subject to TIA Section 315(e), any Holder who has been
a bona fide Holder of a Security for at least six months, (in the case of Global
Securities, as evidenced in writing to the Trustee by the relevant Depositary or
Euroclear or Cedelbank), may on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in aggregate principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith
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upon its acceptance of such appointment, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a bona
fide Holder of a Security for at least six months, (in the case of Global
Securities) as evidenced in writing to the Trustee by the relevant Depositary or
Euroclear or Cedelbank), may on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 1.6. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
(g) The retiring Trustee shall not be liable for any of the acts or
omissions of any successor Trustee appointed hereunder.
SECTION 6.10 Acceptance of Appointment by Successor. Every successor
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Trustee appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its fees, costs, expenses,
charges and any other amounts owed to it hereunder, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder. Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirm ing
to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.11 Merger, Conversion, Consolidation or Succession to
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Business. Any Corporation into which the Trustee may be merged or converted or
- --------
with which it may be Consolidated, or any Corporation resulting from any merger,
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conversion or consolidation to which the Trustee shall be a party, or any
Corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such Corporation shall be otherwise qualified and eligible under
this Article Six, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities. In case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee.
In all such cases such certificates shall have the full force and effect which
this Indenture provides that the certificate of authentication of the Trustee
shall have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Securities in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
SECTION 6.12 Trustee Acting in Other Capacities. To the extent that
-----------------------------------
the Trustee, Banque Internationale a Luxembourg or any other Person appointed
hereunder as Trustee or Paying Agent is acting as Securities Registrar,
Depositary or Paying Agent hereunder, the rights, privileges, immunities and
indemnities set forth in this Article Six shall apply to the Trustee in the
additional capacities listed above.
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 Disclosure of Names and Addresses of Holders. Every
--------------------------------------------
Holder of Securities, by receiving and holding the same, agrees with the Company
and the Trustee that none of the Company or the Trustee or any agent of either
of them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with TIA
Section 3.12, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under TIA Section 312(b).
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SECTION 7.2 Reports by Trustee. Within 60 days after May 30 of each
------------------
year commencing with the first May 30 after the first issuance of Securities,
the Trustee shall transmit to the Holders, in the manner and to the extent
provided in TIA Section 313(c), a brief report dated as of such May 30 if
required by TIA Section 313(a).
SECTION 7.3 Reports by Company. The Company shall file with the
------------------
Trustee and deliver to the Holders of Securities the reports and other
information required to be provided by it pursuant to Section 10.8.
ARTICLE VII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or Persons or
(ii) directly or indirectly, sell, lease, convey or transfer all or
substantially all of its assets (computed on a Consolidated basis) to any other
Person or group of affiliated Persons, unless:
(1) either (a) the Company is the continuing entity or (b) the
resulting, surviving or transferee entity is a Corporation organized under the
laws of The Netherlands or of the United States of America or any state or the
District of Columbia, any member of the European Economic Area or Switzerland
and ex pressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Securities and this Indenture;
(2) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such transaction;
(3) unless such transaction is solely the merger of the Company and
one of its previously existing Wholly Owned Subsidiaries and which transaction
is not in connection with any other transaction, immediately after giving effect
to such transaction, on a pro forma basis, the Consolidated resulting, surviving
or transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio set forth
in Section 10.11 or, if not, the Leverage Ratio would immediately thereafter be
no greater than
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the Leverage Ratio immediately prior thereto;
(4) each Subsidiary Guarantor, unless such Subsidiary Guarantor is
the Person with which the Company has entered into a transaction under this
section, shall have by amendment to its Guarantee of the Securities confirmed
that its Guarantee of the Securities shall apply to the obligations of the
Company or the surviving entity in accordance with the Securities and this
Indenture; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each in form attached hereto as Exhibits
F and G respectively, stating that such consolidation, merger, conveyance,
transfer, lease or acquisition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, complies with
this Article and that all conditions precedent herein provided for relating to
such transaction have been complied with, and, with respect to such Officers'
Certificate.
For purposes of this Section 8.1, the transfer (by lease, assignment,
sale or otherwise) of all or substantially all of the properties and assets of
one or more Subsidiaries, the Company's interest in which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
SECTION 8.2 Successor Substituted. Upon any consolidation of the
---------------------
Company with or merger of the Company with or into any other Corporation or any
conveyance, transfer or lease of the properties and assets of the Company
substantially as an entirety to any Person or Persons in accordance with
Section 8.1, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and (except in the case of a lease) be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and, in the event of any such conveyance or transfer (except in the case of a
lease), the Company shall be discharged of all obligations under this Indenture
and the Securities except with respect to any obligations that arise from, or
are related to, such transaction.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Indentures Without Consent of Holders. Without the
-------------------------------------
consent of any Holders, the Company, when authorized by a Board Resolution, and
the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form and substance satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company contained
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company; or
(3) to add any additional Events of Default; or
(4) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section 6.10;
or
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this
Indenture; provided that such action shall not adversely affect the interests of
the Holders in any material respect; or
(7) to provide for collateral securing the Company's obligations
under this Indenture and the Securities; or
(8) to provide for Guarantees by any other Person of the Company's
obligations pursuant to this Indenture and the Securities;
provided such actions shall not adversely affect the interests of Holders in any
material respect.
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SECTION 9.2 Indentures with Consent of Holders. With the consent of
----------------------------------
the Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture; provided, however, that:
(i) no such modification may, without the consent of Holders of at
least 66 2/3% in aggregate principal amount of Outstanding Securities,
modify the provisions of Section 10.10 (including the defined terms
used therein) in a manner adverse to the Holders; and
(ii) no such modification shall, without the consent of the Holder of
each Outstanding Security affected thereby:
(1) change the Stated Maturity of any Security, or reduce the
principal amount thereof or the rate of interest (or extend the time for payment
of interest, if any) thereon or any premium payable upon the redemption thereof
at the option of the Company, or change the place of payment where, or the coin
or currency in which, any Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of redemption
at the option of the Company, on or after the Redemption Date), or reduce the
Change of Control Purchase Price or the Asset Sale Offer Price after the
corresponding Change of Control or Asset Sale has occurred or alter the
provisions (including the defined terms used therein) regarding the right of the
Company to redeem the Securities in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such amendment,
supplemental indenture or waiver provided for in this Indenture, or
(3) modify any of the waiver provisions, except to increase any
required percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of each
Outstanding Security affected thereby, or
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(4) cause the Securities to become subordinate in right of payment to
any other Indebtedness.
It shall not be necessary for any Act of Holders under this Section
9.2 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.3 Execution of Indentures. In executing, or accepting the
-----------------------
additional trusts created by, any supplemental indenture permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is permitted by this Indenture and an Officers' Certificate stating
that all conditions precedent to the execution of such supplemental indenture
have been fulfilled. The Trustee may, but shall not be obligated to, enter into
any such supplemental indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
SECTION 9.4 Effect of Indentures. Upon the execution of any
--------------------
supplemental indenture under this Article Nine, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.5 Conformity with Trust Indenture Act. Every supple mental
-----------------------------------
indenture executed pursuant to this Article Nine shall conform as a matter of
contract or law to the requirements of the Trust Indenture Act as then in
effect.
SECTION 9.6 Reference in Securities to Indentures. Securities
-------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article Nine may bear a notation in form approved by the
Trustee and the Company as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee and the Company, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
SECTION 9.7 Notice of Indentures. Promptly after the execution by
--------------------
the Company and the Trustee of any supplemental indenture pursuant to the
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provisions of Section 9.2, the Company shall give notice thereof to the Holders
of each Outstanding Security affected, in the manner provided for in Section
1.6, setting forth in general terms the substance of such supplemental
indenture.
ARTICLE X
COVENANTS
SECTION 10.1 Payment of Principal, Premium, if Any, and Interest.
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(1) The Company covenants and agrees for the benefit of the Holders
that it shall duly and punctually pay the principal of (and premium, if any) and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
(2) For the purpose set forth in paragraph (1) above, the Company
shall, no later than 10:00 a.m., New York time, on the Business Day first
preceding each Payment Date, transfer to an account specified by the Trustee
such amount in immediately available and freely transferable U.S. Dollar funds
as shall be sufficient for the purposes of the payment of principal of (and
premium, if any) and interest (and Liquidated Damages, if any) due to be paid on
the Securities on that date.
(3) The Company shall ensure that not later than the second Business
Day immediately preceding the date on which any payment is to be made to the
Trustee pursuant to this Section 10.1, the Company shall procure that a copy of
an irrevocable payment instruction to the bank through which the payment is to
be made shall be sent to the Trustee.
(4) Unless and until the full amount of any payment due on the
Securities has been made to the Trustee, or unless and until the Trustee is
satisfied that such payment will be made, neither it nor the other Paying Agents
shall be bound to make payments in respect of the Securities hereunder.
(5) If the Trustee or a Paying Agent pays any amounts to the Holders
or to any other Agent at a time when it has not received payment in full from
the Company in respect of such Securities, the Company shall, in addition to
paying amounts due under Section 10.1(2), pay to the Trustee on demand interest
thereon at such a rate as the Trustee shall certify as the aggregate of 1% per
annum and the cost
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of funding any such payment made by it (as determined by the Trustee) until the
receipt in full by the Trustee of the funds due to it pursuant to Section
10.1(2).
SECTION 10.2 Maintenance of Office or Agency. The Company shall
-------------------------------
maintain in The City of New York and London, and for so long as the Securities
are listed on the Luxembourg Stock Exchange, in Luxembourg, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands (other than service of process) to or upon the Company in respect of
the Securities and this Indenture may be served. The Corporate Trust Office of
the Trustee shall be such office or agency of the Company, unless the Company
shall designate and maintain some other office or agency for one or more of such
purposes. The Company shall give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company hereby initially designates (1) the Trustee at its address
set forth in Section 1.5 hereof as its office or agency in London and Citibank,
N.A. (New York branch), 111 Wall Street, New York, New York as its office or
agency in New York, for such purposes, (ii) Banque Internationale a Luxembourg,
at its office or agency in Luxembourg for such purposes and (iii) the Paying
Agent at its address set forth in Section 1.5 hereof.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Securities
may be presented or surrendered for any or all such purposes and may from time
to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York and, for so
long as the Securities are listed on the Luxembourg Stock Exchange, in
Luxembourg, for such purposes. The Company shall give prompt written notice to
the Trustee of any such designation or rescission and any change in the location
of any such other office or agency.
SECTION 10.3 Money for Security Payments to Be Held in Trust. If the
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Company shall at any time act as its own Paying Agent, it shall, on or before
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each due date of the principal of (or premium, if any) or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal of (or premium, if any) or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and shall promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it shall, on or before each due date of the principal of (or
premium, if any) or interest on any Securities, deposit with a Paying Agent a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of such action or
any failure so to act.
The Company shall cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.3,
that such Paying Agent shall:
(1) hold all sums held by it for the payment of the principal,
premium, if any, or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal,
premium, if any, or interest, of which it is aware;
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith act under the direction of the Trustee
and pay to the Trustee all sums so held in trust by such Paying Agent; and
(4) indemnify the Trustee and its officers, directors, employees and
agents against any loss, cost or liability caused by, or incurred as a result
of, such Paying Agent's acts or omissions.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust
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by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York and in London, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 10.4 Corporate Existence. Subject to Article Eight, the
-------------------
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect the corporate existence, rights (charter and statutory)
and franchises of the Company and each Subsidiary; provided, however, that the
Company shall not be required to preserve, with respect to the Company, any
such right or franchise or, with respect to any Subsidiary (subject to all the
other covenants in this Indenture), any such corporate existence, right or
franchise, if the Supervisory Board of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries as a whole and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 10.5 Payment of Taxes and Other Claims. The Company shall pay
---------------------------------
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary and (b) all lawful claims for labor,
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materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any Subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
SECTION 10.6 Maintenance of Properties. The Company shall cause all
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properties owned by the Company or any Subsidiary or used or held for use in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 10.6 shall prevent the Company from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of the Company, desirable in the conduct of its business or
the business of any Subsidiary and not disadvantageous in any material respect
to the Holders.
SECTION 10.7 Insurance. The Company shall at all times keep all of
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its and its Subsidiaries' properties which are of an insurable nature insured
with insurers, believed by the Company to be responsible, against loss or damage
to the extent that property of similar character is usually so insured by
Corporations similarly situated and owning like properties.
SECTION 10.8 Provision of Financial Statements. The Company has
---------------------------------
agreed that, for so long as any Securities remain Outstanding, whether or not
the Company is subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, the Company will deliver to the Trustee and, to each Holder
and to prospective purchasers of Securities identified to the Company, within 15
days after the Company is or would have been (if the Company were subject to
such reporting obligations) required to file such with the SEC, annual and
quarterly financial statements substantially equivalent to financial statements
that would have been included in reports filed with the SEC, if the Company were
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the SEC, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required and, unless the SEC will not
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accept such reports, file with the SEC the annual, quarterly and other reports
which it is or would have been required to file with the SEC.
Following the effectiveness of the Registration Statement, the Company
will file with the Trustee, at the time it files them with the SEC, copies of
the annual and quarterly reports and the information, documents and other
reports that the Company is required to file with the SEC under Section 13(a) or
15(d) of the Exchange Act. If the Company ceases to be required to file SEC
reports under the Exchange Act, the Company will nevertheless continue to file
such reports with the Trustee. The Company will furnish copies of the SEC
reports to investors who request them in writing.
SECTION 10.9 Statement by Officers as to Default.
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(a) The Company shall deliver to the Trustee, on the date of delivery
of each quarterly report to be delivered pursuant to Section 10.8, and within 14
days of a request by the Trustee, a brief certificate from the principal
executive officer, principal financial officer or principal accounting officer
as to his or her knowledge of the Company's compliance with all conditions and
covenants under this Indenture. For purposes of this Section 10.9(a), such
compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the Trustee for or the Holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $50,000,000), the Company
shall deliver to the Trustee by registered or certified mail or by facsimile
transmission an Officers' Certificate specifying such event, notice or other
action within five Business Days of its occurrence.
SECTION 10.10 Purchase of Securities upon Change of Control.
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(1) (a) Upon the occurrence of a Change of Control, the Company will
be required to make an offer to each Holder to purchase for cash all or a
portion of such Holder's Securities (provided that the principal amount of such
Securities must be $1,000 or an integral multiple thereof) pursuant to the offer
described below (the "Change of Control Offer"), at a purchase price in cash
equal to
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101% of the principal amount thereof plus accrued and unpaid interest (and
Liquidated Damages, if any) to the date of purchase (the "Change of Control
Purchase Price").
(b) Within 10 Business Days following a Change of Control, the
Company must send a notice to each Holder which notice shall govern the terms of
the Change of Control Offer. Such notice shall state, among other things, the
purchase date, which must be no later than 35 Business Days from the date of the
Change of Control, other than as may be required by law (the "Change of Control
Purchase Date"). The Change of Control Offer shall remain open for 20 Business
Days following its commencement (the "Change of Control Offer Period"). Upon
expiration of the Change of Control Offer Period, the Company shall promptly
purchase all Notes properly tendered in response to the Change of Control Offer.
Holders electing to have a Security purchased pursuant to a Change of Control
Offer will be required to surrender the Security, by delivery of a form entitled
"Option of Holder to Elect Purchase," obtainable from the Trustee or any Paying
Agent substantially in the form of Exhibit H, completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
Business Day prior to the Change of Control Purchase Date. The Paying Agent
promptly will pay the Holders of Securities so accepted an amount equal to the
Change of Control Purchase Price (together with accrued and unpaid interest and
Liquidated Damages, if any) and the Trustee promptly will authenticate and
deliver to such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Purchase Date.
The notice referred to above shall be a written offer (the "Offer")
sent by the Company by first class mail, postage prepaid, to each Holder of
Securities at its address appearing in the Security Register on the date of the
Offer offering to purchase up to the principal amount of Securities specified in
such Offer at the Change of Control Purchase Price. Unless otherwise required by
applicable law, the Offer shall specify an expiration date (the "Expiration
Date") of the Change of Control Offer which shall be, subject to any contrary
requirements of applicable law, 20 Business Days after the date of the Offer and
a settlement date (the "Change of Control Purchase Date") for purchase of
Securities within five Business Days after the Expiration Date. The Company
shall notify the Trustee in writing at least 15 Business Days, or a shorter
period that is acceptable to the Trustee, prior to the mailing of the Offer of
the Company's obligation to make a Change of Control Offer, and the Offer shall
be mailed by the Company or, at the Company's request, by the
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Trustee in the name and at the expense of the Company. The Offer shall contain
information concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable the Holders to make an informed
decision with respect to the Change of Control Offer, which at a minimum will
include (i) the most recent annual and quarterly financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the documents required to be filed with the Trustee
pursuant to Section 10.8 (which requirements may be satisfied by delivery of the
documents together with the Offer), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of the financial
statements referred to in clause (i) (including a description of the events
requiring the Company to make the Change of Control Offer), (iii) if applicable,
appropriate pro forma financial information concerning the Change of Control
Offer and the events requiring the Company to make the Change of Control Offer
and (iv) any other information required by applicable law to be included
therein. The Offer shall contain all instructions and materials necessary to
enable the Holders to tender Securities pursuant to the Change of Control Offer.
The Offer shall also state:
(a) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(b) the Expiration Date and the Change of Control Purchase Date;
(c) the aggregate principal amount of the Outstanding Securities
offered to be purchased by the Company in the Change of Control Offer,
including, if less than 100%, the manner by which the amount has been determined
pursuant to the Section hereof requiring the Change of Control Offer (the
"Purchase Amount");
(d) the Change of Control Purchase Price;
(e) that the Holder may tender all or any portion of the Securities
registered in the name of the Holder and that any portion of a Security tendered
must be tendered in an integral multiple of $1,000 principal amount;
(f) the place or places where the Securities are to be surrendered
for tender pursuant to the Change of Control Offer;
(g) that any of the Securities not tendered or tendered but not
purchased by the Company will continue to accrue interest;
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(h) that on the Change of Control Purchase Date the Purchase Price
will become due and payable upon the Securities being accepted for payment
pursuant to the Change of Control Offer and that any interest shall cease to
accrue on and after the Change of Control Purchase Date;
(i) that each Holder electing to tender the securities in the
purchase will be required to surrender the Securities at the place or places
specified in the Offer prior to the close of business on the Expiration Date
with the Securities being, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
signed by, the Holder or his attorney duly authorized in writing;
(j) that Holders will be entitled to withdraw all or any portion of
the Securities tendered if the Company or its Paying Agent receives, not later
than the close of business on the Expiration Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Securities the Holder tendered, the certificate number of the Securities the
Holder tendered and a statement that such Holder is withdrawing all or a portion
of his tender;
(k) that (i) if the Securities in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not withdrawn in the
Purchase, the Company shall purchase all the Securities and (ii) if the
Securities in an aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn in the Change of Control Offer, the Company shall
purchase the Securities having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis with adjustments that the Company may deem
appropriate so that only Securities in denominations of $1,000 or integral
multiples thereof shall be purchased; and
(l) that in the case of any Holder whose Securities are purchased
only in part, the Company shall sign, and the Trustee shall authenticate and
deliver to the Holder of the Securities without service charge, the new Security
or Securities, of any authorized denomination as requested by the Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased portion
of the Securities so tendered.
Any Offer to Purchase shall be governed by and effected in accordance
with the Offer for such Change of Control Offer.
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The Company will not be required to make an offer to purchase any
series of Securities upon a Change of Control if, before the Change of Control
occurs, it has exercised its right to redeem all of the Securities of such
series as described under Section 11.1.
(2) On or before the Change of Control Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3) cash sufficient to pay the purchase price (together
with accrued and unpaid interest and Liquidated Damages, if any) of all
Securities or portions thereof so accepted and (iii) deliver or cause to be
delivered to the Trustee all Securities so tendered together with an Officers'
Certificate stating the Securities or portions thereof accepted for payment by
the Company.
(3) In the event that the Company makes a Change of Control Offer,
the Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
(4) If the Change of Control Purchase Date hereunder is on or after
an interest payment Record Date and on or before the associated Interest Payment
Date, any accrued and unpaid interest (and Liquidated Damages, if any) due on
such Interest Payment Date will be paid to the Person in whose name a Security
is registered at the close of business on such Record Date, and such interest
(and Liquidated Damages, if applicable) will not be payable to Holders who
tender the Securities pursuant to the Change of Control Offer.
Notwithstanding anything contained in this Indenture to the contrary,
the Company will not, and will not permit any of its Subsidiaries to, incur any
Indebtedness that is contractually subordinate to any other Indebtedness of the
Company unless such Indebtedness is at least as subordinate to the Securities.
SECTION 10.11 Limitation on Incurrence of Additional Indebtedness and
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Disqualified Capital Stock. (1) The Company may not, and may not permit any
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Subsidiary to, directly or indirectly, issue, assume, guaranty, incur, become
directly or indirectly liable with respect to (including as a result of an
Acquisition), or otherwise become responsible for, contingently or otherwise
(individually and collectively, to "incur" or, as appropriate, an "incurrence"),
any
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Indebtedness (including Disqualified Capital Stock and Acquired Indebtedness),
other than Permitted Indebtedness. Notwithstanding the foregoing if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro forma
basis to, such incurrence of Indebtedness; and
(ii) on the date of such incurrence (the "Incurrence Date"), either
(i) the Leverage Ratio of the Company for the Reference Period immediately
preceding the Incurrence Date, after giving effect on a pro forma basis to such
incurrence of such Indebtedness and, to the extent set forth in the definition
of Leverage Ratio, the use of proceeds thereof, would not exceed 7.0 to 1.0 (the
"Debt Incurrence Ratio"), (ii) the Consolidated Coverage Ratio of the Company
for the Reference Period immediately preceding the Incurrence Date, after giving
effect on a pro forma basis to such incurrence of such Indebtedness and, to the
extent set forth in the definition of Consolidated Coverage Ratio, the use of
proceeds thereof, would not be less than 1.75 to 1.0, or (iii) after giving
effect on a pro forma basis to such incurrence of Indebtedness, and, to the
extent used to retire other Indebtedness, the use of proceeds therefrom, the
amount of Indebtedness Outstanding of the Company would not exceed 225% of the
Consolidated Invested Equity Capital of the Company,
then the Company may incur such Indebtedness (including Disqualified Capital
Stock and Acquired Indebtedness).
(2) The foregoing limitations of paragraph (1) of this Section 10.11 will
not prohibit:
(a) if no Event of Default shall have occurred and be continuing, the
incurrence by the Company or its Subsidiaries of Indebtedness in an aggregate
amount incurred and Outstanding at any time pursuant to this subparagraph (a)
(plus any refinancing indebtedness incurred to retire, defease, refinance,
replace or refund such Indebtedness) of up to $400,000,000 (or the equivalent
thereof, at the time of incurrence, in the applicable foreign currencies);
(b) the incurrence by the Company and its Subsidiaries of
Indebtedness pursuant to the Credit Agreement in an aggregate amount incurred
and Outstanding at any time pursuant to this paragraph (b) (plus any refinancing
indebtedness incurred to retire, defease, refinance, replace or refund such
Indebtedness) of up to (Euro)1 billion, minus the amount of any such
Indebtedness (i)
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retired with the Net Cash Proceeds from any Asset Sale applied to reduce
permanently the Outstanding amounts or the commitments with respect to such
Indebtedness pursuant to Section 10.16 or (ii) assumed by a transferee in an
Asset Sale;
(c) the incurrence by any Subsidiary of Indebtedness, if on the
Incurrence Date either (1) the Leverage Ratio of such Subsidiary of the Company
for the Reference Period immediately preceding the Incurrence Date, after giving
effect on a pro forma basis to such incurrence of such Indebtedness and to the
extent set forth in the definition of Leverage Ratio, the use of proceeds
thereof, would be no more than 7.0 to 1.0, or (2) the Consolidated Coverage
Ratio of such Subsidiary for the Reference Period immediately preceding the
Incurrence Date, after giving effect on a pro forma basis to such incurrence of
such Indebtedness and, to the extent set forth in the definition of Consolidated
Coverage Ratio, the use of proceeds thereof, would be no less than 1.75 to 1.00,
or (3) after giving effect on a pro forma basis to such incurrence of such
Indebtedness, and, to the extent used to retire other Indebted ness, the use of
proceeds therefrom, the amount of Indebtedness Outstanding of such Subsidiary
would not exceed 225% of the Consolidated Invested Equity Capital of such
Subsidiary, provided in the case of each of clauses (c)(1), (2) and (3), the net
proceeds therefrom are used in a Related Business of the Company or any
affiliated company of the Company, and provided, further, that for the purposes
of this clause (c) a Subsidiary may be a co-obligor or guarantor on such
Indebtedness of another Subsidiary of the Company (A) if such co-obligor or
guarantor Subsidiary owns (either directly or indirectly through one or more
Subsidiaries of the Company) all or a portion of the Equity Interests of the
Subsidiary of the Company that incurred such Indebtedness, (B) if all or a
portion of the Equity Interests of such co-obligor or guarantor Subsidiary is
owned (either directly or indirectly through one or more Subsidiaries of the
Company) by the Subsidiary that incurred such Indebtedness or (C) if such co-
obligor or guarantor Subsidiary owns (either directly or indirectly through one
or more Subsidiaries of the Company) all or a portion of the business that will
use the proceeds of such Indebtedness; and
(d) if no Event of Default shall have occurred and be continuing, the
incurrence by Subsidiaries of the Company of Indebtedness pursuant to the
Existing Agreements up to, but not in excess of the maximum applicable amounts
of Indebtedness available for borrowing pursuant to the terms of each such
Existing Agreement as in effect on the date of the Indenture; provided that, in
determining
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the maximum applicable amounts available, it shall be assumed that the Company
satisfies any applicable conditions to borrowing.
Indebtedness (including Disqualified Capital Stock) of any Person which is
Outstanding at the time such Person becomes a Subsidiary of the Company
(including upon designation of any subsidiary or other Person as a Subsidiary)
or is merged with or into or Consolidated with the Company or a Subsidiary of
the Company shall be deemed to have been incurred at the time such Person
becomes such a Subsidiary of the Company or is merged with or into or
Consolidated with the Company or a Subsidiary of the Company, as applicable.
Upon each incurrence, the Company may designate pursuant to which provision
of this Section 10.11 such Indebtedness is being incurred and such Indebtedness
shall not be deemed to have been incurred or Outstanding under any other
provision of this Section 10.11, except as stated otherwise in the foregoing
provisions.
SECTION 10.12 Limitation on Restricted Payments. (1) The Company may
---------------------------------
not, and may not permit any of its Subsidiaries to, directly or indirectly, make
any Restricted Payment if, after giving effect to such Restricted Payment on a
pro forma basis:
(A) a Default or an Event of Default shall have occurred and be
continuing,
(B) the Company is not permitted to incur at least $1.00 (or its foreign
currency equivalent) of additional Indebtedness pursuant to the Debt Incurrence
Ratio in Section 10.11, or
(C) the aggregate amount of all Restricted Payments made by the Company
and its Subsidiaries, including after giving effect to such proposed Restricted
Payment, on and after July 30, 1999, would exceed, without duplication (and
except to the extent otherwise credited pursuant to clause (g) of the definition
of "Permitted Investment"), the sum of:
(a) (i) the amount of the cumulative Consolidated EBITDA of the
Company, if positive, less 150% of the cumulative Consolidated Fixed Charges of
the Company, for the period (taken as one accounting period), commencing on the
first day of the first full fiscal quarter commencing after July 30, 1999, to
and
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including the last day of the fiscal quarter ended immediately prior to the date
of each such calculation for which Consolidated financial statements of the
Company are available, provided that such sum shall not be deemed to result in
an amount less than zero for purposes of any calculation pursuant to this clause
(C)(a)(i); or (ii) if such cumulative Consolidated EBITDA of the Company is zero
or less, then the amount of such cumulative Consolidated EBITDA for such period;
plus
(b) the aggregate Net Cash Proceeds received by the Company from the
sale of its Qualified Capital Stock (other than (i) to a Subsidiary of the
Company and (ii) to the extent applied in connection with a Qualified Exchange),
after July 30, 1999; plus
(c) to the extent that any Investment (other than a Permitted
Investment) that was made after July 30, 1999 is sold for cash or Cash
Equivalents or otherwise liquidated or repaid for cash or Cash Equivalents, the
amount of cash or Cash Equivalents received by the Company, but only to the
extent of the lesser of (i) the cash or Cash Equivalents transferred as a return
of capital with respect to such Investment and (ii) the initial amount of such
Investment (in either case, less the cost of disposition, if any); plus
(d) in the event an Unrestricted Subsidiary is designated as a
Subsidiary, an amount equal to fair market value, at such time, of the
Investment of the Company and its Subsidiaries made after July 30, 1999;
provided, however, that such amount shall not exceed the amount of Investments
previously made in such Subsidiary that were counted as Restricted Payments
pursuant to this covenant.
(2)(a) The foregoing clauses (B) and (C) of Section 10.12(1), however,
will not prohibit: (i) any dividend, distribution or payment of dividends on
Disqualified Capital Stock permitted by Section 10.11; and (ii) any repurchase
by the Company of any shares of any class or options to acquire such shares from
any current, future or former directors, officers or employees of the Company or
any of its Subsidiaries or Affiliates, provided that the aggregate amount of all
the repurchases made under this clause shall not exceed $10,000,000 in any
twelve-month period (with unused amounts in any calendar year being carried over
to succeeding calendar years subject to a maximum (without giving effect to the
following proviso) of $14,000,000 in any calendar year); provided, further, that
such amount in any calendar year may be increased by an amount not to exceed (1)
the cash proceeds from the sale of Capital Stock of the Company to its
Supervisory Board members, management board members or officers of the Company
and its
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Subsidiaries that occurs after July 30, 1999, plus (2) the cash proceeds of key
man life insurance policies received by the Company and its Subsidiaries after
July 30, 1999;
and (b) the foregoing clauses (A), (B) and (C) of Section 10.12(1) will not
prohibit:
(i) any dividend, distribution or other payments by any Subsidiary
of the Company on its Equity Interests that is paid pro rata to all holders of
such Equity Interests;
(ii) a Qualified Exchange;
(iii) the payment of any dividend on Qualified Capital Stock within 60
days after the date of its declaration if such dividend could have been made on
the date of such declaration in compliance with the foregoing provisions; or
(iv) the payment of dividends by the Company in cash or Qualified
Capital Stock pursuant to the terms of any Parent Stock Instrument that is
incurred or issued (as applicable) in compliance with this Indenture.
The full amount of any Restricted Payment made pursuant to paragraphs
2(a)(i), (ii) and 2(b)(i), (iii) and (iv), but not pursuant to paragraph
2(b)(ii), however, will be counted as Restricted Payments made for purposes of
the calculation of the aggregate amount of Restricted Payments available to be
made referred to in Section 10.12(1)(C).
For purposes of this section, the amount of any Restricted Payment
made or returned, if other than in cash, shall be the fair market value thereof,
as determined in the good faith reasonable judgment of the Company's Supervisory
Board, unless stated otherwise, at the time made or returned, as applicable.
Additionally, on the date of each Restricted Payment, the Company shall deliver
an Officers' Certificate to the respective Trustee describing in reasonable
detail the nature of such Restricted Payment, stating the amount of such
Restricted Payment, stating in reasonable detail the provisions of this
Indenture pursuant to which such Restricted Payment was made and certifying that
such Restricted Payment was made in compliance with the terms of this Indenture.
SECTION 10.13 Limitation on Dividend and Other Payment Restrictions
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Affecting Subsidiaries. (1) The Company may not, and may not permit
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any Subsidiary to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any consensual restriction on the ability of any
Subsidiary:
(i) to pay dividends, in cash or otherwise, or make any other
distributions to or on behalf of or pay any obligation to or on behalf of the
Company or any Subsidiary of the Company;
(ii) to make or pay loans or advances to or on behalf of the Company
or any Subsidiary of the Company; or
(iii) to transfer property or assets to or on behalf of the Company or
any Subsidiary of the Company,
except:
(a) restrictions imposed by the Securities or the Other Senior Notes
or the Indenture or the Other Senior Notes Indenture or by other Indebtedness of
the Company ranking pari passu with the Securities and the Other Senior Notes,
provided that such restrictions are no more restrictive than those imposed by
the Indenture and the Securities;
(b) restrictions imposed by applicable law;
(c) restrictions under Indebtedness outstanding on July 30, 1999,
including pursuant to the Credit Agreement;
(d) restrictions under any Acquired Indebtedness not incurred in
violation of the Indenture or any agreement (including any Equity Interest)
relating to any property, asset, or business acquired by the Company or any of
its Subsidiaries, which restrictions in each case existed at the time of
acquisition, were not put in place in connection with or in anticipation of such
acquisition, and are not applicable to any Person, other than the Person
acquired, or to any property, asset or business, other than the property, assets
and business so acquired;
(e) any such restriction or requirement imposed by Indebtedness
incurred under the Credit Agreement pursuant to Section 10.11, provided that
such restriction or requirement is no more restrictive than that imposed by the
Credit Agreement as of July 30, 1999;
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(f) with respect solely to a Subsidiary of the Company imposed
pursuant to a binding agreement which has been entered into for the sale or
disposition of all or substantially all of the Equity Interests or assets of
such Subsidiary, provided that such restrictions apply solely to the Equity
Interests or assets of such Subsidiary which are being sold;
(g) restrictions under Purchase Money Indebtedness not incurred in
violation of the Indenture, provided that such restrictions relate only to the
property financed with such Indebtedness;
(h) with respect to any Subsidiary, restrictions contained in the
terms of any Indebtedness incurred in compliance with the Indenture, or any
agreement pursuant to which such Indebtedness was issued, if (A) the encumbrance
or restriction applies only in the event of a payment default or a default with
respect to a financial covenant contained in such Indebtedness or agreement, (B)
the Company shall have reasonably determined that the encumbrance or restriction
is not materially more disadvantageous to the Holders of the Securities than is
customary in comparable financings, and (C) the Company shall have reasonably
determined that any such encumbrance or restriction will not materially affect
the Company's ability to make principal or interest payments on the Securities;
and
(i) in connection with and pursuant to permitted Refinancings,
replacements of restrictions imposed pursuant to clauses (a), (c), (d), or (g),
or this clause (i), of this paragraph that are not more restrictive than those
being replaced and do not apply to any other Person or assets than those that
would have been covered by the restrictions in the Indebtedness so refinanced.
(2) Notwithstanding the provisions of Section 10.13(1), (a) customary
provisions restricting subletting, assignment or transfer of any lease, license,
conveyance, or similar document or instrument entered into in the ordinary
course of business, consistent with industry practice and (b) any asset or
property subject to a Lien which is not prohibited to exist with respect to such
asset pursuant to the terms of this Indenture may be subject to customary
restrictions on the transfer or disposition thereof pursuant to such Lien.
SECTION 10.14 Limitation on Liens Securing Indebtedness. The Company
-----------------------------------------
may not, and may not permit any Subsidiary to, create, incur, assume or suffer
to exist any Lien of any kind, other than Permitted Liens, upon any of their
respective assets now owned or acquired on or after the date of this Indenture
or
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upon any income or profits therefrom securing any Indebtedness of the Company,
unless the Company provides, and causes its Subsidiaries to provide,
concurrently therewith, that the Securities are equally and ratably so secured;
provided that if such Indebtedness is Subordinated Indebtedness, the Lien
securing such Subordinated Indebtedness shall be subordinate and junior to the
Lien securing the Securities with the same relative priority as such
Subordinated Indebtedness shall have with respect to the Securities.
SECTION 10.15 Limitation on Issuances of Guarantees by Subsidiaries.
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(1) Notwithstanding the other provisions of this Indenture, the Company may not
permit any Subsidiary to, directly or indirectly, Guarantee any Indebtedness of
the Company (other than Indebtedness incurred pursuant to the Credit Agreement
in accordance with the terms of this Indenture) ("Guaranteed Indebtedness"),
then such Subsidiary must become a Guarantor (a "Subsidiary Guarantor") of the
Securities on a basis such that the Subsidiary's Guarantee of the Securities
shall stand in substantially the same relative ranking in right of payment to
the guarantee of such other Indebtedness as the Securities stand in relative
ranking to such other Indebtedness; provided that this paragraph shall not be
applicable to any guarantee by any Subsidiary that (a) existed at the time such
Person became a Subsidiary of the Company and (b) was not incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary of the Company.
(2) Subsidiary Guarantees shall be automatically released upon (i)
the sale or other disposition of all or substantially all of the Company's and
its Subsidiaries' beneficial interest in the Equity Interests or assets of such
Subsidiary Guarantor, provided that thereafter such Subsidiary Guarantor shall
cease to be a Subsidiary of the Company, (ii) the consolidation or merger of any
such Subsidiary Guarantor with any Person other than the Company or a Subsidiary
of the Company if, as a result of such consolidation or merger, such Subsidiary
Guarantor ceases to be a Subsidiary of the Company (and shall not be a
Subsidiary of the successor to the Company), (iii) a Legal Defeasance, or (iv)
the unconditional and complete release of such Subsidiary Guarantor from its
Guarantee of all Guaranteed Indebtedness.
SECTION 10.16 Limitation on Sale of Assets and Subsidiary Stock.
-------------------------------------------------
(1) The Company may not, and may not permit any Subsidiary to, in one
or a series of related transactions, convey, sell, transfer, assign or otherwise
dispose of, directly or indirectly, any of the Company's or such Subsidiary's
property, business or assets (including by merger or consolidation in the case
of a Subsidiary
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of the Company), and including any sale or other transfer or issuance of any
Equity Interests of any Subsidiary of the Company, whether by the Company or a
Subsidiary or through the issuance, sale or transfer of Equity Interests by a
Subsidiary of the Company, and including any sale and leaseback transaction (any
of the foregoing, an "Asset Sale"), unless:
(A) (1) the amount equal to the Net Cash Proceeds there from
(the "Asset Sale Offer Amount") is applied
(i) within 360 days (1,825 days in the case of an Asset
Sale resulting from the underwritten public sale of equity securities of
chello broadband or 540 days in the case of any other Special Character
Asset Sale) after the date of such Asset Sale to the optional redemption of
the Securities in accordance with the terms of the Indenture and other
Indebtedness of the Company ranking pari passu in right of payment with the
Securities and with similar provisions requiring the Company to redeem such
Indebtedness with the proceeds from such Asset Sale, pro rata in proportion
to the respective principal amounts (or accreted values in the case of
Indebtedness issued with original issue discount) of the Securities and
such other Indebtedness then Outstanding, or
(ii) within 360 days (1,825 days in the case of an Asset
Sale resulting from the underwritten public sale of equity securities of
chello broadband or 540 days in the case of any other Special Character
Asset Sale) after the date of such Asset Sale to the repurchase of the
Securities and such other Indebtedness ranking pari passu in right of
payment with the Securities and with similar provisions requiring the
Company to make an offer to purchase such Indebtedness with the proceeds
from such Asset Sale pursuant to a cash offer (subject only to conditions
required by applicable law, if any) pro rata in proportion to the
respective principal amounts (or accreted values in the case of
Indebtedness issued with original issue discount) of the Securities and
such other Indebtedness then Outstanding (the "Asset Sale Offer") at a
purchase price of 100% of principal amount (or accreted value in the case
of Indebtedness issued with original issue discount) (the "Asset Sale Offer
Price") together with accrued and unpaid interest and Liquidated Damages,
if any, to the date of payment, made within 360 days (1,825 days in the
case of an Asset Sale resulting from the underwritten public sale of equity
securities of chello broadband or 540
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days in the case of any other Special Character Asset Sale) of such Asset
Sale, or
(iii) within 360 days (1,825 days in the case of an Asset
Sale resulting from the underwritten public sale of equity securities of
chello broadband or 540 days in the case of any other Special Character
Asset Sale), to the repayment of Indebtedness then Outstanding pursuant to
the Credit Agreement or, if required by the terms of such Indebtedness, of
Indebtedness issued by a Subsidiary of the Company (in respect of which
Indebtedness the Company is not a direct or contingent obligor except by
virtue of the Company's pledge of Equity Interests of, and other interests
of or claim on, such Subsidiary or the Company's guarantee of such
Subsidiary's Indebtedness to the extent, in either case, the recourse
against the Company is limited to such Equity Interests or claim), or
(2) within 360 days (1,825 days in the case of an Asset
Sale resulting from the underwritten public sale of equity securities of chello
broadband or 540 days in the case of any other Special Character Asset Sale)
following such Asset Sale, the Asset Sale Offer Amount is invested in assets and
property which in the good faith reasonable judgment of the Company will
immediately constitute or be a part of a Related Business of the Company or such
Subsidiary (if it continues to be a Subsidiary) immediately following such
transaction or is used to make Permitted Investments in the Company or a
Subsidiary of the Company (other than Cash Equivalents or securities of the
Company or any Person controlling the Company except as permitted by the
Indenture), provided that (i) 50% of the Net Cash Proceeds from Special
Character Asset Sales and 100% of the net proceeds from any Asset Sale of an
Investment made in reliance on clause (g) of the definition of "Permitted
Investments" may be reinvested in any Permitted Investment (other than, in
either case, Cash Equivalents or securities of the Company or any Person
controlling the Company except as permitted by the Indenture) which in the good
faith reasonable judgment of the Company will immediately constitute or be a
part of a Related Business and (ii) 100% of the net proceeds from an Asset Sale
constituting the sale of an Investment in any Person (excluding a Person that
would be Consolidated with the Company under GAAP and excluding Related Assets
of the Company or any of its Subsidiaries) in which the Company or any of its
Subsidiaries has an Equity Interest may be reinvested in Investments permitted
by clause (e) or (f) of the definition of "Permitted Investments,"
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(B) at least 75% of the total consideration for such Asset Sale
or series of related Asset Sales consists of cash, Cash Equivalents, Replacement
Assets or the assumption of Indebtedness of a Subsidiary. For purposes of this
subparagraph (B), total consideration received means the total consideration
received for such Asset Sales, minus the amount of (a) Purchase Money
Indebtedness secured solely by the assets sold and assumed by a transferee,
provided that the Company and the Subsidiaries are released from any obligation
in connection therewith; and (b) property that within 30 days of such Asset Sale
is converted into cash or Cash Equivalents, provided that such cash and Cash
Equivalents shall be treated as Net Cash Proceeds attributable to the original
Asset Sale for which such property was received.
(C) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect to, on a pro forma
basis, such Asset Sale, and
(D) in the case of a transaction or series of related
transactions exceeding $15,000,000 (or the foreign currency equivalent on the
date of the transaction) of consideration to any party thereto, the Supervisory
Board of the Company determines in its good faith reasonable judgment that the
Company or such Subsidiary, as applicable, receives fair market value for such
Asset Sale.
(2) An acquisition of Securities pursuant to an Asset Sale Offer may
be deferred until the accumulated Net Cash Proceeds from Asset Sales not applied
to the uses set forth in 1(a)(i), (iii), or 1(b) above (the "Excess Proceeds")
exceeds $50,000,000 (or the foreign currency equivalent thereof), provided that,
in the case of an Asset Sale by a Subsidiary of the Company that is not a Wholly
Owned Subsidiary, only the Company's and its Subsidiaries' pro rata portion of
such Net Cash Proceeds shall constitute Net Cash Proceeds subject to the
provisions of this Section 10.16. Each Asset Sale Offer shall remain open for 20
Business Days following its commencement (the "Asset Sale Offer Period"). Upon
expiration of the Asset Sale Offer Period, the Company shall apply the Asset
Sale Offer Amount, plus an amount equal to accrued and unpaid interest and
Liquidated Damages, if any, to the purchase of all Indebtedness properly
tendered (on a pro rata basis if the Asset Sale Offer Amount is insufficient to
purchase all Indebtedness so tendered) at the Asset Sale Offer Price (together
with accrued interest and Liquidated Damages, if any). To the extent that the
aggregate amount of Securities and such other pari passu Indebtedness tendered
pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount, the
Company may apply any remaining Net Cash Proceeds to any
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purpose consistent with this Indenture, and following the consummation of each
Asset Sale Offer the Excess Proceeds amount shall be reset to zero.
Notwithstanding, and without complying with, the foregoing provisions
of this Section 10.16:
(u) the Company and its Subsidiaries may, in the ordinary course
of business, (a) convey, sell, transfer, assign or otherwise dispose of
inventory and other assets acquired and held for resale in the ordinary
course of business and (b) liquidate and otherwise dispose of Cash
Equivalents;
(v) the Company and its Subsidiaries may convey, sell, transfer,
assign or otherwise dispose of property, businesses, or assets pursuant to
and in accordance with Article Eight.
(w) the Company and its Subsidiaries may sell or dispose of
damaged, worn out or other obsolete personal property in the ordinary
course of business so long as such property is no longer necessary for the
proper conduct of the business of the Company or such Subsidiary, as
applicable, and the Company and its Subsidiaries may replace personal
property in the ordinary course of business so long as the replacement
property is necessary for the proper conduct of the business of the Company
or such Subsidiary, as applicable, and sell or dispose of such replaced
property in the ordinary course;
(x) the Company and its Subsidiaries may convey, sell, transfer,
assign or otherwise dispose of property, businesses, or assets to the
Company or any of its Subsidiaries;
(y) the Company and each of its Subsidiaries may surrender or
waive contract rights or settle, release or surrender contract, tort or
other claims of any kind in the ordinary course of business or grant Liens
not otherwise prohibited by the Indenture;
(z) the Company and its Subsidiaries may exchange assets for
property, businesses, or assets held by any Person (including by merger or
consolidation in the case of a Subsidiary of the Company); provided that
(a) property, businesses and assets, which in one or
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a series of related transactions exceeds $15,000,000 in value, received by
the Company or such Subsidiaries in any such exchange in the good faith
reasonable judgment of the Supervisory Board of the Company will
immediately constitute, be a part of, or be used in, a Related Business of
the Company or such Subsidiaries, (b) the Supervisory Board of the Company
has determined that the terms of any exchange, which in one or a series of
related transactions exceeds $15,000,000 in fair market value, are fair and
reasonable, and (c) any cash or Cash Equivalents received by the Company or
any Subsidiary in such exchange shall be treated as having been received as
a result of an Asset Sale.
All Net Cash Proceeds from an Event of Loss shall be used all within the
period and as otherwise provided above in clause (1) of the first paragraph of
this Section 10.16.
(3) Any Asset Sale Offer shall be made in compliance with all
applicable laws, rules, and regulations, including, if applicable, Regulation
14E of the Exchange Act and the rules and regulations thereunder and all other
applicable Federal and state securities laws. To the extent that the provisions
of any applicable securities laws, rules, or regulations conflict with the
provisions of this section, compliance by the Company or any of its subsidiaries
with such laws, rules or regulations shall not in and of itself cause a breach
of its obligations under this section.
(4) If the payment date in connection with an Asset Sale Offer
hereunder is on or after an interest payment Record Date and on or before the
associated Interest Payment Date, any accrued and unpaid interest (and
Liquidated Damages, if any, due on such Interest Payment Date) will be paid to
the Person in whose name a Security is registered at the close of business on
such Record Date, and such interest (or Liquidated Damages, if applicable) will
not be payable to Holders who tender Securities pursuant to such Asset Sale
Offer.
SECTION 10.17 Limitation on Transactions with Affiliates. The Company
------------------------------------------
may not, and may not permit any Subsidiary on or after the Issue Date to, enter
into any contract, agreement, arrangement or transaction with any Affiliate of
the Company (an "Affiliate Transaction"), or any series of related Affiliate
Transactions, other than Exempted Affiliate Transactions,
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(1) unless it is determined by the Supervisory Board as evidenced by
a Board Resolution that the terms of such Affiliate Transaction are fair and
reasonable to the Company and no less favorable to the Company than could have
been obtained in an arm's length transaction with a non-Affiliate, and
(2) if involving consideration to either party in excess of
$15,000,000 (or its foreign currency equivalent), unless such Affiliate
Transaction(s) is evidenced by an Officers' Certificate addressed and delivered
to the Trustee certifying that such Affiliate Transaction (or Affiliate
Transactions) has been approved by a majority of the members of the Supervisory
Board of the Company that are disinterested in such transaction, if there are
any directors who are so disinterested, and
(3) if involving consideration to either party in excess of
$15,000,000 or $30,000,000 if there are disinterested directors (or in each case
its foreign currency equivalent), unless in addition the Company, prior to the
consummation thereof, obtains a written favorable opinion as to the fairness of
such transaction to the Company from a financial point of view from an
independent investment banking firm of national reputation in the United States
or, if pertaining to a matter for which such investment banking firms do not
customarily render such opinions, an appraisal or valuation firm of national
reputation in the United States.
SECTION 10.18 Additional Amounts. All payments made by the Company
------------------
under or with respect to the Securities will be made free and clear of and
without withholding or deduction for or on account of any present or future
Taxes imposed or levied by or on behalf of any Taxing Authority within The
Netherlands, or within any other jurisdiction in which the Company is organized
or engaged in business, or any other jurisdiction if payments on the Securities
are made from within such jurisdiction (each of the above, a "Relevant Taxing
Jurisdiction"), unless the Company is required to withhold or deduct Taxes by
law or by the interpretation or administration thereof.
If the Company is required to withhold or deduct any amount for or on
account of Taxes (other than any estate, inheritance, gift, sales, excise,
transfer, wealth or personal property tax, or any similar non-income tax,
assessment or governmental charge) imposed by a Taxing Authority within a
Relevant Taxing Jurisdiction, from any payment made under or with respect to the
Securities, the Company will pay such additional amounts ("Additional Amounts")
as may be necessary so that the net amount received by each Holder of Securities
(including
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Additional Amounts) after such withholding or deduction (including any
withholding or deduction in respect of such Additional Amounts) will not be less
than the amount the Holder would have received if such Taxes had not been
withheld or deducted; provided that no such Additional Amounts shall be payable
with respect to a payment made to a Holder with respect to any Tax or portion
thereof that would not have been imposed, payable or due:
(1) but for the existence of any present or former connection between
the Holder (or the beneficial owner of, or person ultimately entitled to obtain
an interest in, such Securities) and The Netherlands or other jurisdiction in
which the Company is organized or engaged in business other than the holding of
the Securities;
(2) but for the failure of the Holder to use its reasonable best
efforts to comply upon written notice by the Company delivered 60 days prior to
any payment date with a request by the Company to satisfy any certification,
identification or other reporting requirements which shall include any
applicable forms or instructions whether imposed by statute, treaty, regulation
or administrative practice concerning the nationality or residence of the Holder
or the connection of the Holder with The Netherlands or other jurisdiction in
which the Company is organized or engaged in business:
(i) provided that Holder's failure to comply with the
60 day requirement described above shall not relieve the Company
of the Company's obligation to pay Additional Amounts if the
Holder's application for any requested certification,
identification or other reporting requirement remains Outstanding
or is otherwise pending and the Holder continues to use its
reasonable best efforts to obtain such information;
(ii) provided, further, that the Company shall pay any
Additional Amounts not paid on any payment date as a result of
the operation of this clause (2) upon the satisfaction of the
relevant certification, identification or other reporting
requirements within 30 days after such payment date, provided
that the Company shall not, as a result of such satisfaction
occurring after the payment date, have already irrevocably paid
to the relevant taxing authority the withheld or deducted amount
in respect of which such Additional Amounts would have been
payable;
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(3) but for the failure of the Holder (or the beneficial individual
owner of, or individual ultimately entitled to obtain an interest in, such
Securities) who is an individual citizen or resident of a member state of the
European Union to comply with a written notice by the Company delivered 60 days
prior to any payment date with a request by the Company to provide any
certification, identification or other reporting requirement, whether imposed by
statute, treaty, regulation or administrative practice, if such action would
otherwise eliminate the requirement for the withholding or deduction of Taxes;
or
(4) if the beneficial owner of, or person ultimately entitled to
obtain an interest in, such Securities had been the Holder of the Securities and
would not be entitled to the payment of Additional Amounts (excluding the impact
of book entry procedures by the Depositary).
In addition, Additional Amounts will not be payable with respect to
any Tax which is payable and so paid otherwise than by withholding or deduction
from payments of, or in respect of principal of, or any interest or Liquidated
Damages on, the Securities. The Company will remit the full amount of any
withholdings or deductions for or on account of Taxes to the relevant Taxing
Authority in accordance with applicable law. The Company will make reasonable
efforts to obtain certified copies of tax receipts evidencing the payment of any
Taxes so deducted or withheld from each Taxing Authority imposing such Taxes.
The Company will furnish to the Holders, within 60 days after the date the
payment of any Taxes so deducted or withheld are due pursuant to applicable law,
either certified copies of tax receipts evidencing such payment by the Company
or, if such receipts are not obtainable, other evidence of such payments by the
Company. At least 30 days prior to each date on which any payment under or with
respect to the Securities is due and payable, if the Company will be obligated
to pay Additional Amounts with respect to such payment, the Company will deliver
to the respective Trustee an Officers' Certificate stating (i) the fact that
such Additional Amounts will be payable, (ii) the amounts so payable and (iii)
such other information necessary to enable the Trustee to pay such Additional
Amounts to the Holders of Securities on the Interest Payment Date.
Wherever in this Indenture there is mentioned, in any context, the payment
of amounts based upon the principal amount of the Securities, or of principal,
premium, if any, interest or Liquidated Damages, if any, or of any other amount
payable under or with respect to any of the Securities, such mention shall be
deemed to include
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mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
SECTION 10.19 Waiver of Stay, Extension or Usury Laws. The Company
---------------------------------------
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law or any usury law or other law, which
would prohibit or forgive the Company from paying all or any portion of the
principal of and/or interest, if any, on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 10.20 Limitation on Lines of Business. Neither the Company
-------------------------------
nor any of its Subsidiaries shall directly or indirectly engage to any
substantial extent in any line or lines of business activity other than that
which, in the reasonable good faith judgment of the Supervisory Board, is a
Related Business.
SECTION 10.21 Limitation on Status as an Investment Company. The
---------------------------------------------
Company and its Subsidiaries shall not take any action or conduct their business
and operations in such a way as would cause them to be required to register as
an "investment company" (as that term is defined in the Investment Company Act
of 1940, as amended), or would otherwise cause them to become subject to
regulation under the Investment Company Act.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1 Right of Redemption.
-------------------
(1) Optional Redemption of the Securities
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time or from time to time on or after February 1, 2005,
upon not less than 30 nor more than 60 days' prior notice, at the redemption
prices
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(expressed as a percentage of principal amount) set forth below, plus accrued
and unpaid interest (and Liquidated Damages, if any,) thereon, if any, to the
date of redemption:
Security Redemption
Price
YEAR
- ---- --------------------
2005........................ 107.260%
2006........................ 104.840%
2007........................ 102.420%
2008 and thereafter......... 100.000%
The Company will publish a redemption notice in accordance with the
procedures described under Section 1.6.
(2) Redemption Upon Equity Offering
Prior to February 1, 2003, upon an Equity Offering of Common Stock for
cash of the Company, up to 35% of the aggregate principal amount of the
Securities may be redeemed at the Company's option within 90 days of such Equity
Offering, on not less than 30 days, but not more than 60 days', notice to each
Holder of the Securities to be redeemed, with cash in an amount not in excess of
the Net Cash Proceeds of such Equity Offering, at a redemption price equal to
111.500% of the principal amount together with accrued and unpaid interest and
Liquidated Damages, if any, thereon to the Redemption Date; provided, however,
that immediately following such redemption not less than 65% of the aggregate
principal amount of the Securities originally issued remain Outstanding; and
provided, further, that such redemption shall occur within 90 days after the
date of the closing of such Equity Offering.
(3) Redemption For Changes In Withholding Taxes
The Company may, at its option, redeem all, but not less than all, of
the Securities then Outstanding, in each case at 100% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
Redemption Date, if a Tax Event has occurred and is continuing. Notice of any
such redemption must be given within not less than 30 days nor more than 60 days
prior to the redemption date. No redemption pursuant to this paragraph (3) may
be made
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unless, prior to the publication of any notice of redemption as a result of a
Tax Event, the Company delivers to the Trustee (i) an Officer's Certificate
stating that a Tax Event has occurred (irrespective of whether the amendment or
change is then effective), describing the facts leading thereto and stating that
the Company cannot avoid the requirement to pay Additional Amounts by taking
reasonable measures available to it and (ii) an opinion of counsel reasonably
acceptable to the Trustee to the effect that the Company is or will become
obligated to pay Additional Amounts as a result of such change or amendment.
(4) Mandatory Redemption
The Company is not required to make mandatory redemption payments or
sinking fund payments with respect to the Securities.
SECTION 11.2 Applicability of Article. Redemption of Securities at
------------------------
the election of the Company or otherwise, as permitted or required by any
provision of this Indenture, shall be made in accordance with such provision and
this Article Eleven.
SECTION 11.3 Election to Redeem; Notice to Trustee. The election of
-------------------------------------
the Company to redeem any Securities pursuant to Section 11.1 shall be evidenced
by a Board Resolution. In case of any redemption at the election of the
Company, the Company shall, at least 60 days prior to the Redemption Date fixed
by the Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Securities to be redeemed and shall deliver to the Trustee such documentation
and records as shall enable the Trustee to select the Securities to be redeemed
pursuant to Section 11.4.
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed. If
-------------------------------------------------
less than all the Securities are to be redeemed, the particular Securities to be
redeemed shall be selected not more than 30 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities not previously called for
redemption pro rata, by lot or by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal amount of Securities; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Security not
redeemed to less than $1,000.
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The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
SECTION 11.5 Notice of Redemption. Notice of redemption shall be
--------------------
given in the manner provided for in Section 1.6 not less than 30 nor more than
60 days prior to the Redemption Date, to each Holder of Securities to be
redeemed.
Each notice of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 11.7, if any,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of a partial redemption, the principal amount)
of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, that on and
after the Redemption Date, upon surrender of such Security, the Holder will
receive, without charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section 11.7)
will become due and payable upon each such Security, or the portion thereof, to
be redeemed, and that interest thereon will cease to accrue on and after said
date, and
(6) the place or places where such Securities are to be presented and
surrendered for payment of the Redemption Price and accrued interest, if any.
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Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.6 Deposit of Redemption Price. Prior to any Redemption
---------------------------
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3) an amount of U.S. Dollars sufficient to pay the
Redemption Price of, and accrued interest on, all the Securities which are to be
redeemed on that date.
SECTION 11.7 Securities Payable on Redemption Date. Notice of
-------------------------------------
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified (together with accrued interest and Liquidated Damages, if
any, to the Redemption Date), and from and after such date (unless the Company
shall default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security
for redemption in accordance with said notice, such Security shall be paid by
the Company at the Redemption Price, together with accrued interest, if any, to
the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the interest rate borne by
the Securities.
SECTION 11.8 Securities Redeemed in Part. Any Security which is to be
---------------------------
redeemed only in part shall be surrendered at the office or agency of the
Company maintained for such purpose pursuant to Section 10.2 (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holder's attorney duly authorized in writing),
and the Company shall execute, and the Trustee shall authenticate and deliver to
the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in
aggregate principal amount
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equal to and in exchange for the unredeemed portion of the principal amount of
the Security so surrendered.
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1 Company's Option to Effect Defeasance or Covenant
-------------------------------------------------
Defeasance. The Company may, at its option by Board Resolution, at any time
- ----------
prior to the Stated Maturity of the Securities, with respect to the Securities,
elect to have either Section 12.2 or Section 12.3 be applied to all Outstanding
Securities upon compliance with the conditions set forth below in this Article
Twelve.
SECTION 12.2 Defeasance and Discharge. Upon the Company's exercise
------------------------
under Section 12.1 of the option applicable to this Section 12.2, the Company
shall be deemed to have been discharged from its obligations with respect to all
Outstanding Securities on the date the conditions set forth in Section 12.4 are
satisfied (hereinafter, "Defeasance"). For this purpose, Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the Outstanding Securities, which shall thereafter
be deemed to be "Outstanding" only for the purposes of Section 12.5 and the
other Sections of this Indenture referred to in clauses (A) and (B) below, and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of Outstanding Securities to
receive, solely from the trust fund described in Section 12.4 and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest (and Liquidated Damages, if any) on such Securities when such
payments are due and any rights of the Holders with respect to such amounts, (B)
the Company's obligations with respect to such Securities under Sections 3.4,
3.5, 3.6, 10.2 and 10.3; (C) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and (D) this Article Twelve. Subject to compliance with
this Article Twelve, the Company may exercise its option under this Section 12.2
notwithstanding the prior exercise of its option under Section 12.3 with respect
to the Securities.
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SECTION 12.3 Covenant Defeasance. Upon the Company's exercise under
-------------------
Section 12.1 of the option applicable to this Section 12.3, the Company shall be
released from its obligations under any covenant contained in Section 8.1 and in
Sections 10.8 through 10.18 with respect to the Outstanding Securities
("Covenant Defeasance") on and after the date the conditions set forth below are
satisfied, and the Securities shall thereafter be deemed not to be "Outstanding"
for the purposes of any direction, waiver, consent or declaration or Act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "Outstanding" for all other purposes hereunder.
For this purpose, Covenant Defeasance means that, with respect to the
Outstanding Securities, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section
5.1(3), 5.1(4) and 5.1(5), but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby.
SECTION 12.4 Conditions to Defeasance or Covenant Defeasance. The
-----------------------------------------------
following shall be the conditions to application of either Section 12.2 or
Section 12.3 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another Trustee satisfying the requirements of
Section 6.8 who shall agree to comply with the provisions of this Article Twelve
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities: (A) U.S. legal tender, or (B)
U.S. Government Obligations or (C) a combination thereof, sufficient, in the
opinion of a firm of independent public accountants that is nationally
recognized in the United States expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying Trustee) to pay and discharge, the principal of
(and premium, if any) and interest on the Outstanding Securities on the Stated
Maturity (or Redemption Date, if applicable) of such principal (and premium, if
any) or installment of interest; provided that the Holders of Securities must
have a valid, perfected, exclusive security interest in such trust.
(2) No Default or Event of Default shall have occurred and be
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<PAGE>
continuing on the date of such deposit or, insofar as paragraphs (6) and (7) of
Section 5.1 are concerned, at any time during the period ending on the 91st day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period).
(3) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries is bound.
(4) In the case of an election under Section 12.2, the Company shall
have delivered to the Trustee an opinion of counsel reasonably acceptable to the
Trustee stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since the date of
this Indenture, there has been a change in the applicable U.S. federal income
tax law, in either case to the effect that, and based thereon such opinion shall
confirm that, the Holders of the Outstanding Securities will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
Defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
Defeasance had not occurred.
(5) In the case of an election under Section 12.3, the Company shall
have delivered to the Trustee an opinion of counsel reasonably acceptable to the
Trustee to the effect that (i) the Holders of the Outstanding Securities will
not recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to U.S. federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of such Outstanding Securities over any other of the
Company's creditors or with the intent of defeating, hindering, delaying or
defrauding any other of the Company's creditors or others; and
(7) The Company shall have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent provided for relating to
either the Defeasance under Section 12.2 or the Covenant Defeasance under
Section 12.3 (as the case may be) have been complied with; and, in the case of
the opinion of counsel,
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<PAGE>
that paragraphs (1) (with respect to the validity and perfection of the security
interest), (2), (3) and (5) of this Section 12.4 have been complied with, and
the Company shall have delivered to the Trustee an Officers' Certificate,
subject to such qualifications and exceptions as the Trustee deems appropriate,
to the effect that, assuming no Holder of the Securities is an insider of the
Company, the trust funds will not be subject to the effect of any applicable
Federal bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
SECTION 12.5 Deposited Money and U.S. Government Securities to Be
----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the
- ---------------------------------------------
last paragraph of Section 10.3, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
Trustee, collectively for purposes of this Section 12.5, the "Trustee") pursuant
to Section 12.4 in respect of the Outstanding Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee and (if applicable)
its officers, directors, employees and agents against any tax, fee or other
charge imposed on or assessed against the U.S. Government Securities deposited
pursuant to Section 12.4 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 12.4 which, in the opinion of a firm of independent public accountants
that is nationally recognized in the United States expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
Defeasance or Covenant Defeasance, as applicable, in accordance with this
Article Twelve.
SECTION 12.6 Reinstatement. If the Trustee or any Paying Agent is
-------------
unable to apply any money in accordance with Section 12.5 by reason of any order
or
127
<PAGE>
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Company's obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 12.2 or 12.3, as the case may be, until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 12.5; provided, however, that if the Company makes any
payment of principal of, premium, if any, or interest on any Security following
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the money
held by the Trustee or Paying Agent.
128
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed all as of the day and year first above written.
UNITED PAN-EUROPE COMMUNICATIONS N.V.
By:____________________________________
Name:
Title:
Citibank, N.A. (London Branch), Trustee
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF SECURITIES]
[If a Global Security, then insert:] THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC"), EUROCLEAR OR
CEDELBANK (EACH, A "DEPOSITARY") OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR
DEPOSITARY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN A DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY A DEPOSITARY TO A NOMINEE
OF A DEPOSITARY OR BY A NOMINEE OF A DEPOSITARY TO A DEPOSITARY OR ANOTHER
NOMINEE OF A DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
[If a Global Security, then insert:] UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF A DEPOSITARY, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF SUCH DEPOSITARY OR A NOMINEE OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF A DEPOSITARY (AND
ANY PAYMENT IS MADE TO ITS NOMINEE OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF A DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, A NOMINEE OF A DEPOSITARY, HAS AN INTEREST HEREIN.
[If a Restricted Global Security, then insert:] THIS SECURITY (OR ITS
PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
A-1
<PAGE>
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. BY ITS ACCEPTANCE HEREOF, THE HOLDER: (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A")) (A "QIB"), OR IS OTHERWISE ACQUIRING THIS SECURITY
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY,
AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY
OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A QIB AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO PERSONS
THAT ARE NOT U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH THE REQUIREMENTS OF REGULATIONS UNDER THE
SECURITIES ACT ("REGULATION S") OR (E) PURSUANT TO AN OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. OFFERS, SALES OR OTHER TRANSFERS OF THIS SECURITY UNDER CLAUSES
(C), (D) AND (E) ABOVE ARE SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT
A-2
<PAGE>
PRIOR TO ANY SUCH OFFERS, SALES OR OTHER TRANSFERS TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS
GIVEN TO THEM BY REGULATIONS.
[If a Regulation S Security, then insert:] THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, PRIOR TO THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE
PERIOD (DEFINED AS 40 DAYS AFTER THE ISSUE DATE WITH RESPECT TO THE SECURITIES)
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT
(A)(1) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF
REGULATION S OR (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES. BY ITS ACCEPTANCE HEREOF, THE HOLDER AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND.
THIS SECURITY MAY NOT BE OFFERED, TRANSFERRED OR SOLD AS PART OF ITS
INITIAL DISTRIBUTION, OTHER THAN TO INDIVIDUALS OR LEGAL ENTITIES, SITUATED IN
OR OUTSIDE THE NETHERLANDS, WHO OR WHICH TRADE OR INVEST IN SECURITIES IN THE
CONDUCT OF THEIR PROFESSION OR BUSINESS (WHICH INCLUDES BANKS, BROKERS, DEALERS,
INSURANCE COMPANIES, PENSION FUNDS, OTHER INSTITUTIONAL INVESTORS AND OTHER
PARTIES (INCLUDING TREASURY DEPARTMENTS OF COMMERCIAL ENTERPRISE AND FINANCE
COMPANIES OR GROUPS), WHICH REGULARLY TRADE OR INVEST IN SECURITIES).
A-3
<PAGE>
A-4
<PAGE>
United Pan-Europe Communications N.V.
$300,000,000 11 1/2% Senior Notes Due 2010
[CUSIP] [ISIN] [Common Code]: [ ]
No. [ ] $[ ]
United Pan-Europe Communications N.V., a public company with limited
liability organized and existing under the laws of The Netherlands (the
"Company," which term includes any successor corporation), for value received,
hereby promises to pay to the registered holder, Cede & Co., as nominee of The
Depository Trust Company or registered assigns, the principal sum of [ ] DOLLARS
or such amount as may be increased or decreased in accordance with the terms of
the Indenture and as set forth on the Schedule of Interest but not to exceed
$300,000,000 on February 1, 2010.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed manually or by facsimile by its duly authorized officer.
Dated: January 20, 2000
UNITED PAN-EUROPE COMMUNICATIONS N.V.
By:________________________
Authorized Signatory
A-6
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: January 20, 2000
This is one of the Securities referred to in the within-mentioned
Indenture.
CITIBANK, N.A.
Not in its individual capacity, but solely as Trustee
By:___________________________
Authorized Signatory
A-7
<PAGE>
[REVERSE OF NOTE]
UNITED PAN-EUROPE COMMUNICATIONS N.V.
$300,000,000
11 1/2% SENIOR NOTE DUE 2010
1. Interest. United Pan-Europe Communications N.V., a public limited
--------
liability company organized and existing under the laws of The Netherlands (the
"Company"), promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the face
hereof at a rate of 11 1/2% per annum. Interest hereon will accrue from and
including the most recent date to which interest has been paid or, if no
interest has been paid, from and including January 20, 2000 to but excluding the
date on which interest is paid. Interest shall be payable in arrears semi-
annually on each February 1 and August 1, commencing on August 1, 2000. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The
Company shall pay interest on overdue principal and on overdue interest (to the
full extent permitted by law) at the rate borne by the Securities.
In the event that, at any time prior to 180 days following the Issue
Date, the Company (x) issues or sells, or (y) offers or negotiates to issue or
sell, for cash, any debt securities (other than debt securities convertible or
exchangeable into Capital Stock of the Company) to Qualified Institutional
Buyers who, as a regular part of their business, purchase debt securities
comparable to the Securities or the Other Senior Notes (any of the events
described in (x) or (y) at any time during such 180 day period, an "Interest
Rate Adjustment Event"), the interest rate otherwise applicable to the
Securities shall, on and after the date of such Interest Rate Adjustment Event,
be increased by 25 basis points such that on and after the date of such Interest
Rate Adjustment Event, interest on the Securities will accrue at a rate of 11
3/4% per annum. Any amounts owing as a result of such increase shall be paid to
the Holders of record as of the Regular Record Date next following any such
Interest Rate Adjustment Event, on the immediately following Interest Payment
Date, and thereafter will be payable semiannually in arrears on February 1 and
August 1 of each year to the Holders of record on the immediately preceding
Regular Record Date.
Promptly following the occurrence of an Interest Rate Adjustment
A-8
<PAGE>
Event, the Company shall give notice of the occurrence thereof to the Trustee,
to the Paying Agent and to each Holder of Securities in the manner provided for
in Section 1.6 of the Indenture. Such notice shall include the amount to be paid
to the Holders of record as of such Regular Record Date on the next following
Interest Payment Date.
2. Method of Payment. The Company will pay interest hereon (except
-----------------
defaulted interest) to the Persons who are registered Holders at the close of
business on January 15 or July 15 next preceding the Interest Payment Date
(whether or not a Business Day). Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company will pay principal and interest
in money of the United States of America that at the time of payment is legal
tender for payment of public and private Indebtedness. Interest may be paid by
check mailed to the Holder entitled thereto at the address indicated on the
register maintained by the Registrar for the Securities.
3. Paying Agent and Registrar. Initially, Citibank, N.A. (London
--------------------------
Branch) (the "Trustee") and Citibank, N.A. (New York Branch) will act as Paying
Agent and Registrar and Banque Internationale a Luxembourg will act as Paying
Agent in Luxembourg. The Company may change any Paying Agent or Registrar
without notice. The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Registrar.
4. Indenture. The Company issued $300,000,000 11 1/2% Senior Notes
---------
due 2010 under an Indenture dated as of January 20, 2000 (the "Indenture")
between the Company and the Trustee. This is one of an issue of Securities of
the Company issued, or to be issued, under the Indenture. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb), as amended from time to time. The Securities are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of them. Capitalized and certain other terms used herein and not
otherwise defined have the meanings set forth in the Indenture. To the extent of
any conflict between the terms of the Securities and the Indenture, the
applicable terms of the Indenture shall govern.
5. Additional Amounts. The Company will pay to the Holders of
------------------
Securities such Additional Amounts as may become payable under Section 10.18 of
the Indenture.
A-9
<PAGE>
6. Optional Redemption of the Securities. The Securities will be
-------------------------------------
redeemable at the option of the Company, in whole or in part, at any time or
from time to time on or after February 1, 2005, upon not less than 30 nor more
than 60 days' prior notice to each Holder of Securities, at the Redemption
Prices (expressed as a percentage of principal amount) if redeemed during the
12- month period commencing on February 1 of the years indicated below, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
Redemption Date:
Security Redemption
YEAR Price
---- -------------------
2005 107.260%
2006 104.840%
2007 102.420%
2008 and thereafter 100.000%
7. Redemption Upon Equity Offering. Prior to February 1, 2003, upon
-------------------------------
an Equity Offering of Common Stock for cash of the Company, up to 35% of the
aggregate principal amount of each of the Securities may be redeemed at the
Company's option within 90 days of such Equity Offering, on not less than 30
days', but not more than 60 days', notice to each Holder of the Securities to be
redeemed, with cash in an amount not in excess of the Net Cash Proceeds of such
Equity Offering, at a Redemption Price equal to 111.500% of the principal amount
of the Securities redeemed, together with accrued and unpaid interest and
Liquidated Damages, if any, thereon to the Redemption Date; provided, however,
that immediately following such redemption not less than 65% of the aggregate
principal amount of the Securities originally issued remain Outstanding; and
provided, further, that such redemption shall occur within 90 days after the
date of the closing of such Equity Securities.
8. Redemption for Changes in Withholding Taxes. The Company may, at
-------------------------------------------
its option, redeem all, but not less than all, of the Securities then
Outstanding, at 100% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the Redemption Date, if a
Tax Event has occurred and is continuing.
9. Mandatory Redemption. The Company is not required to make
--------------------
mandatory redemption payments or sinking fund payments with respect to the
Securities.
A-10
<PAGE>
10. Notice of Redemption. Notice of redemption will be mailed within
--------------------
not less than 30 days nor more than 60 days prior to the Redemption Date to each
Holder of Securities to be redeemed at his registered address. On and after the
Redemption Date, unless the Company defaults in making the redemption payment,
interest ceases to accrue on Securities or portions thereof called for
redemption.
11. Purchase of Securities upon Change of Control. The Indenture
---------------------------------------------
provides that upon the occurrence of a Change of Control and subject to further
limitations contained therein, the Company shall make an offer to purchase Out
standing Securities in accordance with the procedures set forth in the
Indenture.
12. Registration Rights. Pursuant to a Registration Rights Agreement,
-------------------
dated January 20, 2000, among the Company and the Initial Purchasers named
therein, the Company will be obligated to consummate an Exchange Offer pursuant
to which the Holder of this Security shall have the right to exchange this
Security for notes of a separate series issued under the Indenture which have
been registered under the Securities Act, in like principal amount and having
substantially identical terms as the Securities. The Holders shall be entitled
to receive certain payments in the event such Exchange Offer is not consummated
("Liquidated Damages") and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
13. Denominations, Transfer, Exchange. The Securities are in
---------------------------------
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay to it any
taxes and fees required by law or permitted by the Indenture. Under certain
circumstances set forth in the Indenture, the Registrar need not register the
transfer of or exchange any Securities.
14. Persons Deemed Owners. The registered Holder of this Security may
---------------------
be treated as the owner of this Security for all purposes.
15. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its written request. After that, all
liability of the Trustee and any such Paying Agent with respect to such money
shall cease.
A-11
<PAGE>
16. Amendment, Supplement, Waiver, Etc. The Company and the Trustee
----------------------------------
may, without the consent of the Holders of any Outstanding Securities, amend,
waive or supplement the Indenture or the Securities for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies. Other amendments and modifications of the Indenture or the
Securities may be made by the Company and the Trustee with the consent of the
Holders of not less than a majority of the aggregate principal amount of the
Outstanding Securities and with other holders of notes of other series issued
under the Indenture, subject to certain exceptions requiring the consent of the
Holders of the particular Securities to be affected.
17. Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make Restricted Payments, make certain Investments,
create or incur Liens, enter into transactions with Affiliates, enter into
agreements restricting the ability of Subsidiaries to pay dividends and make
distributions and on the ability of the Company to merge or consolidate with any
other person or transfer all or substantially all of the Company's assets. Such
limitations are subject to a number of important qualifications and exceptions.
Pursuant to the Indenture, the Company must annually report to the Trustee on
compliance with such limitations.
18. Defaults and Remedies. Events of Default are set forth in the
---------------------
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than certain events of bankruptcy, insolvency or reorganization
affecting the Company) occurs and is continuing, the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Outstanding Securities
under the Indenture may, by written notice to the Trustee and the Company, and
the Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities shall, declare all principal of
and accrued interest on all Securities to be immediately due and payable and
such amounts shall become immediately due and payable.
19. Trustee Dealings with Company. The Trustee, in its individual or
-----------------------------
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
20. No Recourse Against Others. No board member, director, officer,
--------------------------
employee, agent, authorized representative, incorporator or shareholder of the
A-12
<PAGE>
Company shall have any liability for any obligations of the Company under the
Securities or the Indenture for a claim based on, in respect of, or by reason
of, such obligations or their creation by reason of his, her or its status as
such. Each Holder of Securities by accepting a Security waivers and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Securities.
21. Discharge. The Company's obligations pursuant to the Indenture
---------
will be discharged, except for obligations pursuant to certain provisions
thereof, subject to the terms of the Indenture, upon the payment of all the
Securities or upon the irrevocable deposit with the Trustee of U.S. Dollars or
U.S. Government Securities denominated in U.S. Dollars sufficient to pay when
due principal of and interest on the Securities to maturity or redemption.
22. Authentication. This Security shall not be valid until the
--------------
Trustee signs the certificate of authentication on the other side of this
Security.
23. Governing Law. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING WITHOUT
LIMITATION SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW AND
NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B), AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW. THE
COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND
THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BOUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. The Trustee, the Company
and the Holders agree to submit to the jurisdiction of the courts of the State
of New
A-13
<PAGE>
York in any action or proceeding arising out of or relating to the Indenture or
the Securities.
24. Abbreviations. Customary abbreviations may be used in the name of
-------------
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
25. Currency of Account. U.S. Dollars are the sole currency of
-------------------
account and payment for all sums payable by the Company under the Securities.
26. CUSIP, ISIN and Common Code Numbers. The Company has caused
-----------------------------------
CUSIP, ISIN or Common Code numbers, as applicable, to be printed on the
Securities and the Trustee may use CUSIP, ISIN or Common Code numbers, as
applicable, in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed hereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
United Pan-Europe Communications N.V.
P.O. Box 74763
1070 BT Amsterdam
The Netherlands
Attn: Treasurer
A-14
<PAGE>
FORM OF ASSIGNMENT
If you, the holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Security to:
(Insert assignee's social security or tax ID number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
of _____________________________________________________________________________
Agent to transfer this Security on the books of the Company. The Agent may
substitute another to act for such agent.
In connection with any transfer of this Security occurring prior to the
date which is the earlier of (i) the date of the declaration by the United
States Securities and Exchange Commission of the effectiveness of a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering resales of this Security (which effectiveness shall not have been
suspended or terminated at the date of the transfer) and (ii) the date two years
(or such shorter period of time as may be permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) after the later of the
original issuance date appearing on the face of this Security (or any
Predecessor Security) or the last date on which the Company or any Affiliate of
the Company was the owner of this Security (or any Predecessor Security), the
undersigned confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer and that:
[Check One]
[_] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
or
A-15
<PAGE>
[_] (b) this Security is being transferred other than in accordance with (a)
above and documents, including a transferee certificate substantially in
the form attached hereto, are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
If neither of the foregoing boxes is checked and, in the case of (b) above,
if the appropriate document is not attached or otherwise furnished to the
Trustee, the Trustee or Registrar shall not be obligated to register this
Security in the name of any person other than the Holder hereof unless and until
the conditions to any such transfer or registration set forth herein and in
Section 3.13 and Section 3.14 of the Indenture shall have been satisfied.
Dated: _________ Your signature: _________________________________
(Sign exactly as your name appears on the other
side of this Security)
By:______________________________________________
NOTICE: To be executed by an executive officer
Signature Guaranteed:_____________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program acceptable to
the Trustee)
A-16
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A (including the information
specified in Rule 144A(d)(4)) or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:_____________________ __________________________________________________
NOTICE: To be executed by an executive officer
A-17
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY
Principal
Amount of Amount of Amount
decrease in increase in at maturity
Principal Principal of this
Amount Amount Global
at maturity at maturity Security Signature of
of this of this following authorized
Date of Global Global such decrease officer of
Exchange Security Security (or increase) Trustee
- ------------- ----------- ----------- ------------- ------------
Initial $
balance as of
20/1/00
A-18
<PAGE>
EXHIBIT B
FORM OF TRANSFER CERTIFICATE --
RESTRICTED GLOBAL SECURITY TO
REGULATION S GLOBAL SECURITY
(Transfers pursuant to Sections 3.13(b)(ii) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 11 1/2% Senior Notes Due 2010
(the "Securities")
Reference is hereby made to the Indenture, dated as of January 20, 2000
between the Company and Citibank, N.A., as trustee, (the "Indenture"). Terms
used but not defined herein and defined in Regulation S under the U.S.
Securities Act of 1933 (the "Securities Act") or in the Indenture shall have the
meanings given to them in Regulation S or the Indenture, as the case may be.
This certificate relates to [U.S.$]______ principal amount of Securities,
which are evidenced by the following certificate(s) (the "Specified
Securities"):
[CUSIP][CINS][ISIN] No(s). ________________________________
CERTIFICATE No(s). _________________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the appropriate Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner.
B-1
<PAGE>
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of an interest in
the Regulation S Global Security. In connection with such transfer, the Owner
hereby certifies that such transfer is being effected in accordance with Rule
904 under the Securities Act and with all applicable securities laws of the
states of the United States and other jurisdictions. Accordingly, the Owner
hereby further certifies as follows:
1. the Owner is not a distributor of the Specified Securities, an
Affiliate of the Company or any such distributor or a person acting on behalf of
any of the foregoing;
2. the offer of the Specified Securities was not made to a person in the
United States;
3 either:
(a) at the time the buy order was originated, the Transferee was
outside the United States or the Owner and any person acting on its behalf
reasonably believed that the Transferee was outside the United States; or
(b) the transaction is being executed in, on or through the
facilities of the Eurobond market, as regulated by the Association of
International Bond Dealers, or another designated offshore securities market and
neither the Owner nor any person acting on its behalf knows that the
transactions have been prearranged with a buyer in the United States;
4. no directed selling efforts have been made in the United States by or
on behalf of the Owner or any Affiliate thereof;
5. if the Owner is a dealer in securities or has received a selling
concession, fee or other remuneration in respect of the Specified Securities,
and the transfer is to occur during the Restricted Period, then the requirements
of Rule 904(c)(1) have been satisfied;
6. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
7. upon completion of the transaction, the beneficial interest being
B-2
<PAGE>
transferred will be held through an Agent Member acting for and on behalf of
Euroclear or Cedelbank.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers under the
Purchase Agreement.
Dated:
_______________________________________________
(Print the name of the Undersigned, as such
term is defined in the second paragraph of this
certificate.)
By:____________________________________________
Name:
Title:
(If the Undersigned is a Corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
B-3
<PAGE>
EXHIBIT C
FORM OF TRANSFER CERTIFICATE --
RESTRICTED GLOBAL SECURITY TO UNRESTRICTED
GLOBAL SECURITY
(Transfers Pursuant to Sections 3.13(b)(iii) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 11 1/2% Senior Notes Due 2010
(the "Securities")
Reference is hereby made to the Indenture, dated as of January 20, 2000
between the Company and Citibank, N.A., as trustee, (the "Indenture"). Terms
used but not defined herein and defined in Regulation S under the U.S.
Securities Act of 1933 (the "Securities Act") or in the Indenture shall have the
meanings given to them in Regulation S or the Indenture, as the case may be.
This certificate relates to [U.S.$]_____ principal amount of Securities,
which are evidenced by the following certificate(s) (the "Specified
Securities"):
[CUSIP][CINS][ISIN] No(s). _________________________
CERTIFICATE No(s). __________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the appropriate Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to a
C-1
<PAGE>
person (the "Transferee") who will take delivery in the form of an interest in
the Regulation S Global Security. In connection with such transfer, the Owner
hereby certifies that such transfer is being effected in accordance with Rule
904 or Rule 144 under the Securities Act and with all applicable securities laws
of the states of the United States and other jurisdictions. Accordingly, the
Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Specified Securities,
an Affiliate of the Company or any such distributor or a person acting
on behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and any
person acting on its behalf reasonably believed that the
Transferee was outside the United States; or
(i) the transaction is being executed in, on or
through the facilities of the Eurobond market, as regulated by
the Association of International Bond Dealers, or another
designated offshore securities market and neither the Owner nor
any person acting on its behalf knows that the transactions has
been prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any Affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
C-2
<PAGE>
(F) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring after [date one year after the
latest date of issuance of any of the Specified Securities] and is
being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after [date two years after the
latest date of issuance of any of the Specified Securities] and the
Owner is not, and during the preceding three months has not been, an
Affiliate of the Company.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers under the
Purchase Agreement.
Dated: _________________________________________________
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:______________________________________________
Name:
Title:
(If the Undersigned is a Corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
C-3
<PAGE>
EXHIBIT D
FORM OF TRANSFER CERTIFICATE --
REGULATION S GLOBAL SECURITY TO
RESTRICTED GLOBAL SECURITY
(Transfers to QIBs Pursuant to Sections 3.13(b)(iv) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 11 1/2% Senior Notes Due 2010
(the "Securities")
Reference is hereby made to the Indenture, dated as of January 20, 2000
between the Company and Citibank, N.A. as trustee, (the "Indenture"). Terms
used but not defined herein and defined in Regulation S under the U.S.
Securities Act of 1933 (the "Securities Act") or in the Indenture shall have the
meanings given to them in Regulation S or the Indenture, as the case may be.
This certificate relates to [U.S.$]______ principal amount of Securities,
which are evidenced by the following certificate(s) (the "Specified
Securities"):
[CUSIP][CINS][ISIN] No(s). _________________________
CERTIFICATE No(s). __________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them to
do so. Such beneficial owner or owners are referred to herein collectively as
the "Owner". If the Specified Securities are represented by a Global Security,
they are held through the appropriate Depositary or an Agent Member in the name
of the Undersigned, as or on behalf of the Owner.
D-1
<PAGE>
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of an interest in
the Restricted Global Security. In connection with such transfer, the Owner
hereby certifies that such transfer is being effected in accordance with Rule
144A under the Securities Act and with all applicable securities laws of the
states of the United States and other jurisdictions. Accordingly, the Owner
hereby further certifies as follows:
(1) the Specified Securities are being transferred to a person that
the Owner and any person acting on its behalf reasonably believe is a
"qualified institutional buyer" within the meaning of Rule 144A, acquiring
for its own account or for the account of a qualified institutional buyer;
and
(2) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner may
be relying on Rule 144A in connection with the transfer.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers under the
Purchase Agreement.
Dated: _______________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:____________________________________
Name:
Title:
(If the Undersigned is a Corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
D-2
<PAGE>
EXHIBIT E
UNITED PAN-EUROPE
COMMUNICATIONS N.V.
OFFICERS' CERTIFICATE
[Name], [title(s)] of United Pan-Europe Communications N.V., a public
limited liability company organized and existing under the laws of The
Netherlands (the "Company"), and [name], [title(s)] of the Company, hereby
certify pursuant to Sections ____ and ____ of the Indenture, dated as of January
20, 2000 (the "Indenture"), between the Company and Citibank, N.A., as trustee
(the "Trustee"), that:
(i) he or she has read and understands the provisions of the Indenture and
the definitions relating thereto, (ii) the statements made in this Officers'
Certificate are based upon an examination of the provisions of the Indenture and
upon the relevant books and records of the Company, (iii) in his or her opinion,
he or she has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not the covenants and
conditions of the Indenture relating to the [authentication of the Securities]
[execution of the Indenture] [OTHER] have been complied with and (iv) in his or
her opinion, such covenants and conditions have been complied with.
IN WITNESS WHEREOF, each of the undersigned has executed this Certificate
on this ____ day of ____________, ____.
By:_______________________________
Name:
Titles:
By:_______________________________
Name:
Titles:
E-1
<PAGE>
EXHIBIT F
[Date]
Citibank, N.A.
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Ladies and Gentlemen:
We have acted as special counsel to United Pan-Europe Communications N.V.,
a public company with limited liability organized and existing under the laws of
The Netherlands (the "Company"), in connection with the [initial issuance and
sale by the Company of $300,000,000 aggregate principal amount of the Company's
11 1/2% Senior Notes due 2010 (the "Securities"), which will be issued under an
Indenture, dated as of January 20, 2000 (the "Indenture"), between the Company
and Citibank, N.A. as trustee (the "Trustee")].
This opinion is being furnished to your pursuant to Sections ____ and ____
of the Indenture.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such letter documents. In making our
examination of documents executed by parties other than the Company, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof. As to any
facts material to the opinions expressed herein which we did not independently
establish or verify, we have relied upon oral or written statements or
representations of officers and other representatives of the Company and others.
Pursuant to Sections ____ and ____ of the Indenture, we advise you that in
F-2
<PAGE>
our opinion:
1. We have reviewed Article __ of the Indenture setting forth certain
provisions of general application, and in particular, the pertinent provisions
of Section ___ of the Indenture setting forth the definitions of certain terms,
and Sections ___ and ___ of the Indenture providing that the Trustee is entitled
to receive an Officers' Certificate and an Opinion of Counsel in connection with
any request by the Company to take any action and setting forth certain
requirements with respect to the forms of such documents. We have also reviewed
Article ___ of the Indenture, pertaining to ____.
2. In our opinion, we have made such examination or investigation
(including an examination of the Officers' Certificate of the Company, dated as
of the date hereof, as to the matters addressed in Sections ___ and ___ of the
Indenture) as we deem necessary to enable us to express an informed opinion as
to whether or not the conditions precedent to [the authentication of the
Securities] [the execution of the Indenture] [OTHER] under Section ___ of the
Indenture have been complied with.
3. In our opinion, the conditions precedent to be satisfied with respect
to the [authentication of the Securities] [execution of the Indenture] [OTHER]
under Section __ of the Indenture have been complied with.
Members of our firm are admitted to the bar in the States of ______ and New
York, and we do not express any opinion as to the laws of any jurisdiction other
than the laws of such States and the General Corporation Law of the State of
Delaware and the laws of the United States of America.
This opinion is furnished to you solely for your benefit in connection with
the [authentication of the Securities] [execution of the Indenture] [OTHER] and
is not to be relied upon by any other person without our express written
permission.
Very truly yours,
F-3
<PAGE>
EXHIBIT G
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
(Transfers Pursuant to Section 3.14(a) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 11 1/2% Senior Notes Due 2010
(the "Securities")
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of January 20,
2000 between the Company and Citibank, N.A. as trustee (the "Indenture"). Terms
used but not defined herein have the meanings given to them in the Indenture.
This certificate relates to [U.S. $] [____] principal amount of
Securities, which are evidenced by the following certificate(s) (the
"Securities"):
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and may not be
sold except as permitted in the following sentence. We understand and agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, (x) that such Securities are being offered only in a
transaction not involving any public offering within two years after the date of
the original issuance of the Securities or if within three months after we cease
to be an affiliate (within the meaning of Rule 144 under the Securities Act) of
the Company, such Securities may be resold, pledged or transferred only (i) to
the Company, (ii) so long as the Securities are eligible for resale pursuant to
Rule 144A under the Securities Act ("Rule 144A"), to a person whom we reasonably
believe is a "qualified institution buyer" (as defined in Rule 144A) ("QIB")
that purchases for its own account or for the account of a QIB to whom notice is
given that the resale, pledge or transfer is
G-1
<PAGE>
being made in reliance on Rule 144A (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the certificate for
the Securities), (iii) in an offshore transaction in accordance with Regulation
S under the Securities Act (as indicated by the box checked by the transferor on
the Certificate of Transfer on the reverse of the Note if the Note is not in
book-entry form), and, if such transfer is being effected by certain transferors
prior to the expiration of the "40-day distribution compliance period" (within
the meaning of Rule 903(b)(2) of Regulation S under the Securities Act), a
certificate that may be obtained from the Trustee is delivered by the
transferee, (iv) to an institution that is an "accredited investor" as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act (as indicated by the
box checked by the transferor on the Certificate of Transfer on the reverse of
the certificate for the Securities) which has certified to the Company and the
Trustee for the Securities that it is such an accredited investor and is
acquiring the Securities for investment purposes and not for distribution
(provided that no Securities purchased from a foreign purchaser or from any
person other than a QIB or an institutional accredited investor pursuant to this
clause (iii) shall be permitted to transfer any Securities so purchased to an
institutional accredited investor pursuant to this clause (iv) prior to the
expiration of the "applicable restricted period" (within the meaning of
Regulation S under the Securities Act), (v) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 (if applicable) under
the Securities Act, or (vi) pursuant to an effective registration statement
under the Securities Act, in each case in accordance with any applicable
securities laws of any state of the United States, and we will notify any
purchaser of the Securities from us of the above resale restriction, if then
applicable. We further understand that in connection with any transfer of the
Securities by us that the Company and the Trustee for the Securities may
request, and if so requested we will furnish, such certificates, legal opinions
and other information as they may reasonably require to confirm that any such
transfer complies with the foregoing restrictions.
2. We are able to fend for ourselves in the transactions
contemplated by this Offering Circular, we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and any accounts for which we
are acting are each able to bear the economic risk of our or its investment and
can afford the complete loss of such investment.
3. We understand that the Company, Donaldson, Lufkin & Jenrette
Securities International and the other Initial Purchasers named as such in the
Offering Circular as the initial purchasers of the Securities ("Initial
Purchasers"), and others will rely upon the truth and accuracy of the foregoing
acknowledgments,
G-2
<PAGE>
representations and agreements and we agree that if any of the acknowledgments,
representations and warranties deemed to have been made by us by our purchase of
Securities, for our own account or of one or more accounts as to each of which
we exercise sole investment discretion, are no longer accurate, we shall
promptly notify the Company and the Initial Purchasers.
4. We are acquiring the Securities purchased by us for investment
purposes and not for distribution of our own account or for one or more accounts
as to each of which we exercise sole investment discretion and we are or such
account is an institutional "accredited investor" (as defined in rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act).
5. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
_______________________________
(Name of Purchaser)
By:____________________________
Date:__________________________
G-3
<PAGE>
EXHIBIT H
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 10.10 of the Indenture, check the box:
[_] Section 10.10
If you wish to have a portion of this Security purchased by the Company
pursuant to Section 10.10 of the Indenture, state the amount:
[$_____________(multiple of $1000)]
[(Euro)________(multiple of (Euro)1000)]
Dated:_____________________ Your Signature:______________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guaranteed:___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program acceptable to
the Trustee)
H-1
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
Issuer
CITIBANK, N.A. (London Branch)
Trustee
____________________
Indenture
11 1/4% SENIOR NOTES DUE 2010
Dated as of January 20, 2000
_____________________
$600,000,000 11 1/4% Senior Notes Due 2010
(Euro)200,000,000 11 1/4% Senior Notes Due 2010
<PAGE>
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 Definitions.......................................................... 1
SECTION 1.2 Compliance Certificates and Opinions................................. 41
SECTION 1.3 Form of Documents Delivered to Trustee............................... 42
SECTION 1.4 Acts of Holders...................................................... 42
SECTION 1.5 Notices.............................................................. 44
SECTION 1.6 Notice to Holders; Waiver............................................ 46
SECTION 1.7 Effect of Headings and Table of Contents............................. 46
SECTION 1.8 Successors and Assigns............................................... 47
SECTION 1.9 Separability Clause.................................................. 47
SECTION 1.10 Benefits of Indenture................................................ 47
SECTION 1.11 Governing Law........................................................ 47
SECTION 1.12 Conflict with Trust Indenture Act.................................... 47
SECTION 1.13 Legal Holidays....................................................... 48
SECTION 1.14 No Personal Liability of Board Members, Officers, Employees
and Shareholders..................................................... 48
SECTION 1.15 Independence of Covenants............................................ 48
SECTION 1.16 Exhibits............................................................. 49
SECTION 1.17 Counterparts......................................................... 49
SECTION 1.18 Duplicate Originals.................................................. 49
SECTION 1.19 Agent for Service; Submission to Jurisdiction; Waiver of
Immunities........................................................... 49
SECTION 1.20 Judgment Currency.................................................... 50
ARTICLE II SECURITY FORMS
SECTION 2.1 Forms Generally...................................................... 50
ARTICLE III THE SECURITIES
SECTION 3.1 Title and Terms...................................................... 51
SECTION 3.2 Denominations........................................................ 52
SECTION 3.3 Execution, Authentication, Delivery and Dating....................... 53
SECTION 3.4 Temporary Securities................................................. 57
SECTION 3.5 Registration, Registration of Transfer and Exchange.................. 57
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities..................... 59
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SECTION 3.7 Payment of Interest; Interest Rights Preserved................................. 60
SECTION 3.8 Persons Deemed Owners.......................................................... 61
SECTION 3.9 Cancellation................................................................... 62
SECTION 3.10 Computation of Interest........................................................ 62
SECTION 3.11 "CUSIP" and/or "ISIN" Numbers.................................................. 62
SECTION 3.12 Book-Entry Provisions for Global Securities, Certificated Securities........... 63
SECTION 3.13 Transfer and Exchange of Securities............................................ 64
SECTION 3.14 Special Transfer Provisions.................................................... 76
ARTICLE IV SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture........................................ 77
SECTION 4.2 Application of Trust Money..................................................... 78
ARTICLE V REMEDIES
SECTION 5.1 Events of Default.............................................................. 79
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment............................. 80
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee................ 81
SECTION 5.4 Trustee May File Proofs of Claim............................................... 82
SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities.................... 83
SECTION 5.6 Application of Money Collected................................................. 84
SECTION 5.7 Limitation on Suits............................................................ 84
SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest...... 85
SECTION 5.9 Restoration of Rights and Remedies............................................. 85
SECTION 5.10 Rights and Remedies Cumulative................................................. 85
SECTION 5.11 Delay or Omission Not Waiver................................................... 86
SECTION 5.12 Control by Holders............................................................. 86
SECTION 5.13 Waiver of Past Defaults........................................................ 86
SECTION 5.14 Waiver of Stay or Extension Laws............................................... 87
ARTICLE VI THE TRUSTEE
SECTION 6.1 Certain Duties and Responsibilities............................................ 87
SECTION 6.2 Notice of Default.............................................................. 88
SECTION 6.3 Certain Rights of Trustee...................................................... 89
SECTION 6.4 Trustee Not Responsible for Issuance of Securities............................. 90
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SECTION 6.5 May Hold Securities....................................................... 90
SECTION 6.6 Money Held in Trust....................................................... 91
SECTION 6.7 Compensation and Reimbursement............................................ 91
SECTION 6.8 Corporate Trustee Required; Eligibility; Conflicting Interests............ 92
SECTION 6.9 Resignation and Removal; Appointment of Successor......................... 92
SECTION 6.10 Acceptance of Appointment by Successor.................................... 94
SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business............... 95
SECTION 6.12 Trustee Acting in Other Capacities........................................ 95
ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 Disclosure of Names and Addresses of Holders.............................. 95
SECTION 7.2 Reports by Trustee........................................................ 96
SECTION 7.3 Reports by Company........................................................ 96
ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms...................... 96
SECTION 8.2 Successor Substituted..................................................... 97
ARTICLE IX SUPPLEMENTAL INDENTURES
SECTION 9.1 Indentures Without Consent of Holders..................................... 98
SECTION 9.2 Indentures with Consent of Holders........................................ 99
SECTION 9.3 Execution of Indenture.................................................... 100
SECTION 9.4 Effect of Indentures...................................................... 100
SECTION 9.5 Conformity with Trust Indenture Act....................................... 100
SECTION 9.6 Reference in Securities to Indentures..................................... 100
SECTION 9.7 Notice of Indentures...................................................... 101
ARTICLE X COVENANTS
SECTION 10.1 Payment of Principal, Premium, if Any, and Interest....................... 101
SECTION 10.2 Maintenance of Office or Agency........................................... 102
SECTION 10.3 Money for Security Payments to Be Held in Trust........................... 103
SECTION 10.4 Corporate Existence....................................................... 104
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SECTION 10.5 Payment of Taxes and Other Claims.......................................... 105
SECTION 10.6 Maintenance of Properties.................................................. 105
SECTION 10.7 Insurance.................................................................. 105
SECTION 10.8 Provision of Financial Statements.......................................... 105
SECTION 10.9 Statement by Officers as to Default........................................ 106
SECTION 10.10 Purchase of Securities upon Change of Control.............................. 107
SECTION 10.11 Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock.............................................................. 111
SECTION 10.12 Limitation on Restricted Payments.......................................... 113
SECTION 10.13 Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries............................................................... 116
SECTION 10.14 Limitation on Liens Securing Indebtedness.................................. 118
SECTION 10.15 Limitation on Issuances of Guarantees by Subsidiaries...................... 118
SECTION 10.16 Limitation on Sale of Assets and Subsidiary Stock.......................... 119
SECTION 10.17 Limitation on Transactions with Affiliates................................. 124
SECTION 10.18 Additional Amounts......................................................... 124
SECTION 10.19 Waiver of Stay, Extension or Usury Laws.................................... 127
SECTION 10.20 Limitation on Lines of Business............................................ 127
SECTION 10.21 Limitation on Status as an Investment Company.............................. 127
ARTICLE XI REDEMPTION OF SECURITIES.......................................................... 128
SECTION 11.1 Right of Redemption........................................................ 128
SECTION 11.2 Applicability of Article................................................... 129
SECTION 11.3 Election to Redeem; Notice to Trustee...................................... 129
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed.......................... 129
SECTION 11.5 Notice of Redemption....................................................... 130
SECTION 11.6 Deposit of Redemption Price................................................ 130
SECTION 11.7 Securities Payable on Redemption Date...................................... 131
SECTION 11.8 Securities Redeemed in Part................................................ 131
ARTICLE XII DEFEASANCE AND COVENANT DEFEASANCE................................................ 132
SECTION 12.1 Company's Option to Effect Defeasance or Covenant Defeasance............... 132
SECTION 12.2 Defeasance and Discharge................................................... 132
SECTION 12.3 Covenant Defeasance........................................................ 132
SECTION 12.4 Conditions to Defeasance or Covenant Defeasance............................ 133
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SECTION 12.5 Deposited Money and U.S. Government Securities to Be
Held in Trust; Other Miscellaneous Provisions......... 135
SECTION 12.6 Reinstatement......................................... 135
EXHIBIT A................................................................ A-1
EXHIBIT B................................................................ B-1
EXHIBIT C................................................................ C-1
EXHIBIT D................................................................ D-1
EXHIBIT E................................................................ E-1
EXHIBIT F................................................................ F-1
EXHIBIT G................................................................ G-1
EXHIBIT H................................................................ H-1
EXHIBIT I................................................................ I-1
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INDENTURE, dated as of January 20, 2000 by and between United Pan-
Europe Communications N.V., a public limited liability company organized and
existing under the laws of The Netherlands (herein called the "Company"), having
its principal office at Fred. Roeskestraat 123, 1076 EE Amsterdam, The
Netherlands, and Citibank, N.A. (London Branch), as Trustee (herein called the
"Trustee"). Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as defined below) of the
Company's 11 1/4% Senior Notes due 2010 denominated in U.S. Dollars and 11 1/4%
Senior Notes due 2010 denominated in Euros:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 Definitions. For all purposes of this Indenture, except
-----------
as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and "self-liquidating
paper," as used in TIA Section 311, shall have the meanings assigned to them in
the rules of the SEC adopted under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with "GAAP" as defined in this section
1.1;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section, paragraph or other subdivision; and
(e) unless otherwise indicated, references to Articles, Sections,
paragraphs or other subdivisions are references to such Articles, Sections,
paragraphs or other subdivisions of this Indenture.
1
<PAGE>
"Acceleration Notice" has the meaning set forth in Section 5.2.
"Acquired Indebtedness" means Indebtedness (including Disqualified
Capital Stock) of any Person existing at the time such Person becomes a
Subsidiary of the Company, including by designation, or is merged or
consolidated into or with the Company or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of any Person or
all or substantially all the assets of any Person by any other Person, whether
by purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Additional Amounts" has the meaning specified in Section 10.18.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise; provided that with respect to ownership interest in the Company
and its Subsidiaries, a Beneficial Owner of 10% or more of the total voting
power normally entitled to vote in the election of directors, managers or
trustees, as applicable, shall for such purposes be deemed to constitute
control.
"Agent Member" means, with respect to any Depositary, any member of,
or participant in, such Depositary.
"Applicable Procedures" has the meaning set forth in Section
3.13(b)(ii).
"Annualized Consolidated EBITDA" means Consolidated EBITDA for the
Reference Period multiplied by four.
"Asset Acquisition" means (i) an Investment or capital contribution
(by means of transfers of cash or other property to others or payments for
property or services of the account or use of others, or otherwise) by the
Company or any
2
<PAGE>
Subsidiary in any other Person, or any acquisition or purchase of Capital Stock
of another Person by the Company or any Subsidiary, or (ii) an acquisition by
the Company or any Subsidiary of the property and assets (other than Capital
Stock) of any Person other than the Company or any Subsidiary which constitute
substantially all of a division, operating unit or line of business of such
Person or which is otherwise outside the ordinary course of business.
"Asset Sale" has the meaning set forth in Section 10.16.
"Average Life" means, as of the date of determination, with respect to
any security or instrument, the quotient obtained by dividing (1) the sum of the
products (a) of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (2) the sum of all such principal (or redemption)
payments.
"Beneficial Owner" or "beneficial owner" for purposes of the
definition of "Change of Control" and "Affiliate" has the meaning attributed to
it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue
Date), whether or not applicable, except that a "person" shall be deemed to have
"beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time.
"Board Resolution" means a copy of a resolution certified by a
managing director or other authorized officer, assistant officer or
representative of the Company to have been duly adopted by the Supervisory Board
of the Company and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
and Amsterdam, The Netherlands are authorized or obligated by law or executive
order to close.
"Capital Contribution" means any contribution to the equity of the
Company from a direct or indirect parent of the Company for which no
consideration other than the issuance of Qualified Capital Stock is paid.
3
<PAGE>
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any Corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebted ness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that Corporation.
"Cash Equivalent" means:
(1) securities issued or directly and fully guaranteed or insured by (i)
the United States of America or any agency or instrumentality thereof or
(ii) any member of the European Economic Area or Switzerland, or any,
agency or instrumentality thereof provided that such country, agency or
instrumentality has a credit rating at least equal to that of the United
States of America (provided that, in each case, the full faith and credit
of such respective nation is pledged in support thereof), or
(2) time deposits and certificates of deposit and commercial paper issued
by the parent Corporation of any domestic (United States) commercial bank
of recognized standing having capital and surplus in excess of $500,000,000
(or the foreign currency equivalent thereof), or
(3) commercial paper issued by others rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the equivalent
thereof by Moody's Investors Service, Inc.
and in the case of each of (1), (2), and (3) maturing within one year after
the date of acquisition, or
(4) Euro or Dollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months, and overnight bank deposits, in each case with any
domestic (United States) commercial bank (including the Trustee) having
capital and surplus in excess of $500,000,000 (or the foreign currency
equivalent thereof) and a Keefe Bank Watch Rating of "B" or better;
4
<PAGE>
provided, in the case of (1) through (4), that with respect to any non-
domestic Person, Cash Equivalents shall also mean those investments that
are comparable to clauses (ii) and (iv) above in such Person's country of
organization or country where it conducts business operations.
"Cedelbank" means Cedelbank.
"Certificated Security" means any certificated Security in fully
registered definitive form.
"Change of Control" means any merger or consolidation of the Company
with or into any Person or any sale, transfer or other conveyance, whether
direct or indirect, of all or substantially all of the Company's assets, on a
Consolidated basis, in one transaction or a series of related transactions, if,
immediately after giving effect to such transaction(s), either
(A) any "person" or "group" (other than the Parent or any of the
Principals) is or becomes the "beneficial owner," directly or indirectly, of
more than 35% of the total voting power of all classes of the Company's
securities in the aggregate normally entitled to vote in the election of
directors, managers, or trustees, as applicable, of the transferee(s) or
surviving entity or entities and such "person" or "group" beneficially owns
(after giving effect to such transaction) a greater percent age of the total
voting power than is at that time beneficially owned by Parent and the
Principals (in the aggregate) and none of the Parent nor any of the Principals
has the right or ability by voting power, contract or otherwise to elect or
nominate for elections a majority of the Company's Supervisory Board, or
(B) the Continuing Directors cease for any reason to constitute
a majority of the Supervisory Board of the Company then in office, or
(C) the Company adopts a plan of liquidation (other than a plan
of liquidation as a consequence of which (1) the Parent and the Principals (in
the aggregate) beneficially own at least the same percentage of voting power
after the consummation of such plan as before or otherwise retain the right or
ability, by voting power, to control the Person that acquires the proceeds of
such liquidation and (2) the Person that acquires the substantial majority of
the proceeds of such liquidation shall have assumed by supplemental indenture
the Company's obligations pursuant to this Indenture).
5
<PAGE>
"Common Depositary" means Citivic Nominees Limited, as common
depositary for Euroclear and Cedelbank and depositary for the Euro Denominated
Securities, together with its successors in such capacity.
"Common Stock" of any Person means Capital Stock of the Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of the Person, to shares of Capital Stock of any other class of the Person.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Order" or "Company Request" means a written request or order
signed in the name of the Company by a member of the Company's management board
or its supervisory board, the Chief Executive Officer, the President or a Vice
President, and by the Chief Financial Officer, the Chief Accounting Officer, the
Treasurer, an Assistant Treasurer, the Secretary, an Assistant Secretary or
other authorized representative of the Company and delivered to the Trustee.
"Consolidated Coverage Ratio" of any Person on any date of
determination (the "Transaction Date") means the ratio, on a pro forma basis, of
(a) the aggregate amount of Consolidated EBITDA of such Person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and business permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Fixed Charges of such Person
(exclusive of amounts attributable to operations and businesses permanently
discontinued or disposed of, but only to the extent that the obligations giving
rise to such Consolidated Fixed Charges would no longer be obligations
contributing to such Person's Consolidated Fixed Charges subsequent to the
Transaction Date) during the Reference Period; provided that for purposes of
such calculation, (i) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of the Reference Period, (ii)
transactions giving rise to the need to calculate the Consolidated Coverage
Ratio shall be assumed to have occurred on the first day of the Reference
Period, (iii) the incurrence of any Indebtedness during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date
6
<PAGE>
(and the application of the proceeds therefrom to the extent used to refinance
or retire other Indebtedness) shall be assumed to have occurred on the first day
of such Reference Period, and (iv) the Consolidated Fixed Charges of such Person
attributable to interest on any Indebtedness or dividends on any Disqualified
Capital Stock bearing a floating interest (or dividend) rate shall be computed
on a pro forma basis as if the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the applicable rate for the
entire period, unless such person or any of its Subsidiaries is a party to an
Interest Swap or Hedging Obligation (which shall remain in effect for the 12-
month period immediately following the Transaction Date) that has the effect of
fixing the interest rate on the date of computation, in which case such rate
(whether higher or lower) shall be used.
"Consolidated Invested Equity Capital" means, with respect to any
Person as of any date, the sum of the Invested Equity Capital of such Person as
of such date and, without duplication, the Invested Equity Capital of each of
its Subsidiaries as of such date. For purposes of calculating the Consolidated
Invested Equity Capital of any Person as of any date, in order to avoid
duplication, the Invested Equity Capital of a Subsidiary of such Person shall
not include any amounts that would be included in the Consolidated Invested
Equity Capital of any equity owner of such Subsidiary, to the extent that such
amounts were utilized by such equity owner prior to such date to permit the
incurrence of Indebtedness pursuant to clauses 2(iii) and (c)(3) of Section
10.11. For example, if a direct Subsidiary of the Company has Consolidated
Invested Equity Capital of $100 and incurs $225 of such Indebtedness, then a
direct or indirect Subsidiary of such Subsidiary will not be deemed to have any
Invested Equity Capital based on contributions or loans to it by such first
Subsidiary. In addition, the Invested Equity Capital of a Subsidiary of a Person
will never be considered to be greater than the Invested Equity Capital of such
Person, except as a result of contributions of Invested Equity Capital to such
Subsidiary by third parties.
"Consolidation" means, with respect to any Person, the consolidation
of the accounts of the Subsidiaries with those of such Person, all in accordance
with GAAP; provided that "Consolidation" will not include consolidation of the
accounts of any Unrestricted Subsidiary with the accounts of such Person. The
term "Consolidated" has a correlative meaning to the foregoing.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the Consolidated Net Income of such Person for such period adjusted to
add thereto (to the extent deducted from net revenues in determining
Consolidated Net Income), without duplication, the sum of
7
<PAGE>
(1) Consolidated income tax expense,
(2) Consolidated depreciation and amortization expense,
(3) Consolidated Fixed Charges, and
(4) non-cash stock-based compensation,
less the amount of all cash payments made by such Person or any of its
Subsidiaries during such period to the extent such payments relate to non-cash
charges that were added back in determining Consolidated EBITDA for such period
or any prior period; provided that Consolidated income tax expense, depreciation
and amortization of a Subsidiary that is not a Wholly Owned Subsidiary shall
only be added to the extent of the equity interest of such Person in such
Subsidiary.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of:
(a) interest expensed or capitalized, paid, accrued, or scheduled to
be paid or accrued (including, in accordance with the following
sentence, interest attributable to Capitalized Lease Obligations) of
such Person and its Consolidated Subsidiaries during such period,
including (1) original issue discount and non-cash interest payments
or accruals on any Indebtedness, (2) the interest portion of all
deferred payment obligations, and (3) all commissions, discounts and
other fees and charges owed with respect to bankers' acceptances and
letters of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such
period,
(b) the amount of dividends accrued or payable (or guaranteed) by
such Person or any of its Consolidated Subsidiaries in respect of
Preferred Stock (other than by Subsidiaries of such Person to such
Person or such Person's Wholly Owned Subsidiaries).
For purposes of this definition, (x) interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
in good faith by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such Person or a
Subsidiary of such
8
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Person of an obligation of another Person shall be deemed to be the interest
expense attributable to the Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any Person for any
period, the net income (or loss) of such Person and its Consolidated
Subsidiaries (determined on a Consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing such
net income (or loss) and without duplication):
(a) all gains (but not losses) which are either extraordinary (as
determined in accordance with GAAP) or are nonrecurring (including any
gain from the sale or other disposition of assets outside the ordinary
course of business or from the issuance or sale of any capital stock),
(b) the net income, if positive, of any Person, other than a
Consolidated Subsidiary, in which such Person or any of its
Consolidated Subsidiaries has an interest, except to the extent of the
amount of any dividends or distributions actually paid in cash to such
Person or a Consolidated Subsidiary of such Person during such period,
but in any case not in excess of such Person's pro rata equity
interest share of such Person's net income for such period,
(c) the net income or loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition, and
(d) the net income, if positive, of any such Person's Consolidated
Subsidiaries to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by
operation of the terms of its charter or bylaws or any other
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Consolidated Subsidiary
other than this Indenture.
"Consolidated Subsidiary" means, for any Person, each Subsidiary
(excluding all Unrestricted Subsidiaries) of such Person (whether now existing
or hereafter created or acquired) the financial statements of which are
Consolidated for financial statement reporting purposes with the financial
statements of such Person in accordance with GAAP.
9
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"Consolidated Tangible Assets" of any Person means the total amount of
assets less applicable reserves and other properly deductible items which under
GAAP would be calculated on a Consolidated balance sheet of the Person and its
Subsidiaries after deducting all goodwill, trademarks, patents, unamortized debt
discount and expense and other like intangibles, which, in each case under GAAP,
would be included on such Consolidated balance sheet.
"Continuing Director" means during any period of 12 consecutive months
after the Issue Date, individuals who at the beginning of any such 12-month
period constituted the Supervisory Board of the Company (together with any new
supervisory directors whose election by the shareholders was from a list of
candidates drawn up by the holder or holders of the Company's priority shares
and new supervisory directors designated in or provided for in an agreement
regarding the merger, consolidation or sale, transfer or other conveyance, of
all or substantially all of the assets of the Company or the Parent, if such
agreement was approved by a vote of such majority of supervisory directors).
"Corporate Trust Office" means the principal corporate trust office of
the Trustee, at which at any particular time its corporate trust business shall
be administered, which office at the date of execution of this Indenture is
located at 11 Old Jewry, London EC2R 8DU, except that, with respect to
presentation of Securities for payment or for registration of transfer or
exchange, such term shall mean the office or agency of the Trustee at which, at
any particular time, its corporate agency business shall be conducted.
"Corporation" includes Corporations, associations, companies and
business trusts.
"Credit Agreement" means the loan and note issuance agreement dated
July 27, 1999 between certain Subsidiaries of the Company and Bank of American
International Limited, CIBC World Markets plc, Citibank, N.A., MeesPierson N.V.,
Paribas, The Royal Bank of Scotland plc, Toronto Dominion Bank Europe Limited
and The Toronto Dominion Bank, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as such agreement and/or related documents may be amended, restated,
supplemented, renewed, replaced or otherwise modified from time to time whether
or not with the same agent, trustee, representative lenders or Holders, and,
subject to the proviso to the next succeeding sentence, irrespective of any
changes in the terms and conditions thereof. Without limiting the generality of
the foregoing, the term "Credit
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Agreement" shall include agreements in respect of Interest Swap and Hedging
Obligations with lenders party to the Credit Agreement and shall also include
any amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to any Credit Agreement and all refundings,
refinancings and replacements of any Credit Agreement, including any agreement:
(1) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby,
(2) adding or deleting borrowers or guarantors thereunder, so long as
borrowers and guarantors may include one or more of the Company and
its Subsidiaries and their respective successors and assigns,
(3) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder; provided that on the date such
Indebtedness is incurred it would not be prohibited by Section
10.11; or
(4) otherwise altering the terms and conditions thereof in a manner
not prohibited by the other terms of this Indenture.
"CT Corporation System" has the meaning specified in Section 1.19.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" has the meaning specified in Section 3.12.
"Disqualified Capital Stock" means (a) except as set forth in clause
(b), with respect to any Person, Equity Interests of such Person that, by its
terms or by the terms of any security into which it is convertible, exercisable
or exchangeable, is, or upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the option
of the holder thereof) by such Person or any of its Subsidiaries, in whole or in
part, on or prior to 91 days following the Stated Maturity of the Securities and
(b) with respect to any Subsidiary of the Company, any Equity Interests of such
Subsidiary other than (i) any common equity with no economic preference,
privileges, or redemption or repayment
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provisions or (ii) preferred stock convertible into such common equity of such
Subsidiary with no payment of dividends or liquidation preference due or payable
thereon on or prior to 91 days following the Stated Maturity of the Securities.
"Dollar Denominated Securities" means the $600,000,000 11 1/4% Senior
Notes due 2010, together with the Exchange Dollar Denominated Securities.
"Dollars" or "$" or "U.S. Dollars" means the lawful currency of the
United States of America and, in relation to any amount to be advanced or paid
under this Indenture or the Securities, funds having immediate value.
"Dollar Paying Agent" means an office or agency of the Company where
Dollar Denominated Securities may be presented for payment.
"Dollar Registrar" means an office or agency of the Company in London,
where Dollar Denominated Securities may be presented for registration of
transfer or exchange.
"DTC" means the Depository Trust Company, its nominees and successors.
"EEA Government Obligation" means direct non-callable obligations of,
or non-callable obligations guaranteed by, any member nation of the European
Union for the payment of which obligation or guarantee the full faith and credit
of the respective nation is pledged; provided that such nation has a credit
rating at least equal to that of the highest rated member nation of the European
Economic Area.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such Person's
equity, and shall in any event include any Capital Stock issued by, or
partnership, participation or membership interests in, such Person.
"Equity Offering" means (i) an underwritten public offering or
floatation of ordinary shares of the Company which has been registered under the
Securities Act, or admitted to listing on the Amsterdam Stock Exchange or its
equivalent in any other European Union jurisdiction, in any case resulting in
Net Cash Proceeds to the Company of at least $100,000,000 (or its foreign
currency equivalent), or (ii) a sale of Qualified Capital Stock of the Company
to any Person which is (or a controlled Affiliate of a Person which is), engaged
principally in a
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Related Business, resulting in Net Cash Proceeds to the Company of at least
$100,000,000 (or its foreign currency equivalent); provided, however, that a
sale of Qualified Capital Stock of the Company to any subsidiary of the Company
or any Person that is a controlled Affiliate of the Company shall not be an
Equity Offering.
"Euro" or "(Euro)" means the currency adopted by those countries
participating in the third stage of European monetary union.
"Euro Denominated Securities" means the (Euro)200,000,000 11 1/4%
Senior Notes due 2010, together with the Exchange Euro Denominated Securities.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"European Economic Area" means the member nations of the European
Economic Area pursuant to the Oporto Agreement on the European Economic Area
dated May 2, 1992 as amended.
"European Legal Tender" means legal tender in the countries
constituting the European Monetary Union, EEA Government Obligations or a
combination thereof.
"European Union" means the member nations to the third stage of
economic and monetary union pursuant to the treaty of Rome establishing the
European Community, as amended by the Treaty on European Union, signed at
Maastricht on February 7, 1992.
"Euro Paying Agent" means an office or agency of the Company where
Euro Denominated Securities may be presented for payment.
"Euro Registrar" means an office or agency of the Company where Euro
Denominated Securities may be presented for registration of transfer or
exchange.
"Event of Default" has the meaning set forth under Section 5.1.
"Event of Loss" means, with respect to any property or asset, any (1)
loss, destruction or damage of such property or asset or (2) any condemnation,
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seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended (or any successor act), and the rules and regulations
thereunder (or respective successors thereto).
"Exchange Dollar Denominated Securities" means the Dollar Denominated
Securities to be issued pursuant to this Indenture in connection with the offer
to exchange Securities for Initial Securities that may be made by the Company
pursuant to the Registration Rights Agreement.
"Exchange Euro Denominated Securities" means the Euro Denominated
Securities to be issued pursuant to this Indenture in connection with the offer
to exchange Securities for Initial Securities that may be made by the Company
pursuant to the Registration Rights Agreement.
"Exchange Offer" means the exchange registered with the SEC to
exchange Initial Securities for Exchange Securities pursuant to the terms of the
Registration Rights Agreement.
"Exchange Registration Statement" means an Exchange Registration
Statement as defined in the Registration Rights Agreement.
"Exchange Securities" means the Exchange Dollar Denominated
Securities and the Exchange Euro Denominated Securities.
"Exempted Affiliate Transaction" means (i) Restricted Payments
comprised of pro rata dividends paid in cash on any class of Equity Interests
and made in compliance with this Indenture, (ii) transactions, at arms-length
and as so set forth in a Board Resolution, between or among holders of any
Equity Interest of any Subsidiary of the Company and such Subsidiary, so long as
such holder is not otherwise an Affiliate of the Company, (iii) transactions
between or among the Company, and its Subsidiaries, (iv) the Company or any of
its Subsidiaries entering into or performing any employment agreement, stock
option agreement or other agreement relating to the terms of employment,
compensation or termination of employment in the ordinary course of business of
the Company or such Subsidiary, (v) any contract, agreement, arrangement or
transaction with any Affiliate in effect as of the Issue Date and any amendment,
waiver, variation or other modification in
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respect of any such contract, agreement, arrangement or transaction so long as
such amendment, waiver, variation or other modification is not disadvantageous
to the Company and its Subsidiaries in any material respect, (vi) Restricted
Payments and Investments permitted under Section 10.12, (vii) transactions with
customers, clients, suppliers, or purchasers or sellers of goods or services, in
each case in the ordinary course of business and otherwise in compliance with
the terms of this Indenture which are fair to the Company and its Subsidiaries,
in the reasonable determination of the Company or Subsidiary, as the case may
be, or are on terms no less favorable to the Company or the Subsidiary than
those that could be obtained in a comparable arm's length transaction with an
entity that is not an Affiliate or Principal and is in the best interests of the
Company or the Subsidiary, and (viii) transactions with respect to network
capacity or dark or lit communications fiber capacity or telecommunications
conduit between the Company or any Subsidiary and any Unrestricted Subsidiary or
other Affiliate and joint sales and marketing pursuant to an agreement or
agreements between the Company or any Subsidiary and any Unrestricted Subsidiary
or other Affiliate, provided that in the case of this clause (viii), such
agreements are on terms that are no less favorable to the Company or the
Subsidiary than those that could be obtained in an arm's-length transaction with
an entity that is not an Affiliate or Principal and are in the best interests of
the Company and the Subsidiary entered into in the ordinary course of business.
"Existing Agreements" means (i) any and all instruments, as in effect
on the Issue Date, between the Company or any of its Subsidiaries and a
commercial lending institution or institutions, which makes borrowing of funds
available to the Company or any such Subsidiary from such institution or
institutions and (ii) any replacements of the instruments in clause (i) entered
into by the respective Subsidiary that was party to the instrument so replaced
or their respective successors and a commercial lending institution or
institutions for an amount up to the maximum amount of the instrument so
replaced.
"Existing Indebtedness" means the Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, reduced to the extent such amounts are repaid.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the
United States Code, as amended from time to time.
"GAAP" means United States generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
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<PAGE>
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"Global Security" means a Regulation S Global Security (or
Unrestricted Global Security) or a Restricted Global Security.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as verb has a corresponding meaning.
"Guarantor" is defined to mean any Person obligated under a Guarantee.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" of any Person means, without duplication,
(a) all liabilities and obligations, contingent or otherwise, of such
Person, to the extent such liabilities and obligations would appear as
a liability upon the Consolidated balance sheet of such Person in
accordance with GAAP, (1) in respect of borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (2) evidenced by bonds, notes,
debentures or similar instruments, (3) representing the balance
deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade
creditors which have remained unpaid for greater than 90 days past
16
<PAGE>
their original due date) those incurred in the ordinary course of its
business that would constitute ordinarily a trade payable to trade
creditors;
(b) all liabilities and obligations, contingent or otherwise, of such
Person (1) evidenced by bankers' acceptances or similar instruments
issued or accepted by banks, (2) relating to any Capitalized Lease
Obligation, or (3) evidenced by a letter of credit or a reimbursement
obligation of such Person with respect to any letter of credit (other
than obligations with respect to letters of credit securing
obligations (other than obligations described in (a)(1) through (3)
above) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon);
(c) all net obligations of such Person under Interest Swap and
Hedging Obligations;
(d) all liabilities and obligations of others of the kinds described
in the preceding clauses (a), (b) or (c) that such Person has
guaranteed or provided credit support or that is otherwise its legal
liability or which are secured by any assets or property of such
Person;
(e) any and all deferrals, renewals, extensions, refinancing and
refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described
in any of the preceding clauses (a), (b), (c) or (d), or this clause
(e), whether or not between or among the same parties; and
(f) all Disqualified Capital Stock of such Person (measured at the
greater of its voluntary or involuntary maximum fixed repurchase
price, plus accrued and unpaid dividends).
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were
purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified
Capital
17
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Stock, such fair market value to be determined in good faith by the
Supervisory Board of the Company.
The amount of any Indebtedness outstanding as of any date shall be (1)
the accreted value thereof, in the case of any Indebtedness issued
with original issue discount, but the accretion of original issue
discount in accordance with the original terms of Indebtedness issued
with an original issue discount will not be deemed to be an incurrence
and (2) the principal amount thereof, excluding any interest thereon,
in the case of any other Indebtedness.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Purchasers" means, with respect to the Initial Securities
issued pursuant to this Indenture on the Issue Date, each of Donaldson, Lufkin &
Jenrette International and the other Initial Purchasers named as such in the
Offering Circular.
"Initial Securities" means the $600,000,000 11 1/4% Senior Notes due
2010 and the (Euro)200,000,000 11 1/4% Senior Notes due 2010, issued under this
Indenture on the Issue Date.
"Institutional Accredited Investor" means an institutional "Accredited
Investor," as defined in Regulation D of the Securities Act.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Adjustment Event" has the meaning set forth in Section
3.1.
"Interest Swap and Hedging Obligation" means any obligation of any
Person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such Person
is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate
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<PAGE>
of interest on a stated notional amount in exchange for periodic payments made
by such Person calculated by applying a fixed or floating rate of interest on
the same notional amount.
"Invested Equity Capital" means, with respect to any Person as of any
date, without duplication, the sum of (i) the total dollar amount contributed in
cash plus the value of all property contributed (valued at fair market value at
the time of contribution, determined in good faith by the Supervisory Board) to
such Person since the date of its creation in the form of common equity, plus,
(ii) the total dollar amount contributed in cash plus the value of all property
contributed (valued at fair market value at the time of contribution, determined
in good faith by the Supervisory Board) to such Person since the date of
creation by the holders of its common equity (and their Affiliates) in
consideration of the issuance of preferred equity or Indebtedness, on a basis
that is substantially proportionate to their common equity interests (with any
disproportionately large equity interests received by the Company or a
Subsidiary relative to their respective contributions being ignored for this
purpose), plus, (iii) the total dollar amount contributed in cash plus the value
of all property contributed (valued at fair market value at the time of
contribution, determined in good faith by the Supervisory Board) to such Person
since the date of its creation by the Company or a Wholly Owned Subsidiary of
the Company in consideration of the issuance of preferred equity or
Indebtedness, and less (iv) the value of all interest, returns in respect of
Indebtedness, dividends and other distributions (in whatever form and however
designated, valued at fair market value as determined in good faith by the
Supervisory Board) made by such Person since the date of its creation to the
holders of its common equity (and their Affiliates); provided that in no event
shall the aggregate amount of interest, dividends and other distributions made
to any holder of common equity of a Person (or its Affiliates) operate to reduce
the Invested Equity Capital of such Person by more than the total contributions
to such Person (per clauses (i) through (iii) above) by such equity holder (and
its Affiliates).
"Investment" by any Person in any other Person means (without
duplication):
(a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services,
securities or otherwise) of capital stock, bonds, notes, debentures,
partnership or other ownership interests or other securities,
including any options or warrants, of such other Person or any
agreement to make any such acquisition;
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(b) the making by such Person of any deposit with, or advance, loan
or other extension of credit to, such other Person (including the
purchase of property from another Person subject to an understanding
or agreement, contingent or otherwise, to resell such property to such
other Person) or any commitment to make any such advance, loan or
extension (but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business);
(c) other than guarantees of Indebtedness of the Company or to the
extent permitted by Section 10.11, the entering into by such Person of
any guarantee of, or other credit support or contingent obligation
with respect to, Indebtedness or other liability of such other Person;
(d) the making of any capital contribution by such Person to such
other Person; and
(e) the designation by the Supervisory Board of the Company of any
Person to be an Unrestricted Subsidiary.
The Company shall be deemed to make an Investment in an amount equal
to the fair market value of the net assets of any Subsidiary (or, if
neither the Company nor any of its Subsidiaries has theretofore made
an Investment in such subsidiary, in an amount equal to the
Investments being made), at the time that such Subsidiary is
designated an Unrestricted Subsidiary, and any property transferred to
an Unrestricted Subsidiary from the Company or a Subsidiary of the
Company shall be deemed an Investment valued at its fair market value
at the time of such transfer. Investments shall be measured by the
fair market value attributed to the Investment at the time made or
returned, as applicable.
"Issue Date" means the date of first issuance of the Initial
Securities hereunder.
"Leverage Ratio" on any date of determination (the "Transaction Date")
for any Person means the ratio, on a pro forma basis, of (a) the aggregate
amount of Indebtedness of such Person and its Subsidiaries on a Consolidated
basis to (b) the aggregate amount of Annualized Consolidated EBITDA of such
Person attributable to continuing operations and business (exclusive of amounts
attributable
20
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to operations and businesses permanently discontinued or disposed of); provided
that for purposes of calculating Annualized Consolidated EBITDA for this
definition,
(1) acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the
Transaction Date shall be assumed to have occurred on the first
day of the Reference Period,
(2) transactions giving rise to the need to calculate the Leverage
Ratio shall be assumed to have occurred on the first day of the
Reference Period,
(3) the incurrence of any Indebtedness or issuance of any
Disqualified Capital Stock during the Reference Period or
subsequent to the Reference Period and on or prior to the
Transaction Date (and the application of the proceeds therefrom
to the extent used to refinance or retire other Indebtedness)
shall be assumed to have occurred on the first day of the
Reference Period, and
(4) the Consolidated Fixed Charges of such Person attributable to
interest on any Indebtedness or dividends on any Disqualified
Capital Stock bearing a floating interest (or dividend) rate
shall be computed on a pro forma basis as if the average rate in
effect from the beginning of the Reference Period to the
Transaction Date had been the applicable rate for the entire
period, unless such Person or any of its Subsidiaries is a party
to an Interest Swap or Hedging Obligation (which shall remain in
effect for the 12-month period immediately following the
Transaction Date) that has the effect of fixing the interest rate
on the date of computation, in which case such rate (whether
higher or lower) shall be used.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired. For purposes of this definition,
the sale, lease, conveyance, or other transfer by the Company or any Subsidiary
of the Company, in the ordinary course of its business and not constituting a
security interest in assets serving as collateral for any of their respective
obligations, including the granting of
21
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indefeasible rights of use or equivalent arrangements with respect to, network
capacity, communications fiber capacity or conduit, shall not be a Lien.
"Liquidated Damages" means all liquidated damages then owing pursuant
to the Registration Rights Agreement.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or otherwise.
"Net Cash Proceeds" means the aggregate amount of cash or Cash
Equivalents received by the Company in the case of a sale, or Capital
Contribution in respect, of Qualified Capital Stock and by the Company and its
Subsidiaries in respect of an Asset Sale, plus, in the case of an issuance of
Qualified Capital Stock upon any exercise, exchange or conversion of securities
(including options, warrants, rights and convertible or exchangeable debt) of
the Company that were issued for cash on or after July 30, 1999, the amount of
cash originally received by the Company upon the issuance of such securities
(including options, warrants, rights and convertible or exchangeable debt) less,
in each case, the sum of all payments, fees, commissions and (in the case of
Asset Sales, reasonable and customary) expenses (including, without limitation,
the fees and expenses of legal counsel and investment banking fees and expenses)
incurred in connection with such Asset Sale or sale of Qualified Capital Stock,
and, in the case of an Asset Sale only, less the amount (estimated reasonably
and in good faith by the Company) of income, franchise, sales and other
applicable taxes required to be paid by the Company or any of its respective
Subsidiaries in connection with such Asset Sale in the taxable year that such
sale is consummated or in the immediately succeeding taxable year, the
computation of which shall take into account the reduction in tax liability
resulting from any available operating losses and net operating loss carryovers,
tax credits and tax credit carryforwards, and similar tax attributes.
"New Acquisitions" means the acquisition by the Company or its
subsidiaries of @Entertainment, Inc., A2000 Holding N.V., Time Warner Cable
France S.A., Reseaux Cables de France S.A., Videopole S.A., Kabel Plus, a.s.,
SBS Broadcasting S.A., GelreVision N.V., SKT spol. s.r.o. and NBS Broadband
Services AB, all substantially as described in the Offering Circular (and each
such Person's respective subsidiaries).
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"Non-Recourse Indebtedness" means Indebtedness of a Person to the
extent that under the terms thereof and pursuant to applicable law, no personal
recourse could be had against the Company or its Subsidiaries (giving effect to
the designations of such Person as an Unrestricted Subsidiary) for the Payment
of the principal of or interest or premium or other amounts with respect to such
Indebtedness or for any claim based on such Indebtedness and that enforcement of
obligations on such Indebtedness is limited solely to recourse against interests
in specified assets.
"Obligation" means any principal, premium or interest payment, or
monetary penalty, or damages, due by the Company under the terms of the
Securities or this Indenture, including any Liquidated Damages due pursuant to
the terms of the Registration Rights Agreement.
"Offering" means the offering of the Securities by the Company.
"Offering Circular" means the offering memorandum, dated January 14,
2000, pursuant to which the Securities were offered and sold.
"Officers' Certificate" means a certificate signed by a member of the
Company's management board or its Supervisory Board, the Chief Executive Officer
or a Vice President, and by the Chief Financial Officer, the Chief Accounting
Officer, the Treasurer, an Assistant Treasurer, the Secretary, an Assistant
Secretary or other authorized representative of the Company and delivered to the
Trustee in the form substantially similar to Exhibit F attached hereto, which
shall comply with the Indenture, except in the case of an authentication order
pursuant to Section 3.3, which must only be signed by one of the above noted
persons.
"Opinion of Counsel" means an opinion of counsel in the form
substantially similar to Exhibit G attached hereto, who may be counsel to the
Company, including an employee of the Company.
"Other Senior Notes" means the Company's $300,000,000 11 1/2% Senior
Notes due 2010, and its $1,000,000,000 13 3/4% Senior Discount Notes due 2010
issued pursuant to the Other Senior Notes Indenture.
"Other Senior Notes Indenture" means one or more Indentures, dated as
of January 20, 2000, between the Company and Citibank, N.A. as trustee, pursuant
to which the Other Senior Notes were issued.
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"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption U.S. Dollars (in the case of the Dollar Denominated Securities)
or European Legal Tender (in the case of the Euro Denominated Securities)
in the necessary amount have been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if such
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture;
(iii) Securities, except to the extent provided in Sections 12.2
and 12.3, with respect to which the Company has effected Defeasance and/or
Covenant Defeasance as provided in Article Twelve; and
(iv) Securities which have been paid pursuant to Section 3.6 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands the Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or
24
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waiver, only Securities which any Responsible Officer of the Trustee knows to be
so owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor.
"Parent" means UnitedGlobalCom, Inc. and its successor(s).
"Parent Stock Instrument" means either (a) Indebtedness (including
Disqualified Capital Stock) and Qualified Capital Stock of the Company that is
convertible or exchangeable into, at the option of the Company or any holder
thereof, or secured by, or whose value to the holder thereof is dependent upon
any shares of Parent's Capital Stock that were owned by the Company or any of
its Subsidiaries as of July 30, 1999; provided that such Indebtedness and
Capital Stock of the Company shall have been issued in consideration of cash,
the net proceeds of which shall have been received by the Company or (b) the
Class A Common Stock of Parent owned by the Company or any of its Subsidiaries
as of July 30, 1999 or any like number of shares of Class B Common Stock of
Parent issued in exchange for the shares of the Class A Common Stock of Parent
held as of July 30, 1999.
"Participants" means (i) with respect to the Dollar Denominated
Securities, institutions that have accounts with DTC or its nominee and (ii)
with respect to the Euro Denominated Securities, institutions that have accounts
with Euroclear or Cedelbank or their respective nominees.
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and premium, if
any) or interest on any Securities on behalf of the Company.
"Payment Date" means any date on which a payment of principal,
premium, if any, interest (or Liquidated Damages, if any) is due to be paid on
any of the Securities.
"Permitted Indebtedness" means that:
(a) the Company may incur Indebtedness evidenced by the Securities
and issued pursuant to this Indenture and Indebtedness evidenced by
the Other Senior Notes and issued pursuant to the Other
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Senior Notes Indenture up to the amounts being issued on the original
Issue Date;
(b) the Company may incur Refinancing Indebtedness with respect to
any Indebtedness (including Disqualified Capital Stock), described in
clause (a) or this clause (b) of this definition or incurred pursuant
to clause (1)(ii) of Section 10.11, and any Subsidiary may incur
Refinancing Indebtedness (including Disqualified Capital Stock),
described in this clause (b) or clause (2)(c) of Section 10.11 and the
Company and its Subsidiaries may incur Refinancing Indebtedness with
respect to Indebtedness which is outstanding on the Issue Date (after
giving effect to the New Acquisitions) (less the amount of any such
Existing Indebtedness repaid on or after the Issue Date or which was
refinanced pursuant to this clause (b));
(c) the Company and its Subsidiaries may incur Indebtedness solely in
respect of bankers acceptances, letters of credit and performance and
surety bonds and completion guarantees (to the extent that such
incurrence does not result in the incurrence of any obligation to
repay any obligation relating to borrowed money of others), all in the
ordinary course of business in accordance with customary industry
practices, in amounts and for the purposes customary in the Company's
industry;
(d) the Company may incur Indebtedness to any Subsidiary, and any
Subsidiary may incur Indebtedness to any other Subsidiary or to the
Company; provided that in the case of Indebtedness of the Company,
such obligations shall be unsecured and subordinated in all respects
to the Company's obligations pursuant to the Securities and the Other
Senior Notes and any event that causes such Subsidiary no longer to be
a Subsidiary (including by designation to be an Unrestricted
Subsidiary) shall be deemed to be a new incurrence of such
Indebtedness, if then outstanding, subject to Section 10.11;
(e) the Company and its Subsidiaries may incur Interest Swap and
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate or currency risk with respect to any fixed or
floating rate Indebtedness that is permitted by this Indenture to be
outstanding or any receivable or liability the payment of which is
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determined by reference to a foreign currency; provided that the
notional amount of any such Interest Swap and Hedging Obligation does
not exceed the principal amount of Indebtedness to which such Interest
Swap and Hedging Obligation relates;
(f) the Company and its Subsidiaries may guarantee Indebtedness of
any of the Company's Subsidiaries, provided that the incurrence of
such Indebtedness by such Subsidiary is permitted under this
Indenture; and
(g) Subsidiaries of the Company may issue preferred stock or
Indebtedness to the holders (or their Affiliates) of the common equity
of such Subsidiary on a basis that is substantially proportionate to
their common equity interests (with any disproportionately large
equity interests received by the Company or a Subsidiary of the
Company relative to their respective contributions being ignored for
this purpose).
"Permitted Investment" means:
(a) Cash Equivalents;
(b) intercompany Indebtedness to the extent permitted under clause
(d) of the definition of "Permitted Indebtedness";
(c) an Investment by the Company or a Subsidiary of the Company in a
Person engaged primarily in a Related Business if as a result of such
Investment such Person becomes a Subsidiary of the Company or is
merged with or into the Company or a Subsidiary of the Company, so
long as the surviving entity is the Company or a Subsidiary of the
Company;
(d) an Investment in any Subsidiary of the Company;
(e) other Investments in any Person or Persons engaged primarily in a
Related Business with respect to which the Company maintains the power
to influence or participate in the management of such Person by virtue
of representation on such Person's board or directors
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or through a contractual relationship with such Person or its holders
of Capital Stock;
(f) other Investments in any Person or Persons engaged primarily in a
Related Business with respect to which the Supervisory Board of the
Company or of the relevant Subsidiary determines in its good faith
reasonable judgement that the Company or any of its Subsidiaries will
receive as a result of such Investment commensurate network services
benefits (including by becoming a customer, client, supplier,
purchaser or seller of goods or services of or to such Person or
Persons) from the arrangements entered into as a result of such
Investment;
(g) other Investments in any Person or Persons engaged primarily in a
Related Business; provided that, after giving pro forma effect to each
such Investment, the amount of all such Investments made solely in
reliance upon this clause (g) on and after July 30, 1999 that are
Outstanding at any time does not exceed in the aggregate $100,000,000
(or the foreign currency equivalent thereof measured on the date of
the making of such Investment), plus, unless such amounts shall have
been credited under clause (3) of Section 10.12 and utilized to make a
Restricted Payment, (w) the amount of the Net Cash Proceeds to the
Company from the sale of Qualified Capital Stock (other than (i) to a
Subsidiary of the Company, and (ii) to the extent applied in a
Qualified Exchange), (x) an amount equal to 50% of the Net Cash
Proceeds from Special Character Asset Sales, (y) an amount equal to
the Net Cash Proceeds to the Company or any of its Subsidiaries of any
sale of securities constituting a Parent Stock Instrument (other than
(i) to a Subsidiary of the Company, and (ii) to the extent applied in
connection with a Qualified Exchange) and (z) the amount of
Investments made pursuant to this clause (g) after July 30, 1999 that
are returned to the Company or any Subsidiary on or prior to the date
of any such calculation, which amount shall be the lesser of (i) the
amount of the cash invested plus the value of all noncash investments
(valued at the fair market value at the time of the Investment,
determined in the good faith reasonable judgment of the Company or the
relevant Subsidiary) and (ii) the amount of the Net Cash Proceeds
received plus the value of noncash proceeds received (valued at the
fair market value at the time of the return of such
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<PAGE>
Investment, determined in the good faith reasonable judgment of the
Company or the relevant Subsidiary);
(h) Investments made in the ordinary course of business as partial or
full payment for constructing a network relating principally to a
Related Business of the Company or any Subsidiary;
(i) Investments solely in the form and consisting of Capital Stock of
the Company (other than Disqualified Capital Stock);
(j) any Investment acquired by the Company or any of its restricted
Subsidiaries (a) in exchange for any other Investment or accounts
receivable held by the Company or any such restricted Subsidiary in
connection with or as a result of a bankruptcy, workout,
reorganization or recapitalization of the issuer of such other
investment or accounts receivable or (b) as a result of a foreclosure
by the Company or any of its restricted Subsidiaries with respect to
any secured Investment or other transfer of title with respect to any
secured Investment in default;
(k) an Investment in prepaid expenses and lease, utility and workers'
compensation, performance and other similar deposits in the ordinary
course of business;
(l) loans, advances, or extensions of credit to employees, officers,
directors made in the ordinary course of business;
(m) the net obligations of any counterparty under Interest Swap and
Hedging Obligations obtained in conformity with industry practices;
(n) Investments made on or after July 30, 1999 in SBS Broadcasting
S.A. not to exceed the amounts required to be made by the Company
pursuant to the Investment Agreement by and between, SBS Broadcasting
S.A., the Company and United International Holdings Inc., dated June
29, 1999, relating to the acquisition by the Company of Equity
Interests in SBS Broadcasting S.A.; and
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(o) Investments made on or after July 30, 1999 directly or
indirectly, in ARA Cable Services Inc. or ARA Programming &
Distribution Ltd. of Saudi Arabia, not to exceed $75,000,000.
"Permitted Lien" means:
(a) Liens existing on the Issue Date;
(b) Liens securing the Securities and the Other Senior Notes;
(c) Liens securing Indebtedness, or any agreement (including any
Equity Interest) relating to any property, asset, or business
acquired, of a Person existing at the time such Person becomes a
Subsidiary (including by designation) or is merged with or into the
Company or a Subsidiary or Liens securing Indebtedness incurred in
connection with an Acquisition, provided that such Liens were in
existence prior to the date of such acquisition, merger or
consolidation, were not incurred in anticipation thereof, and do not
extend to any other assets than those of the Person (or its
businesses) being acquired (or so designated);
(d) leases or subleases granted to other Persons in the ordinary
course of business not materially interfering with the conduct of the
business of the Company or any of its Subsidiaries or materially
detracting from the value of the relative assets of the Company or any
Subsidiary;
(e) Liens arising from precautionary Uniform Commercial Code
financing statement filings regarding operating leases entered into by
the Company or any of its Subsidiaries in the ordinary course of
business;
(f) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more
adverse to the Holders of the Securities than the terms of the Liens
securing such refinanced Indebtedness, provided that the Indebtedness
secured is not increased and the Lien is not extended to any
additional assets or property that would not have been security for
the Indebtedness refinanced;
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<PAGE>
(g) Liens securing Indebtedness incurred under the Credit Agreement
and other Indebtedness solely of Subsidiaries of the Company incurred
in accordance with the terms of this Indenture;
(h) Liens in favor of the Company or Liens on assets of Subsidiaries
of the Company in favor of other such Subsidiaries;
(i) Liens securing Refinancing Indebtedness that complies with the
definition of "Refinancing Indebtedness";
(j) Liens securing Acquired Indebtedness and Indebtedness assumed in
acquiring Related Assets, provided that such Liens were not put in
place in contemplation of the incurrence by the Company or its
Subsidiaries of such Indebtedness, such Liens do not extend to any
property or assets of the Company or any of its Subsidiaries other
than those acquired in connection therewith, and the Investment that
is the subject of such acquisition is a Permitted Investment;
(k) statutory liens of carriers, warehousemen, mechanics, material
men, landlords, repairmen or other like Liens arising by operation of
law in the ordinary course of business, provided that (1) the
underlying obligations are not overdue for a period of more than 30
days, or (2) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; and
(l) Liens not otherwise permitted by this Indenture in an amount not
to exceed 5% of the Company's Consolidated Tangible Assets.
"Person" means any Corporation, individual, limited liability company,
joint stock company, joint venture, partnership, limited liability partnership,
unincorporated association, governmental regulatory entity, country, state or
political subdivision thereof, trust, municipally or other entity.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same Indebtedness as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for a
mutilated
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<PAGE>
security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same Indebtedness as the mutilated, lost, destroyed or
stolen Security.
"Preferred Stock" means any Equity Interest of any class or classes of
a Person (however designated) which is preferred as to payments of dividends, or
as to distributions upon any liquidation or dissolution, over Equity Interests
of any other class of such Person.
"Principals" means Albert M. Carollo, Lawrence F. DeGeorge, Lawrence
J. DeGeorge, Curtis Rochelle, Marian Rochelle, Rochelle Investments, Ltd. (so
long as it is controlled by Curtis or Marian Rochelle), Gene W. Schneider, G.
Schneider Holdings, Co. and The Gene W. Schneider Family Trust (so long as each
is controlled by Gene W. Schneider or trustees appointed by him), Janet S.
Schneider and Mark L. Schneider, and with respect to any such Person means: (A)
any controlling stockholder or 80% (or more) owned Subsidiary of such Person, or
with respect to each individual Person, (i) family partnerships, Corporations or
other entities holding Equity Interests in the Company, the transferee(s) or the
surviving entities or entities solely for the benefit of such Person or any of
the Persons listed in (ii), (iii), (iv) or (v) below, (ii) such Person's spouse,
(iii) such Person's children, grandchildren, stepchildren, step grandchildren
and their spouses, (iv) heirs, legatees and devisees, and (v) trusts solely for
the benefit of any of the foregoing; or (B) any trust Corporation, partnership
or other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of
such Person and/or such other Persons referred to in the immediately preceding
clause (A).
"Pro Forma" or "pro forma" shall have the meaning set forth in
Regulation S-X of the Securities Act, unless otherwise specifically stated
herein.
"Purchase Money Indebtedness" of any Person means any Indebtedness of
such Person to any seller or other Person incurred solely to finance the
acquisition (including in the case of a Capitalized Lease Obligation, the
lease), construction, installation or improvement of any after acquired real or
personal tangible property which, in the reasonable good faith judgment of the
Supervisory Board of the Company, is directly related to a Related Business.
"Qualified Capital Stock" means any Capital Stock of the Company that
is not Disqualified Capital Stock.
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"Qualified Exchange" means:
(a) any legal defeasance, redemption, retirement, repurchase or other
acquisition of Capital Stock, or Indebtedness of the Company issued on
or after July 30, 1999 with the Net Cash Proceeds received by the
Company from the substantially concurrent sale of its Qualified
Capital Stock or, to the extent used to retire Indebtedness (other
than Disqualified Capital Stock) of the Company issued on or after
July 30, 1999, Subordinated Indebtedness of the Company,
(b) any exchange of Qualified Capital Stock of the Company for any
Capital Stock or Indebtedness of the Company issued on or after July
30, 1999, or
(c) any issuance of Subordinated Indebtedness of the Company in
exchange for Indebtedness (other than Disqualified Capital Stock) of
the Company issued on or after July 30, 1999.
"Qualified Institutional Buyer" or "QIB" has the meaning specified in
Rule 144A.
"Redemption Date," when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Reference Period" with regard to any Person means the full fiscal
quarter ended immediately preceding any date upon which any determination is to
be made pursuant to the terms of the Securities or this Indenture, for which
Consolidated financial statements of the Company are available.
"Refinancing Indebtedness" means Indebtedness (including Disqualified
Capital Stock) (a) issued in exchange for, or the proceeds from the issuance and
sale of which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or in part,
or (b) constituting an amendment, modification or supplement to, or a deferral
or renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness
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<PAGE>
(including Disqualified Capital Stock and Refinancing Indebtedness) in a
principal amount (or, if issued with an original issue discount, an original
accreted value, determined in accordance with GAAP) or, in the case of
Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
with the Refinancing and the amount of any premium paid in connection with such
Refinancing in accordance with the terms of the documents governing the
Indebtedness (including Disqualified Capital Stock and Refinancing Indebtedness)
refinanced without giving effect to any modification thereof made in connection
with or in contemplation of such refinancing) the lesser of (1) the principal
amount or, in the case of Disqualified Capital Stock, liquidation preference, of
the Indebtedness (including Disqualified Capital Stock and Refinancing
Indebtedness) so Refinanced and (2) if such Indebtedness being Refinanced was
issued with an original issue discount, the accreted value thereof (as
determined in accordance with GAAP) at the time of such Refinancing; provided
that (A) such Refinancing Indebtedness shall only be used to refinance
Outstanding Indebtedness (including Disqualified Capital Stock) of such Person
issuing such Refinancing Indebtedness (except that the Company may refinance
Outstanding Indebtedness of a Subsidiary), (B) such Refinancing Indebtedness
shall (x) not have an Average Life shorter than the Indebtedness (including
Disqualified Capital Stock) to be so refinanced at the time of such Refinancing
and (y) in all respects, be no less contractually subordinated or junior, if
applicable, to the rights of Holders of the Securities than was the Indebtedness
(including Disqualified Capital Stock) to be refinanced, (C) such Refinancing
Indebtedness shall have a final stated maturity or redemption date, as
applicable, no earlier than the final stated maturity or redemption date, as
applicable, of the Indebtedness (including Disqualified Capital Stock) to be so
refinanced, and (D) such Refinancing Indebtedness shall be secured (if secured)
in a manner no more adverse to the Holders of the Securities than the terms of
the Liens (if any) securing such refinanced Indebtedness, including, without
limitation, the amount of Indebtedness secured shall not be increased.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the date hereof, between the Initial Purchasers and the Company.
"Registration Statement" means the Registration Statement as defined
in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment
Date means January 15 or July 15 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
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<PAGE>
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" has the meaning specified in Section
3.3.
"Related Assets" means all assets, rights, contractual or otherwise,
and properties, whether tangible or intangible, used or intended for use in
connection with a Related Business; provided that Related Assets shall not
include any Equity Interests or indebtedness of, or interests in, any Person.
"Related Business" means the business of constructing, creating,
developing, marketing or operating one or more cable, telephone or
communications systems, including, without limitation, any system for
transmitting, or providing service or product for the transmission of, voice,
video or data through transmission facilities, Internet service providers or any
business reasonably related to any of the foregoing and any business conducted
by the Company or any Subsidiary of the Company on the Issue Date; provided that
the determination of what constitutes a Related Business shall be made in good
faith by the Supervisory Board of the Company.
"Related Business Acquisition" means an Asset Acquisition of (i)
properties or assets to be used in a Related Business, (ii) of the Capital Stock
of any Person that becomes a restricted Subsidiary as a result of such Asset
Acquisition or (iii) of the Capital Stock of any Person that becomes an
Unrestricted Subsidiary as a result of such Asset Acquisition, but only if such
Asset Acquisition would be permitted pursuant to Section 10.12 or as a Permitted
Investment; provided that, in the case of clauses (ii) and (iii), such Person's
assets and properties consist principally of properties or assets that will be
used in a Related Business.
"Replacement Assets" means property or assets that will be used in a
Related Business of the Company or any Subsidiary and Equity Interests of a
Person that becomes a Subsidiary of the Company.
"Responsible Officer" shall mean, when used with respect to the
Trustee, any officer within the corporate trust department of the Trustee,
including any vice-president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee who
customarily performs functions similar to those performed by the Persons who at
the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such
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<PAGE>
person's knowledge of and familiarity with the particular subject and who shall
have direct responsibility for the administration of this Indenture.
"Restricted Dollar Denominated Global Security" means a Restricted
Global Security representing Dollar Denominated Securities.
"Restricted Euro Denominated Global Securities" means a Restricted
Global Security representing Euro Denominated Securities.
"Restricted Global Security" has the meaning specified in Section 3.3.
"Restricted Investment" means, in one or a series of related
transactions, any Investment, other than other Permitted Investments.
"Restricted Payment" means, with respect to any Person:
(a) the declaration or payment of any dividend or other distribution
in respect of Equity Interests of such Person or any parent or
Subsidiary of such Person,
(b) any payment on account of the purchase, redemption or other
acquisition or retirement for value of Equity Interests of such Person
or any Subsidiary or parent of such Person,
(c) other than with the proceeds from the substantially concurrent
sale of, or in exchange for, Refinancing Indebtedness, any purchase,
redemption, or other acquisition or retirement for value of, any
payment in respect of any amendment of the terms of or any defeasance
of, any Subordinated Indebtedness, directly or indirectly, by such
Person or a parent or Subsidiary of such Person prior to the scheduled
maturity, any scheduled repayment of principal, or scheduled sinking
fund payment, as the case may be, of such Indebtedness and
(d) any Restricted Investment by such Person;
provided, however, that the term "Restricted Payment" does not include (1) any
dividend, distribution or other payment on or with respect to Equity Interests
of a Person or the parent of such Person to the extent payable solely in shares
of Qualified
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<PAGE>
Capital Stock of such Person, or (2) any dividend, distribution or other payment
to the Company or any of its Subsidiaries by the Company or any of its
Subsidiaries, or (3) any payment on account of the exchange of shares of Common
Stock of Parent for a like number of substantially identical (except with regard
to voting rights) shares of Common Stock of Parent, or (4) payments to or for
the account of the Stichting Administratiekantor UPC (the "Foundation") or its
successors of amounts related to taxes payable upon the grant of options to
certain employees in shares of the Company held by the Foundation, provided
that, for purposes of this clause (4), neither the Company nor any of its
Subsidiaries shall be liable to any Person in respect of such amounts, other
than for the payment of such amounts actually received or to be received by it,
to the Foundation.
"Restricted Period" means the period through and including the 40/th/
day after the later of the commencement of the Offering and the Issue Date of
the Initial Securities.
"Restricted Securities" means Restricted Global Securities and
Regulation S Global Securities.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the United States Securities and Exchange Commission.
"Securities" means, collectively, the "Securities" issued under this
Indenture, including the Initial Securities and the Exchange Securities.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" shall have the meaning provided under
Regulation S-X of the Securities Act, as in effect on the Issue Date.
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"Special Character Asset Sale" means any Asset Sale solely consisting
of assets and property or interests therein comprising its interests in chello
broadband, UPCtv or Priority Telecom determined by the Company in its good faith
reasonable judgment.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity," when used with respect to any Security, means the
date specified in any Security as the fixed date on which the final payment of
principal and interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company that is
subordinated in right of payment by its terms or the terms of any document or
instrument relating thereto to the Securities, in any respect or when used in
the definitions of Restricted Payment or Qualified Exchange has a final stated
maturity on (except for the Securities) or after the Stated Maturity.
"Subsidiary," with respect to any Person, means (1) a Corporation a
majority of whose Equity Interests with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, (2) any other Person (other than a
Corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or indirectly,
at the date of determination thereof has majority ownership interest, or (3) a
partnership in which such Person or a Subsidiary of such Person is, at the time,
a general partner and in which such Person, directly or indirectly, at the date
of determination thereof has a majority ownership interest. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be a Subsidiary of the Company
or of any Subsidiary of the Company. Unless the context requires otherwise,
Subsidiary means each direct and indirect Subsidiary of the Company.
"Supervisory Board" means, with respect to any Person, the
supervisory board of directors of such Person or any committee of the
supervisory board of directors of such Person authorized, with respect to any
particular matter, to exercise the power of the supervisory board of directors
of such Person.
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"TARGET" means the Trans-European Automated Real-time Gross Settlement
Express Transfer (TARGET) system.
"Tax" or "Taxes" means any and all present or future taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, and all liabilities
with respect thereto, together with any penalties, interest, or additions
thereto.
"Tax Event" means that as a result of any change in or amendment to
the laws, treaties or regulations of any Taxing Authority (or any official or
administrative pronouncement or action or judicial decision) interpreting or
applying such laws, treaties or regulations where such change or amendment is
proposed and becomes effective on or after the Issue Date, in making any payment
due or to become due under the Securities, the Company is or would be required
on the next succeeding payment date to pay Additional Amounts and the payment of
such Additional Amounts cannot be avoided by the use of any reasonable measures
available to the Company.
"Taxing Authority" means any nation or government or any political
subdivision thereof or any agency or instrumentality therein and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force at the date as of which this Indenture was executed, except as
provided in Section 9.5.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Global Security" has the meaning set forth in Section
3.3(d).
"Unrestricted Securities" means an Unrestricted Global Security and
all other Securities that are not Restricted Securities, including Exchange
Dollar Denominated Securities and Exchange Euro Denominated Securities.
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"Unrestricted Subsidiary" means any subsidiary of the Company that
does not own any Equity Interest of, or own or hold any Lien on any property of,
the Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the
Supervisory Board of the Company); provided that such Subsidiary at the time of
such designation (a) has no Indebtedness other than Non-Recourse Indebtedness;
(b) is not party to any agreement, contract, arrangement or understanding with
the Company or any Subsidiary of the Company, unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Subsidiaries. The Supervisory Board of the Company
may designate any Unrestricted Subsidiary to be a Subsidiary, provided that (1)
no Default or Event of Default is existing or will occur as a consequence
thereof and (2) immediately after giving effect to such designation, on a pro
forma basis, the Company could incur at least $1.00 (or its foreign currency
equivalent) of Indebtedness pursuant to the Debt Incurrence Ratio of Section
10.11. Each such designation shall be evidenced by filing with the Trustee a
certified copy of the resolution giving effect to such designation and an
Officer's Certificate certifying that such designation complied with the
foregoing conditions.
"U.S. Government Obligations" means direct non-callable obligations
of, or noncallable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests
of which (other than directors' qualifying shares) are owned by the Company or
one or more Wholly Owned Subsidiaries of the Company.
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SECTION 1.2 Compliance Certificates and Opinions. Upon any
------------------------------------
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenant compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 10.9(a)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.3 Form of Documents Delivered to Trustee. In any case
--------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters,
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and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be Consolidated (with
proper identification of each matter covered therein) and form one instrument.
SECTION 1.4 Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take
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acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of authority.
The fact and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any other
manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held by any
Person, and the date of holding the same, shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
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SECTION 1.5 Notices. Any notice or communication shall be
-------
sufficiently given if in writing and delivered in person, by facsimile and
confirmed by overnight courier, or mailed by first-class mail addressed as
follows:
if to the Company:
United Pan-Europe Communications N.V.
P.O. Box 74763
1070 BT Amsterdam
The Netherlands
Attention: General Counsel and Treasurer
Facsimile: 31 20 778 9841
Telephone: 31 20 778 9840
with a copy to:
Holme, Roberts & Owen LLP
Heathcoat House
20 Savile Row
London W1X 1AE
England
Attention: Paul G. Thompson
Facsimile: 44 171 287 9344
Telephone: 44 171 494 5600
if to the Trustee or Paying Agent:
Citibank, N.A.
5 Carmelite Street
London EC4Y 0PA
copies of notices to the Trustee should also go to:
Citibank, N.A.
11 Old Jewry
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London EC2R 8DU
Attention: Global Agency and Trust Services
Facsimile: 44 171 508 3879
Telephone: 44 171 508 3815
if to the Luxembourg Paying and Transfer Agent:
Banque International a Luxembourg
69 route d'Esch
Luxembourg L-2953
c/o the Trustee
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to a
Holder including any notice delivered in connection with TIA Section 310(b), TIA
Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed to
him at his address as set forth on the Security Register and shall be
sufficiently given to him if so mailed within the time prescribed. To the extent
required by the TIA, any notice or communication shall also be mailed to any
Person described in TIA Section 313(c).
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, if a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 1.6 Notice to Holders; Waiver. Where this Indenture provides
-------------------------
for notice of any event to Holders by the Company or the Trustee, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each Holder affected by such
event, at the address of such Holder as it appears in the Security Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. As long as the Securities are listed on the
Luxembourg Stock Exchange and notice is required by the rules of the Luxembourg
Stock Exchange, such notice
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shall be sufficiently given by publication of such notice to Holders of the
Securities in English will be in a leading newspaper having general circulation
in Luxembourg (which is expected to be the Luxembourg Wort) or, if such
publication is not practicable, in one other leading English language daily
newspaper with general circulation in Europe, such newspaper being published on
each business day in morning editions, whether or not it shall be published in
Saturday, Sunday or holiday editions. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Any notice mailed to a Holder in the
manner herein prescribed shall be conclusively deemed to have been received by
such Holder, whether or not such Holder actually receives such notice. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 1.7 Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 1.8 Successors and Assigns. All covenants and agreements in
----------------------
this Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.9 Separability Clause. In case any provision in this
-------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.10 Benefits of Indenture. Nothing in this Indenture or in
---------------------
the Securities, express or implied, shall give to any Person, other than the
parties
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hereto, any Paying Agent, any Security Registrar and their successors hereunder
and the Holders any legal or equitable right, remedy or claim under this
Indenture.
SECTION 1.11 Governing Law. This Indenture and the Securities shall
-------------
be governed by and construed in accordance with the law of the State of New York
including without limitation Section 5-1401 and 5-1402 of the New York General
Obligation Law and New York Civil Practice Laws and Rules 327(b), as applied to
contracts made and performed within the State of New York, without regard to
conflicts of law. The Company hereby irrevocably submits to the jurisdiction of
any New York State court sitting in the borough of Manhattan in the city of New
York or any federal court sitting in the borough of Manhattan in the city of New
York in respect of any suit, action or proceeding arising out of or relating to
this Indenture and the Securities, and irrevocably accepts for itself and in
respect of its property, generally and unconditionally, jurisdiction of the
aforesaid courts. The Company irrevocably waives, to the fullest extent they
may effectively do so under applicable law, trial by jury and any objection
which they may now or hereafter have to the laying of the venue of any such
suit, action or proceeding bought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of the Trustee or any
Holder to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
SECTION 1.12 Conflict with Trust Indenture Act. Prior to the issuance
---------------------------------
of the Exchange Securities or the effectiveness of the Shelf Registration
Statement, the Trust Indenture Act shall apply as a matter of contract to this
Indenture for purposes of interpretation, construction and defining the rights
and obligations hereunder. Upon the issuance of the Exchange Securities or the
effectiveness of the Shelf Registration Statement, this Indenture shall be
subject to the provisions of the Trust Indenture Act that are required to be
part of this Indenture and shall, to the extent applicable, be governed by such
provisions. If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such provision or requirement of the Trust Indenture Act shall
control.
If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision
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shall be deemed to apply to this Indenture as so modified or excluded, as the
case may be.
SECTION 1.13 Legal Holidays. In any case where any Interest Payment
--------------
Date, Redemption Date, or Stated Maturity or Maturity of any Security shall not
be a Business Day at a place of payment, then (notwithstanding any other
provision of this Indenture or of the Securities) payment of principal of (or
premium, if any) or interest need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date or at the Stated Maturity or
Maturity; provided that no interest shall accrue solely by virtue of such delay
for the period from and after such Interest Payment Date, Redemption Date,
Stated Maturity or Maturity, as the case may be.
SECTION 1.14 No Personal Liability of Board Members, Officers,
-------------------------------------------------
Employees and Shareholders. No board member, director, officer, employee,
- --------------------------
agent, authorized representative, incorporator or shareholder of the Company, as
such, shall have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation, solely by reason of its status as
a board member, director, officer, employee, agent, authorized representative,
incorporator or shareholder of the Company. By accepting a Security, the
Trustee on behalf of each Holder waives and releases all such liability (but
only such liability). The waiver and release are part of the consideration for
issuance of the Securities.
SECTION 1.15 Independence of Covenants. All covenants and agreements
-------------------------
in this Indenture shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or be otherwise within the limitations
of, another covenant shall not avoid the occurrence of a Default if such action
is taken or condition exists.
SECTION 1.16 Exhibits. All exhibits attached hereto are by this
--------
reference made a part hereof with the same effect as if herein set forth in
full.
SECTION 1.17 Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
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SECTION 1.18 Duplicate Originals. The parties may sign any number of
-------------------
copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
SECTION 1.19 Agent for Service; Submission to Jurisdiction; Waiver of
--------------------------------------------------------
Immunities. By the execution and delivery of this Indenture, the Company (i)
- ----------
acknowledges that it has, by separate written instruments, designated and
appointed CT Corporation System, 1633 Broadway, New York, NY 10019 ("CT
Corporation System") (and any successor entity), as its authorized agent upon
which process may be served in any suit or proceeding arising out of or relating
to this Indenture that may be instituted in any federal or state court in the
Borough of Manhattan, City of New York, State of New York or brought under
federal or state securities laws, and represent and warrant that CT Corporation
System has accepted such designation, (ii) submits to the jurisdiction of any
such court in any such suit or proceeding and (iii) agrees that service of
process upon CT Corporation System and written notice of said service to the
Company, in accordance with Section 1.5 shall be deemed in every respect
effective service of process upon the Company in any such suit or proceeding.
The Company further agrees to take any and all action, including the execution
and filing of any and all such documents and instruments, as may be necessary to
continue such designation and appointment of CT Corporation System in full force
and effect for as long as any of the Securities remain Outstanding (subject to
the limitation set forth in clause (i)); provided, however, that the Company
may, and to the extent CT Corporation System ceases to be able to be served on
the basis contemplated herein shall, by written notice to the Trustee, designate
such additional or alternative agent for service of process under this Section
1.19 that (i) maintains an office located in the Borough of Manhattan City of
New York, State of New York, and (ii) is either (x) United States counsel for
the Company or (y) a corporate service company which acts as agent for service
of process for other persons in the ordinary course of its business. Such
written notice shall identify the name of such agent for service of process and
the address of the office of such agent for service of process in the Borough of
Manhattan, City of New York, State of New York.
To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court of (i) any jurisdiction in which the Company owns
or leases property or assets, (ii) the United States or the State of New York or
(iii) the Netherlands or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property and assets or this
Agreement or any of the Notes or
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actions to enforce judgments in respect of any thereof, the Company hereby
irrevocably waives such immunity in respect of its obligations under the above-
referenced documents, to the extent permitted by law.
SECTION 1.20 Judgment Currency. The Company hereby agrees to
-----------------
indemnify the Trustee, its directors, its officers and each person, if any, who
controls the Trustee within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act against any loss incurred by such person as a
result of any judgment or order being given or made against the Company for any
U.S. Dollar amount due under this Agreement and such judgment or order being
expressed and paid in a currency (the "Judgment Currency") other than U.S.
Dollars and as a result of any variation as between (i) the rate of exchange at
which the U.S. Dollar amount is converted into the Judgment Currency for the
purpose of such judgment or order and (ii) the spot rate of exchange in The City
of New York at which such party on the date of payment of such judgment or order
is able to purchase U.S. Dollars with the amount of the Judgment Currency
actually received by such party. The foregoing indemnity shall continue in full
force and effect notwithstanding any such judgment or order as aforesaid. The
term "spot rate of exchange" shall include any premiums and costs of exchange
payable in connection with the purchase of, or conversion into, U.S. Dollars.
ARTICLE II
SECURITY FORMS
SECTION 2.1 Forms Generally. The Securities and the Trustee's
---------------
certificate of authentication with respect thereto shall be in substantially the
form set forth in Exhibit A hereto with respect to the Dollar Denominated
Securities and Exhibit B hereto with respect to the Euro Denominated Securities,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or system on which the Securities may be listed or eligible for trading or as
may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities. Any portion of
the text of any Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security.
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The Certificated Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner permitted by
the rules of any securities exchange or system on which the Securities may be
listed or eligible for trading, all as determined by the managing directors,
officers and authorized representatives of the Company executing such
Securities, as evidenced by their execution of such Securities.
ARTICLE III
THE SECURITIES
SECTION 3.1 Title and Terms. The aggregate principal amount of
---------------
Dollar Denominated Securities and Euro Denominated Securities which may be
authenticated and delivered under this Indenture is initially limited to
$600,000,000 and (Euro)200,000,000, respectively, except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Section 3.4, 3.5, 3.6, 9.6,
10.10, 10.16 or 11.8.
The Initial Securities shall be known and designated as the
"$600,000,000 11 1/4% Series A Senior Notes due 2010" and the
"(Euro)200,000,000 11 1/4% Series A Senior Notes due 2010" and the Exchange
Securities shall be known as the "$600,000,000 11 1/4% Series B Senior Notes"
and the "(Euro)200,000,000 11 1/4% Series B Senior Notes". The final Stated
Maturity of the Securities shall be February 1, 2010. Except as set forth in the
next paragraph of this Section 3.1, interest on the Dollar Denominated
Securities will accrue at a rate of 11 1/4% per annum from January 20, 2000 or
from the most recent Interest Payment Date to which cash interest has been paid
or duly provided for, and will be payable semiannually in arrears on February 1
and August 1 of each year, commencing August 1, 2000 to the Holders of record on
the immediately preceding Regular Record Date. Except as set forth in the next
paragraph of this Section 3.1, interest on the Euro Denominated Securities will
accrue at a rate of 11 1/4% per annum from January 20, 2000 or from the most
recent Interest Payment Date to which cash interest has been paid or duly
provided for, and will be payable semiannually in arrears on February 1 and
August 1 of each year, commencing August 1, 2000 to the Holders of record on the
immediately preceding Regular Record Date. Interest on the Securities will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
In the event that, at any time prior to 180 days following the Issue
Date, the Company (x) issues or sells, or (y) offers or negotiates to issue or
sell, for
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cash, any debt securities (other than debt securities convertible or
exchangeable into Capital Stock of the Company) to Qualified Institutional
Buyers who, as a regular part of their business, purchase debt securities
comparable to the Securities or the Other Senior Notes (any of the events
described in (x) or (y) at any time during such 180 day period, an "Interest
Rate Adjustment Event"), the interest rate otherwise applicable to the
Securities shall, on and after the date of such Interest Rate Adjustment Event,
be increased by 25 basis points such that, on and after the date of such
Interest Rate Adjustment Event, interest on the Dollar Denominated Securities
will accrue at a rate of 11 1/2% per annum. Any amounts owing as a result of
such increase shall be paid to the Holders of record as of the Regular Record
Date next following any such Interest Rate Adjustment Event, on the immediately
following Interest Payment Date, and thereafter will be payable semiannually in
arrears on February 1 and August 1 of each year to the Holders of record on the
immediately preceding Regular Record Date.
Promptly following the occurrence of an Interest Rate Adjustment
Event, the Company shall give notice of the occurrence thereof to the Trustee,
to the Paying Agent and to each Holder of Securities in the manner provided for
in Section 1.6. Such notice shall include the amount to be paid to the Holders
of record as of such Regular Record Date on the next following Interest Payment
Date.
Principal of, premium, if any, and interest on the Securities will be
payable, and the Securities may be exchanged or transferred, at the office or
agency of the Company in The City of New York and in London, which, unless
otherwise provided by the Company, will be the offices of the Trustee. At the
option of the Company, interest may be paid by check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Security
Register.
The Securities shall be redeemable as provided in Article Eleven.
At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and certain
Events of Default thereunder may be defeased as provided in Article Twelve.
The Securities will be general, senior, unsecured obligations of the
Company, ranking pari passu in right of payment with each other.
SECTION 3.2 Denominations. The Securities (including any Global
-------------
Security) shall be issuable only in registered form without coupons and only in
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denominations of US$1,000 in the case of the Dollar Denominated Securities or
(Euro)1,000 in the case of Euro Denominated Securities or any integral multiple
of US$1,000 or (Euro)1,000, as the case may be, above such amount. The
Securities shall not be issuable in bearer form. No service charge shall be made
for any registration of transfer or exchange of Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
SECTION 3.3 Execution, Authentication, Delivery and Dating.
----------------------------------------------
(a) The Securities shall be executed on behalf of the Company by its
Chief Executive Officer, its President, a Vice President or a managing director
(being an executive officer of the Company with due authority granted by the
management board of the Company to execute Securities) of the Company. The
signature of any of these officers or directors on the Securities may be manual
or facsimile signatures of the present or any future such authorized officer or
director and may be imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers or directors of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities. In addition, any
Security may be signed on behalf of the Company by such Persons as, at the
actual date of the execution of such Security, shall be the proper officers or
directors of the Company, although at the date of such Security or of the
execution of this Indenture any such Person was not such officer or director.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
Each Security shall be dated the date of its authentication. No
Security shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security a certificate
of authentication substantially in the form provided for herein duly executed by
the Trustee by manual signature of an authorized signatory, and such certificate
upon any Security shall be
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conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder and is entitled to the benefits of this
Indenture.
On the Issue Date the Trustee shall authenticate Initial Securities
for original issue in the aggregate principal amount not to exceed $600,000,000
and (Euro)200,000,000, respectively, upon a written order of the Company in the
form of an Officer's Certificate. Such order shall specify the amount of the
Initial Securities to be authenticated and the date on which the original issue
of Initial Securities is to be authenticated. In addition, the Trustee shall
authenticate Exchange Securities for original issue in the aggregate principal
amount of up to $600,000,000 and (Euro)200,000,000, in each case upon a written
order of the Company in the form of an Officer's Certificate, provided that such
Exchange Securities shall be issuable only upon the valid surrender for
cancellation of Initial Securities of a like aggregate principal amount in
accordance with the Registration Rights Agreement. The Officer's Certificate
shall specify the amount of Exchange Securities to be authenticated and the date
on which the Exchange Securities are to be authenticated. Upon the written order
of the Company in the form of an Officer's Certificate, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company.
(b) The terms and provisions contained in the form of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
(c) Restricted Global Securities. (i) The Initial Securities offered
----------------------------
and sold in reliance on Rule 144A shall be issued in the form of one or more
global securities (the "Restricted Global Security") in definitive, fully
registered form without interest coupons, with such applicable legends as are
provided for in Exhibit A hereto, except as otherwise permitted herein.
(ii) Each Restricted Dollar Denominated Global Security shall be
registered in the name of DTC or its nominee and deposited with the
Trustee, at its Corporate Trust Office, as custodian for DTC, duly
executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of a Restricted
Dollar Denominated Global Security may from time to time be increased
or decreased by adjustments made on the records of the Trustee, as
custodian for DTC, in connection with a corresponding
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decrease or increase in the aggregate principal amount of a Dollar
Denominated Security that is a Regulation S Global Security (a
"Regulation S Dollar Denominated Global Security") or a Dollar
Denominated Security that is an Unrestricted Global Security (an
"Unrestricted Dollar Denominated Global Security"), as hereinafter
provided.
(iii) Each Restricted Euro Denominated Global Security
shall be registered in the name of the Common Depositary or its
nominee and deposited with the Common Depositary, on behalf of
Euroclear and Cedelbank, duly executed by the Company and
authenticated by the Trustee as hereinafter provided for credit to the
respective accounts of Euroclear and Cedelbank. The aggregate
principal amount of a Restricted Euro Denominated Global Security may
from time to time be increased or decreased by adjustments made on the
records of the Common Depositary, in connection with a corresponding
decrease or increase in the aggregate principal amount of a Euro
Denominated Security that is a Regulation S Global Security (a
"Regulation S Euro Denominated Global Security") or a Euro Denominated
Security that is an Unrestricted Global Security (an "Unrestricted
Euro Denominated Global Security"), as hereinafter provided.
(d) Regulation S Global Securities. (i) Initial Securities
------------------------------
offered and sold in reliance on Regulation S shall be initially issued in
the form of one or more Global Securities in definitive, fully registered
form without interest coupons, with such applicable legends as are provided
for in Exhibit A hereto, except as otherwise permitted herein. Until such
time as the Restricted Period shall have terminated, such Global Securities
shall be referred to herein as the "Regulation S Global Security." After
such time as the Restricted Period shall have terminated, such Regulation S
Global Securities shall be referred to herein, as the "Unrestricted Global
Securities."
(ii) Each Regulation S Dollar Denominated Global Security
and Unrestricted Dollar Denominated Global Security shall be
registered in the name of DTC or its nominee and deposited with the
Trustee, at its Corporate Trust Office, as custodian for DTC, duly
executed by the Company and authenticated by the Trustee as herein
after provided, for credit to the respective accounts at DTC of
55
<PAGE>
the depositaries for Euroclear or Cedelbank. The aggregate principal
amount of each Regulation S Dollar Denominated Global Security (or
Unrestricted Dollar Denominated Global Security) may from time to time
be increased or decreased by adjustments made on the records of the
Trustee, as custodian for DTC, in connection with a corresponding
decrease or increase in the aggregate principal amount of a Restricted
Dollar Denominated Global Security, as hereinafter provided.
(iii) The Regulation S Euro Denominated Global Security and
Unrestricted Euro Denominated Global Security shall be registered in
the name of the Common Depositary or its nominee and deposited with
the Common Depositary, as custodian for Euroclear and Cedelbank, duly
executed by the Company and authenticated by the Trustee as
hereinafter provided, for credit to the respective accounts of
Euroclear and Cedelbank. The aggregate principal amount of a
Regulation S Euro Denominated Global Security or an Unrestricted
Global Security may from time to time be increased or decreased by
adjustments made on the records of the Common Depositary, as
custodian for Euroclear and Cedelbank, in connection with a
corresponding decrease or increase in the aggregate principal amount
of a Restricted Euro Denominated Global Security, as hereinafter
provided.
(e) The Exchange Dollar Denominated Securities and the Exchange
Euro Denominated Securities which are issued in exchange for initial Dollar
Denominated Securities and initial Euro Denominated Securities respectively
shall be issued initially in the form of one or more permanent Global Securities
in definitive, fully registered form without interest coupons, substantially in
the form set forth in Exhibit A and Exhibit B respectively, deposited with the
Trustee, as custodian for DTC in the case of the Exchange Dollar Denominated
Securities, and deposited with the Common Depositary, on behalf of Euroclear and
Cedelbank in the case of the Exchange Euro Denominated Securities, and shall
bear the applicable legends relating to Global Securities set forth in Exhibit A
and Exhibit B that are required to appear on such Securities. Exchange Dollar
Denominated Securities and Exchange Euro Denominated Securities shall constitute
Unrestricted Securities.
(f) In case the Company, pursuant to Article Eight, shall be
Consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any
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Person, and the successor Person resulting from such consolidation, or surviving
such merger, or into which the Company shall have been merged, or the Person
which shall have received a conveyance, transfer, lease or other disposition as
aforesaid, shall have executed an indenture supplemental hereto with the Trustee
pursuant to Article Eight, any of the Securities authenticated or delivered
prior to such consolidation, merger, conveyance, transfer, lease or other
disposition may, from time to time, at the request of the successor Person, be
exchanged for other Securities executed in the name of the successor Person with
such changes in phraseology and form as may be appropriate, but otherwise in
substance of like tenor as the Securities surrendered for such exchange and of
like principal amount; and the Trustee, upon Company Request of the successor
Person, shall authenticate and deliver Securities as specified in such request
for the purpose of such exchange. If Securities shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Securities, such successor Person, at the option of the Holders but without
expense to them, shall provide for the exchange of all Securities at the time
Outstanding for Securities authenticated and delivered in such new name.
SECTION 3.4 Temporary Securities. Pending the preparation of
--------------------
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 10.2,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
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SECTION 3.5 Registration, Registration of Transfer and Exchange. The
---------------------------------------------------
Company shall cause to be kept at the Corporate Trust Office of the Trustee a
register (the register maintained in such office and in any other office or
agency designated pursuant to Section 10.2 being herein sometimes referred to as
the "Security Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities and
of transfers and exchange of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as security registrar (the "Security Registrar") for the purpose of registering
Securities and transfers and exchanges of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 10.2, the Company
shall execute, the Trustee shall authenticate and deliver, and the Security
Registrar shall register, if the requirements, of such transfer are met, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like currency and aggregate
principal amount (including an exchange of Initial Securities for Exchange
securities), upon surrender of the Securities to be exchanged at such office
or agency provided that Dollar Denominated Securities may not be exchanged for
Euro Denominated Securities, and vice versa. Whenever any Securities are so
surrendered for exchange, the Company shall execute, the Trustee shall
authenticate and deliver, and the Security Registrar shall register, the
Securities which the Holder making the exchange is entitled to receive, provided
that no exchange of Initial Securities for Exchange Securities shall occur until
an Exchange Registration Statement shall have been declared effective by the SEC
(confirmed in an Officer's Certificate) and that the Initial Securities to be
exchanged for the Exchange Securities shall be cancelled by the Trustee.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
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Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Security Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.4, 9.6, 10.10, 10.16 or 11.8 not involving
any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the selection of Securities to be redeemed under Section 11.4 and
ending at the close of business on the day of such mailing of the relevant
notice of redemption or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities. If (i)
------------------------------------------------
any mutilated Security is surrendered to the Trustee or (ii) the Company and the
Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Security, and there is delivered to the Company and the Trustee such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company shall execute and upon
Company Order the Trustee shall authenticate and deliver, in exchange for any
such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount, bearing a number
not contemporaneously Outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
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governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 3.6 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7 Payment of Interest; Interest Rights Preserved. Interest
----------------------------------------------
on any Security which is payable, and is punctually paid or duly provided for,
on any Interest Payment Date shall be paid to the Person in whose name such
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest at the office or agency of
the Company maintained for such purpose pursuant to Section 10.2; provided,
however, that each installment of interest may at the Company's option be paid
(i) by mailing a check for such interest, payable to or upon the written order
of the Person entitled thereto pursuant to Section 3.8, to the address of such
Person as it appears in the Security Register, or (ii) by wire transfer of such
interest in immediately available funds to an account, in the case of the Dollar
Denominated Securities, located in the United States maintained by the DTC, and,
in the case of the Euro Denominated Securities, to an account located in Europe.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease to
be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
must be paid by the Company, at its election in each case, as provided in
paragraph (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date for
the
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payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of U.S. Dollars (in the case of the Dollar Denominated
Securities) or European Legal Tender (in the case of the Euro Denominated
Securities) equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such U.S. Dollars (in
the case of the Dollar Denominated Securities) or European Legal Tender (in the
case of the Euro Denominated Securities) when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date, and in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
given in the manner provided for in Section 1.6, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so given, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following paragraph(2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange or system on which the Securities may be listed or eligible for
trading, and upon such notice as may be required by such exchange or system, if,
after written notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8 Persons Deemed Owners. Prior to the due presentment of
---------------------
a Security for registration of transfer, the Company, the Trustee and
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any agent of the Company or the Trustee may treat the Person in whose name such
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of (and premium, if any) and (subject to Sections
3.5 and 3.7) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and none of the Company, the Trustee or
any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 3.9 Cancellation. All Securities surrendered for payment,
------------
redemption, registration of transfer or exchange shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver to
the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the
Company has not issued and sold, and all Securities so delivered shall be
promptly cancelled by the Trustee. If the Company shall so acquire any of the
Securities, however, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of by the Trustee in accordance
with its customary procedures and certification of their disposal delivered to
the Company unless by Company Order the Company shall direct that cancelled
Securities be returned to it.
SECTION 3.10 Computation of Interest. Interest on the Securities
-----------------------
shall be computed on the basis of a 360-day year comprised of twelve 30-day
months.
SECTION 3.11 "CUSIP" and/or "ISIN" Numbers. The Company in issuing
-----------------------------
the Securities may use a "CUSIP" and/or "ISIN" number (if then generally in
use), and if so, the Trustee and the Common Depositary shall use "CUSIP" and/or
"ISIN" numbers in notices of redemption or exchange as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
as to the correctness or accuracy of such numbers either as printed in the
notice or on the Securities, and that reliance may be placed only on the other
identification numbers printed on the Securities. The Company shall promptly
notify the Trustee
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and the Common Depositary in writing of any change in the "CUSIP" or "ISIN"
numbers of the Securities.
SECTION 3.12 Book-Entry Provisions for Global Securities,
-------------------------------------------
Certificated Securities.
- -----------------------
Except as indicated below in this Section 3.12, the Securities shall
be represented only by Global Securities. The Global Securities shall be
deposited with a Depositary for such Securities (and shall be registered in the
name of such Depositary or its nominee). The Depositary for the Dollar
Denominated Securities shall be DTC unless the Company appoints a successor
Depositary by delivery of a Company Order to the Trustee specifying such
successor Depositary. The Depositary for the Euro Denominated Securities shall
be Citibank, N.A. unless Euroclear and Cedelbank appoint a successor Depositary
(which shall be the "Common Depositary").
All payments on a Dollar Denominated Global Security will be made to
DTC or its nominee, as the case may be, as the registered owner and Holder of
such Dollar Denominated Global Security. All payments on a Euro Denominated
Global Security will be made to the order of the Common Depositary or its
nominee, as the case may be, as the registered holder of such Euro Denominated
Global Security. In each case, the Company will be fully discharged by payment
to or to the order of such Depositary from any responsibility or liability in
respect of each amount so paid. Upon receipt of any such payment in respect of a
Dollar Denominated Global Security, DTC will credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Dollar Denominated Global Security as shown on the
records of DTC. The Common Depositary will instruct the Euro Paying Agent to
make payments in respect of the Euro Denominated Securities to Euroclear and
Cedelbank in amounts proportionate to their respective beneficial interests in
the principal amount of each Euro Denominated Global Security, and Euroclear and
Cedelbank will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security as shown on the records of Euroclear and Cedelbank.
Unless and until it is exchanged in whole or in part for Certificated
Securities, a Global Security may not be transferred except as a whole by the
relevant Depositary or nominee thereof to another nominee of the Depositary or
to a successor of the Depositary or a nominee of such successor.
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Owners of beneficial interests in Global Securities shall be entitled
or required, as the case may be, but only under the circumstances described in
this Section 3.12, to receive physical delivery of Certificated Securities.
Interests in a Global Security shall be exchangeable or transferable,
as the case may be, for Certificated Securities if (i) in the case of a Dollar
Denominated Global Security, DTC notifies the Company that it is unwilling or
unable to continue as Depositary for such Dollar Denominated Global Security, or
DTC ceases to be a "Clearing Agency" registered under the United States
Securities Exchange Act of 1934, and a successor depositary is not appointed by
the Company within one hundred and twenty (120) days, (ii) in the case of a Euro
Denominated Global Security, Euroclear and Cedelbank notify the Company that
they are unwilling or unable to continue as clearing agencies for such Euro
Denominated Global Security, (iii) in the case of a Euro Denominated Global
Security, the Common Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such Euro Denominated Global Security, and
a successor Common Depositary is not appointed within one hundred and twenty
(120) days or (iv) in the case of any Global Security, an Event of Default has
occurred and is continuing with respect thereto and the owner of a beneficial
interest therein requests such exchange or transfer. Upon the occurrence of any
of the events described in the preceding sentence, the Company shall cause the
appropriate Certificated Securities to be delivered to the owners of beneficial
interests in the Global Securities or the Participants in DTC, Euroclear or
Cedelbank through which such owners hold their beneficial interest. Certificated
Securities shall be exchangeable or transferable for interests in other
Certificated Securities as described herein.
SECTION 3.13 Transfer and Exchange of Securities.
-----------------------------------
(a) Obligations with Respect to Transfers and Exchanges of Securities.
-----------------------------------------------------------------
Upon surrender for registration of transfer of any Security of a series to the
appropriate Registrar, and subject to the other provisions of this Section 3.13,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of such series of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, and subject to the other provisions of
this Section 3.13, Securities of any series may be exchanged for other
Securities of such series of any authorized denominations and of a like
aggregate principal amount, upon surrender of the Securities to be exchanged at
such office or agency. Whenever
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any Securities are so surrendered for exchange, and subject to the other
provisions of this Section 3.13, the Company shall execute, and the Trustee
shall authenticate and deliver, the Securities which the Holder making the
exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Indebtedness, and subject to the other provisions of this Section 3.13, entitled
to the same benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company, the Trustee or the Common
Depositary) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company or the appropriate Registrar and be
duly executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or governmental charge payable in connection with any
registration of transfer or exchange of Securities.
(b) Transfer and Exchange of Dollar Denominated Global Securities.
-------------------------------------------------------------
Notwithstanding any provisions of this Indenture or the Securities, transfers of
a Dollar Denominated Global Security, in whole or in part, transfers and
exchanges of interests therein of the kinds described in clauses (ii), (iii) and
(iv) below and exchange of interests in Dollar Denominated Global Securities or
of other Dollar Denominated Securities as described in clause (v) below, shall
be made only in accordance with this Section 3.13(b). Transfers and exchanges
subject to this Section 3.13 shall also be subject to the other provisions of
this Indenture that are not inconsistent with this Section 3.13.
(i) General. A Dollar Denominated Global Security may not be
-------
transferred, in whole or in part, to any Person other than DTC or a nominee
thereof or a successor to DTC or its nominee, and no such transfer to any
such other Person may be registered; provided that this clause (i) shall
not prohibit any transfer of a Dollar Denominated Security that is issued
in exchange for a Dollar Denominated Global Security but is not itself a
Dollar Denominated Global Security. No transfer of a Dollar Denominated
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Security of any series to any Person shall be effective under this
Indenture or the Dollar Denominated Securities of such series unless and
until such Dollar Denominated Security has been registered in the name of
such Person. Nothing in this Section 3.13(b)(i) shall prohibit or render
ineffective any transfer of a beneficial interest in a Dollar Denominated
Global Security effected in accordance with the other provisions of this
Section 3.13(b).
(ii) Restricted Global Security to Regulation S Global Security.
----------------------------------------------------------
If the Holder of a beneficial interest in a Restricted Dollar Denominated
Global Security of any series wishes at any time to transfer such interest
to a Person who wishes to take delivery thereof in the form of a beneficial
interest in a Regulation S Dollar Denominated Global Security of such
series, such transfer may be effected, subject to the rules and procedures
of DTC, Euroclear and Cedelbank, in each case to the extent applicable (the
"Applicable Procedures"), only in accordance with the provisions of this
Section 3.13(b)(ii). Upon receipt by the Dollar Registrar of (A) written
instructions given in accordance with the Applicable Procedures from an
Agent Member directing the Dollar Registrar, to credit or cause to be
credited to a specified Agent Member's account a beneficial interest in a
Regulation S Dollar Denominated Global Security in a principal amount equal
to that of the beneficial interest in a Restricted Dollar Denominated
Global Security to be so transferred; (B) a written order given in
accordance with the Applicable Procedures containing information regarding
the account of the Agent Member (and/or the Euroclear or Cedelbank account,
as the case may be) to be credited with, and the account of the Agent
Member to be debited for, such beneficial interest; and (C) a certificate
in substantially the form set forth in Exhibit C given by the Holder of
such beneficial interest, the principal amount of a Restricted Dollar
Denominated Global Security shall be reduced, and the principal amount of a
Regulation S Dollar Denominated Global Security shall be increased, by the
principal amount of the beneficial interest in a Restricted Dollar
Denominated Global Security to be so transferred, in each case by means of
an appropriate adjustment on the records of the Dollar Registrar, and the
Dollar Registrar shall instruct DTC or its authorized representative to
make a corresponding adjustment to its records and to credit or cause to be
credited to the account of the Person specified
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in such instructions (which shall be the Agent Member for Euroclear or
Cedelbank or both, as the case may be) a beneficial interest in a
Regulation S Dollar Denominated Global Security having a principal amount
equal to the amount so transferred.
(iii) Restricted Dollar Denominated Global Security to
------------------------------------------------
Unrestricted Dollar Denominated Global Security. If the Holder of a
-----------------------------------------------
beneficial interest in a Restricted Dollar Denominated Global Security of
any series wishes at any time to transfer such interest to a Person who
wishes to take delivery thereof in the form of a beneficial interest in an
Unrestricted Dollar Denominated Global Security of such series, such
transfer may be effected, subject to the Applicable Procedures, only in
accordance with this Section 3.13(b)(iii). Upon receipt by the Dollar
Registrar, of (A) written instructions given in accordance with the
Applicable Procedures from an Agent Member directing the Dollar Registrar
to credit or cause to be credited to a specified Agent Member's account a
beneficial interest in an Unrestricted Dollar Denominated Global Security
in a principal amount equal to that of the beneficial interest in a
Restricted Dollar Denominated Global Security to be so transferred, (B) a
written order given in accordance with the Applicable Procedures containing
information regarding the account of the Agent Member (and, if applicable,
the Euroclear or Cedelbank account, as the case may be) to be credited
with, and the account of the Agent Member to be debited for, such
beneficial interest, and (C) a certificate in substantially the form set
forth in Exhibit D given by the Holder of such beneficial interest, the
principal amount of the Restricted Dollar Denominated Global Security shall
be reduced, and the principal amount of an Unrestricted Dollar Denominated
Global Security shall be increased, by the principal amount of the
beneficial interest in a Restricted Global Dollar Denominated Security to
be so transferred, in each case by means of an appropriate adjustment on
the records of the Dollar Registrar and the Dollar Registrar shall instruct
DTC or its authorized representative to make a corresponding adjustment to
its records and to credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest in an
Unrestricted Dollar Denominated Global Security having a principal amount
equal to the amount so transferred.
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(iv) Regulation S Dollar Denominated Global Security or
--------------------------------------------------
Unrestricted Dollar Denominated Global Security to Restricted Dollar
--------------------------------------------------------------------
Denominated Global Security. If the Holder of a beneficial interest in a
---------------------------
Regulation S Dollar Denominated Global Security of any series or an
Unrestricted Dollar Denominated Global Security of any series wishes at any
time to transfer such interest to a Person who wishes to take delivery
thereof in the form of a beneficial interest in a Restricted Dollar
Denominated Global Security of such series, such transfer may be effected,
subject to the Applicable Procedures, only in accordance with this Section
3.13(b)(iv). Upon receipt by the Dollar Registrar of (A) written
instructions given in accordance with the Applicable Procedures from an
Agent Member directing the Dollar Registrar to credit or cause to be
credited to a specified Agent Member's account a beneficial interest in a
Restricted Dollar Denominated Global Security in a principal amount equal
to that of the beneficial interest in a Regulation S Dollar Denominated
Global Security or an Unrestricted Dollar Denominated Global Security to be
so transferred, (B) a written order given in accordance with the Applicable
Procedures containing information regarding the account of the Agent Member
to be credited with, and the account of the Agent Member (and, if
applicable, the Euroclear or Cedelbank account, as the case may be) to be
debited for, such beneficial interest, and (C) with respect to a transfer
of a beneficial interest in a Regulation S Dollar Denominated Global
Security (but not an Unrestricted Dollar Denominated Global Security) to a
Person whom the transferor reasonably believes is a QIB, a certificate in
substantially the form set forth in Exhibit E given by the Holder of such
beneficial interest, the principal amount of a Restricted Dollar
Denominated Global Security shall be increased, and the principal amount of
a Regulation S Dollar Denominated Global Security or an Unrestricted Dollar
Denominated Global Security shall be reduced, by the principal amount of
the beneficial interest in a Restricted Dollar Denominated Global Security
to be so transferred, in each case by means of an appropriate adjustment on
the records of the Dollar Registrar and the Dollar Registrar shall instruct
DTC or its authorized representative to make a corresponding adjustment to
its records and to credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest in the
Restricted Dollar
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Denominated Global Security having a principal amount equal to the amount
so transferred.
(v) Exchanges of Dollar Denominated Global Security for Dollar
----------------------------------------------------------
Denominated Non-Global Security. In the event that a Dollar Denominated
-------------------------------
Global Security or any portion thereof is exchanged for Dollar Denominated
Securities other than Dollar Denominated Global Securities, such other
Dollar Denominated Securities may in turn be exchanged (on transfer or
otherwise) for Securities that are not Dollar Denominated Global Securities
or for beneficial interests in a Dollar Denominated Global Security (if any
is then Outstanding) only in accordance with such procedures, which shall
be substantially consistent with the provisions of clauses (i) through (iv)
above and (vi) below (including the certification requirements intended to
insure that transfers and exchanges of beneficial interests in a Dollar
Denominated Global Security comply with Rule 144A, Rule 144 or Regulation
S, as the case may be) and any Applicable Procedures, as may be from time
to time adopted by the Company and the Trustee.
(vi) Interest in Regulation S Dollar Denominated Global Security
-----------------------------------------------------------
to be Held Through Euroclear or Cedelbank. Until the termination of the
-----------------------------------------
Restricted Period with respect thereto, interests in a Regulation S Global
Security may be held only through Agent Members acting for and on behalf of
Euroclear and Cedelbank, provided that this clause (vi) shall not prohibit
any transfer in accordance with Section 3.13(b)(iv) hereof.
(c) Transfer and Exchange of Euro Denominated Global Securities.
-----------------------------------------------------------
Notwithstanding any provisions of this Indenture or the Euro Denominated
Securities, transfers of a Euro Denominated Global Security, in whole or in
part, transfers and exchanges of interests therein of the kinds described in
clauses (ii), (iii) and (iv) below and exchange of interests in Euro Denominated
Global Securities or of other Euro Denominated Securities as described in clause
(v) below, shall be made only in accordance with this Section 3.13(c). Transfers
and exchanges subject to this Section 3.13 shall also be subject to the other
provisions of this Indenture that are not inconsistent with this Section 3.13.
69
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(i) General. A Euro Denominated Global Security may not be
-------
transferred, in whole or in part, to any Person other than the Common
Depositary or a nominee thereof or a successor Common Depositary or its
nominee, and no such transfer to any such other Person may be registered;
provided that this clause (i) shall not prohibit any transfer of a Euro
Denominated Security that is issued in exchange for a Euro Denominated
Global Security but is not itself a Euro Denominated Global Security. No
transfer of a Euro Denominated Security to any Person shall be effective
under this Indenture or the Euro Denominated Securities unless and until
such Euro Denominated Security has been registered in the name of such
Person. Nothing in this Section 3.13(c)(i) shall prohibit or render
ineffective any transfer of a beneficial interest in a Euro Denominated
Global Security effected in accordance with the other provisions of this
Section 3.13(c).
(ii) Restricted Euro Denominated Global Security to Regulation S
-----------------------------------------------------------
Euro Denominated Global Security. If the Holder of a beneficial interest
--------------------------------
in a Restricted Euro Denominated Global Security wishes at any time to
transfer such interest to a Person who wishes to take delivery thereof in
the form of a beneficial interest in a Regulation S Euro Denominated Global
Security, such transfer may be effected, subject to the Applicable
Procedures, only in accordance with the provisions of this Section
3.13(c)(ii). Upon receipt by the Euro Registrar of (A) written instructions
given in accordance with the Applicable Procedures from Euroclear or
Cedelbank directing the Euro Registrar to credit or cause to be credited to
Euroclear's or Cedelbank's account a beneficial interest in a Regulation S
Euro Denominated Global Security in a principal amount equal to that of the
beneficial interest in a Restricted Euro Denominated Global Security to be
so transferred; (B) a written order given in accordance with the Applicable
Procedures containing information regarding the account of Euroclear or
Cedelbank to be credited with, and the account of Euroclear or Cedelbank to
be debited for, such beneficial interest and (C) a certificate in
substantially the form set forth in Exhibit C given by the Holder of such
beneficial interest, the principal amount of a Restricted Euro Denominated
Global Security shall be reduced, and the principal amount of a Regulation
S Euro Denominated Global Security shall be increased, by the principal
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<PAGE>
amount of the beneficial interest in a Restricted Euro Denominated Global
Security to be so transferred, in each case by means of an appropriate
adjustment on the records of the Euro Registrar and the Euro Registrar
shall instruct the Common Depositary or its authorized representative to
make a corresponding adjustment to its records and to credit or cause to be
credited to the account of Euroclear or Cedelbank a beneficial interest in
a Regulation S Euro Denominated Global Security having a principal amount
equal to the amount so transferred.
(iii) Restricted Euro Denominated Global Security to Unrestricted
-----------------------------------------------------------
Euro Denominated Global Security. If the Holder of a beneficial interest
--------------------------------
in a Restricted Euro Denominated Global Security wishes at any time to
transfer such interest to a Person who wishes to take delivery thereof in
the form of a beneficial interest in an Unrestricted Euro Denominated
Global Security, such transfer may be effected, subject to the Applicable
Procedures, only in accordance with this Section 3.13(c)(iii). Upon receipt
by the Euro Registrar of (A) written instructions given in accordance with
the Applicable Procedures from Euroclear or Cedelbank directing the Euro
Registrar to credit or cause to be credited to Euroclear's or Cedelbank's
account a beneficial interest in an Unrestricted Euro Denominated Global
Security in a principal amount equal to that of the beneficial interest in
a Restricted Euro Denominated Global Security to be so transferred, (B) a
written order given in accordance with the Applicable Procedures containing
information regarding the account of Euroclear or Cedelbank to be credited
with, and the account of Euroclear or Cedelbank to be debited for, such
beneficial interest and (C) a certificate in substantially the form set
forth in Exhibit D given by the Holder of such beneficial interest, the
principal amount of the Restricted Euro Denominated Global Security shall
be reduced, and the principal amount of an Unrestricted Euro Denominated
Global Security shall be increased, by the principal amount of the
beneficial interest in a Restricted Euro Denominated Global Security to be
so transferred, in each case by means of an appropriate adjustment on the
records of the Euro Registrar and the Euro Registrar shall instruct the
Common Depositary or its authorized representative to make a corresponding
adjustment to its records and to credit or cause to be credited to the
account of Euroclear or Cedelbank a beneficial interest
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in a Regulation S Euro Denominated Global Security having a principal
amount equal to the amount so transferred.
(iv) Regulation S Euro Denominated Global Security or
------------------------------------------------
Unrestricted Euro Denominated Global Security to Restricted Euro
----------------------------------------------------------------
Denominated Global Security. If the Holder of a beneficial interest in a
---------------------------
Regulation S Euro Denominated Global Security or an Unrestricted Euro
Denominated Global Security wishes at any time to transfer such interest to
a Person who wishes to take delivery thereof in the form of a beneficial
interest in a Restricted Euro Denominated Global Security, such transfer
may be effected, subject to the Applicable Procedures, only in accordance
with this Section 3.13(c)(iv). Upon receipt by the Euro Registrar of (A)
written instructions given in accordance with the Applicable Procedures
from Euroclear or Cedelbank directing the Euro Registrar to credit or cause
to be credited to Euroclear's or Cedelbank's account a beneficial interest
in a Restricted Euro Denominated Global Security in a principal amount
equal to that of the beneficial interest in a Regulation S Euro Denominated
Global Security or an Unrestricted Euro Denominated Global Security to be
so transferred, (B) a written order given in accordance with the Applicable
Procedures containing information regarding the account of Euroclear or
Cedelbank to be credited with, and the account of Euroclear or Cedelbank to
be debited for, such beneficial interest and (C) with respect to a transfer
of a beneficial interest in a Regulation S Euro Denominated Global Security
(but not an Unrestricted Euro Denominated Global Security) to a Person whom
the transferor reasonably believes is a QIB, a certificate in substantially
the form set forth in Exhibit E given by the Holder of such beneficial
interest, the principal amount of a Restricted Euro Denominated Global
Security shall be increased, and the principal amount of a Regulation S
Euro Denominated Global Security or an Unrestricted Euro Denominated Global
Security shall be reduced, by the principal amount of the beneficial
interest in a Restricted Euro Denominated Global Security to be so
transferred, in each case by means of an appropriate adjustment on the
records of the Euro Registrar and the Euro Registrar shall instruct the
Common Depositary or its authorized representative to make a corresponding
adjustment to its records and to credit or cause to be credited to the
account of the Person specified in such instructions a beneficial
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<PAGE>
interest in a Restricted Euro Denominated Global Security having a
principal amount equal to the amount so transferred.
(v) Exchanges of Euro Denominated Global Security for Euro
------------------------------------------------------
Denominated Non-Global Security. In the event that a Euro Denominated
-------------------------------
Global Security or any portion thereof is exchanged for Securities other
than Euro Denominated Global Securities, such other Securities may in turn
be exchanged (on transfer or otherwise) for Securities that are not Euro
Denominated Global Securities or for beneficial interests in a Euro
Denominated Global Security (if any is then Outstanding) only in accordance
with such procedures, which shall be substantially consistent with the
provisions of clauses (i) through (iv) above and (vi) below (including the
certification requirements intended to insure that transfers and exchanges
of beneficial interests in a Euro Denominated Global Security comply with
Rule 144A, Rule 144 or Regulation S, as the case may be) and any Applicable
Procedures, as may be from time to time adopted by the Company and the
Trustee.
(vi) Interest in Euro Denominated Global Security to be Held
-------------------------------------------------------
Through Euroclear or Cedelbank. Interests in a Euro Denominated Global
------------------------------
Security may be held only through Agent Members acting for and on behalf of
Euroclear and Cedelbank, provided that this clause (vi) shall not prohibit
any transfer in accordance with Section 3.13(c)(iv) hereof.
(d) Legends. Each Restricted Security and Global Security issued
-------
hereunder shall, upon issuance, bear the legends set forth in Exhibit A hereto
that are required to be applied to such a Security and such required legends
shall not be removed from such Security except as provided in the next sentence
or Section 3.13(e). The legend required for a Restricted Security may be removed
from a Security if there is delivered to the Company and the appropriate
Registrar such satisfactory evidence, which may include an opinion of
independent counsel licensed to practice law in the State of New York, as may be
reasonably required by the Company that neither such legend nor the restrictions
on transfer set forth therein are required to ensure that transfers of such
Security will not violate the registration requirements of the Securities Act.
Upon provision of such satisfactory evidence, the Trustee, at the direction of
the Company, shall authenticate and deliver in exchange for such Security
another security or securities having an equal aggregate principal
73
<PAGE>
amount that does not bear such legend. If such a legend required for a
Restricted Security has been removed from a Security as provided above, it shall
not be a Restricted Security and no other Security issued in exchange for all or
any part of such Security shall bear such legend, unless the Company has
reasonable cause to believe that such other security is a "restricted security"
within the meaning of Rule 144 and instructs the Trustee in writing to cause a
legend to appear thereon.
(e) Global Securities. The provisions of clauses (i), (ii), (iii),
-----------------
and (iv) below shall apply only to Global Securities;
(i) General. Each Global Security authenticated under this
-------
Indenture shall be registered in the name of the appropriate Depositary or
a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor.
(ii) Transfer to Persons other than Depositary. Notwithstanding
-----------------------------------------
any other provision in this Indenture or the Securities, no Global Security
may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the
name of any person other than the appropriate Depositary or a nominee
thereof unless (A) in the case of a Dollar Denominated Global Security, DTC
notifies the Company that it is unwilling or unable to continue as
Depositary for such Global Security, or DTC ceases to be a "Clearing
Agency" registered under the United States Securities Exchange Act of 1934,
and a successor depositary is not appointed by the Company within one
hundred and twenty (120) days, (B) in the case of a Euro Denominated Global
Security, Euroclear and Cedelbank notify the Company that they are
unwilling or unable to continue as clearing agencies for such Euro
Denominated Global Security, (C) in the case of a Euro Denominated Global
Security, the Common Depositary notifies the Company that it is unwilling
or unable to continue as Depositary for such Euro Denominated Global
Security, and a successor Common Depositary is not appointed within one
hundred and twenty (120) days or (D) in the case of any Global Security, an
Event of Default has occurred and is continuing with respect thereto and
the owner of a beneficial interest therein requests such exchange or
transfer. Any Global Security exchanged pursuant to clause (A), (B) or (C)
above shall be so exchanged in whole and not in part and any Global
Security
74
<PAGE>
exchanged pursuant to clause (D) above may be exchanged in whole or from
time to time in part as directed by DTC. Any Security issued in exchange
for a Global Security or any portion thereof shall be a Global Security,
provided that any such Security so issued that is registered in the name of
a Person other than the appropriate Depositary or a nominee thereof shall
not be a Global Security.
(iii) Global Security to Certificated Security. Securities
----------------------------------------
issued in exchange for a Global Security or any portion thereof pursuant to
clause (ii) above shall be issued in definitive, fully registered form
without interest coupons, shall have an aggregate principal amount equal to
that of such Global Security or portion thereof to be so exchanged, shall
be registered in such names and be in such authorized denominations as the
appropriate Depositary shall designate and shall bear any legends required
hereunder. Any Global Security to be exchanged in whole shall be
surrendered by the appropriate Depositary to the Security Registrar. With
regard to any Global Security to be exchanged in part, either such Global
Security shall be so surrendered for exchange or, in the case of a Dollar
Denominated Global Security, if the Trustee is acting as custodian for DTC
or its nominee with respect to such Global Security or, in the case of a
Euro Denominated Global Security, if the Common Depositary is acting as
Depositary for Euroclear and Cedelbank, the principal amount thereof shall
be reduced, by an amount equal to the portion thereof to be so exchanged,
by means of an appropriate adjustment made on the records of the Trustee,
as Authenticating Agent, or of the Common Depositary. Upon any such
surrender or adjustment, the Trustee shall authenticate and deliver the
Security issuable on such exchange to or upon the order of the appropriate
Depositary or an authorized representative thereof.
(iv) In the event of the occurrence of any of the events
specified in clause (ii) above, the Company will promptly make available to
the Trustee a supply of Certificated Securities in definitive, fully
registered form, without interest coupons, sufficient to meet the Trustee's
requirements hereunder.
(v) No Rights of Agent Members in Global Security. No Agent
---------------------------------------------
Member of any Depositary nor any other Persons
75
<PAGE>
on whose behalf Agent Members may act (including Euroclear and Cedelbank
and account Holders and Participants therein) shall have any rights under
the Indenture with respect to any Global Security, or under any Global
Security, and each Depositary or its nominee, as the case may be, may be
treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner and Holder of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other
authorization furnished by the applicable Depositary or such nominee, as
the case may be, or impair, as between DTC, Euroclear and Cedelbank, their
respective Agent Members and any other person on whose behalf an Agent
Member may act, the operation of customary practices of such Persons
governing the exercise of the rights of a Holder of any Security.
SECTION 3.1 Special Transfer Provisions.
---------------------------
(a) Transfers to Institutional Accredited Investors. If Securities
-----------------------------------------------
are being transferred to an Institutional Accredited Investor, the Securities
shall be accompanied by delivery of a transferee certificate for Institutional
Accredited Investors substantially in the form of Exhibit H hereto and an
opinion of counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act.
(b) Other Transfers. If a Holder proposes to transfer a Security
---------------
pursuant to any exemption from the registration requirements of the Securities
Act other than as provided for above, the Security Registrar shall only register
such transfer or exchange if such transferor delivers to the Security Registrar
and the Trustee an Opinion of Counsel satisfactory to the Company and the
Security Registrar that such transfer is in compliance with the Securities Act
and the terms of this Indenture; provided that the Company may, based upon the
opinion of its counsel, instruct the Security Registrar by a Company Order not
to register such transfer in any case where the proposed transferee is not a
QIB, an Institutional Accredited Investor or a non-U.S. Person.
(c) General. By its acceptance of any Security bearing Legends, each
-------
Holder of such a Security acknowledges the restrictions on transfer of such
76
<PAGE>
Security set forth in this Indenture and in the Legends and agrees that it will
transfer such Security only as provided in this Indenture.
The Security Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.12 or this Section
3.14 for a period of two years, after which time such letters, notices and other
written communications shall at the written request of the Company be delivered
to the Company. The Company shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable time
upon the giving of reasonable prior written notice to the Security Registrar.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall upon Company Request cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of Securities expressly provided
for herein or pursuant hereto) and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture when
(1) either
(a) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.6 and (ii) Securities
for whose payment U.S. Dollars (in the case of the Dollar Denominated
Securities) or European Legal Tender (in the case of the Euro Denominated
Securities) have theretofore been deposited in trust with the Trustee or
any Paying Agent or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust as provided
in Section 10.3) have been delivered to the Trustee for cancellation; or
(b) (i) all such Securities not theretofore delivered to the Trustee
for cancellation have become due and payable, or (ii) the Company has given
irrevocable and unconditional notice of redemption for all of the
Outstanding
77
<PAGE>
Securities within 60 days of such notice pursuant to the redemption
provisions of this Indenture,
and the Company, in the case of (i) or (ii) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose an amount sufficient to pay and discharge the entire
Indebtedness on such Securities not theretofore delivered to the Trustee
for cancellation, for principal (and premium, if any) and accrued interest
(and Liquidated Damages, if any,) to the date of such deposit;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
(3) the Company has delivered irrevocable instructions to the Trustee
to apply the deposited U.S. Dollars (in the case of the Dollar Denominated
Securities) or European Legal Tender (in the case of the Euro Denominated
Securities) toward the payment of the Securities at Maturity or the Redemption
Date, as the case may be, which must be within 60 days thereof;
(4) the Holders of the Securities have a valid, perfected, exclusive
security interest in such trust; and
(5) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7 and, if U.S. Dollars
(in the case of the Dollar Denominated Securities) or European Legal Tender (in
the case of the Euro Denominated Securities) shall have been deposited with the
Trustee pursuant to clause(1)(b) of this Section 4.1, the obligations of the
Trustee under Section 4.2 and the last paragraph of Section 10.3 shall survive.
SECTION 4.2 Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture,
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<PAGE>
to the payment, either directly or through any Paying Agent (including the
Company acting as its own Paying Agent) as the Trustee may determine, to the
Persons entitled thereto, of the principal (and premium, if any) and interest
for whose payment such money has been deposited with the Trustee; but such money
need not be segregated from other funds except to the extent required by law.
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default. "Event of Default," wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest (or Liquidated Damages, if
any) on any Security when it becomes due and payable, and continuance of such
default for a period of 30 days;
(2) default in the payment of the principal of (or premium, if any,
on) any Security as and when the same becomes payable at its Maturity, or upon
redemption, by acceleration or otherwise, including, without limitation, payment
of the Change of Control Purchase Price or the Asset Sale Offer Price, or
otherwise on Securities validly tendered and not properly withdrawn pursuant to
a Change of Control Offer or Asset Sale Offer, as applicable; or
(3) failure to perform any other covenant or agreement of the Company
under this Indenture or Securities and, except for the provisions under Section
10.10, 10.16, Article Eight and Section 10.12, continued for 30 days after
written notice to the Company by the Trustee or to the Company and the Trustee
by Holders of at least 25% in aggregate principal amount of the Outstanding
Securities;
(4) a default in Indebtedness of the Company or any of its
Subsidiaries with an aggregate amount Outstanding in excess of $50,000,000 (or
its foreign currency equivalent) (a) resulting from the failure to pay principal
at maturity or otherwise at end of any applicable grace period for such payment
pursuant to the
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<PAGE>
original terms of such Indebtedness or (b) as a result of which the maturity of
such Indebtedness has been accelerated prior to its stated maturity; or
(5) the rendering of a final judgment or final judgments not covered
by insurance in an amount in excess of $50,000,000 (or its foreign currency
equivalent) at any one time against the Company or any of its Subsidiaries by a
court or courts of competent jurisdiction, which judgment or judgments remain
unbonded, undischarged or unstayed for a period of 60 days after the date on
which the right to appeal all such judgments has expired; or
(6) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or any
Significant Subsidiary or any other applicable federal, state or foreign law, or
appointing a receiver, liquidator, assignee, trustee or sequestrator (or other
similar official) of the Company or any Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or
(7) the institution by the Company or any Significant Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the U.S. Federal Bankruptcy Code or any other applicable federal, state or
foreign law, or the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee or sequestrator (or
other similar official) of the Company or any Significant Subsidiary or of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the admission by it in writing of its inability to pay
its Indebtedness generally as they become due.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. If
--------------------------------------------------
an Event of Default (other than an Event of Default specified in Section 5.1(6)
or 5.1 (7) relating to the Company) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities may declare the principal and accrued interest (and
Liquidated Damages, if any) of all the Securities to be due and payable
immediately by a notice in writing to the Company (and to the Trustee if given
by Holders) (an
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<PAGE>
"Acceleration Notice"), and upon any such declaration such principal, accrued
interest (and Liquidated Damages, if any) shall become immediately due and
payable. If an Event of Default specified in Section 5.1(6) or 5.1(7) relating
to the Company occurs and is continuing, then the principal and accrued interest
(and Liquidated Damages, if any) of all the Securities shall ipso facto become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article Five, the Holders of a
majority in principal amount of the Outstanding Securities, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Outstanding Securities,
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Securities which has become due otherwise than by such declaration
of acceleration, and interest on such unpaid principal at the rate borne by the
Securities,
(C) to the extent that payment of such interest is lawful,
interest on overdue interest at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and
(2) all existing Events of Default, other than the non-payment of
amounts of principal, (or premium, if any,) and interest on the Securities which
have become due solely by such declaration of acceleration, and except a Default
with respect to any provision requiring a supermajority approval to amend, which
Default may only be waived by such a supermajority, have been cured or waived as
provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee. The Company covenants that if
- -------
(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof, the Company will, upon demand
of the Trustee, pay to the Trustee for the benefit of the Holders of such
Securities the whole amount then due and payable on such Securities for
principal (and premium, if any) and interest, and interest on any overdue
principal (and premium, if any) and, to the extent that payment of such interest
shall be legally enforceable, upon any overdue installment of interest, at the
rate borne by the Securities, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4 Trustee May File Proofs of Claim. In case of the pendency
--------------------------------
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the principal of the Securities shall then be due and payable as
herein expressed or by
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declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal, premium, if any,
or interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest (and Liquidated
Damages, if any) owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and
counsel) and of the Holders allowed in such judicial proceeding,
and
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute the same;
and any custodian, receiver, assignee, trustee, liquidator or sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 5.5 Trustee May Enforce Claims Without Possession of
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Securities. All rights of action and claims under this Indenture or the
- ----------
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of
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the Trustee and its agents and counsel, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been recovered.
SECTION 5.6 Application of Money Collected. Any money collected by
------------------------------
the Trustee pursuant to this Article Five shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 6.7;
SECOND: To the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest (and Liquidated Damages, if any) on the
Securities in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if any)
and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 5.7 Limitation on Suits. No Holder of any Securities shall
-------------------
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(1) the Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) the Trustee is indemnified and/or secured (whether by payment in
advance or otherwise) to its reasonable satisfaction;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
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(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority or
more in aggregate principal amount of the Outstanding Securities; it being
understood and intended that no one or more Holders shall have any right in any
manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders, or to
obtain or to seek to obtain priority or preference over any other Holders or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal and ratable benefit of all the Holders.
SECTION 5.8 Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest. Notwithstanding any other provision in this Indenture,
- --------------------
the Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment as provided herein (including, if applicable,
Article Twelve) and in such Security of the principal of (and premium, if any)
and (subject to Section 3.7) interest (and Liquidated Damages, if any) on such
Security on the respective Stated Maturities expressed in such Security (or, in
the case of redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 5.9 Restoration of Rights and Remedies. If the Trustee or
----------------------------------
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative. Except as otherwise
------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in the last paragraph of Section 3.6, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
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SECTION 5.11 Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Trustee or of any Holder of any Security to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Five or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 5.12 Control by Holders. The Holders of not less than a
------------------
majority in aggregate principal amount of the Outstanding Securities shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders not consenting
unless it has received indemnity reasonably satisfactory to it.
SECTION 5.13 Waiver of Past Defaults. The Holders of a majority in
-----------------------
aggregate principal amount of the Outstanding Securities may on behalf of the
Holders of all the Securities waive any past Default hereunder and its
consequences, except a Default
(1) in respect of the payment of the principal of (or premium, if
any) or interest (and Liquidated Damages, if any) on any Security, or
(2) in respect of a covenant or provision hereof which cannot be
modified or amended without the approval of a supermajority, which Default may
only be waived by such a supermajority; or
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(3) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 5.14 Waiver of Stay or Extension Laws. The Company covenants
--------------------------------
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
shall not hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1 Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but, in the case
of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall be under
a duty to examine the same to
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determine whether or not they reasonably conform to the requirements of this
Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own grossly negligent action, its own grossly
negligent failure to act or its own willful misconduct, except that
(1) this paragraph (c) shall not be construed to limit the effect of
paragraph (a) of this Section 6.1;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the Trustee
was grossly negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of
the Holders of the requisite amount of the Outstanding Securities relating to
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or indemnity reasonably satisfactory to it against such
risk or liability is not assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
SECTION 6.2 Notice of Default. Within 60 days after being notified
-----------------
or becoming aware of the occurrence of any Default hereunder, the Trustee shall
transmit, in the manner and to the extent provided in TIA Section 313(c), notice
of
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such Default hereunder known to any Responsible Officer of the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
the case of a Default in the payment of the principal of (or premium, if any) or
interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interest of the
Holders.
SECTION 6.3 Certain Rights of Trustee. Subject to Section 6.1 and to
-------------------------
the provisions of TIA Sections 315(a) through 315(d):
(1) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of Indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Supervisory Board of the Company may be sufficiently evidenced by a Board
Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
receive and conclusively rely upon an Officers' Certificate and/or an Opinion of
Counsel;
(4) the Trustee may consult with counsel and other professional
advisers and the written advice of such counsel or advisers or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless the Trustee is indemnified
and/or secured (whether by payment in advance or otherwise) to its reasonable
satisfaction;
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(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of Indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, nominees,
custodians, delegates or attorneys and the Trustee shall not be responsible for
supervising the actions of such agent, nominee, custodian, delegate or attorney,
nor for any misconduct or negligence on the part of any agent, nominee,
custodian, delegate or attorney appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture; and
(9) the Trustee shall be entitled to assume that there has been no
Event of Default and that the Company has complied with all of its obligations
hereunder, unless a Responsible Officer of the Trustee has knowledge to the
contrary thereof.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not assured to it.
SECTION 6.4 Trustee Not Responsible for Issuance of Securities.
--------------------------------------------------
The Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Securities, except that the Trustee represents that it
is duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder. The Trustee shall not be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
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SECTION 6.5 May Hold Securities. The Trustee, any Paying Agent, any
-------------------
Security Registrar or any other agent of the Company or of the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company
with the same rights it would have if it were not Trustee, Paying Agent,
Security Registrar or such other agent.
SECTION 6.6 Money Held in Trust. Money held by the Trustee in trust
-------------------
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.
SECTION 6.7 Compensation and Reimbursement. The Company agrees:
------------------------------
(1) to pay to the Trustee from time to time compensation for all
services rendered by it hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust) as agreed in writing between the Company and the Trustee;
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to the Trustee's gross negligence or bad
faith; and
(3) to indemnify the Trustee and its directors, officers, employees
and agents for, and to hold them harmless against, any loss, liability or
expense (including counsel's fees and expenses) without gross negligence or bad
faith on the part of any of them, arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself or themselves against any claim or liability in connection with
the exercise or performance of any of its or their powers or duties hereunder.
Upon the occurrence of an Event of Default or a potential Event of
Default or upon the Trustee being required, or considering it necessary, to
undertake duties outside the usual scope of a Trustee, the Trustee will be
entitled to charge additional fees as agreed upon in writing with the Company.
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The obligations of the Company under this Section 6.7 to compensate
the Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional Indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture or the earlier resignation or removal of the
Trustee. As security for the performance of such obligations of the Company, the
Trustee shall have a claim prior to the Securities upon all property and funds
held or collected by the Trustee as such.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(6) or (7), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation for such services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section 6.7 shall survive the termination of
this Indenture or the earlier resignation or removal of the Trustee.
SECTION 6.8 Corporate Trustee Required; Eligibility; Conflicting
----------------------------------------------------
Interests.
- ---------
(a) There shall be at all times a Trustee hereunder which shall be
subject to and comply with the provisions of Section 310(a)(1) of the Trust
Indenture Act and shall have a combined capital and surplus of at least
$50,000,000. If such Corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of federal, state, territorial
or District of Columbia supervising or examining authority, then, for the
purposes of this Section 6.8, the combined capital and surplus of such
Corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
6.8, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article Six.
(b) The Trustee shall be subject to and comply with Section 310(b) of
the Trust Indenture Act.
SECTION 6.9 Resignation and Removal; Appointment of Successor.
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(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10.
(b) The Trustee may resign at any time by giving 60 days' written
notice thereof to the Company and without assigning any reason thereto or being
responsible for any costs or expenses occasioned thereby. If the instrument of
acceptance by a successor Trustee required by Section 6.10 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may on behalf of the Company, appoint in its
place a reputable financial institution and the Company shall not unreasonably
object to such appointment or may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in aggregate principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any Holder
who has been a bona fide Holder of a Security for at least six months (in the
case of Global Securities, as evidenced in writing to the Trustee by the
relevant Depositary or Euroclear or Cedelbank), or
(2) the Trustee shall cease to be eligible under Section 6.8(a) and
shall fail to resign after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six months (in
the case of Global Securities, as evidenced in writing to the Trustee by the
relevant Depositary or Euroclear or Cedelbank), or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i)the Company, by a Board Resolution, may
remove the Trustee or (ii)subject to TIA Section 315(e), any Holder who has been
a bona fide Holder of a
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Security for at least six months, (in the case of Global Securities, as
evidenced in writing to the Trustee by the relevant Depositary or Euroclear or
Cedelbank), may on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in aggregate principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee and supersede the successor Trustee appointed by
the Company. If no successor Trustee shall have been so appointed by the Company
or the Holders and accepted appointment in the manner hereinafter provided, any
Holder who has been a bona fide Holder of a Security for at least six months,
(in the case of Global Securities) as evidenced in writing to the Trustee by the
relevant Depositary or Euroclear or Cedelbank), may on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 1.6. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
(g) The retiring Trustee shall not be liable for any of the acts or
omissions of any successor Trustee appointed hereunder.
SECTION 6.1 Acceptance of Appointment by Successor. Every successor
--------------------------------------
Trustee appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its fees, costs, expenses,
charges and any other amounts owed to it hereunder, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee
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all property and money held by such retiring Trustee hereunder. Upon request of
any such successor Trustee, the Company shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor Trustee
all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.1 Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business. Any Corporation into which the Trustee may be merged or converted or
- --------
with which it may be Consolidated, or any Corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
Corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such Corporation shall be otherwise qualified and eligible under
this Article Six, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities. In case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee.
In all such cases such certificates shall have the full force and effect which
this Indenture provides that the certificate of authentication of the Trustee
shall have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Securities in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
SECTION 6.1 Trustee Acting in Other Capacities. To the extent that
-----------------------------------
the Trustee, Banque Internationale a Luxembourg or any other Person appointed
hereunder as Trustee or Paying Agent is acting as Securities Registrar, Common
Depositary, Depositary or Paying Agent hereunder, the rights, privileges,
immunities and indemnities set forth in this Article Six shall apply to the
Trustee in the additional capacities listed above.
ARTICLE VII
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HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 Disclosure of Names and Addresses of Holders. Every
--------------------------------------------
Holder of Securities, by receiving and holding the same, agrees with the Company
and the Trustee that none of the Company or the Trustee or any agent of either
of them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with TIA
Section 3.12, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under TIA Section 312(b).
SECTION 7.2 Reports by Trustee. Within 60 days after May 30 of each
------------------
year commencing with the first May 30 after the first issuance of Securities,
the Trustee shall transmit to the Holders, in the manner and to the extent
provided in TIA Section 313(c), a brief report dated as of such May 30 if
required by TIA Section 313(a).
SECTION 7.3 Reports by Company. The Company shall file with the
------------------
Trustee and deliver to the Holders of Securities the reports and other
information required to be provided by it pursuant to Section 10.8.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or Persons or
(ii) directly or indirectly, sell, lease, convey or transfer all or
substantially all of its assets (computed on a Consolidated basis) to any other
Person or group of affiliated Persons, unless:
(1) either (a) the Company is the continuing entity or (b) the
resulting, surviving or transferee entity is a Corporation organized under the
laws of The Netherlands or of the United States of America or any state or the
District of Columbia, any member of the European Economic Area or Switzerland
and expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Securities and this Indenture;
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(2) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such transaction;
(3) unless such transaction is solely the merger of the Company and
one of its previously existing Wholly Owned Subsidiaries and which transaction
is not in connection with any other transaction, immediately after giving effect
to such transaction, on a pro forma basis, the Consolidated resulting, surviving
or transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio set forth
in Section 10.11 or, if not, the Leverage Ratio would immediately thereafter be
no greater than the Leverage Ratio immediately prior thereto;
(4) each Subsidiary Guarantor, unless such Subsidiary Guarantor is
the Person with which the Company has entered into a transaction under this
section, shall have by amendment to its Guarantee of the Securities confirmed
that its Guarantee of the Securities shall apply to the obligations of the
Company or the surviving entity in accordance with the Securities and this
Indenture; and
(5) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each in form attached hereto as Exhibits F and G
respectively, stating that such consolidation, merger, conveyance, transfer,
lease or acquisition and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture, complies with this Article
and that all conditions precedent herein provided for relating to such
transaction have been complied with, and, with respect to such Officers'
Certificate.
For purposes of this Section 8.1, the transfer (by lease, assignment,
sale or otherwise) of all or substantially all of the properties and assets of
one or more Subsidiaries, the Company's interest in which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
SECTION 8.2 Successor Substituted. Upon any consolidation of the
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Company with or merger of the Company with or into any other Corporation or any
conveyance, transfer or lease of the properties and assets of the Company
substantially as an entirety to any Person or Persons in accordance with Section
8.1, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and
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(except in the case of a lease) be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and, in the event of any
such conveyance or transfer (except in the case of a lease), the Company shall
be discharged of all obligations under this Indenture and the Securities except
with respect to any obligations that arise from, or are related to, such
transaction.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Indentures Without Consent of Holders. Without the
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consent of any Holders, the Company, when authorized by a Board Resolution, and
the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form and substance satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company contained
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company; or
(3) to add any additional Events of Default; or
(4) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section 6.10;
or
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this
Indenture; provided that such action shall not adversely affect the interests of
the Holders in any material respect; or
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(7) to provide for collateral securing the Company's obligations
under this Indenture and the Securities; or
(8) to provide for Guarantees by any other Person of the Company's
obligations pursuant to this Indenture and the Securities;
provided such actions shall not adversely affect the interests of Holders in any
material respect.
SECTION 9.2 Indentures with Consent of Holders. With the consent of
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the Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture; provided, however, that:
(i) no such modification may, without the consent of Holders of at
least 66 2/3% in aggregate principal amount of Outstanding Securities,
modify the provisions of Section 10.10 (including the defined terms
used therein) in a manner adverse to the Holders; and
(ii) no such modification shall, without the consent of the Holder of
each Outstanding Security affected thereby:
(1) change the Stated Maturity of any Security, or reduce the
principal amount thereof or the rate of interest (or extend the time for payment
of interest, if any) thereon or any premium payable upon the redemption thereof
at the option of the Company, or change the place of payment where, or the coin
or currency in which, any Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of redemption
at the option of the Company, on or after the Redemption Date), or reduce the
Change of Control Purchase Price or the Asset Sale Offer Price after the
corresponding Change of Control or Asset Sale has occurred or alter the
provisions (including the defined terms used therein) regarding the right of the
Company to redeem the Securities in a manner adverse to the Holders, or
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(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such amendment,
supplemental indenture or waiver provided for in this Indenture, or
(3) modify any of the waiver provisions, except to increase any
required percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of each
Outstanding Security affected thereby, or
(4) cause the Securities to become subordinate in right of payment to
any other Indebtedness.
It shall not be necessary for any Act of Holders under this Section
9.2 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.3 Execution of Indentures. In executing, or accepting the
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additional trusts created by, any supplemental indenture permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is permitted by this Indenture and an Officers' Certificate stating
that all conditions precedent to the execution of such supplemental indenture
have been fulfilled. The Trustee may, but shall not be obligated to, enter into
any such supplemental indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
SECTION 9.4 Effect of Indentures. Upon the execution of any
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supplemental indenture under this Article Nine, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.5 Conformity with Trust Indenture Act. Every supplemental
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indenture executed pursuant to this Article Nine shall conform as a matter of
contract or law to the requirements of the Trust Indenture Act as then in
effect.
SECTION 9.6 Reference in Securities to Indentures. Securities
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authenticated and delivered after the execution of any supplemental indenture
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pursuant to this Article Nine may bear a notation in form approved by the
Trustee and the Company as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee and the Company, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
SECTION 9.7 Notice of Indentures. Promptly after the execution by
--------------------
the Company and the Trustee of any supplemental indenture pursuant to the
provisions of Section 9.2, the Company shall give notice thereof to the Holders
of each Outstanding Security affected, in the manner provided for in Section
1.6, setting forth in general terms the substance of such supplemental
indenture.
ARTICLE X
COVENANTS
SECTION 10.1 Payment of Principal, Premium, if Any, and Interest.
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(1) The Company covenants and agrees for the benefit of the Holders
that it shall duly and punctually pay the principal of (and premium, if any) and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
(2) For the purpose set forth in paragraph (1) above, the Company
shall, no later than 10:00 a.m., New York time, on the Business Day first
preceding each Payment Date, transfer to an account specified by the Trustee
such amount in immediately available and freely transferable U.S. Dollar funds,
in the case of Dollar Denominated Securities, or Euro funds in the case of Euro
Denominated Securities, as shall be sufficient for the purposes of the payment
of principal of (and premium, if any) and interest (and Liquidated Damages, if
any) due to be paid on the Securities on that date.
(3) The Company shall ensure that not later than the second Business
Day immediately preceding the date on which any payment is to be made to the
Trustee pursuant to this Section 10.1, the Company shall procure that a copy of
an irrevocable payment instruction to the bank through which the payment is to
be made shall be sent to the Trustee.
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(4) Unless and until the full amount of any payment due on the
Securities has been made to the Trustee, or unless and until the Trustee is
satisfied that such payment will be made, neither it nor the other Paying Agents
shall be bound to make payments in respect of the Securities hereunder.
(5) If the Trustee or a Paying Agent pays any amounts to the Holders
or to any other Agent at a time when it has not received payment in full from
the Company in respect of such Securities, the Company shall, in addition to
paying amounts due under Section 10.1(2), pay to the Trustee on demand interest
thereon at such a rate as the Trustee shall certify as the aggregate of 1% per
annum and the cost of funding any such payment made by it (as determined by the
Trustee) until the receipt in full by the Trustee of the funds due to it
pursuant to Section 10.1(2).
SECTION 10.2 Maintenance of Office or Agency. The Company shall
-------------------------------
maintain in The City of New York and London, and for so long as the Securities
are listed on the Luxembourg Stock Exchange, in Luxembourg, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands (other than service of process) to or upon the Company in respect of
the Securities and this Indenture may be served. The Corporate Trust Office of
the Trustee shall be such office or agency of the Company, unless the Company
shall designate and maintain some other office or agency for one or more of such
purposes. The Company shall give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company hereby initially designates (1) the Trustee at its address
set forth in Section 1.5 hereof as its office or agency in London and Citibank,
N.A. (New York branch), 111 Wall Street, New York, New York as its office or
agency in New York, for such purposes, (ii) Banque Internationale a Luxembourg,
at its office or agency in Luxembourg for such purposes and (iii) the Paying
Agent at its address set forth in Section 1.5 hereof.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Securities
may
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be presented or surrendered for any or all such purposes and may from time to
time rescind any such designation; provided, however, that no such designation
or rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in The City of New York and, for so long as the
Securities are listed on the Luxembourg Stock Exchange, in Luxembourg, for such
purposes. The Company shall give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such other
office or agency.
SECTION 10.3 Money for Security Payments to Be Held in Trust. If the
-----------------------------------------------
Company shall at any time act as its own Paying Agent, it shall, on or before
each due date of the principal of (or premium, if any) or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal of (or premium, if any) or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and shall promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it shall, on or before each due date of the principal of (or
premium, if any) or interest on any Securities, deposit with a Paying Agent a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of such action or
any failure so to act.
The Company shall cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.3,
that such Paying Agent shall:
(1) hold all sums held by it for the payment of the principal,
premium, if any, or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal,
premium, if any, or interest, of which it is aware;
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(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith act under the direction of the Trustee
and pay to the Trustee all sums so held in trust by such Paying Agent; and
(4) indemnify the Trustee and its officers, directors, employees and
agents against any loss, cost or liability caused by, or incurred as a result
of, such Paying Agent's acts or omissions.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York and in London, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 10.4 Corporate Existence. Subject to Article Eight, the
-------------------
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect the corporate existence, rights (charter and statutory)
and franchises of the Company and each Subsidiary; provided, however, that the
Company shall not be required to preserve, with respect to the Company, any such
right or franchise or, with respect to any Subsidiary (subject to all the other
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covenants in this Indenture), any such corporate existence, right or franchise,
if the Supervisory Board of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries as a whole and that the loss thereof is not disadvantageous in
any material respect to the Holders.
SECTION 10.5 Payment of Taxes and Other Claims. The Company shall pay
---------------------------------
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary and (b) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any Subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
SECTION 10.6 Maintenance of Properties. The Company shall cause all
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properties owned by the Company or any Subsidiary or used or held for use in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 10.6 shall prevent the Company from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of the Company, desirable in the conduct of its business or
the business of any Subsidiary and not disadvantageous in any material respect
to the Holders.
SECTION 10.7 Insurance. The Company shall at all times keep all of
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its and its Subsidiaries' properties which are of an insurable nature insured
with insurers, believed by the Company to be responsible, against loss or damage
to the extent that property of similar character is usually so insured by
Corporations similarly situated and owning like properties.
SECTION 10.8 Provision of Financial Statements. The Company has
---------------------------------
agreed that, for so long as any Securities remain Outstanding, whether or not
the Company is subject to the reporting requirements of Section 13 or 15(d) of
the
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Exchange Act, the Company will deliver to the Trustee and, to each Holder and to
prospective purchasers of Securities identified to the Company, within 15 days
after the Company is or would have been (if the Company were subject to such
reporting obligations) required to file such with the SEC, annual and quarterly
financial statements substantially equivalent to financial statements that would
have been included in reports filed with the SEC, if the Company were subject to
the requirements of Section 13 or 15(d) of the Exchange Act, including, with
respect to annual information only, a report thereon by the Company's certified
independent public accountants as such would be required in such reports to the
SEC, and, in each case, together with a management's discussion and analysis of
financial condition and results of operations which would be so required and,
unless the SEC will not accept such reports, file with the SEC the annual,
quarterly and other reports which it is or would have been required to file with
the SEC.
Following the effectiveness of the Registration Statement, the Company
will file with the Trustee, at the time it files them with the SEC, copies of
the annual and quarterly reports and the information, documents and other
reports that the Company is required to file with the SEC under Section 13(a) or
15(d) of the Exchange Act. If the Company ceases to be required to file SEC
reports under the Exchange Act, the Company will nevertheless continue to file
such reports with the Trustee. The Company will furnish copies of the SEC
reports to investors who request them in writing.
SECTION 10.9 Statement by Officers as to Default.
-----------------------------------
(a) The Company shall deliver to the Trustee, on the date of delivery
of each quarterly report to be delivered pursuant to Section 10.8, and within 14
days of a request by the Trustee, a brief certificate from the principal
executive officer, principal financial officer or principal accounting officer
as to his or her knowledge of the Company's compliance with all conditions and
covenants under this Indenture. For purposes of this Section 10.9(a), such
compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the Trustee for or the Holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $50,000,000), the Company
shall deliver to the Trustee by
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registered or certified mail or by facsimile transmission an Officers'
Certificate specifying such event, notice or other action within five Business
Days of its occurrence.
SECTION 10.10 Purchase of Securities upon Change of Control.
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(1) (a) Upon the occurrence of a Change of Control, the Company will
be required to make an offer to each Holder to purchase for cash all or a
portion of such Holder's Securities (provided that the principal amount of such
Securities must be $1,000 (or (Euro)1,000, as applicable) or an integral
multiple thereof) pursuant to the offer described below (the "Change of Control
Offer"), at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest (and Liquidated Damages, if any) to the
date of purchase (the "Change of Control Purchase Price").
(b) Within 10 Business Days following a Change of Control, the
Company must send a notice to each Holder which notice shall govern the terms of
the Change of Control Offer. Such notice shall state, among other things, the
purchase date, which must be no later than 35 Business Days from the date of the
Change of Control, other than as may be required by law (the "Change of Control
Purchase Date"). The Change of Control Offer shall remain open for 20 Business
Days following its commencement (the "Change of Control Offer Period"). Upon
expiration of the Change of Control Offer Period, the Company shall promptly
purchase all Notes properly tendered in response to the Change of Control Offer.
Holders electing to have a Security purchased pursuant to a Change of Control
Offer will be required to surrender the Security, by delivery of a form entitled
"Option of Holder to Elect Purchase," obtainable from the Trustee or any Paying
Agent substantially in the form of Exhibit I, completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
Business Day prior to the Change of Control Purchase Date. The Paying Agent
promptly will pay the Holders of Securities so accepted an amount equal to the
Change of Control Purchase Price (together with accrued and unpaid interest and
Liquidated Damages, if any) and the Trustee promptly will authenticate and
deliver to such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Purchase Date.
The notice referred to above shall be a written offer (the "Offer")
sent by the Company by first class mail, postage prepaid, to each Holder of
Securities at
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its address appearing in the Security Register on the date of the Offer offering
to purchase up to the principal amount of Securities specified in such Offer at
the Change of Control Purchase Price. Unless otherwise required by applicable
law, the Offer shall specify an expiration date (the "Expiration Date") of the
Change of Control Offer which shall be, subject to any contrary requirements of
applicable law, 20 Business Days after the date of the Offer and a settlement
date (the "Change of Control Purchase Date") for purchase of Securities within
five Business Days after the Expiration Date. The Company shall notify the
Trustee in writing at least 15 Business Days, or a shorter period that is
acceptable to the Trustee, prior to the mailing of the Offer of the Company's
obligation to make a Change of Control Offer, and the Offer shall be mailed by
the Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company. The Offer shall contain information concerning the
business of the Company and its Subsidiaries which the Company in good faith
believes will enable the Holders to make an informed decision with respect to
the Change of Control Offer, which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to Section 10.8 (which
requirements may be satisfied by delivery of the documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of the financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Change of Control Offer), (iii) if applicable, appropriate pro forma
financial information concerning the Change of Control Offer and the events
requiring the Company to make the Change of Control Offer and (iv) any other
information required by applicable law to be included therein. The Offer shall
contain all instructions and materials necessary to enable the Holders to tender
Securities pursuant to the Change of Control Offer. The Offer shall also state:
(a) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(b) the Expiration Date and the Change of Control Purchase Date;
(c) the aggregate principal amount of the Outstanding Securities
offered to be purchased by the Company in the Change of Control Offer,
including, if less than 100%, the manner by which the amount has been determined
pursuant to the Section hereof requiring the Change of Control Offer (the
"Purchase Amount");
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(d) the Change of Control Purchase Price;
(e) that the Holder may tender all or any portion of the Securities
registered in the name of the Holder and that any portion of a Security tendered
must be tendered in an integral multiple of $1,000 or (EURO)1,000 principal
amount;
(f) the place or places where the Securities are to be surrendered
for tender pursuant to the Change of Control Offer;
(g) that any of the Securities not tendered or tendered but not
purchased by the Company will continue to accrue interest;
(h) that on the Change of Control Purchase Date the Purchase Price
will become due and payable upon the Securities being accepted for payment
pursuant to the Change of Control Offer and that any interest shall cease to
accrue on and after the Change of Control Purchase Date;
(i) that each Holder electing to tender the securities in the
purchase will be required to surrender the Securities at the place or places
specified in the Offer prior to the close of business on the Expiration Date
with the Securities being, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
signed by, the Holder or his attorney duly authorized in writing;
(j) that Holders will be entitled to withdraw all or any portion of
the Securities tendered if the Company or its Paying Agent receives, not later
than the close of business on the Expiration Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Securities the Holder tendered, the certificate number of the Securities the
Holder tendered and a statement that such Holder is withdrawing all or a portion
of his tender;
(k) that (i) if the Securities in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not withdrawn in the
Purchase, the Company shall purchase all the Securities and (ii) if the
Securities in an aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn in the Change of Control Offer, the Company shall
purchase the Securities having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis with adjustments that the Company may deem
appropriate so that only
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Securities in denominations of $1,000 or (EURO)1,000 or integral multiples
thereof shall be purchased; and
(1) that in the case of any Holder whose Securities are purchased
only in part, the Company shall sign, and the Trustee shall authenticate and
deliver to the Holder of the Securities without service charge, the new Security
or Securities, of any authorized denomination as requested by the Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased portion
of the Securities so tendered.
Any Offer to Purchase shall be governed by and effected in accordance
with the Offer for such Change of Control Offer.
The Company will not be required to make an offer to purchase any
series of Securities upon a Change of Control if, before the Change of Control
occurs, it has exercised its right to redeem all of the Securities of such
series as described under Section 11.1.
(2) On or before the Change of Control Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3) cash sufficient to pay the purchase price (together
with accrued and unpaid interest and Liquidated Damages, if any) of all
Securities or portions thereof so accepted and (iii) deliver or cause to be
delivered to the Trustee all Securities so tendered together with an Officers'
Certificate stating the Securities or portions thereof accepted for payment by
the Company.
(3) In the event that the Company makes a Change of Control Offer,
the Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
(4) If the Change of Control Purchase Date hereunder is on or after
an interest payment Record Date and on or before the associated Interest Payment
Date, any accrued and unpaid interest (and Liquidated Damages, if any) due on
such Interest Payment Date will be paid to the Person in whose name a Security
is registered at the close of business on such Record Date, and such interest
(and
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Liquidated Damages, if applicable) will not be payable to Holders who tender the
Securities pursuant to the Change of Control Offer.
Notwithstanding anything contained in this Indenture to the contrary,
the Company will not, and will not permit any of its Subsidiaries to, incur any
Indebtedness that is contractually subordinate to any other Indebtedness of the
Company unless such Indebtedness is at least as subordinate to the Securities.
SECTION 10.11 Limitation on Incurrence of Additional Indebtedness and
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Disqualified Capital Stock. (1) The Company may not, and may not permit any
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Subsidiary to, directly or indirectly, issue, assume, guaranty, incur, become
directly or indirectly liable with respect to (including as a result of an
Acquisition), or otherwise become responsible for, contingently or otherwise
(individually and collectively, to "incur" or, as appropriate, an
"incurrence"), any Indebtedness (including Disqualified Capital Stock and
Acquired Indebtedness), other than Permitted Indebtedness. Notwithstanding the
foregoing if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro forma
basis to, such incurrence of Indebtedness; and
(ii) on the date of such incurrence (the "Incurrence Date"), either
(i) the Leverage Ratio of the Company for the Reference Period immediately
preceding the Incurrence Date, after giving effect on a pro forma basis to such
incurrence of such Indebtedness and, to the extent set forth in the definition
of Leverage Ratio, the use of proceeds thereof, would not exceed 7.0 to 1.0 (the
"Debt Incurrence Ratio"), (ii) the Consolidated Coverage Ratio of the Company
for the Reference Period immediately preceding the Incurrence Date, after giving
effect on a pro forma basis to such incurrence of such Indebtedness and, to the
extent set forth in the definition of Consolidated Coverage Ratio, the use of
proceeds thereof, would not be less than 1.75 to 1.0, or (iii) after giving
effect on a pro forma basis to such incurrence of Indebtedness, and, to the
extent used to retire other Indebtedness, the use of proceeds therefrom, the
amount of Indebtedness Outstanding of the Company would not exceed 225% of the
Consolidated Invested Equity Capital of the Company, then the Company may incur
such Indebtedness (including Disqualified Capital Stock and Acquired
Indebtedness).
(2) The foregoing limitations of paragraph (1) of this Section 10.11 will
not prohibit:
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(a) if no Event of Default shall have occurred and be continuing, the
incurrence by the Company or its Subsidiaries of Indebtedness in an aggregate
amount incurred and Outstanding at any time pursuant to this subparagraph (a)
(plus any refinancing indebtedness incurred to retire, defease, refinance,
replace or refund such Indebtedness) of up to $400,000,000 (or the equivalent
thereof, at the time of incurrence, in the applicable foreign currencies);
(b) the incurrence by the Company and its Subsidiaries of
Indebtedness pursuant to the Credit Agreement in an aggregate amount incurred
and Outstanding at any time pursuant to this paragraph (b) (plus any refinancing
indebtedness incurred to retire, defease, refinance, replace or refund such
Indebtedness) of up to (EURO)1 billion, minus the amount of any such
Indebtedness (i) retired with the Net Cash Proceeds from any Asset Sale applied
to reduce permanently the Outstanding amounts or the commitments with respect to
such Indebtedness pursuant to Section 10.16 or (ii) assumed by a transferee in
an Asset Sale;
(c) the incurrence by any Subsidiary of Indebtedness, if on the
Incurrence Date either (1) the Leverage Ratio of such Subsidiary of the Company
for the Reference Period immediately preceding the Incurrence Date, after giving
effect on a pro forma basis to such incurrence of such Indebtedness and to the
extent set forth in the definition of Leverage Ratio, the use of proceeds
thereof, would be no more than 7.0 to 1.0, or (2) the Consolidated Coverage
Ratio of such Subsidiary for the Reference Period immediately preceding the
Incurrence Date, after giving effect on a pro forma basis to such incurrence of
such Indebtedness and, to the extent set forth in the definition of Consolidated
Coverage Ratio, the use of proceeds thereof, would be no less than 1.75 to
1.00, or (3) after giving effect on a pro forma basis to such incurrence of such
Indebtedness, and, to the extent used to retire other Indebtedness, the use of
proceeds therefrom, the amount of Indebtedness Outstanding of such Subsidiary
would not exceed 225% of the Consolidated Invested Equity Capital of such
Subsidiary, provided in the case of each of clauses (c)(1), (2) and (3), the
net proceeds therefrom are used in a Related Business of the Company or any
affiliated company of the Company, and provided, further, that for the purposes
of this clause (c) a Subsidiary may be a co-obligor or guarantor on such
Indebtedness of another Subsidiary of the Company (A) if such co-obligor or
guarantor Subsidiary owns (either directly or indirectly through one or more
Subsidiaries of the Company) all or a portion of the Equity Interests of the
Subsidiary of the Company that incurred such Indebtedness, (B) if all or a
portion of the Equity Interests of such co-obligor or guarantor Subsidiary is
owned (either directly or indirectly through one or more Subsidiaries of the
Company) by the Subsidiary that incurred such Indebtedness or
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(C) if such co-obligor or guarantor Subsidiary owns (either directly or
indirectly through one or more Subsidiaries of the Company) all or a portion of
the business that will use the proceeds of such Indebtedness; and
(d) if no Event of Default shall have occurred and be continuing, the
incurrence by Subsidiaries of the Company of Indebtedness pursuant to the
Existing Agreements up to, but not in excess of the maximum applicable amounts
of Indebtedness available for borrowing pursuant to the terms of each such
Existing Agreement as in effect on the date of the Indenture; provided that, in
determining the maximum applicable amounts available, it shall be assumed that
the Company satisfies any applicable conditions to borrowing.
Indebtedness (including Disqualified Capital Stock) of any Person which is
Outstanding at the time such Person becomes a Subsidiary of the Company
(including upon designation of any subsidiary or other Person as a Subsidiary)
or is merged with or into or Consolidated with the Company or a Subsidiary of
the Company shall be deemed to have been incurred at the time such Person
becomes such a Subsidiary of the Company or is merged with or into or
Consolidated with the Company or a Subsidiary of the Company, as applicable.
Upon each incurrence, the Company may designate pursuant to which provision
of this Section 10.11 such Indebtedness is being incurred and such Indebtedness
shall not be deemed to have been incurred or Outstanding under any other
provision of this Section 10.11, except as stated otherwise in the foregoing
provisions.
SECTION 10.12 Limitation on Restricted Payments. (1) The Company may
---------------------------------
not, and may not permit any of its Subsidiaries to, directly or indirectly, make
any Restricted Payment if, after giving effect to such Restricted Payment on a
pro forma basis:
(A) a Default or an Event of Default shall have occurred and be
continuing,
(B) the Company is not permitted to incur at least $1.00 (or its foreign
currency equivalent) of additional Indebtedness pursuant to the Debt Incurrence
Ratio in Section 10.11, or
(C) the aggregate amount of all Restricted Payments made by the Company
and its Subsidiaries, including after giving effect to such proposed
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Restricted Payment, on and after July 30, 1999, would exceed, without
duplication (and except to the extent otherwise credited pursuant to clause (g)
of the definition of "Permitted Investment"), the sum of:
(a) (i) the amount of the cumulative Consolidated EBITDA of the
Company, if positive, less 150% of the cumulative Consolidated Fixed Charges of
the Company, for the period (taken as one accounting period), commencing on the
first day of the first full fiscal quarter commencing after July 30, 1999, to
and including the last day of the fiscal quarter ended immediately prior to the
date of each such calculation for which Consolidated financial statements of the
Company are available, provided that such sum shall not be deemed to result in
an amount less than zero for purposes of any calculation pursuant to this clause
(C)(a)(i); or (ii) if such cumulative Consolidated EBITDA of the Company is zero
or less, then the amount of such cumulative Consolidated EBITDA for such period;
plus
(b) the aggregate Net Cash Proceeds received by the Company from the
sale of its Qualified Capital Stock (other than (i) to a Subsidiary of the
Company and (ii) to the extent applied in connection with a Qualified Exchange),
after July 30, 1999; plus
(c) to the extent that any Investment (other than a Permitted
Investment) that was made after July 30, 1999 is sold for cash or Cash
Equivalents or otherwise liquidated or repaid for cash or Cash Equivalents, the
amount of cash or Cash Equivalents received by the Company, but only to the
extent of the lesser of (i) the cash or Cash Equivalents transferred as a return
of capital with respect to such Investment and (ii) the initial amount of such
Investment (in either case, less the cost of disposition, if any); plus
(d) in the event an Unrestricted Subsidiary is designated as a
Subsidiary, an amount equal to fair market value, at such time, of the
Investment of the Company and its Subsidiaries made after July 30, 1999;
provided, however, that such amount shall not exceed the amount of Investments
previously made in such Subsidiary that were counted as Restricted Payments
pursuant to this covenant.
(2) (a) The foregoing clauses (B) and (C) of Section 10.12(1),
however, will not prohibit: (i) any dividend, distribution or payment of
dividends on Disqualified Capital Stock permitted by Section 10.11; and (ii) any
repurchase by the Company of any shares of any class or options to acquire such
shares from any current, future or former directors, officers or employees of
the Company or any of its Subsidiaries or Affiliates, provided that the
aggregate amount of all the
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repurchases made under this clause shall not exceed $10,000,000 in any twelve-
month period (with unused amounts in any calendar year being carried over to
succeeding calendar years subject to a maximum (without giving effect to the
following proviso) of $14,000,000 in any calendar year); provided, further, that
such amount in any calendar year may be increased by an amount not to exceed (1)
the cash proceeds from the sale of Capital Stock of the Company to its
Supervisory Board members, management board members or officers of the Company
and its Subsidiaries that occurs after July 30, 1999, plus (2) the cash proceeds
of key man life insurance policies received by the Company and its Subsidiaries
after July 30, 1999;
and (b) the foregoing clauses (A), (B) and (C) of Section 10.12(1) will not
prohibit:
(i) any dividend, distribution or other payments by any Subsidiary
of the Company on its Equity Interests that is paid pro rata to all holders of
such Equity Interests;
(ii) a Qualified Exchange;
(iii) the payment of any dividend on Qualified Capital Stock within 60
days after the date of its declaration if such dividend could have been made on
the date of such declaration in compliance with the foregoing provisions; or
(iv) the payment of dividends by the Company in cash or Qualified
Capital Stock pursuant to the terms of any Parent Stock Instrument that is
incurred or issued (as applicable) in compliance with this Indenture.
The full amount of any Restricted Payment made pursuant to paragraphs
2(a)(i), (ii) and 2(b)(i), (iii) and (iv), but not pursuant to paragraph
2(b)(ii), however, will be counted as Restricted Payments made for purposes of
the calculation of the aggregate amount of Restricted Payments available to be
made referred to in Section 10.12(1)(C).
For purposes of this section, the amount of any Restricted Payment
made or returned, if other than in cash, shall be the fair market value thereof,
as determined in the good faith reasonable judgment of the Company's Supervisory
Board, unless stated otherwise, at the time made or returned, as applicable.
Additionally, on the date of each Restricted Payment, the Company shall deliver
an Officers' Certificate to the respective Trustee describing in reasonable
detail the nature of such Restricted Payment, stating the amount of such
Restricted Payment,
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stating in reasonable detail the provisions of this Indenture pursuant to which
such Restricted Payment was made and certifying that such Restricted Payment was
made in compliance with the terms of this Indenture.
SECTION 10.13 Limitation on Dividend and Other Payment Restrictions
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Affecting Subsidiaries. (1) The Company may not, and may not permit any
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Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual restriction on the ability of any
Subsidiary:
(i) to pay dividends, in cash or otherwise, or make any other
distributions to or on behalf of or pay any obligation to or on behalf of the
Company or any Subsidiary of the Company;
(ii) to make or pay loans or advances to or on behalf of the Company
or any Subsidiary of the Company; or
(iii) to transfer property or assets to or on behalf of the Company or
any Subsidiary of the Company,
except:
(a) restrictions imposed by the Securities or the Other Senior Notes
or the Indenture or the Other Senior Notes Indenture or by other Indebtedness of
the Company ranking pari passu with the Securities and the Other Senior Notes,
provided that such restrictions are no more restrictive than those imposed by
the Indenture and the Securities;
(b) restrictions imposed by applicable law;
(c) restrictions under Indebtedness outstanding on July 30, 1999,
including pursuant to the Credit Agreement;
(d) restrictions under any Acquired Indebtedness not incurred in
violation of the Indenture or any agreement (including any Equity Interest)
relating to any property, asset, or business acquired by the Company or any of
its Subsidiaries, which restrictions in each case existed at the time of
acquisition, were not put in place in connection with or in anticipation of such
acquisition, and are not applicable to any Person, other than the Person
acquired, or to any property, asset or business, other than the property, assets
and business so acquired;
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(e) any such restriction or requirement imposed by Indebtedness
incurred under the Credit Agreement pursuant to Section 10.11, provided that
such restriction or requirement is no more restrictive than that imposed by the
Credit Agreement as of July 30, 1999;
(f) with respect solely to a Subsidiary of the Company imposed
pursuant to a binding agreement which has been entered into for the sale or
disposition of all or substantially all of the Equity Interests or assets of
such Subsidiary, provided that such restrictions apply solely to the Equity
Interests or assets of such Subsidiary which are being sold;
(g) restrictions under Purchase Money Indebtedness not incurred in
violation of the Indenture, provided that such restrictions relate only to the
property financed with such Indebtedness;
(h) with respect to any Subsidiary, restrictions contained in the
terms of any Indebtedness incurred in compliance with the Indenture, or any
agreement pursuant to which such Indebtedness was issued, if (A) the encumbrance
or restriction applies only in the event of a payment default or a default with
respect to a financial covenant contained in such Indebtedness or agreement, (B)
the Company shall have reasonably determined that the encumbrance or restriction
is not materially more disadvantageous to the Holders of the Securities than is
customary in comparable financings, and (C) the Company shall have reasonably
determined that any such encumbrance or restriction will not materially affect
the Company's ability to make principal or interest payments on the Securities;
and
(i) in connection with and pursuant to permitted Refinancings,
replacements of restrictions imposed pursuant to clauses (a), (c), (d), or (g),
or this clause (i), of this paragraph that are not more restrictive than those
being replaced and do not apply to any other Person or assets than those that
would have been covered by the restrictions in the Indebtedness so refinanced.
(2) Notwithstanding the provisions of Section 10.13(1), (a) customary
provisions restricting subletting, assignment or transfer of any lease, license,
conveyance, or similar document or instrument entered into in the ordinary
course of business, consistent with industry practice and (b) any asset or
property subject to a Lien which is not prohibited to exist with respect to such
asset pursuant to the terms of this Indenture may be subject to customary
restrictions on the transfer or disposition thereof pursuant to such Lien.
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SECTION 10.14 Limitation on Liens Securing Indebtedness. The Company
-----------------------------------------
may not, and may not permit any Subsidiary to, create, incur, assume or suffer
to exist any Lien of any kind, other than Permitted Liens, upon any of their
respective assets now owned or acquired on or after the date of this Indenture
or upon any income or profits therefrom securing any Indebtedness of the
Company, unless the Company provides, and causes its Subsidiaries to provide,
concurrently therewith, that the Securities are equally and ratably so secured;
provided that if such Indebtedness is Subordinated Indebtedness, the Lien
securing such Subordinated Indebtedness shall be subordinate and junior to the
Lien securing the Securities with the same relative priority as such
Subordinated Indebtedness shall have with respect to the Securities.
SECTION 10.15 Limitation on Issuances of Guarantees by Subsidiaries.
-----------------------------------------------------
(1) Notwithstanding the other provisions of this Indenture, the Company may not
permit any Subsidiary to, directly or indirectly, Guarantee any Indebtedness of
the Company (other than Indebtedness incurred pursuant to the Credit Agreement
in accordance with the terms of this Indenture) ("Guaranteed Indebtedness"),
then such Subsidiary must become a Guarantor (a "Subsidiary Guarantor") of the
Securities on a basis such that the Subsidiary's Guarantee of the Securities
shall stand in substantially the same relative ranking in right of payment to
the guarantee of such other Indebtedness as the Securities stand in relative
ranking to such other Indebtedness; provided that this paragraph shall not be
applicable to any guarantee by any Subsidiary that (a) existed at the time such
Person became a Subsidiary of the Company and (b) was not incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary of the Company.
(2) Subsidiary Guarantees shall be automatically released upon (i)
the sale or other disposition of all or substantially all of the Company's and
its Subsidiaries' beneficial interest in the Equity Interests or assets of such
Subsidiary Guarantor, provided that thereafter such Subsidiary Guarantor shall
cease to be a Subsidiary of the Company, (ii) the consolidation or merger of any
such Subsidiary Guarantor with any Person other than the Company or a Subsidiary
of the Company if, as a result of such consolidation or merger, such Subsidiary
Guarantor ceases to be a Subsidiary of the Company (and shall not be a
Subsidiary of the successor to the Company), (iii) a Legal Defeasance, or (iv)
the unconditional and complete release of such Subsidiary Guarantor from its
Guarantee of all Guaranteed Indebtedness.
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SECTION 10.16 Limitation on Sale of Assets and Subsidiary Stock.
-------------------------------------------------
(1) The Company may not, and may not permit any Subsidiary to, in one
or a series of related transactions, convey, sell, transfer, assign or otherwise
dispose of, directly or indirectly, any of the Company's or such Subsidiary's
property, business or assets (including by merger or consolidation in the case
of a Subsidiary of the Company), and including any sale or other transfer or
issuance of any Equity Interests of any Subsidiary of the Company, whether by
the Company or a Subsidiary or through the issuance, sale or transfer of Equity
Interests by a Subsidiary of the Company, and including any sale and leaseback
transaction (any of the foregoing, an "Asset Sale"), unless:
(A) (1) the amount equal to the Net Cash Proceeds therefrom
(the "Asset Sale Offer Amount") is applied
(i) within 360 days (1,825 days in the case of an Asset
Sale resulting from the underwritten public sale of equity securities of
chello broadband or 540 days in the case of any other Special Character
Asset Sale) after the date of such Asset Sale to the optional redemption of
the Securities in accordance with the terms of the Indenture and other
Indebtedness of the Company ranking pari passu in right of payment with the
Securities and with similar provisions requiring the Company to redeem such
Indebtedness with the proceeds from such Asset Sale, pro rata in proportion
to the respective principal amounts (or accreted values in the case of
Indebtedness issued with original issue discount) of the Securities and
such other Indebtedness then Outstanding, or
(ii) within 360 days (1,825 days in the case of an Asset
Sale resulting from the underwritten public sale of equity securities of
chello broadband or 540 days in the case of any other Special Character
Asset Sale) after the date of such Asset Sale to the repurchase of the
Securities and such other Indebtedness ranking pari passu in right of
payment with the Securities and with similar provisions requiring the
Company to make an offer to purchase such Indebtedness with the proceeds
from such Asset Sale pursuant to a cash offer (subject only to conditions
required by applicable law, if any) pro rata in proportion to the
respective principal amounts (or accreted values in the case of
Indebtedness issued with original issue discount) of the Securities and
such other Indebtedness then Outstanding (the "Asset Sale Offer") at a
purchase price of 100% of
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principal amount (or accreted value in the case of Indebtedness issued
with original issue discount) (the "Asset Sale Offer Price") together
with accrued and unpaid interest and Liquidated Damages, if any, to the
date of payment, made within 360 days (1,825 days in the case of an Asset
Sale resulting from the underwritten public sale of equity securities of
chello broadband or 540 days in the case of any other Special Character
Asset Sale) of such Asset Sale, or
(iii) within 360 days (1,825 days in the case of an Asset Sale
resulting from the underwritten public sale of equity securities of chello
broadband or 540 days in the case of any other Special Character Asset
Sale), to the repayment of Indebtedness then Outstanding pursuant to the
Credit Agreement or, if required by the terms of such Indebtedness, of
Indebtedness issued by a Subsidiary of the Company (in respect of which
Indebtedness the Company is not a direct or contingent obligor except by
virtue of the Company's pledge of Equity Interests of, and other interests
of or claim on, such Subsidiary or the Company's guarantee of such
Subsidiary's Indebtedness to the extent, in either case, the recourse
against the Company is limited to such Equity Interests or claim), or
(2) within 360 days (1,825 days in the case of an Asset Sale
resulting from the underwritten public sale of equity securities of chello
broadband or 540 days in the case of any other Special Character Asset Sale)
following such Asset Sale, the Asset Sale Offer Amount is invested in assets and
property which in the good faith reasonable judgment of the Company will
immediately constitute or be a part of a Related Business of the Company or such
Subsidiary (if it continues to be a Subsidiary) immediately following such
transaction or is used to make Permitted Investments in the Company or a
Subsidiary of the Company (other than Cash Equivalents or securities of the
Company or any Person controlling the Company except as permitted by the
Indenture), provided that (i) 50% of the Net Cash Proceeds from Special
Character Asset Sales and 100% of the net proceeds from any Asset Sale of an
Investment made in reliance on clause (g) of the definition of "Permitted
Investments" may be reinvested in any Permitted Investment (other than, in
either case, Cash Equivalents or securities of the Company or any Person
controlling the Company except as permitted by the Indenture) which in the good
faith reasonable judgment of the Company will immediately constitute or be a
part of a Related Business and (ii) 100% of the net proceeds from an Asset Sale
constituting the sale of an Investment in any Person (excluding a Person that
would be Consolidated with the Company under GAAP and excluding Related Assets
of the
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Company or any of its Subsidiaries) in which the Company or any of its
Subsidiaries has an Equity Interest may be reinvested in Investments permitted
by clause (e) or (f) of the definition of "Permitted Investments,"
(B) at least 75% of the total consideration for such Asset Sale
or series of related Asset Sales consists of cash, Cash Equivalents, Replacement
Assets or the assumption of Indebtedness of a Subsidiary. For purposes of this
subparagraph (B), total consideration received means the total consideration
received for such Asset Sales, minus the amount of (a) Purchase Money
Indebtedness secured solely by the assets sold and assumed by a transferee,
provided that the Company and the Subsidiaries are released from any obligation
in connection therewith; and (b) property that within 30 days of such Asset Sale
is converted into cash or Cash Equivalents, provided that such cash and Cash
Equivalents shall be treated as Net Cash Proceeds attributable to the original
Asset Sale for which such property was received.
(C) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect to, on a pro forma
basis, such Asset Sale, and
(D) in the case of a transaction or series of related
transactions exceeding $15,000,000 (or the foreign currency equivalent on the
date of the transaction) of consideration to any party thereto, the Supervisory
Board of the Company determines in its good faith reasonable judgment that the
Company or such Subsidiary, as applicable, receives fair market value for such
Asset Sale.
(2) An acquisition of Securities pursuant to an Asset Sale Offer may
be deferred until the accumulated Net Cash Proceeds from Asset Sales not applied
to the uses set forth in 1(a)(i), (iii), or 1(b) above (the "Excess Proceeds")
exceeds $50,000,000 (or the foreign currency equivalent thereof), provided that,
in the case of an Asset Sale by a Subsidiary of the Company that is not a Wholly
Owned Subsidiary, only the Company's and its Subsidiaries' pro rata portion of
such Net Cash Proceeds shall constitute Net Cash Proceeds subject to the
provisions of this Section 10.16. Each Asset Sale Offer shall remain open for 20
Business Days following its commencement (the "Asset Sale Offer Period"). Upon
expiration of the Asset Sale Offer Period, the Company shall apply the Asset
Sale Offer Amount, plus an amount equal to accrued and unpaid interest and
Liquidated Damages, if any, to the purchase of all Indebtedness properly
tendered (on a pro rata basis if the Asset Sale Offer Amount is insufficient to
purchase all Indebtedness so tendered) at the Asset Sale Offer Price (together
with accrued interest and Liquidated Damages, if
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any). To the extent that the aggregate amount of Securities and such other pari
passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the
Asset Sale Offer Amount, the Company may apply any remaining Net Cash Proceeds
to any purpose consistent with this Indenture, and following the consummation of
each Asset Sale Offer the Excess Proceeds amount shall be reset to zero.
Notwithstanding, and without complying with, the foregoing provisions
of this Section 10.16:
(u) the Company and its Subsidiaries may, in the ordinary
course of business, (a) convey, sell, transfer, assign or otherwise dispose
of inventory and other assets acquired and held for resale in the ordinary
course of business and (b) liquidate and otherwise dispose of Cash
Equivalents;
(v) the Company and its Subsidiaries may convey, sell,
transfer, assign or otherwise dispose of property, businesses, or assets
pursuant to and in accordance with Article Eight.
(w) the Company and its Subsidiaries may sell or dispose of
damaged, worn out or other obsolete personal property in the ordinary
course of business so long as such property is no longer necessary for the
proper conduct of the business of the Company or such Subsidiary, as
applicable, and the Company and its Subsidiaries may replace personal
property in the ordinary course of business so long as the replacement
property is necessary for the proper conduct of the business of the Company
or such Subsidiary, as applicable, and sell or dispose of such replaced
property in the ordinary course;
(x) the Company and its Subsidiaries may convey, sell,
transfer, assign or otherwise dispose of property, businesses, or assets to
the Company or any of its Subsidiaries;
(y) the Company and each of its Subsidiaries may surrender
or waive contract rights or settle, release or surrender contract, tort or
other claims of any kind in the ordinary course of business or grant Liens
not otherwise prohibited by the Indenture;
(z) the Company and its Subsidiaries may exchange assets
for property, businesses, or assets held by any Person
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(including by merger or consolidation in the case of a Subsidiary of the
Company); provided that (a) property, businesses and assets, which in one
or a series of related transactions exceeds $15,000,000 in value, received
by the Company or such Subsidiaries in any such exchange in the good faith
reasonable judgment of the Supervisory Board of the Company will
immediately constitute, be a part of, or be used in, a Related Business of
the Company or such Subsidiaries, (b) the Supervisory Board of the Company
has determined that the terms of any exchange, which in one or a series of
related transactions exceeds $15,000,000 in fair market value, are fair and
reasonable, and (c) any cash or Cash Equivalents received by the Company or
any Subsidiary in such exchange shall be treated as having been received as
a result of an Asset Sale.
All Net Cash Proceeds from an Event of Loss shall be used all within the
period and as otherwise provided above in clause (1) of the first paragraph of
this Section 10.16.
(3) Any Asset Sale Offer shall be made in compliance with all
applicable laws, rules, and regulations, including, if applicable, Regulation
14E of the Exchange Act and the rules and regulations thereunder and all other
applicable Federal and state securities laws. To the extent that the provisions
of any applicable securities laws, rules, or regulations conflict with the
provisions of this section, compliance by the Company or any of its subsidiaries
with such laws, rules or regulations shall not in and of itself cause a breach
of its obligations under this section.
(4) If the payment date in connection with an Asset Sale Offer
hereunder is on or after an interest payment Record Date and on or before the
associated Interest Payment Date, any accrued and unpaid interest (and
Liquidated Damages, if any, due on such Interest Payment Date) will be paid to
the Person in whose name a Security is registered at the close of business on
such Record Date, and such interest (or Liquidated Damages, if applicable) will
not be payable to Holders who tender Securities pursuant to such Asset Sale
Offer.
SECTION 10.17 Limitation on Transactions with Affiliates. The Company
------------------------------------------
may not, and may not permit any Subsidiary on or after the Issue Date to, enter
into any contract, agreement, arrangement or transaction with any Affiliate of
the Company (an "Affiliate Transaction"), or any series of related Affiliate
Transactions, other than Exempted Affiliate Transactions,
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(1) unless it is determined by the Supervisory Board as evidenced by
a Board Resolution that the terms of such Affiliate Transaction are fair and
reasonable to the Company and no less favorable to the Company than could have
been obtained in an arm's length transaction with a non-Affiliate, and
(2) if involving consideration to either party in excess of
$15,000,000 (or its foreign currency equivalent), unless such Affiliate
Transaction(s) is evidenced by an Officers' Certificate addressed and delivered
to the Trustee certifying that such Affiliate Transaction (or Affiliate
Transactions) has been approved by a majority of the members of the Supervisory
Board of the Company that are disinterested in such transaction, if there are
any directors who are so disinterested, and
(3) if involving consideration to either party in excess of
$15,000,000 or $30,000,000 if there are disinterested directors (or in each case
its foreign currency equivalent), unless in addition the Company, prior to the
consummation thereof, obtains a written favorable opinion as to the fairness of
such transaction to the Company from a financial point of view from an
independent investment banking firm of national reputation in the United States
or, if pertaining to a matter for which such investment banking firms do not
customarily render such opinions, an appraisal or valuation firm of national
reputation in the United States.
SECTION 10.18 Additional Amounts. All payments made by the Company
------------------
under or with respect to the Securities will be made free and clear of and
without withholding or deduction for or on account of any present or future
Taxes imposed or levied by or on behalf of any Taxing Authority within The
Netherlands, or within any other jurisdiction in which the Company is organized
or engaged in business, or any other jurisdiction if payments on the Securities
are made from within such jurisdiction (each of the above, a "Relevant Taxing
Jurisdiction"), unless the Company is required to withhold or deduct Taxes by
law or by the interpretation or administration thereof.
If the Company is required to withhold or deduct any amount for or on
account of Taxes (other than any estate, inheritance, gift, sales, excise,
transfer, wealth or personal property tax, or any similar non-income tax,
assessment or governmental charge) imposed by a Taxing Authority within a
Relevant Taxing Jurisdiction, from any payment made under or with respect to the
Securities, the Company will pay such additional amounts ("Additional Amounts")
as may be necessary so that the net amount received by each Holder of Securities
(including Additional Amounts) after such withholding or deduction (including
any withholding
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or deduction in respect of such Additional Amounts) will not be less than the
amount the Holder would have received if such Taxes had not been withheld or
deducted; provided that no such Additional Amounts shall be payable with respect
to a payment made to a Holder with respect to any Tax or portion thereof that
would not have been imposed, payable or due:
(1) but for the existence of any present or former connection between
the Holder (or the beneficial owner of, or person ultimately entitled to obtain
an interest in, such Securities) and The Netherlands or other jurisdiction in
which the Company is organized or engaged in business other than the holding of
the Securities;
(2) but for the failure of the Holder to use its reasonable best
efforts to comply upon written notice by the Company delivered 60 days prior to
any payment date with a request by the Company to satisfy any certification,
identification or other reporting requirements which shall include any
applicable forms or instructions whether imposed by statute, treaty, regulation
or administrative practice concerning the nationality or residence of the Holder
or the connection of the Holder with The Netherlands or other jurisdiction in
which the Company is organized or engaged in business:
(i) provided that Holder's failure to comply with the 60 day
requirement described above shall not relieve the Company of the Company's
obligation to pay Additional Amounts if the Holder's application for any
requested certification, identification or other reporting requirement
remains Outstanding or is otherwise pending and the Holder continues to use
its reasonable best efforts to obtain such information;
(ii) provided, further, that the Company shall pay any Additional
Amounts not paid on any payment date as a result of the operation of this
clause (2) upon the satisfaction of the relevant certification,
identification or other reporting requirements within 30 days after such
payment date, provided that the Company shall not, as a result of such
satisfaction occurring after the payment date, have already irrevocably
paid to the relevant taxing authority the withheld or deducted amount in
respect of which such Additional Amounts would have been payable;
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(3) but for the failure of the Holder (or the beneficial individual
owner of, or individual ultimately entitled to obtain an interest in, such
Securities) who is an individual citizen or resident of a member state of the
European Union to comply with a written notice by the Company delivered 60 days
prior to any payment date with a request by the Company to provide any
certification, identification or other reporting requirement, whether imposed by
statute, treaty, regulation or administrative practice, if such action would
otherwise eliminate the requirement for the withholding or deduction of Taxes;
or
(4) if the beneficial owner of, or person ultimately entitled to
obtain an interest in, such Securities had been the Holder of the Securities and
would not be entitled to the payment of Additional Amounts (excluding the impact
of book entry procedures by the Depositary or Common Depositary).
In addition, Additional Amounts will not be payable with respect to
any Tax which is payable and so paid otherwise than by withholding or deduction
from payments of, or in respect of principal of, or any interest or Liquidated
Damages on, the Securities. The Company will remit the full amount of any
withholdings or deductions for or on account of Taxes to the relevant Taxing
Authority in accordance with applicable law. The Company will make reasonable
efforts to obtain certified copies of tax receipts evidencing the payment of any
Taxes so deducted or withheld from each Taxing Authority imposing such Taxes.
The Company will furnish to the Holders, within 60 days after the date the
payment of any Taxes so deducted or withheld are due pursuant to applicable law,
either certified copies of tax receipts evidencing such payment by the Company
or, if such receipts are not obtainable, other evidence of such payments by the
Company. At least 30 days prior to each date on which any payment under or with
respect to the Securities is due and payable, if the Company will be obligated
to pay Additional Amounts with respect to such payment, the Company will deliver
to the respective Trustee an Officers' Certificate stating (i) the fact that
such Additional Amounts will be payable, (ii) the amounts so payable and (iii)
such other information necessary to enable the Trustee to pay such Additional
Amounts to the Holders of Securities on the Interest Payment Date.
Wherever in this Indenture there is mentioned, in any context, the payment
of amounts based upon the principal amount of the Securities, or of principal,
premium, if any, interest or Liquidated Damages, if any, or of any other amount
payable under or with respect to any of the Securities, such mention shall be
deemed to include
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mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
SECTION 10.19 Waiver of Stay, Extension or Usury Laws. The Company
---------------------------------------
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law or any usury law or other law, which
would prohibit or forgive the Company from paying all or any portion of the
principal of and/or interest, if any, on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 10.20 Limitation on Lines of Business. Neither the Company
--------------------------------
nor any of its Subsidiaries shall directly or indirectly engage to any
substantial extent in any line or lines of business activity other than that
which, in the reasonable good faith judgment of the Supervisory Board, is a
Related Business.
SECTION 10.21 Limitation on Status as an Investment Company. The
----------------------------------------------
Company and its Subsidiaries shall not take any action or conduct their business
and operations in such a way as would cause them to be required to register as
an "investment company" (as that term is defined in the Investment Company Act
of 1940, as amended), or would otherwise cause them to become subject to
regulation under the Investment Company Act.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1 Right of Redemption.
-------------------
(1) Optional Redemption of the Securities
Except as set forth in clauses (2) and (3) of this Section 11.1, the
Securities are not redeemable at the option of the Company, in whole or in part.
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(2) Redemption Upon Equity Offering
Prior to February 1, 2003, upon an Equity Offering of Common Stock for
cash of the Company, up to 35% of the aggregate principal amount of each of the
Dollar Denominated Securities and the Euro Denominated Securities (determined
separately) may be redeemed at the Company's option within 90 days of such
Equity Offering, on not less than 30 days, but not more than 60 days', notice to
each Holder of the Securities to be redeemed, with cash in an amount not in
excess of the Net Cash Proceeds of such Equity Offering, at a redemption price
equal to 111.250% of the principal amount, in the case of the Dollar Denominated
Securities and 111.250% of the principal amount in the case of the Euro
Denominated Securities, in each case together with accrued and unpaid interest
and Liquidated Damages, if any, thereon to the Redemption Date; provided,
however, that immediately following such redemption not less than 65% of the
aggregate principal amount of the Dollar Denominated Securities and the Euro
Denominated Securities (determined separately) originally issued remain
Outstanding; and provided, further, that such redemption shall occur within 90
days after the date of the closing of such Equity Offering.
(3) Redemption For Changes In Withholding Taxes
The Company may, at its option, redeem all, but not less than all, of
the Securities then Outstanding, in each case at 100% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
Redemption Date, if a Tax Event has occurred and is continuing. Notice of any
such redemption must be given within not less than 30 days nor more than 60 days
prior to the redemption date. No redemption pursuant to this paragraph (3) may
be made unless, prior to the publication of any notice of redemption as a result
of a Tax Event, the Company delivers to the Trustee (i) an Officer's Certificate
stating that a Tax Event has occurred (irrespective of whether the amendment or
change is then effective), describing the facts leading thereto and stating that
the Company cannot avoid the requirement to pay Additional Amounts by taking
reasonable measures available to it and (ii) an opinion of counsel reasonably
acceptable to the Trustee to the effect that the Company is or will become
obligated to pay Additional Amounts as a result of such change or amendment.
(4) Mandatory Redemption
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The Company is not required to make mandatory redemption payments or
sinking fund payments with respect to the Securities.
SECTION 11.2 Applicability of Article. Redemption of Securities at
------------------------
the election of the Company or otherwise, as permitted or required by any
provision of this Indenture, shall be made in accordance with such provision and
this Article Eleven.
SECTION 11.3 Election to Redeem; Notice to Trustee. The election of
-------------------------------------
the Company to redeem any Securities pursuant to Section 11.1 shall be evidenced
by a Board Resolution. In case of any redemption at the election of the
Company, the Company shall, at least 60 days prior to the Redemption Date fixed
by the Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Securities to be redeemed and shall deliver to the Trustee such documentation
and records as shall enable the Trustee to select the Securities to be redeemed
pursuant to Section 11.4.
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed. If
-------------------------------------------------
less than all the Securities are to be redeemed, the particular Securities to be
redeemed shall be selected not more than 30 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities not previously called for
redemption pro rata, by lot or by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal amount of Securities; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Security not
redeemed to less than $1,000 or (Euro)1,000, as the case may be.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
SECTION 11.5 Notice of Redemption. Notice of redemption shall be
--------------------
given in the manner provided for in Section 1.6 not less than 30 nor more than
60 days prior to the Redemption Date, to each Holder of Securities to be
redeemed.
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Each notice of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 11.7, if any,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of a partial redemption, the principal amount)
of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, that on and
after the Redemption Date, upon surrender of such Security, the Holder will
receive, without charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section 11.7)
will become due and payable upon each such Security, or the portion thereof, to
be redeemed, and that interest thereon will cease to accrue on and after said
date, and
(6) the place or places where such Securities are to be presented and
surrendered for payment of the Redemption Price and accrued interest, if any.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.6 Deposit of Redemption Price. Prior to any Redemption
---------------------------
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3) an amount of U.S. Dollars (in the case of the Dollar
Denominated Securities) or European Legal Tender (in the case of the Euro
Denominated Securities) sufficient to pay the Redemption Price of, and accrued
interest on, all the Securities which are to be redeemed on that date.
SECTION 11.7 Securities Payable on Redemption Date. Notice of
-------------------------------------
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on
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the Redemption Date, become due and payable at the Redemption Price therein
specified (together with accrued interest and Liquidated Damages, if any, to the
Redemption Date), and from and after such date (unless the Company shall default
in the payment of the Redemption Price and accrued interest) such Securities
shall cease to bear interest. Upon surrender of any such Security for redemption
in accordance with said notice, such Security shall be paid by the Company at
the Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the interest rate borne by
the Securities.
SECTION 11.8 Securities Redeemed in Part. Any Security which is to
---------------------------
be redeemed only in part shall be surrendered at the office or agency of the
Company maintained for such purpose pursuant to Section 10.2 (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holder's attorney duly authorized in writing),
and the Company shall execute, and the Trustee shall authenticate and deliver to
the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal amount of the Security so surrendered.
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1 Company's Option to Effect Defeasance or Covenant
-------------------------------------------------
Defeasance. The Company may, at its option by Board Resolution, at any time
- ----------
prior to the Stated Maturity of the Securities, with respect to the Securities,
elect to have either Section 12.2 or Section 12.3 be applied to all Outstanding
Securities upon compliance with the conditions set forth below in this Article
Twelve.
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SECTION 12.2 Defeasance and Discharge. Upon the Company's exercise
------------------------
under Section 12.1 of the option applicable to this Section 12.2, the Company
shall be deemed to have been discharged from its obligations with respect to all
Outstanding Securities on the date the conditions set forth in Section 12.4 are
satisfied (hereinafter, "Defeasance"). For this purpose, Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the Outstanding Securities, which shall thereafter
be deemed to be "Outstanding" only for the purposes of Section 12.5 and the
other Sections of this Indenture referred to in clauses (A) and (B) below, and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of Outstanding Securities to
receive, solely from the trust fund described in Section 12.4 and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest (and Liquidated Damages, if any) on such Securities when such
payments are due and any rights of the Holders with respect to such amounts, (B)
the Company's obligations with respect to such Securities under Sections 3.4,
3.5, 3.6, 10.2 and 10.3; (C) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and (D) this Article Twelve. Subject to compliance
with this Article Twelve, the Company may exercise its option under this Section
12.2 notwithstanding the prior exercise of its option under Section 12.3 with
respect to the Securities.
SECTION 12.3 Covenant Defeasance. Upon the Company's exercise under
-------------------
Section 12.1 of the option applicable to this Section 12.3, the Company shall be
released from its obligations under any covenant contained in Section 8.1 and in
Sections 10.8 through 10.18 with respect to the Outstanding Securities
("Covenant Defeasance") on and after the date the conditions set forth below are
satisfied, and the Securities shall thereafter be deemed not to be "Outstanding"
for the purposes of any direction, waiver, consent or declaration or Act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "Outstanding" for all other purposes hereunder.
For this purpose, Covenant Defeasance means that, with respect to the
Outstanding Securities, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of
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Default under Section 5.1(3), 5.1(4) and 5.1(5), but, except as specified above,
the remainder of this Indenture and such Securities shall be unaffected thereby.
SECTION 12.4 Conditions to Defeasance or Covenant Defeasance. The
-----------------------------------------------
following shall be the conditions to application of either Section 12.2 or
Section 12.3 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another Trustee satisfying the requirements of
Section 6.8 who shall agree to comply with the provisions of this Article Twelve
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities: (A) U.S. legal tender (with
respect to the Dollar Denominated Securities), legal tender in the countries
constituting the European Monetary Union (with respect to the Euro Denominated
Securities), or (B) U.S. Government Obligations (with respect to the Dollar
Denominated Securities), EEA Government Obligations (with respect to Euro
Denominated Securities), or (C) a combination thereof, sufficient, in the
opinion of a firm of independent public accountants that is nationally
recognized in the United States expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying Trustee) to pay and discharge, the principal of
(and premium, if any) and interest on the Outstanding Securities on the Stated
Maturity (or Redemption Date, if applicable) of such principal (and premium, if
any) or installment of interest; provided that the Holders of Securities must
have a valid, perfected, exclusive security interest in such trust.
(2) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as paragraphs (6) and (7) of
Section 5.1 are concerned, at any time during the period ending on the 91st day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period).
(3) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries is bound.
(4) In the case of an election under Section 12.2, the Company shall
have delivered to the Trustee an opinion of counsel reasonably acceptable to the
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Trustee stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since the date of
this Indenture, there has been a change in the applicable U.S. federal income
tax law, in either case to the effect that, and based thereon such opinion shall
confirm that, the Holders of the Outstanding Securities will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
Defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
Defeasance had not occurred.
(5) In the case of an election under Section 12.3, the Company shall
have delivered to the Trustee an opinion of counsel reasonably acceptable to the
Trustee to the effect that (i) the Holders of the Outstanding Securities will
not recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to U.S. federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of such Outstanding Securities over any other of the
Company's creditors or with the intent of defeating, hindering, delaying or
defrauding any other of the Company's creditors or others; and
(7) The Company shall have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent provided for relating to
either the Defeasance under Section 12.2 or the Covenant Defeasance under
Section 12.3 (as the case may be) have been complied with; and, in the case of
the opinion of counsel, that paragraphs (1) (with respect to the validity and
perfection of the security interest), (2), (3) and (5) of this Section 12.4 have
been complied with, and the Company shall have delivered to the Trustee an
Officers' Certificate, subject to such qualifications and exceptions as the
Trustee deems appropriate, to the effect that, assuming no Holder of the
Securities is an insider of the Company, the trust funds will not be subject to
the effect of any applicable Federal bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally.
SECTION 12.5 Deposited Money and U.S. Government Securities to Be
----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of
- ---------------------------------------------
the last paragraph of Section 10.3, all money and U.S. Government Obligations
and EEA Government Obligations (including the proceeds thereof) deposited with
the
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Trustee (or other qualifying Trustee, collectively for purposes of this Section
12.5, the "Trustee") pursuant to Section 12.4 in respect of the Outstanding
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Holders of such Securities of
all sums due and to become due thereon in respect of principal, premium, if any,
and interest, but such money need not be segregated from other funds except to
the extent required by law.
The Company shall pay and indemnify the Trustee and (if applicable)
its officers, directors, employees and agents against any tax, fee or other
charge imposed on or assessed against the U.S. Government Securities deposited
pursuant to Section 12.4 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations or EEA Government Obligations
held by it as provided in Section 12.4 which, in the opinion of a firm of
independent public accountants that is nationally recognized in the United
States expressed in a written certification thereof delivered to the Trustee,
are in excess of the amount thereof which would then be required to be deposited
to effect an equivalent Defeasance or Covenant Defeasance, as applicable, in
accordance with this Article Twelve.
SECTION 12.6 Reinstatement. If the Trustee or any Paying Agent is
-------------
unable to apply any money in accordance with Section 12.5 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Company's obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 12.2 or 12.3, as the case may be, until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 12.5; provided, however, that if the Company makes any
payment of principal of, premium, if any, or interest on any Security following
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the money
held by the Trustee or Paying Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed all as of the day and year first above written.
UNITED PAN-EUROPE COMMUNICATIONS N.V.
By: ___________________________
Name:
Title:
Citibank, N.A. (London Branch), Trustee
By: ___________________________
Name:
Title:
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EXHIBIT A
[FORM OF DOLLAR DENOMINATED SECURITIES]
[If a Global Security, then insert:] THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC"), EUROCLEAR OR
CEDELBANK (EACH, A "DEPOSITARY") OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR
DEPOSITARY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN A DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY A DEPOSITARY TO A NOMINEE
OF A DEPOSITARY OR BY A NOMINEE OF A DEPOSITARY TO A DEPOSITARY OR ANOTHER
NOMINEE OF A DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
[If a Global Security, then insert:] UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF A DEPOSITARY, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF SUCH DEPOSITARY OR A NOMINEE OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF A DEPOSITARY (AND
ANY PAYMENT IS MADE TO ITS NOMINEE OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF A DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, A NOMINEE OF A DEPOSITARY, HAS AN INTEREST HEREIN.
[If a Restricted Global Security, then insert:] THIS SECURITY (OR ITS
PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
A-1
<PAGE>
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. BY ITS ACCEPTANCE HEREOF, THE HOLDER: (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A")) (A "QIB"), OR IS OTHERWISE ACQUIRING THIS SECURITY
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY,
AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY
OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A QIB AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO PERSONS
THAT ARE NOT U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH THE REQUIREMENTS OF REGULATION S UNDER THE
SECURITIES ACT ("REGULATION S") OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. OFFERS, SALES OR OTHER TRANSFERS OF THIS SECURITY UNDER CLAUSES
(C), (D) AND (E) ABOVE ARE SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT
A-2
<PAGE>
PRIOR TO ANY SUCH OFFERS, SALES OR OTHER TRANSFERS TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS
GIVEN TO THEM BY REGULATION S.
[If a Regulation S Security, then insert: THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, PRIOR TO THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE
PERIOD (DEFINED AS 40 DAYS AFTER THE ISSUE DATE WITH RESPECT TO THE SECURITIES)
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT
(A)(1) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF
REGULATION S OR (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES. BY ITS ACCEPTANCE HEREOF, THE HOLDER AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND.
THIS SECURITY MAY NOT BE OFFERED, TRANSFERRED OR SOLD AS PART OF ITS
INITIAL DISTRIBUTION, OTHER THAN TO INDIVIDUALS OR LEGAL ENTITIES, SITUATED IN
OR OUTSIDE THE NETHERLANDS, WHO OR WHICH TRADE OR INVEST IN SECURITIES IN THE
CONDUCT OF THEIR PROFESSION OR BUSINESS (WHICH INCLUDES BANKS, BROKERS, DEALERS,
INSURANCE COMPANIES, PENSION FUNDS, OTHER INSTITUTIONAL INVESTORS AND OTHER
PARTIES (INCLUDING TREASURY DEPARTMENTS OF COMMERCIAL ENTERPRISE AND FINANCE
COMPANIES OR GROUPS), WHICH REGULARLY TRADE OR INVEST IN SECURITIES).
A-3
<PAGE>
A-4
<PAGE>
United Pan-Europe Communications N.V.
$600,000,000 11 1/4% Senior Notes Due 2010
[CUSIP] [ISIN] [Common Code]: [ ]
No. [ ] $[ ]
United Pan-Europe Communications N.V., a public company with limited
liability organized and existing under the laws of The Netherlands (the
"Company," which term includes any successor corporation), for value received,
hereby promises to pay to the registered holder, Cede & Co., as nominee of The
Depository Trust Company or registered assigns, the principal sum of [ ]
DOLLARS or such amount as may be increased or decreased in accordance with the
terms of the Indenture and as set forth on the Schedule of Interest but not to
exceed $600,000,000 on February 1, 2010.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed manually or by facsimile by its duly authorized officer.
Dated: January 20, 2000
UNITED PAN-EUROPE COMMUNICATIONS N.V.
By:__________________
Authorized Signatory
A-6
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: January 20, 2000
This is one of the Securities referred to in the within-mentioned
Indenture.
CITIBANK, N.A.
Not in its individual capacity, but solely as Trustee
By: ___________________________
Authorized Signatory
A-7
<PAGE>
[REVERSE OF NOTE]
UNITED PAN-EUROPE COMMUNICATIONS N.V.
$600,000,000
11 1/4% SENIOR NOTE DUE 2010
1. Interest. United Pan-Europe Communications N.V., a public
--------
limited liability company organized and existing under the laws of The
Netherlands (the "Company"), promises to pay, until the principal hereof is paid
or made available for payment, interest on the principal amount set forth on the
face hereof at a rate of 11 1/4% per annum. Interest hereon will accrue from and
including the most recent date to which interest has been paid or, if no
interest has been paid, from and including January 20, 2000 to but excluding the
date on which interest is paid. Interest shall be payable in arrears semi-
annually on each February 1 and August 1, commencing on August 1, 2000. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The
Company shall pay interest on overdue principal and on overdue interest (to the
full extent permitted by law) at the rate borne by the Securities.
In the event that, at any time prior to 180 days following the Issue
Date, the Company (x) issues or sells, or (y) offers or negotiates to issue or
sell, for cash, any debt securities (other than debt securities convertible or
exchangeable into Capital Stock of the Company) to Qualified Institutional
Buyers who, as a regular part of their business, purchase debt securities
comparable to the Securities or the Other Senior Notes (any of the events
described in (x) or (y) at any time during such 180 day period, an "Interest
Rate Adjustment Event"), the interest rate otherwise applicable to the
Securities shall, on and after the date of such Interest Rate Adjustment Event,
be increased by 25 basis points such that, on and after the date of such
Interest Rate Adjustment Event, interest on the Dollar Denominated Securities
will accrue at a rate of 11 1/2% per annum. Any amounts owing as a result of
such increase shall be paid to the Holders of record as of the Regular Record
Date next following any such Interest Rate Adjustment Event, on the immediately
following Interest Payment Date, and thereafter will be payable semiannually in
arrears on February 1 and August 1 of each year to the Holders of record on the
immediately preceding Regular Record Date.
A-8
<PAGE>
Promptly following the occurrence of an Interest Rate Adjustment
Event, the Company shall give notice of the occurrence thereof to the Trustee,
to the Paying Agent and to each Holder of Securities in the manner provided for
in Section 1.6 of the Indenture. Such notice shall include the amount to be
paid to the Holders of record as of such Regular Record Date on the next
following Interest Payment Date.
2. Method of Payment. The Company will pay interest hereon (except
-----------------
defaulted interest) to the Persons who are registered Holders at the close of
business on January 15 or July 15 next preceding the Interest Payment Date
(whether or not a Business Day). Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company will pay principal and
interest in money of the United States of America that at the time of payment is
legal tender for payment of public and private Indebtedness. Interest may be
paid by check mailed to the Holder entitled thereto at the address indicated on
the register maintained by the Registrar for the Securities.
3. Paying Agent and Registrar. Initially, Citibank, N.A. (London
--------------------------
Branch) (the "Trustee") and Citibank, N.A. (New York Branch) will act as Paying
Agent and Registrar and Banque Internationale a Luxembourg will act as Paying
Agent in Luxembourg. The Company may change any Paying Agent or Registrar
without notice. The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Registrar.
4. Indenture. The Company issued $600,000,000 11 1/4% Senior Notes
---------
due 2010 and (Euro)200,000,000 11 1/4% Senior Notes due 2010 under an Indenture
dated as of January 20, 2000 (the "Indenture") between the Company and the
Trustee. This is one of an issue of Securities of the Company issued, or to be
issued, under the Indenture. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb), as amended from time
to time. The Securities are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of them. Capitalized and certain
other terms used herein and not otherwise defined have the meanings set forth in
the Indenture. To the extent of any conflict between the terms of the Securities
and the Indenture, the applicable terms of the Indenture shall govern.
A-9
<PAGE>
5. Additional Amounts. The Company will pay to the Holders of
------------------
Securities such Additional Amounts as may become payable under Section 10.18 of
the Indenture.
6. Optional Redemption of the Securities. The Company will not have
-------------------------------------
the right to redeem any of the Securities prior to their maturity on February 1,
2010 (other than as described in the next two following paragraphs).
7. Redemption Upon Equity Offering. Prior to February 1, 2003, upon
-------------------------------
an Equity Offering of Common Stock for cash of the Company, up to 35% of the
aggregate principal amount of each of the Dollar Denominated Securities and Euro
Denominated Securities (determined separately) may be redeemed at the Company's
option within 90 days of such Equity Offering, on not less than 30 days', but
not more than 60 days', notice to each Holder of the Securities to be redeemed,
with cash in an amount not in excess of the Net Cash Proceeds of such Equity
Offering, at a Redemption Price equal to 111.250% of the principal amount of the
Securities redeemed, together with accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Redemption Date; provided, however, that
immediately following such redemption not less than 65% of the aggregate
principal amount of the Dollar Denominated Securities and the Euro Denominated
Securities (determined separately) originally issued remain Outstanding; and
provided, further, that such redemption shall occur within 90 days after the
date of the closing of such Equity Securities.
8. Redemption for Changes in Withholding Taxes. The Company may, at
-------------------------------------------
its option, redeem all, but not less than all, of the Securities then
Outstanding, in each case at 100% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the Redemption
Date, if a Tax Event has occurred and is continuing.
9. Mandatory Redemption. The Company is not required to make
--------------------
mandatory redemption payments or sinking fund payments with respect to the
Securities.
10. Notice of Redemption. Notice of redemption will be mailed within
--------------------
not less than 30 days nor more than 60 days prior to the Redemption Date to each
Holder of Securities to be redeemed at his registered address. On and after the
Redemption Date, unless the Company defaults in making the redemption payment,
interest ceases to accrue on Securities or portions thereof called for
redemption.
A-10
<PAGE>
11. Purchase of Securities upon Change of Control. The Indenture
---------------------------------------------
provides that upon the occurrence of a Change of Control and subject to further
limitations contained therein, the Company shall make an offer to purchase
Outstanding Securities in accordance with the procedures set forth in the
Indenture.
12. Registration Rights. Pursuant to a Registration Rights
-------------------
Agreement, dated January 20, 2000, among the Company and the Initial Purchasers
named therein, the Company will be obligated to consummate an Exchange Offer
pursuant to which the Holder of this Security shall have the right to exchange
this Security for notes of a separate series issued under the Indenture which
have been registered under the Securities Act, in like principal amount and
having substantially identical terms as the Securities. The Holders shall be
entitled to receive certain payments in the event such Exchange Offer is not
consummated ("Liquidated Damages") and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
13. Denominations, Transfer, Exchange. The Securities are in
---------------------------------
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay to it any
taxes and fees required by law or permitted by the Indenture. Under certain
circumstances set forth in the Indenture, the Registrar need not register the
transfer of or exchange any Securities.
14. Persons Deemed Owners. The registered Holder of this Security
---------------------
may be treated as the owner of this Security for all purposes.
15. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its written request. After that, all
liability of the Trustee and any such Paying Agent with respect to such money
shall cease.
16. Amendment, Supplement, Waiver, Etc. The Company and the Trustee
-----------------------------------
may, without the consent of the Holders of any Outstanding Securities, amend,
waive or supplement the Indenture or the Securities for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies. Other amendments and modifications of the Indenture or the
Securities may be made by the Company and the Trustee with the consent of the
A-11
<PAGE>
Holders of not less than a majority of the aggregate principal amount of the
Outstanding Securities and with other holders of notes of other series issued
under the Indenture, subject to certain exceptions requiring the consent of the
Holders of the particular Securities to be affected.
17. Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make Restricted Payments, make certain Investments,
create or incur Liens, enter into transactions with Affiliates, enter into
agreements restricting the ability of Subsidiaries to pay dividends and make
distributions and on the ability of the Company to merge or consolidate with any
other person or transfer all or substantially all of the Company's assets. Such
limitations are subject to a number of important qualifications and exceptions.
Pursuant to the Indenture, the Company must annually report to the Trustee on
compliance with such limitations.
18. Defaults and Remedies. Events of Default are set forth in the
---------------------
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than certain events of bankruptcy, insolvency or reorganization
affecting the Company) occurs and is continuing, the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Outstanding Securities
under the Indenture may, by written notice to the Trustee and the Company, and
the Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities shall, declare all principal of
and accrued interest on all Securities to be immediately due and payable and
such amounts shall become immediately due and payable.
19. Trustee Dealings with Company. The Trustee, in its individual or
-----------------------------
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
20. No Recourse Against Others. No board member, director, officer,
--------------------------
employee, agent, authorized representative, incorporator or shareholder of the
Company shall have any liability for any obligations of the Company under the
Securities or the Indenture for a claim based on, in respect of, or by reason
of, such obligations or their creation by reason of his, her or its status as
such. Each Holder of Securities by accepting a Security waivers and releases
all such liability. The waiver and release are part of the consideration for
the issuance of the Securities.
A-12
<PAGE>
21. Discharge. The Company's obligations pursuant to the Indenture
---------
will be discharged, except for obligations pursuant to certain provisions
thereof, subject to the terms of the Indenture, upon the payment of all the
Securities or upon the irrevocable deposit with the Trustee of U.S. Dollars or
U.S. Government Securities denominated in U.S. Dollars sufficient to pay when
due principal of and interest on the Securities to maturity or redemption.
22. Authentication. This Security shall not be valid until the
--------------
Trustee signs the certificate of authentication on the other side of this
Security.
23. Governing Law. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING WITHOUT
LIMITATION SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW AND
NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B), AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW. THE
COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND
THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BOUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. The Trustee, the Company
and the Holders agree to submit to the jurisdiction of the courts of the State
of New York in any action or proceeding arising out of or relating to the
Indenture or the Securities.
24. Abbreviations. Customary abbreviations may be used in the name
-------------
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not
A-13
<PAGE>
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
25. Currency of Account. U.S. Dollars are the sole currency of
-------------------
account and payment for all sums payable by the Company under the Securities.
26. CUSIP, ISIN and Common Code Numbers. The Company has caused
-----------------------------------
CUSIP, ISIN or Common Code numbers, as applicable, to be printed on the
Securities and the Trustee may use CUSIP, ISIN or Common Code numbers, as
applicable, in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed hereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
United Pan-Europe Communications N.V.
P.O. Box 74763
1070 BT Amsterdam
The Netherlands
Attn: Treasurer
A-14
<PAGE>
FORM OF ASSIGNMENT
If you, the holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Security to:
________________________________________________________________________________
(Insert assignee's social security or tax ID number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
of______________________________________________________________________________
Agent to transfer this Security on the books of the Company. The Agent may
substitute another to act for such agent.
In connection with any transfer of this Security occurring prior to the
date which is the earlier of (i) the date of the declaration by the United
States Securities and Exchange Commission of the effectiveness of a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering resales of this Security (which effectiveness shall not have been
suspended or terminated at the date of the transfer) and (ii) the date two years
(or such shorter period of time as may be permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) after the later of the
original issuance date appearing on the face of this Security (or any
Predecessor Security) or the last date on which the Company or any Affiliate of
the Company was the owner of this Security (or any Predecessor Security), the
undersigned confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer and that:
[Check One]
[_] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
or
A-15
<PAGE>
[_] (b) this Security is being transferred other than in accordance with (a)
above and documents, including a transferee certificate substantially in
the form attached hereto, are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
If neither of the foregoing boxes is checked and, in the case of (b) above,
if the appropriate document is not attached or otherwise furnished to the
Trustee, the Trustee or Registrar shall not be obligated to register this
Security in the name of any person other than the Holder hereof unless and until
the conditions to any such transfer or registration set forth herein and in
Section 3.13 and Section 3.14 of the Indenture shall have been satisfied.
Dated: ________________ Your signature: ____________________________________
(Sign exactly as your name appears on the other
side of this Security)
By:_________________________________________________
NOTICE: To be executed by an executive officer
Signature Guaranteed: ________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program acceptable
to the Trustee)
A-16
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A (including the information
specified in Rule 144A(d)(4)) or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated: _________________________ ____________________________________
NOTICE: To be executed by an executive
officer
A-17
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY
Principal
Amount of Amount of Amount
decrease in increase in at maturity
Principal Principal of this
Amount Amount Global
at maturity at maturity Security Signature of
of this of this following authorized
Date of Global Global such decrease officer of
Exchange Security Security (or increase) Trustee
- ---------- -------------- ------------- ----------------- -------------
Initial $
balance as
of 20/1/00
A-18
<PAGE>
EXHIBIT B
[FORM OF EURO DENOMINATED SECURITIES]
[If a Global Security, then insert:] THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC"), EUROCLEAR OR
CEDELBANK (EACH, A "DEPOSITARY") OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR
DEPOSITARY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN A DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY A DEPOSITARY TO A NOMINEE
OF A DEPOSITARY OR BY A NOMINEE OF A DEPOSITARY TO A DEPOSITARY OR ANOTHER
NOMINEE OF A DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
[If a Global Security, then insert:] UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF A DEPOSITARY, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF SUCH DEPOSITARY OR A NOMINEE OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF A DEPOSITARY (AND
ANY PAYMENT IS MADE TO ITS NOMINEE OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF A DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, A NOMINEE OF A DEPOSITARY, HAS AN INTEREST HEREIN.
[If a Restricted Global Security, then insert:] THIS SECURITY (OR ITS
PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
B-1
<PAGE>
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. BY ITS ACCEPTANCE HEREOF, THE HOLDER: (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A")) (A "QIB"), OR IS OTHERWISE ACQUIRING THIS SECURITY
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY,
AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY
OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A QIB AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO PERSONS
THAT ARE NOT U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH THE REQUIREMENTS OF REGULATION S UNDER THE
SECURITIES ACT ("REGULATION S") OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. OFFERS, SALES OR OTHER TRANSFERS OF THIS SECURITY UNDER CLAUSES
(C), (D) AND (E) ABOVE ARE SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT
B-2
<PAGE>
PRIOR TO ANY SUCH OFFERS, SALES OR OTHER TRANSFERS TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS
GIVEN TO THEM BY REGULATION S.
[If a Regulation S Security, then insert: THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, PRIOR TO THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE
PERIOD (DEFINED AS 40 DAYS AFTER THE ISSUE DATE WITH RESPECT TO THE SECURITIES)
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT
(A)(1) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF
REGULATION S OR (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES. BY ITS ACCEPTANCE HEREOF, THE HOLDER AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND.
THIS SECURITY MAY NOT BE OFFERED, TRANSFERRED OR SOLD AS PART OF ITS
INITIAL DISTRIBUTION, OTHER THAN TO INDIVIDUALS OR LEGAL ENTITIES, SITUATED IN
OR OUTSIDE THE NETHERLANDS, WHO OR WHICH TRADE OR INVEST IN SECURITIES IN THE
CONDUCT OF THEIR PROFESSION OR BUSINESS (WHICH INCLUDES BANKS, BROKERS, DEALERS,
INSURANCE COMPANIES, PENSION FUNDS, OTHER INSTITUTIONAL INVESTORS AND OTHER
PARTIES (INCLUDING TREASURY DEPARTMENTS OF COMMERCIAL ENTERPRISE AND FINANCE
COMPANIES OR GROUPS), WHICH REGULARLY TRADE OR INVEST IN SECURITIES).
B-3
<PAGE>
United Pan-Europe Communications N.V.
(Euro)200,000,000 11 1/4% Senior Notes Due 2010
[CUSIP] [ISIN] [Common Code]: [ ]
No. [ ] (Euro)[ ]
United Pan-Europe Communications N.V., a public company with limited
liability organized and existing under the laws of The Netherlands (the
"Company," which term includes any successor corporation), for value received,
hereby promises to pay to the registered holder, Citivic Nominees Limited, as
Common Depositary for Morgan Guaranty Trust Company of New York, as operator of
Euroclear, and for Cedelbank or registered assigns, the principal sum of [
] EUROS or such amount as may be increased or decreased in accordance with the
terms of the Indenture and as set forth on the Schedule of Interest but not to
exceed (Euro)[ ] on February 1, 2010.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
B-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed manually or by facsimile by its duly authorized officer.
Dated: January 20, 2000
UNITED PAN-EUROPE COMMUNICATIONS N.V.
By:__________________
Authorized Signatory
B-5
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: January 20, 2000
This is one of the Securities referred to in the within-mentioned
Indenture.
CITIBANK, N.A.
Not in its individual capacity, but solely as Trustee
By:__________________________
Authorized Signatory
B-6
<PAGE>
REVERSE OF NOTE
UNITED PAN-EUROPE COMMUNICATIONS N.V.
(Euro)200,000,000
11 1/4% SENIOR NOTE DUE 2010
1. Interest. United Pan-Europe Communications N.V., a public limited
--------
liability company organized and existing under the laws of The Netherlands (the
"Company"), promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the face
hereof at a rate of 11 1/4% per annum. Interest hereon will accrue from and
including the most recent date to which interest has been paid or, if no
interest has been paid, from and including January 20, 2000 to but excluding the
date on which interest is paid. Interest shall be payable in arrears semi-
annually on each February 1 and August 1, commencing on August 1, 2000. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The
Company shall pay interest on overdue principal and on overdue interest (to the
full extent permitted by law) at the rate borne by the Securities.
In the event that, at any time prior to 180 days following the Issue
Date, the Company (x) issues or sells, or (y) offers or negotiates to issue or
sell, for cash, any debt securities (other than debt securities convertible or
exchangeable into Capital Stock of the Company) to Qualified Institutional
Buyers who, as a regular part of their business, purchase debt securities
comparable to the Securities or the Other Senior Notes (any of the events
described in (x) or (y) at any time during such 180 day period, an "Interest
Rate Adjustment Event"), the interest rate otherwise applicable to the
Securities shall, on and after the date of such Interest Rate Adjustment Event,
be increased by 25 basis points such that, on and after the date of such
Interest Rate Adjustment Event, interest on the Dollar Denominated Securities
will accrue at a rate of 11 1/2% per annum. Any amounts owing as a result of
such increase shall be paid to the Holders of record as of the Regular Record
Date next following any such Interest Rate Adjustment Event, on the immediately
following Interest Payment Date, and thereafter will be payable semi-annually in
arrears on February 1 and August 1 of each year to the Holders of record on the
immediately preceding Regular Record Date.
B-7
<PAGE>
Promptly following the occurrence of an Interest Rate Adjustment
Event, the Company shall give notice of the occurrence thereof to the Trustee,
to the Paying Agent and to each Holder of Securities in the manner provided for
in Section 1.6 of the Indenture. Such notice shall include the amount to be paid
to the Holders of record as of such Regular Record Date on the next following
Interest Payment Date.
2. Method of Payment. The Company will pay interest hereon (except
-----------------
defaulted interest) to the Persons who are registered Holders at the close of
business on January 15 or July 15 next preceding the Interest Payment Date
(whether or not a Business Day). Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company will pay principal and interest
in Euros. Interest may be paid by check mailed to the Holder entitled thereto at
the address indicated on the register maintained by the Registrar for the
Securities.
3. Paying Agent and Registrar. Initially, Citibank, N.A. (London
--------------------------
Branch) (the "Trustee") and Citibank, N.A. (New York Branch) will act as Paying
Agent and Registrar and Banque Internationale a Luxembourg will act as Paying
Agent in Luxembourg. The Company may change any Paying Agent or Registrar
without notice. The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Registrar.
4. Indenture. The Company issued $600,000,000 11 1/4% Senior Notes
---------
due 2010 and (Euro)200,000,000 11 1/4% Senior Notes due 2010 under an Indenture
dated as of January 20, 2000 (the "Indenture") between the Company and the
Trustee. This is one of an issue of Securities of the Company issued, or to be
issued, under the Indenture. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb), as amended from time
to time. The Securities are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of them. Capitalized and certain
other terms used herein and not otherwise defined have the meanings set forth in
the Indenture. To the extent of any conflict between the terms of the Securities
and the Indenture, the applicable terms of the Indenture shall govern.
5. Additional Amounts. The Company will pay to the Holders of
------------------
Securities such Additional Amounts as may become payable under Section 10.18 of
the Indenture.
B-8
<PAGE>
6. Optional Redemption of the Securities. The Company will not have
-------------------------------------
the right to redeem any Securities prior to their maturity on February 1, 2020
(other than as described in the next two following paragraphs).
7. Redemption Upon Equity Offering. Prior to February 1, 2003, upon
-------------------------------
an Equity Offering of Common Stock for cash of the Company, up to 35% of the
aggregate principal amount of each of the Dollar Denominated Securities and Euro
Denominated Securities (determined separately) may be redeemed at the Company's
option within 90 days of such Equity Offering, on not less than 30 days', but
not more than 60 days', notice to each Holder of the Securities to be redeemed,
with cash in an amount not in excess of the Net Cash Proceeds of such Equity
Offering, at a Redemption Price equal to 111.250% of the principal amount of the
Securities redeemed, together with accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Redemption Date; provided, however, that
immediately following such redemption not less than 65% of the aggregate
principal amount of the Dollar Denominated Securities and Euro Denominated
Securities (determined separately) originally issued remain Outstanding; and
provided, further, that such redemption shall occur within 90 days after the
date of the closing of such Equity Securities.
8. Redemption for Changes in Withholding Taxes. The Company may, at
-------------------------------------------
its option, redeem all, but not less than all, of the Securities then
Outstanding, in each case at 100% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the Redemption
Date, if a Tax Event has occurred and is continuing.
9. Mandatory Redemption. The Company is not required to make
--------------------
mandatory redemption payments or sinking fund payments with respect to the
Securities.
10. Notice of Redemption. Notice of redemption will be mailed within
--------------------
not less than 30 days nor more than 60 days prior to the Redemption Date to each
Holder of Securities to be redeemed at his registered address. On and after the
Redemption Date, unless the Company defaults in making the redemption payment,
interest ceases to accrue on Securities or portions thereof called for
redemption.
11. Purchase of Securities upon Change of Control. The Indenture
---------------------------------------------
provides that upon the occurrence of a Change of Control and subject to further
B-9
<PAGE>
limitations contained therein, the Company shall make an offer to purchase
Outstanding Securities in accordance with the procedures set forth in the
Indenture.
12. Registration Rights. Pursuant to a Registration Rights Agreement,
-------------------
dated January 20, 2000, among the Company and the Initial Purchasers named
therein, the Company will be obligated to consummate an Exchange Offer pursuant
to which the Holder of this Security shall have the right to exchange this
Security for notes of a separate series issued under the Indenture which have
been registered under the Securities Act, in like principal amount and having
substantially identical terms as the Securities. The Holders shall be entitled
to receive certain payments in the event such Exchange Offer is not consummated
("Liquidated Damages") and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
13. Denominations, Transfer, Exchange. The Securities are in
---------------------------------
registered form, without coupons, in denominations of (Euro)1,000 and integral
multiples of (Euro)1,000. A Holder may transfer or exchange Securities in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay to
it any taxes and fees required by law or permitted by the Indenture. Under
certain circumstances set forth in the Indenture, the Registrar need not
register the transfer of or exchange any Securities.
14. Persons Deemed Owners. The registered Holder of this Security may
---------------------
be treated as the owner of this Security for all purposes.
15. Unclaimed Money. If money for the payment of principal or interest
---------------
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its written request. After that, all liability of
the Trustee and any such Paying Agent with respect to such money shall cease.
16. Amendment, Supplement, Waiver, Etc. The Company and the Trustee
-----------------------------------
may, without the consent of the Holders of any Outstanding Securities, amend,
waive or supplement the Indenture or the Securities for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies. Other amendments and modifications of the Indenture or the
Securities may be made by the Company and the Trustee with the consent of the
Holders of not less than a majority of the aggregate principal amount of the
Outstanding Securities and with other holders of notes of other series issued
under
B-10
<PAGE>
the Indenture, subject to certain exceptions requiring the consent of the
Holders of the particular Securities to be affected.
17. Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make Restricted Payments, make certain Investments,
create or incur Liens, enter into transactions with Affiliates, enter into
agreements restricting the ability of Subsidiaries to pay dividends and make
distributions and on the ability of the Company to merge or consolidate with any
other person or transfer all or substantially all of the Company's assets. Such
limitations are subject to a number of important qualifications and exceptions.
Pursuant to the Indenture, the Company must annually report to the Trustee on
compliance with such limitations.
18. Defaults and Remedies. Events of Default are set forth in the
---------------------
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than certain events of bankruptcy, insolvency or reorganization
affecting the Company) occurs and is continuing, the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Outstanding Securities
under the Indenture may, by written notice to the Trustee and the Company, and
the Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities shall, declare all principal of
and accrued interest on all Securities to be immediately due and payable and
such amounts shall become immediately due and payable.
19. Trustee Dealings with Company. The Trustee, in its individual or
-----------------------------
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
20. No Recourse Against Others. No board member, director, officer,
--------------------------
employee, agent, authorized representative, incorporator or shareholder of the
Company shall have any liability for any obligations of the Company under the
Securities or the Indenture for a claim based on, in respect of, or by reason
of, such obligations or their creation by reason of his, her or its status as
such. Each Holder of Securities by accepting a Security waivers and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Securities.
21. Discharge. The Company's obligations pursuant to the Indenture
---------
will be discharged, except for obligations pursuant to certain provisions
thereof,
B-11
<PAGE>
subject to the terms of the Indenture, upon the payment of all the Securities or
upon the irrevocable deposit with the Trustee of legal tender in the countries
constituting the European Monetary Union or EEA Government Securities
denominated in legal tender in the countries constituting the European Monetary
Union sufficient to pay when due principal of and interest on the Securities to
maturity or redemption.
22. Authentication. This Security shall not be valid until the
--------------
Trustee signs the certificate of authentication on the other side of this
Security.
23. Governing Law. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING WITHOUT
LIMITATION SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW AND
NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B), AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW. THE
COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND
THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BOUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. The Trustee, the Company
and the Holders agree to submit to the jurisdiction of the courts of the State
of New York in any action or proceeding arising out of or relating to the
Indenture or the Securities.
24. Abbreviations. Customary abbreviations may be used in the name of
-------------
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not
B-12
<PAGE>
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
25. Currency of Account. Subject to the Indenture, Euros are the sole
-------------------
currency of account and payment for all sums payable by the Company under the
Securities.
26. ISIN and Common Code Numbers. The Company has caused ISIN or
----------------------------
Common Code numbers, as applicable, to be printed on the Securities and the
Trustee may use ISIN or Common Code numbers, as applicable, in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Securities or as contained in
any notice of redemption and reliance may be placed only on the other
identification numbers placed hereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
United Pan-Europe Communications N.V.
P.O. Box 74763
1070 BT Amsterdam
The Netherlands
Attn: Treasurer
B-13
<PAGE>
FORM OF ASSIGNMENT
If you, the holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Security to:
________________________________________________________________________________
(Insert assignee's social security or tax ID number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
of _____________________________________________________________________________
Agent to transfer this Security on the books of the Company. The Agent may
substitute another to act for such agent.
In connection with any transfer of this Security occurring prior to the
date which is the earlier of (i) the date of the declaration by the United
States Securities and Exchange Commission of the effectiveness of a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering resales of this Security (which effectiveness shall not have been
suspended or terminated at the date of the transfer) and (ii) the date two years
(or such shorter period of time as may be permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) after the later of the
original issuance date appearing on the face of this Security (or any
Predecessor Security) or the last date on which the Company or any Affiliate of
the Company was the owner of this Security (or any Predecessor Security), the
undersigned confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer and that:
[Check One]
[_] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
or
B-14
<PAGE>
[_] (b) this Security is being transferred other than in accordance with (a)
above and documents, including a transferee certificate substantially in
the form attached hereto, are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
If neither of the foregoing boxes is checked and, in the case of (b) above,
if the appropriate document is not attached or otherwise furnished to the
Trustee, the Trustee or Registrar shall not be obligated to register this
Security in the name of any person other than the Holder hereof unless and until
the conditions to any such transfer or registration set forth herein and in
Section 3.13 and Section 3.14 of the Indenture shall have been satisfied.
Dated: _______________ Your signature:______________________________________
(Sign exactly as your name appears on the other side
of this Security)
By:__________________________________________________
NOTICE: To be executed by an executive officer
Signature Guaranteed:___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program acceptable to
the Trustee)
B-15
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A (including the information
specified in Rule 144A(d)(4)) or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:____________________ ________________________________________
NOTICE: To be executed by an executive
officer
B-16
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY
<TABLE>
<CAPTION>
Principal
Amount of Amount of Amount
decrease in increase in at maturity
Principal Principal of this
Amount Amount Global
at maturity at maturity Security Signature of
of this of this following authorized
Date of Global Global such decrease officer of
Exchange Security Security (or increase) Trustee
- -------- ------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Initial (Euro)
balance as
of 20/1/00
</TABLE>
B-17
<PAGE>
EXHIBIT C
FORM OF TRANSFER CERTIFICATE --
RESTRICTED GLOBAL SECURITY TO
REGULATION S GLOBAL SECURITY
(Transfers pursuant to Sections 3.13(b)(ii) and 3.13(c)(ii) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 11 1/4% Senior Notes due 2010
(the "Securities")
Reference is hereby made to the Indenture, dated as of January 20, 2000
between the Company and Citibank, N.A., as trustee, (the "Indenture"). Terms
used but not defined herein and defined in Regulation S under the U.S.
Securities Act of 1933 (the "Securities Act") or in the Indenture shall have the
meanings given to them in Regulation S or the Indenture, as the case may be.
This certificate relates to [U.S.$][(Euro)]______ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
[CUSIP][CINS][ISIN] No(s). ________________________________
CERTIFICATE No(s). _________________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the appropriate Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner.
C-1
<PAGE>
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of an interest in
the Regulation S Global Security. In connection with such transfer, the Owner
hereby certifies that such transfer is being effected in accordance with Rule
904 under the Securities Act and with all applicable securities laws of the
states of the United States and other jurisdictions. Accordingly, the Owner
hereby further certifies as follows:
1. the Owner is not a distributor of the Specified Securities, an
Affiliate of the Company or any such distributor or a person acting on behalf of
any of the foregoing;
2. the offer of the Specified Securities was not made to a person in the
United States;
3 either:
(a) at the time the buy order was originated, the Transferee was
outside the United States or the Owner and any person acting on its behalf
reasonably believed that the Transferee was outside the United States; or
(b) the transaction is being executed in, on or through the
facilities of the Eurobond market, as regulated by the Association of
International Bond Dealers, or another designated offshore securities market and
neither the Owner nor any person acting on its behalf knows that the
transactions have been prearranged with a buyer in the United States;
4. no directed selling efforts have been made in the United States by or
on behalf of the Owner or any Affiliate thereof;
5. if the Owner is a dealer in securities or has received a selling
concession, fee or other remuneration in respect of the Specified Securities,
and the transfer is to occur during the Restricted Period, then the requirements
of Rule 904(c)(1) have been satisfied;
6. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
C-2
<PAGE>
7. upon completion of the transaction, the beneficial interest being
transferred will be held through an Agent Member acting for and on behalf of
Euroclear or Cedelbank.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers under the
Purchase Agreement.
Dated:
________________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By: ____________________________________
Name:
Title:
(If the Undersigned is a Corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
C-3
<PAGE>
EXHIBIT D
FORM OF TRANSFER CERTIFICATE --
RESTRICTED GLOBAL SECURITY TO UNRESTRICTED
GLOBAL SECURITY
(Transfers Pursuant to Sections 3.13(b)(iii) and 3.13(c)(iii) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 11 1/4% Senior Notes due 2010
(the "Securities")
Reference is hereby made to the Indenture, dated as of January 20, 2000
between the Company and Citibank, N.A., as trustee, (the "Indenture"). Terms
used but not defined herein and defined in Regulation S under the U.S.
Securities Act of 1933 (the "Securities Act") or in the Indenture shall have the
meanings given to them in Regulation S or the Indenture, as the case may be.
This certificate relates to [U.S.$][(Euro)]_____ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
[CUSIP][CINS][ISIN] No(s). _________________________
CERTIFICATE No(s). __________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the appropriate Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner.
D-1
<PAGE>
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of an interest in
the Regulation S Global Security. In connection with such transfer, the Owner
hereby certifies that such transfer is being effected in accordance with Rule
904 or Rule 144 under the Securities Act and with all applicable securities laws
of the states of the United States and other jurisdictions. Accordingly, the
Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Specified
Securities, an Affiliate of the Company or any such distributor or a
person acting on behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and any
person acting on its behalf reasonably believed that the
Transferee was outside the United States; or
(i) the transaction is being executed in, on or through
the facilities of the Eurobond market, as regulated by the
Association of International Bond Dealers, or another
designated offshore securities market and neither the Owner nor
any person acting on its behalf knows that the transactions has
been prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any Affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted
D-2
<PAGE>
Period, then the requirements of Rule 904(c)(1) have been satisfied;
and
(F) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring after [date one year after the
latest date of issuance of any of the Specified Securities] and is
being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after [date two years after the
latest date of issuance of any of the Specified Securities] and the
Owner is not, and during the preceding three months has not been, an
Affiliate of the Company.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers under the
Purchase Agreement.
Dated:
________________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:_____________________________________
Name:
Title:
(If the Undersigned is a Corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
D-3
<PAGE>
EXHIBIT E
FORM OF TRANSFER CERTIFICATE --
REGULATION S GLOBAL SECURITY TO
RESTRICTED GLOBAL SECURITY
(Transfers to QIBs Pursuant to Sections 3.13(b)(iv) and 3.13(c)(iv) of the
Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 11 1/4% Senior Notes due 2010
(the "Securities")
Reference is hereby made to the Indenture, dated as of January 20, 2000
between the Company and Citibank, N.A. as trustee, (the "Indenture"). Terms used
but not defined herein and defined in Regulation S under the U.S. Securities Act
of 1933 (the "Securities Act") or in the Indenture shall have the meanings given
to them in Regulation S or the Indenture, as the case may be.
This certificate relates to [U.S.$][(Euro)]______ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
[CUSIP][CINS][ISIN] No(s). _________________________
CERTIFICATE No(s). __________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the appropriate Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner.
E-1
<PAGE>
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of an interest in
the Restricted Global Security. In connection with such transfer, the Owner
hereby certifies that such transfer is being effected in accordance with Rule
144A under the Securities Act and with all applicable securities laws of the
states of the United States and other jurisdictions. Accordingly, the Owner
hereby further certifies as follows:
(1) the Specified Securities are being transferred to a person that
the Owner and any person acting on its behalf reasonably believe is a
"qualified institutional buyer" within the meaning of Rule 144A, acquiring
for its own account or for the account of a qualified institutional buyer;
and
(2) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner may
be relying on Rule 144A in connection with the transfer.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers under the
Purchase Agreement.
Dated:
________________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By: ____________________________________
Name:
Title:
(If the Undersigned is a Corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
E-2
<PAGE>
EXHIBIT F
UNITED PAN-EUROPE
COMMUNICATIONS N.V.
OFFICERS' CERTIFICATE
[Name], [title(s)] of United Pan-Europe Communications N.V., a public
limited liability company organized and existing under the laws of The
Netherlands (the "Company"), and [name], [title(s)] of the Company, hereby
certify pursuant to Sections ____ and ____ of the Indenture, dated as of January
20, 2000 (the "Indenture"), between the Company and Citibank, N.A., as trustee
(the "Trustee"), that:
(i) he or she has read and understands the provisions of the Indenture and
the definitions relating thereto, (ii) the statements made in this Officers'
Certificate are based upon an examination of the provisions of the Indenture and
upon the relevant books and records of the Company, (iii) in his or her opinion,
he or she has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not the covenants and
conditions of the Indenture relating to the [authentication of the Securities]
[execution of the Indenture] [OTHER] have been complied with and (iv) in his or
her opinion, such covenants and conditions have been complied with.
IN WITNESS WHEREOF, each of the undersigned has executed this Certificate
on this ____ day of ____________, ____.
By:___________________________________
Name:
Titles:
By:___________________________________
Name:
Titles:
F-1
<PAGE>
EXHIBIT G
[Date]
Citibank, N.A.
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Ladies and Gentlemen:
We have acted as special counsel to United Pan-Europe Communications N.V.,
a public company with limited liability organized and existing under the laws of
The Netherlands (the "Company"), in connection with the [initial issuance and
sale by the Company of $600,000,000 aggregate principal amount of the Company's
11 1/4% Senior Notes due 2010 and its (Euro)200,000,000 aggregate principal
amount of the Company's 11 1/4% Senior Notes due 2010 (collectively, the
"Securities"), which will be issued under an Indenture, dated as of January 20,
2000 (the "Indenture"), between the Company and Citibank, N.A. as trustee (the
"Trustee")].
This opinion is being furnished to your pursuant to Sections ____ and ____
of the Indenture.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such letter documents. In making our
examination of documents executed by parties other than the Company, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof. As to any
facts material to the opinions expressed herein which we did not independently
establish or verify, we have relied upon oral or written statements or
representations of officers and other representatives of the Company and others.
G-1
<PAGE>
Pursuant to Sections ____ and ____ of the Indenture, we advise you that in
our opinion:
1. We have reviewed Article __ of the Indenture setting forth certain
provisions of general application, and in particular, the pertinent provisions
of Section ___ of the Indenture setting forth the definitions of certain terms,
and Sections ___ and ___ of the Indenture providing that the Trustee is entitled
to receive an Officers' Certificate and an Opinion of Counsel in connection with
any request by the Company to take any action and setting forth certain
requirements with respect to the forms of such documents. We have also reviewed
Article ___ of the Indenture, pertaining to ____.
2. In our opinion, we have made such examination or investigation
(including an examination of the Officers' Certificate of the Company, dated as
of the date hereof, as to the matters addressed in Sections ___ and ___ of the
Indenture) as we deem necessary to enable us to express an informed opinion as
to whether or not the conditions precedent to [the authentication of the
Securities] [the execution of the Indenture] [OTHER] under Section ___ of the
Indenture have been complied with.
3. In our opinion, the conditions precedent to be satisfied with respect
to the [authentication of the Securities] [execution of the Indenture] [OTHER]
under Section __ of the Indenture have been complied with.
Members of our firm are admitted to the bar in the States of ______ and New
York, and we do not express any opinion as to the laws of any jurisdiction other
than the laws of such States and the General Corporation Law of the State of
Delaware and the laws of the United States of America.
This opinion is furnished to you solely for your benefit in connection with
the [authentication of the Securities] [execution of the Indenture] [OTHER] and
is not to be relied upon by any other person without our express written
permission.
Very truly yours,
G-2
<PAGE>
EXHIBIT H
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
(Transfers Pursuant to Section 3.14(a) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 11 1/4% Senior Notes due 2010
(the "Securities")
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of January 20,
2000 between the Company and Citibank, N.A. as trustee (the "Indenture"). Terms
used but not defined herein have the meanings given to them in the Indenture.
This certificate relates to [U.S. $] [(Euro)]____ principal amount of
Securities, which are evidenced by the following certificate(s) (the
"Securities"):
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and may not be
sold except as permitted in the following sentence. We understand and agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, (x) that such Securities are being offered only in a
transaction not involving any public offering within two years after the date of
the original issuance of the Securities or if within three months after we cease
to be an affiliate (within the meaning of Rule 144 under the Securities Act) of
the Company, such Securities may be resold, pledged or transferred only (i) to
the Company, (ii) so long as the Securities are eligible for resale pursuant to
Rule 144A under the Securities Act ("Rule 144A"), to a person whom we reasonably
believe is a "qualified institution buyer" (as defined in Rule 144A) ("QIB")
that purchases for its own account or for the account of a QIB to whom notice is
given that the resale, pledge or transfer is
H-1
<PAGE>
being made in reliance on Rule 144A (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the certificate for
the Securities), (iii) in an offshore transaction in accordance with Regulation
S under the Securities Act (as indicated by the box checked by the transferor on
the Certificate of Transfer on the reverse of the Note if the Note is not in
book-entry form), and, if such transfer is being effected by certain transferors
prior to the expiration of the "40-day distribution compliance period" (within
the meaning of Rule 903(b)(2) of Regulation S under the Securities Act), a
certificate that may be obtained from the Trustee is delivered by the
transferee, (iv) to an institution that is an "accredited investor" as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act (as indicated by the
box checked by the transferor on the Certificate of Transfer on the reverse of
the certificate for the Securities) which has certified to the Company and the
Trustee for the Securities that it is such an accredited investor and is
acquiring the Securities for investment purposes and not for distribution
(provided that no Securities purchased from a foreign purchaser or from any
person other than a QIB or an institutional accredited investor pursuant to this
clause (iii) shall be permitted to transfer any Securities so purchased to an
institutional accredited investor pursuant to this clause (iv) prior to the
expiration of the "applicable restricted period" (within the meaning of
Regulation S under the Securities Act), (v) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 (if applicable) under
the Securities Act, or (vi) pursuant to an effective registration statement
under the Securities Act, in each case in accordance with any applicable
securities laws of any state of the United States, and we will notify any
purchaser of the Securities from us of the above resale restriction, if then
applicable. We further understand that in connection with any transfer of the
Securities by us that the Company and the Trustee for the Securities may
request, and if so requested we will furnish, such certificates, legal opinions
and other information as they may reasonably require to confirm that any such
transfer complies with the foregoing restrictions.
2. We are able to fend for ourselves in the transactions
contemplated by this Offering Circular, we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and any accounts for which we
are acting are each able to bear the economic risk of our or its investment and
can afford the complete loss of such investment.
3. We understand that the Company, Donaldson, Lufkin & Jenrette
International and the other Initial Purchasers named as such in the Offering
Circular as the initial purchasers of the Securities ("Initial Purchasers"), and
others will rely upon the truth and accuracy of the foregoing acknowledgments,
H-2
<PAGE>
representations and agreements and we agree that if any of the acknowledgments,
representations and warranties deemed to have been made by us by our purchase of
Securities, for our own account or of one or more accounts as to each of which
we exercise sole investment discretion, are no longer accurate, we shall
promptly notify the Company and the Initial Purchasers.
4. We are acquiring the Securities purchased by us for investment
purposes and not for distribution of our own account or for one or more accounts
as to each of which we exercise sole investment discretion and we are or such
account is an institutional "accredited investor" (as defined in rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act).
5. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
_______________________________________
(Name of Purchaser)
By:____________________________________
Date:__________________________________
H-3
<PAGE>
EXHIBIT I
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 10.10 of the Indenture, check the box:
[_] Section 10.10
If you wish to have a portion of this Security purchased by the Company
pursuant to Section 10.10 of the Indenture, state the amount:
[$__________________(multiple of $1000)]
[(Euro)_____________(multiple of (Euro)1000)]
Dated:_____________________ Your Signature:_________________________
(Sign exactly as your name appears on
the other side of this Security)
Signature Guaranteed:___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program acceptable to
the Trustee)
I-1
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
Issuer
CITIBANK, N.A. (London Branch)
Trustee
--------------------
Indenture
SENIOR DISCOUNT NOTES DUE 2010
Dated as of January 20, 2000
---------------------
$1,000,000,000 13 3/4% Senior Discount Notes Due 2010
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..... 1
SECTION 1.1 Definitions.......................................... 1
SECTION 1.2 Compliance Certificates and Opinions................. 40
SECTION 1.3 Form of Documents Delivered to Trustee............... 40
SECTION 1.4 Acts of Holders...................................... 41
SECTION 1.5 Notices.............................................. 43
SECTION 1.6 Notice to Holders; Waiver............................ 44
SECTION 1.7 Effect of Headings and Table of Contents............. 45
SECTION 1.8 Successors and Assigns............................... 45
SECTION 1.9 Separability Clause.................................. 45
SECTION 1.10 Benefits of Indenture................................ 46
SECTION 1.11 Governing Law........................................ 46
SECTION 1.12 Conflict with Trust Indenture Act.................... 46
SECTION 1.13 Legal Holidays....................................... 47
SECTION 1.14 No Personal Liability of Board Members, Officers,
Employees and Shareholders........................... 47
SECTION 1.15 Independence of Covenants............................ 47
SECTION 1.16 Exhibits............................................. 47
SECTION 1.17 Counterparts......................................... 48
SECTION 1.18 Duplicate Originals.................................. 48
SECTION 1.19 Agent for Service; Submission to Jurisdiction;
Waiver of Immunities................................. 48
SECTION 1.20 Judgment Currency.................................... 49
ARTICLE II SECURITY FORMS.............................................. 49
SECTION 2.1 Forms Generally...................................... 49
ARTICLE III THE SECURITIES.............................................. 50
SECTION 3.1 Title and Terms...................................... 50
SECTION 3.2 Denominations........................................ 52
SECTION 3.3 Execution, Authentication, Delivery and Dating....... 52
</TABLE>
i
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<TABLE>
<CAPTION>
Page
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SECTION 3.4 Temporary Securities................................. 55
SECTION 3.5 Registration, Registration of Transfer and Exchange.. 56
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities..... 57
SECTION 3.7 Payment of Interest; Interest Rights Preserved....... 58
SECTION 3.8 Persons Deemed Owners................................ 59
SECTION 3.9 Cancellation......................................... 60
SECTION 3.10 Computation of Interest.............................. 60
SECTION 3.11 "CUSIP" and/or "ISIN" Numbers........................ 60
SECTION 3.12 Book-Entry Provisions for Global Securities,
Certificated Securities.............................. 61
SECTION 3.13 Transfer and Exchange of Securities.................. 62
SECTION 3.14 Special Transfer Provisions.......................... 69
ARTICLE IV SATISFACTION AND DISCHARGE.................................. 70
SECTION 4.1 Satisfaction and Discharge of Indenture.............. 70
SECTION 4.2 Application of Trust Money........................... 71
ARTICLE V REMEDIES.................................................... 71
SECTION 5.1 Events of Default.................................... 71
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment... 73
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement
by Trustee........................................... 74
SECTION 5.4 Trustee May File Proofs of Claim..................... 75
SECTION 5.5 Trustee May Enforce Claims Without Possession of
Securities........................................... 76
SECTION 5.6 Application of Money Collected....................... 76
SECTION 5.7 Limitation on Suits.................................. 77
SECTION 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest................................. 78
SECTION 5.9 Restoration of Rights and Remedies................... 78
SECTION 5.10 Rights and Remedies Cumulative....................... 78
SECTION 5.11 Delay or Omission Not Waiver......................... 78
</TABLE>
ii
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<TABLE>
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<S> <C>
SECTION 5.12 Control by Holders................................... 79
SECTION 5.13 Waiver of Past Defaults.............................. 79
SECTION 5.14 Waiver of Stay or Extension Laws..................... 80
ARTICLE VI THE TRUSTEE................................................. 80
SECTION 6.1 Certain Duties and Responsibilities.................. 80
SECTION 6.2 Notice of Default.................................... 81
SECTION 6.3 Certain Rights of Trustee............................ 81
SECTION 6.4 Trustee Not Responsible for Issuance of Securities... 83
SECTION 6.5 May Hold Securities.................................. 83
SECTION 6.6 Money Held in Trust.................................. 83
SECTION 6.7 Compensation and Reimbursement....................... 84
SECTION 6.8 Corporate Trustee Required; Eligibility; Conflicting
Interests............................................ 85
SECTION 6.9 Resignation and Removal; Appointment of Successor.... 85
SECTION 6.10 Acceptance of Appointment by Successor............... 87
SECTION 6.11 Merger, Conversion, Consolidation or Succession to
Business............................................. 87
SECTION 6.12 Trustee Acting in Other Capacities................... 88
ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY .......... 88
SECTION 7.1 Disclosure of Names and Addresses of Holders......... 88
SECTION 7.2 Reports by Trustee................................... 89
SECTION 7.3 Reports by Company................................... 89
ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE........ 89
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms.. 89
SECTION 8.2 Successor Substituted................................. 90
</TABLE>
iii
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ARTICLE IX SUPPLEMENTAL INDENTURES...................................... 91
SECTION 9.1 Indentures Without Consent of Holders................. 91
SECTION 9.2 Indentures with Consent of Holders.................... 92
SECTION 9.3 Execution of Indenture................................ 93
SECTION 9.4 Effect of Indentures.................................. 93
SECTION 9.5 Conformity with Trust Indenture Act................... 93
SECTION 9.6 Reference in Securities to Indentures................. 93
SECTION 9.7 Notice of Indentures.................................. 93
ARTICLE X COVENANTS.................................................... 94
SECTION 10.1 Payment of Principal, Premium, if Any, and Interest... 94
SECTION 10.2 Maintenance of Office or Agency....................... 95
SECTION 10.3 Money for Security Payments to Be Held in Trust....... 95
SECTION 10.4 Corporate Existence................................... 97
SECTION 10.5 Payment of Taxes and Other Claims..................... 98
SECTION 10.6 Maintenance of Properties............................. 98
SECTION 10.7 Insurance............................................. 98
SECTION 10.8 Provision of Financial Statements..................... 98
SECTION 10.9 Statement by Officers as to Default................... 99
SECTION 10.10 Purchase of Securities upon Change of Control......... 100
SECTION 10.11 Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital Stock........................ 103
SECTION 10.12 Limitation on Restricted Payments..................... 106
SECTION 10.13 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries................................ 109
SECTION 10.14 Limitation on Liens Securing Indebtedness............. 111
SECTION 10.15 Limitation on Issuances of Guarantees by Subsidiaries. 111
SECTION 10.16 Limitation on Sale of Assets and Subsidiary Stock..... 112
SECTION 10.17 Limitation on Transactions with Affiliates............ 116
SECTION 10.18 Additional Amounts.................................... 117
SECTION 10.19 Waiver of Stay, Extension or Usury Laws............... 120
SECTION 10.20 Limitation on Lines of Business....................... 120
</TABLE>
iv
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<S> <C>
SECTION 10.21 Limitation on Status as an Investment Company......... 120
ARTICLE XI REDEMPTION OF SECURITIES..................................... 121
SECTION 11.1 Right of Redemption................................... 121
SECTION 11.2 Applicability of Article.............................. 122
SECTION 11.3 Election to Redeem; Notice to Trustee................. 122
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed..... 123
SECTION 11.5 Notice of Redemption.................................. 123
SECTION 11.6 Deposit of Redemption Price........................... 124
SECTION 11.7 Securities Payable on Redemption Date................. 124
SECTION 11.8 Securities Redeemed in Part........................... 125
ARTICLE XII DEFEASANCE AND COVENANT DEFEASANCE........................... 125
SECTION 12.1 Company's Option to Effect Defeasance or Covenant
Defeasance............................................ 125
SECTION 12.2 Defeasance and Discharge.............................. 125
SECTION 12.3 Covenant Defeasance................................... 126
SECTION 12.4 Conditions to Defeasance or Covenant Defeasance....... 126
SECTION 12.5 Deposited Money and U.S. Government Securities to Be
Held in Trust; Other Miscellaneous Provisions......... 128
SECTION 12.6 Reinstatement......................................... 129
</TABLE>
v
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<TABLE>
<CAPTION>
Page
<S> <C>
EXHIBIT A................................................................. A-1
EXHIBIT B................................................................. B-1
EXHIBIT C................................................................. C-1
EXHIBIT D................................................................. D-1
EXHIBIT E................................................................. E-1
EXHIBIT F................................................................. F-1
EXHIBIT G................................................................. G-1
EXHIBIT H................................................................. H-1
</TABLE>
vi
<PAGE>
INDENTURE, dated as of January 20, 2000 by and between United Pan-
Europe Communications N.V., a public limited liability company organized and
existing under the laws of The Netherlands (herein called the "Company"), having
its principal office at Fred. Roeskestraat 123, 1076 EE Amsterdam, The
Netherlands, and Citibank, N.A. (London Branch), as Trustee (herein called the
"Trustee"). Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as defined below) of the
Company's 13 3/4% Senior Discount Notes due 2010:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 Definitions. For all purposes of this Indenture, except
-----------
as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and "self-liquidating
paper," as used in TIA Section 311, shall have the meanings assigned to them in
the rules of the SEC adopted under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with "GAAP" as defined in this
section 1.1;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section, paragraph or other subdivision; and
(e) unless otherwise indicated, references to Articles, Sections,
paragraphs or other subdivisions are references to such Articles, Sections,
paragraphs or other subdivisions of this Indenture.
1
<PAGE>
"Acceleration Notice" has the meaning set forth in Section 5.2.
"Accreted Value" means, as of any date of determination, (i) prior to
February 1, 2005, the sum (rounded to the nearest whole dollar) of (a) the
initial offering price ($512.24 per $1,000 in principal amount at maturity of
the Senior Discount Notes) and (b) the portion of the excess of the principal
amount of Senior Discount Notes over such initial offering price which shall
have been accreted thereon through such date, such amount to be so accreted on a
daily basis at the rate of (x) subject to clause (y), 13 3/4% compounded semi-
annually on each February 1 and August 1 from the date of issuance of the Senior
Discount Notes through the date of determination, and (y) on and after the date
of the occurrence, if any, of an Interest Rate Adjustment Event, 14% compounded
semi-annually on each February 1 and August 1 from and including the date of the
Interest Rate Adjustment Event through the date of determination, and (ii) on
and after February 1, 2005, the principal amount at maturity of Senior Discount
Notes of the applicable series.
"Acquired Indebtedness" means Indebtedness (including Disqualified
Capital Stock) of any Person existing at the time such Person becomes a
Subsidiary of the Company, including by designation, or is merged or
consolidated into or with the Company or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of any Person or
all or substantially all the assets of any Person by any other Person, whether
by purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Additional Amounts" has the meaning specified in Section 10.18.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise; provided that with respect to ownership interest in the Company
and its Subsidiaries, a Beneficial Owner of 10% or more of the total voting
power normally entitled to
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vote in the election of directors, managers or trustees, as applicable, shall
for such purposes be deemed to constitute control.
"Agent Member" means, with respect to any Depositary, any member of,
or participant in, such Depositary.
"Applicable Procedures" has the meaning set forth in
Section 3.13(b)(ii).
"Annualized Consolidated EBITDA" means Consolidated EBITDA for the
Reference Period multiplied by four.
"Asset Acquisition" means (i) an Investment or capital contribution
(by means of transfers of cash or other property to others or payments for
property or services of the account or use of others, or otherwise) by the
Company or any Subsidiary in any other Person, or any acquisition or purchase of
Capital Stock of another Person by the Company or any Subsidiary, or (ii) an
acquisition by the Company or any Subsidiary of the property and assets (other
than Capital Stock) of any Person other than the Company or any Subsidiary which
constitute substantially all of a division, operating unit or line of business
of such Person or which is otherwise outside the ordinary course of business.
"Asset Sale" has the meaning set forth in Section 10.16.
"Average Life" means, as of the date of determination, with respect to
any security or instrument, the quotient obtained by dividing (1) the sum of the
products (a) of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (2) the sum of all such principal (or redemption)
payments.
"Beneficial Owner" or "beneficial owner" for purposes of the
definition of "Change of Control" and "Affiliate" has the meaning attributed to
it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue
Date), whether or not applicable, except that a "person" shall be deemed to have
"beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time.
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"Board Resolution" means a copy of a resolution certified by a
managing director or other authorized officer, assistant officer or
representative of the Company to have been duly adopted by the Supervisory Board
of the Company and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
and Amsterdam, The Netherlands are authorized or obligated by law or executive
order to close.
"Capital Contribution" means any contribution to the equity of the
Company from a direct or indirect parent of the Company for which no
consideration other than the issuance of Qualified Capital Stock is paid.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any Corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that Corporation.
"Cash Equivalent" means:
(1) securities issued or directly and fully guaranteed or insured by (i)
the United States of America or any agency or instrumentality thereof or
(ii) any member of the European Economic Area or Switzerland, or any,
agency or instrumentality thereof provided that such country, agency or
instrumentality has a credit rating at least equal to that of the United
States of America (provided that, in each case, the full faith and credit
of such respective nation is pledged in support thereof), or
(2) time deposits and certificates of deposit and commercial paper issued
by the parent Corporation of any domestic (United States) commercial bank
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of recognized standing having capital and surplus in excess of $500,000,000
(or the foreign currency equivalent thereof), or
(3) commercial paper issued by others rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the equivalent
thereof by Moody's Investors Service, Inc.
and in the case of each of (1), (2), and (3) maturing within one year after the
date of acquisition, or
(4) Euro or Dollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months, and overnight bank deposits, in each case with any
domestic (United States) commercial bank (including the Trustee) having
capital and surplus in excess of $500,000,000 (or the foreign currency
equivalent thereof) and a Keefe Bank Watch Rating of "B" or better;
provided, in the case of (1) through (4), that with respect to any non-
domestic Person, Cash Equivalents shall also mean those investments that
are comparable to clauses (ii) and (iv) above in such Person's country of
organization or country where it conducts business operations.
"Cedelbank" means Cedelbank.
"Certificated Security" means any certificated Security in fully
registered definitive form.
"Change of Control" means any merger or consolidation of the Company
with or into any Person or any sale, transfer or other conveyance, whether
direct or indirect, of all or substantially all of the Company's assets, on a
Consolidated basis, in one transaction or a series of related transactions, if,
immediately after giving effect to such transaction(s), either
(A) any "person" or "group" (other than the Parent or any of the
Principals) is or becomes the "beneficial owner," directly or indirectly, of
more than 35% of the total voting power of all classes of the Company's
securities in the aggregate normally entitled to vote in the election of
directors, managers, or trustees, as applicable, of the transferee(s) or
surviving entity or entities and such "person" or "group" beneficially owns
(after giving effect to such transaction) a greater percent age of the total
voting power than is at that time beneficially owned by Parent
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and the Principals (in the aggregate) and none of the Parent nor any of the
Principals has the right or ability by voting power, contract or otherwise to
elect or nominate for elections a majority of the Company's Supervisory Board,
or
(B) the Continuing Directors cease for any reason to constitute
a majority of the Supervisory Board of the Company then in office, or
(C) the Company adopts a plan of liquidation (other than a plan
of liquidation as a consequence of which (1) the Parent and the Principals (in
the aggregate) beneficially own at least the same percentage of voting power
after the consummation of such plan as before or otherwise retain the right or
ability, by voting power, to control the Person that acquires the proceeds of
such liquidation and (2) the Person that acquires the substantial majority of
the proceeds of such liquidation shall have assumed by supplemental indenture
the Company's obligations pursuant to this Indenture).
"Common Stock" of any Person means Capital Stock of the Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of the Person, to shares of Capital Stock of any other class of the Person.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Order" or "Company Request" means a written request or order
signed in the name of the Company by a member of the Company's management board
or its supervisory board, the Chief Executive Officer, the President or a Vice
President, and by the Chief Financial Officer, the Chief Accounting Officer, the
Treasurer, an Assistant Treasurer, the Secretary, an Assistant Secretary or
other authorized representative of the Company and delivered to the Trustee.
"Consolidated Coverage Ratio" of any Person on any date of
determination (the "Transaction Date") means the ratio, on a pro forma basis,
of (a) the aggregate amount of Consolidated EBITDA of such Person attributable
to continuing operations and businesses (exclusive of amounts attributable to
operations and business permanently discontinued or disposed of) for the
Reference Period to
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(b) the aggregate Consolidated Fixed Charges of such Person (exclusive of
amounts attributable to operations and businesses permanently discontinued or
disposed of, but only to the extent that the obligations giving rise to such
Consolidated Fixed Charges would no longer be obligations contributing to such
Person's Consolidated Fixed Charges subsequent to the Transaction Date) during
the Reference Period; provided that for purposes of such calculation, (i)
Acquisitions which occurred during the Reference Period or subsequent to the
Reference Period and on or prior to the Transaction Date shall be assumed to
have occurred on the first day of the Reference Period, (ii) transactions giving
rise to the need to calculate the Consolidated Coverage Ratio shall be assumed
to have occurred on the first day of the Reference Period, (iii) the incurrence
of any Indebtedness during the Reference Period or subsequent to the Reference
Period and on or prior to the Transaction Date (and the application of the
proceeds therefrom to the extent used to refinance or retire other Indebtedness)
shall be assumed to have occurred on the first day of such Reference Period, and
(iv) the Consolidated Fixed Charges of such Person attributable to interest on
any Indebtedness or dividends on any Disqualified Capital Stock bearing a
floating interest (or dividend) rate shall be computed on a pro forma basis as
if the average rate in effect from the beginning of the Reference Period to the
Transaction Date had been the applicable rate for the entire period, unless such
person or any of its Subsidiaries is a party to an Interest Swap or Hedging
Obligation (which shall remain in effect for the 12-month period immediately
following the Transaction Date) that has the effect of fixing the interest rate
on the date of computation, in which case such rate (whether higher or lower)
shall be used.
"Consolidated Invested Equity Capital" means, with respect to any
Person as of any date, the sum of the Invested Equity Capital of such Person as
of such date and, without duplication, the Invested Equity Capital of each of
its Subsidiaries as of such date. For purposes of calculating the Consolidated
Invested Equity Capital of any Person as of any date, in order to avoid
duplication, the Invested Equity Capital of a Subsidiary of such Person shall
not include any amounts that would be included in the Consolidated Invested
Equity Capital of any equity owner of such Subsidiary, to the extent that such
amounts were utilized by such equity owner prior to such date to permit the
incurrence of Indebtedness pursuant to clauses 2(iii) and (c)(3) of Section
10.11. For example, if a direct Subsidiary of the Company has Consolidated
Invested Equity Capital of $100 and incurs $225 of such Indebtedness, then a
direct or indirect Subsidiary of such Subsidiary will not be deemed to have any
Invested Equity Capital based on contributions or loans to it by such first
Subsidiary. In addition, the Invested Equity Capital of a Subsidiary of a Person
will never be considered to be greater than the Invested Equity Capital of
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such Person, except as a result of contributions of Invested Equity Capital to
such Subsidiary by third parties.
"Consolidation" means, with respect to any Person, the consolidation
of the accounts of the Subsidiaries with those of such Person, all in accordance
with GAAP; provided that "Consolidation" will not include consolidation of the
accounts of any Unrestricted Subsidiary with the accounts of such Person. The
term "Consolidated" has a correlative meaning to the foregoing.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the Consolidated Net Income of such Person for such period adjusted to
add thereto (to the extent deducted from net revenues in determining
Consolidated Net Income), without duplication, the sum of
(1) Consolidated income tax expense,
(2) Consolidated depreciation and amortization expense,
(3) Consolidated Fixed Charges, and
(4) non-cash stock-based compensation,
less the amount of all cash payments made by such Person or any of its
Subsidiaries during such period to the extent such payments relate to non-cash
charges that were added back in determining Consolidated EBITDA for such period
or any prior period; provided that Consolidated income tax expense, depreciation
and amortization of a Subsidiary that is not a Wholly Owned Subsidiary shall
only be added to the extent of the equity interest of such Person in such
Subsidiary.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of:
(a) interest expensed or capitalized, paid, accrued, or scheduled to
be paid or accrued (including, in accordance with the following
sentence, interest attributable to Capitalized Lease Obligations) of
such Person and its Consolidated Subsidiaries during such period,
including (1) original issue discount and non-cash interest payments
or accruals on any Indebtedness, (2) the interest portion of all
deferred
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payment obligations, and (3) all commissions, discounts and other fees
and charges owed with respect to bankers' acceptances and letters of
credit financings and currency and Interest Swap and Hedging
Obligations, in each case to the extent attributable to such period,
(b) the amount of dividends accrued or payable (or guaranteed) by
such Person or any of its Consolidated Subsidiaries in respect of
Preferred Stock (other than by Subsidiaries of such Person to such
Person or such Person's Wholly Owned Subsidiaries).
For purposes of this definition, (x) interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
in good faith by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such Person or a
Subsidiary of such Person of an obligation of another Person shall be deemed to
be the interest expense attributable to the Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any Person for any
period, the net income (or loss) of such Person and its Consolidated
Subsidiaries (determined on a Consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing such
net income (or loss) and without duplication):
(a) all gains (but not losses) which are either extraordinary (as
determined in accordance with GAAP) or are nonrecurring (including any
gain from the sale or other disposition of assets outside the ordinary
course of business or from the issuance or sale of any capital stock),
(b) the net income, if positive, of any Person, other than a
Consolidated Subsidiary, in which such Person or any of its
Consolidated Subsidiaries has an interest, except to the extent of the
amount of any dividends or distributions actually paid in cash to such
Person or a Consolidated Subsidiary of such Person during such period,
but in any case not in excess of such Person's pro rata equity
interest share of such Person's net income for such period,
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(c) the net income or loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition, and
(d) the net income, if positive, of any such Person's Consolidated
Subsidiaries to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by
operation of the terms of its charter or bylaws or any other
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Consolidated Subsidiary
other than this Indenture.
"Consolidated Subsidiary" means, for any Person, each Subsidiary
(excluding all Unrestricted Subsidiaries) of such Person (whether now existing
or hereafter created or acquired) the financial statements of which are
Consolidated for financial statement reporting purposes with the financial
statements of such Person in accordance with GAAP.
"Consolidated Tangible Assets" of any Person means the total amount of
assets less applicable reserves and other properly deductible items which under
GAAP would be calculated on a Consolidated balance sheet of the Person and its
Subsidiaries after deducting all goodwill, trademarks, patents, unamortized debt
discount and expense and other like intangibles, which, in each case under GAAP,
would be included on such Consolidated balance sheet.
"Continuing Director" means during any period of 12 consecutive months
after the Issue Date, individuals who at the beginning of any such 12-month
period constituted the Supervisory Board of the Company (together with any new
supervisory directors whose election by the shareholders was from a list of
candidates drawn up by the holder or holders of the Company's priority shares
and new supervisory directors designated in or provided for in an agreement
regarding the merger, consolidation or sale, transfer or other conveyance, of
all or substantially all of the assets of the Company or the Parent, if such
agreement was approved by a vote of such majority of supervisory directors).
"Corporate Trust Office" means the principal corporate trust office of
the Trustee, at which at any particular time its corporate trust business shall
be administered, which office at the date of execution of this Indenture is
located at 11 Old Jewry, London EC2R 8DU, except that, with respect to
presentation of Securities for payment or for registration of transfer or
exchange, such term shall
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mean the office or agency of the Trustee at which, at any particular time, its
corporate agency business shall be conducted.
"Corporation" includes Corporations, associations, companies and
business trusts.
"Credit Agreement" means the loan and note issuance agreement dated
July 27, 1999 between certain Subsidiaries of the Company and Bank of American
International Limited, CIBC World Markets plc, Citibank, N.A., MeesPierson N.V.,
Paribas, The Royal Bank of Scotland plc, Toronto Dominion Bank Europe Limited
and The Toronto Dominion Bank, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as such agreement and/or related documents may be amended, restated,
supplemented, renewed, replaced or otherwise modified from time to time whether
or not with the same agent, trustee, representative lenders or Holders, and,
subject to the proviso to the next succeeding sentence, irrespective of any
changes in the terms and conditions thereof. Without limiting the generality of
the foregoing, the term "Credit Agreement" shall include agreements in respect
of Interest Swap and Hedging Obligations with lenders party to the Credit
Agreement and shall also include any amendment, amendment and restatement,
renewal, extension, restructuring, supplement or modification to any Credit
Agreement and all refundings, refinancings and replacements of any Credit
Agreement, including any agreement:
(1) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby,
(2) adding or deleting borrowers or guarantors thereunder, so long as
borrowers and guarantors may include one or more of the Company and
its Subsidiaries and their respective successors and assigns,
(3) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder; provided that on the date such
Indebtedness is incurred it would not be prohibited by Section
10.11; or
(4) otherwise altering the terms and conditions thereof in a manner
not prohibited by the other terms of this Indenture.
"CT Corporation System" has the meaning specified in Section 1.19.
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"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" has the meaning specified in Section 3.12.
"Disqualified Capital Stock" means (a) except as set forth in clause
(b), with respect to any Person, Equity Interests of such Person that, by its
terms or by the terms of any security into which it is convertible, exercisable
or exchangeable, is, or upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the option
of the holder thereof) by such Person or any of its Subsidiaries, in whole or in
part, on or prior to 91 days following the Stated Maturity of the Securities and
(b) with respect to any Subsidiary of the Company, any Equity Interests of such
Subsidiary other than (i) any common equity with no economic preference,
privileges, or redemption or repayment provisions or (ii) preferred stock
convertible into such common equity of such Subsidiary with no payment of
dividends or liquidation preference due or payable thereon on or prior to 91
days following the Stated Maturity of the Securities.
"Dollars" or "$" or "U.S. Dollars" means the lawful currency of the
United States of America and, in relation to any amount to be advanced or paid
under this Indenture or the Securities, funds having immediate value.
"DTC" means the Depository Trust Company, its nominees and successors.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such Person's
equity, and shall in any event include any Capital Stock issued by, or
partnership, participation or membership interests in, such Person.
"Equity Offering" means (i) an underwritten public offering or
floatation of ordinary shares of the Company which has been registered under the
Securities Act, or admitted to listing on the Amsterdam Stock Exchange or its
equivalent in any other European Union jurisdiction, in any case resulting in
Net Cash Proceeds to the Company of at least $100,000,000 (or its foreign
currency equivalent), or (ii) a sale of Qualified Capital Stock of the Company
to any Person which is (or a controlled Affiliate of a Person which is), engaged
principally in a
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Related Business, resulting in Net Cash Proceeds to the Company of at least
$100,000,000 (or its foreign currency equivalent); provided, however, that a
sale of Qualified Capital Stock of the Company to any subsidiary of the Company
or any Person that is a controlled Affiliate of the Company shall not be an
Equity Offering.
"Euro" or "(Euro)" means the currency adopted by those countries
participating in the third stage of European monetary union.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"European Economic Area" means the member nations of the European
Economic Area pursuant to the Oporto Agreement on the European Economic Area
dated May 2, 1992 as amended.
"European Union" means the member nations to the third stage of
economic and monetary union pursuant to the treaty of Rome establishing the
European Community, as amended by the Treaty on European Union, signed at
Maastricht on February 7, 1992.
"Event of Default" has the meaning set forth under Section 5.1.
"Event of Loss" means, with respect to any property or asset, any
(1) loss, destruction or damage of such property or asset or (2) any
condemnation, seizure or taking, by exercise of the power of eminent domain or
otherwise, of such property or asset, or confiscation or requisition of the use
of such property or asset.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended (or any successor act), and the rules and regulations
thereunder (or respective successors thereto).
"Exchange Offer" means the exchange registered with the SEC to
exchange Initial Securities for Exchange Securities pursuant to the terms of the
Registration Rights Agreement.
"Exchange Registration Statement" means an Exchange Registration
Statement as defined in the Registration Rights Agreement.
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"Exchange Securities" means the Securities to be issued pursuant to
this Indenture in connection with the offer to exchange Securities for Initial
Securities that may be made by the Company pursuant to the Registration Rights
Agreement.
"Exempted Affiliate Transaction" means (i) Restricted Payments
comprised of pro rata dividends paid in cash on any class of Equity Interests
and made in compliance with this Indenture, (ii) transactions, at arms-length
and as so set forth in a Board Resolution, between or among holders of any
Equity Interest of any Subsidiary of the Company and such Subsidiary, so long as
such holder is not otherwise an Affiliate of the Company, (iii) transactions
between or among the Company, and its Subsidiaries, (iv) the Company or any of
its Subsidiaries entering into or performing any employment agreement, stock
option agreement or other agreement relating to the terms of employment,
compensation or termination of employment in the ordinary course of business of
the Company or such Subsidiary, (v) any contract, agreement, arrangement or
transaction with any Affiliate in effect as of the Issue Date and any amendment,
waiver, variation or other modification in respect of any such contract,
agreement, arrangement or transaction so long as such amendment, waiver,
variation or other modification is not disadvantageous to the Company and its
Subsidiaries in any material respect, (vi) Restricted Payments and Investments
permitted under Section 10.12, (vii) transactions with customers, clients,
suppliers, or purchasers or sellers of goods or services, in each case in the
ordinary course of business and otherwise in compliance with the terms of this
Indenture which are fair to the Company and its Subsidiaries, in the reasonable
determination of the Company or Subsidiary, as the case may be, or are on terms
no less favorable to the Company or the Subsidiary than those that could be
obtained in a comparable arm's length transaction with an entity that is not an
Affiliate or Principal and is in the best interests of the Company or the
Subsidiary, and (viii) transactions with respect to network capacity or dark or
lit communications fiber capacity or telecommunications conduit between the
Company or any Subsidiary and any Unrestricted Subsidiary or other Affiliate and
joint sales and marketing pursuant to an agreement or agreements between the
Company or any Subsidiary and any Unrestricted Subsidiary or other Affiliate,
provided that in the case of this clause (viii), such agreements are on terms
that are no less favorable to the Company or the Subsidiary than those that
could be obtained in an arm's-length transaction with an entity that is not an
Affiliate or Principal and are in the best interests of the Company and the
Subsidiary entered into in the ordinary course of business.
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"Existing Agreements" means (i) any and all instruments, as in effect
on the Issue Date, between the Company or any of its Subsidiaries and a
commercial lending institution or institutions, which makes borrowing of funds
available to the Company or any such Subsidiary from such institution or
institutions and (ii) any replacements of the instruments in clause (i) entered
into by the respective Subsidiary that was party to the instrument so replaced
or their respective successors and a commercial lending institution or
institutions for an amount up to the maximum amount of the instrument so
replaced.
"Existing Indebtedness" means the Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, reduced to the extent such amounts are repaid.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the
United States Code, as amended from time to time.
"GAAP" means United States generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"Global Security" means a Regulation S Global Security (or
Unrestricted Global Security) or a Restricted Global Security.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary
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course of business. The term "Guarantee" used as verb has a corresponding
meaning.
"Guarantor" is defined to mean any Person obligated under a Guarantee.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" of any Person means, without duplication,
(a) all liabilities and obligations, contingent or otherwise, of
such Person, to the extent such liabilities and obligations would
appear as a liability upon the Consolidated balance sheet of such
Person in accordance with GAAP, (1) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), (2) evidenced by
bonds, notes, debentures or similar instruments, (3) representing the
balance deferred and unpaid of the purchase price of any property or
services, except (other than accounts payable or other obligations to
trade creditors which have remained unpaid for greater than 90 days
past their original due date) those incurred in the ordinary course of
its business that would constitute ordinarily a trade payable to trade
creditors;
(b) all liabilities and obligations, contingent or otherwise, of
such Person (1) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (2) relating to any
Capitalized Lease Obligation, or (3) evidenced by a letter of credit
or a reimbursement obligation of such Person with respect to any
letter of credit (other than obligations with respect to letters of
credit securing obligations (other than obligations described in
(a)(1) through (3) above) entered into in the ordinary course of
business of such Person to the extent such letters of credit are not
drawn upon);
(c) all net obligations of such Person under Interest Swap and
Hedging Obligations;
(d) all liabilities and obligations of others of the kinds described
in the preceding clauses (a), (b) or (c) that such Person has
guaranteed
16
<PAGE>
or provided credit support or that is otherwise its legal
liability or which are secured by any assets or property of such
Person;
(e) any and all deferrals, renewals, extensions, refinancing
and refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a), (b), (c) or (d),
or this clause (e), whether or not between or among the same
parties; and
(f) all Disqualified Capital Stock of such Person (measured at
the greater of its voluntary or involuntary maximum fixed
repurchase price, plus accrued and unpaid dividends).
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this
Indenture, and if such price is based upon, or measured by, the
fair market value of such Disqualified Capital Stock, such fair
market value to be determined in good faith by the Supervisory
Board of the Company.
The amount of any Indebtedness outstanding as of any date shall
be (1) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount, but the
accretion of original issue discount in accordance with the
original terms of Indebtedness issued with an original issue
discount will not be deemed to be an incurrence and (2) the
principal amount thereof, excluding any interest thereon, in the
case of any other Indebtedness.
"Indenture" means this instrument as originally executed and as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Purchasers" means, with respect to the Initial
Securities issued pursuant to this Indenture on the Issue Date, each of
Donaldson, Lufkin & Jenrette International and the other Initial Purchasers
named as such in the Offering Circular.
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<PAGE>
"Initial Securities" means the $1,000,000,000 13 3/4% Senior
Discount Notes due 2010 issued under this Indenture on the Issue Date.
"Institutional Accredited Investor" means an institutional
"Accredited Investor," as defined in Regulation D of the Securities Act.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Interest Rate Adjustment Event" has the meaning set forth in
Section 3.1.
"Interest Swap and Hedging Obligation" means any obligation of
any Person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such Person
is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such Person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Invested Equity Capital" means, with respect to any Person as of
any date, without duplication, the sum of (i) the total dollar amount
contributed in cash plus the value of all property contributed (valued at fair
market value at the time of contribution, determined in good faith by the
Supervisory Board) to such Person since the date of its creation in the form of
common equity, plus, (ii) the total dollar amount contributed in cash plus the
value of all property contributed (valued at fair market value at the time of
contribution, determined in good faith by the Supervisory Board) to such Person
since the date of creation by the holders of its common equity (and their
Affiliates) in consideration of the issuance of preferred equity or Indebted
ness, on a basis that is substantially proportionate to their common equity
interests (with any disproportionately large equity interests received by the
Company or a Subsidiary relative to their respective contributions being ignored
for this purpose), plus, (iii) the total dollar amount contributed in cash plus
the value of all property contributed (valued at fair market value at the time
of contribution, determined in good faith by the Supervisory Board) to such
Person since the date of its creation by the Company or a Wholly Owned
Subsidiary of the Company in
18
<PAGE>
consideration of the issuance of preferred equity or Indebtedness, and less (iv)
the value of all interest, returns in respect of Indebtedness, dividends and
other distributions (in whatever form and however designated, valued at fair
market value as determined in good faith by the Supervisory Board) made by such
Person since the date of its creation to the holders of its common equity (and
their Affiliates); provided that in no event shall the aggregate amount of
interest, dividends and other distributions made to any holder of common equity
of a Person (or its Affiliates) operate to reduce the Invested Equity Capital of
such Person by more than the total contributions to such Person (per clauses (i)
through (iii) above) by such equity holder (and its Affiliates).
"Investment" by any Person in any other Person means (without
duplication):
(a) the acquisition (whether by purchase, merger, consolidation
or otherwise) by such Person (whether for cash, property,
services, securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or
other securities, including any options or warrants, of such
other Person or any agreement to make any such acquisition;
(b) the making by such Person of any deposit with, or advance,
loan or other extension of credit to, such other Person
(including the purchase of property from another Person subject
to an understanding or agreement, contingent or otherwise, to
resell such property to such other Person) or any commitment to
make any such advance, loan or extension (but excluding accounts
receivable, endorsements for collection or deposits arising in
the ordinary course of business);
(c) other than guarantees of Indebtedness of the Company or to
the extent permitted by Section 10.11, the entering into by such
Person of any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of
such other Person;
(d) the making of any capital contribution by such Person to
such other Person; and
19
<PAGE>
(e) the designation by the Supervisory Board of the Company of
any Person to be an Unrestricted Subsidiary.
The Company shall be deemed to make an Investment in an amount
equal to the fair market value of the net assets of any
Subsidiary (or, if neither the Company nor any of its
Subsidiaries has theretofore made an Investment in such
subsidiary, in an amount equal to the Investments being made), at
the time that such Subsidiary is designated an Unrestricted
Subsidiary, and any property transferred to an Unrestricted
Subsidiary from the Company or a Subsidiary of the Company shall
be deemed an Investment valued at its fair market value at the
time of such transfer. Investments shall be measured by the fair
market value attributed to the Investment at the time made or
returned, as applicable.
"Issue Date" means the date of first issuance of the Initial
Securities hereunder.
"Leverage Ratio" on any date of determination (the "Transaction
Date") for any Person means the ratio, on a pro forma basis, of (a) the
aggregate amount of Indebtedness of such Person and its Subsidiaries on a
Consolidated basis to (b) the aggregate amount of Annualized Consolidated EBITDA
of such Person attributable to continuing operations and business (exclusive of
amounts attributable to operations and businesses permanently discontinued or
disposed of); provided that for purposes of calculating Annualized Consolidated
EBITDA for this definition,
(1) acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the
Transaction Date shall be assumed to have occurred on the
first day of the Reference Period,
(2) transactions giving rise to the need to calculate the
Leverage Ratio shall be assumed to have occurred on the
first day of the Reference Period,
(3) the incurrence of any Indebtedness or issuance of any
Disqualified Capital Stock during the Reference Period or
subsequent to the Reference Period and on or prior to the
Transaction Date (and the application of the proceeds
20
<PAGE>
therefrom to the extent used to refinance or retire other
Indebtedness) shall be assumed to have occurred on the
first day of the Reference Period, and
(4) the Consolidated Fixed Charges of such Person attributable
to interest on any Indebtedness or dividends on any
Disqualified Capital Stock bearing a floating interest (or
dividend) rate shall be computed on a pro forma basis as if
the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the
applicable rate for the entire period, unless such Person
or any of its Subsidiaries is a party to an Interest Swap
or Hedging Obligation (which shall remain in effect for the
12-month period immediately following the Transaction Date)
that has the effect of fixing the interest rate on the date
of computation, in which case such rate (whether higher or
lower) shall be used.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired. For purposes of this definition, the
sale, lease, conveyance, or other transfer by the Company or any Subsidiary of
the Company, in the ordinary course of its business and not constituting a
security interest in assets serving as collateral for any of their respective
obligations, including the granting of indefeasible rights of use or equivalent
arrangements with respect to, network capacity, communications fiber capacity or
conduit, shall not be a Lien.
"Liquidated Damages" means all liquidated damages then owing
pursuant to the Registration Rights Agreement.
"Maturity," when used with respect to any Security, means the
date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, notice of redemption or otherwise.
"Net Cash Proceeds" means the aggregate amount of cash or Cash
Equivalents received by the Company in the case of a sale, or Capital
Contribution in respect, of Qualified Capital Stock and by the Company and its
Subsidiaries in respect of an Asset Sale, plus, in the case of an issuance of
Qualified Capital Stock
21
<PAGE>
upon any exercise, exchange or conversion of securities (including options,
warrants, rights and convertible or exchangeable debt) of the Company that were
issued for cash on or after July 30, 1999, the amount of cash originally
received by the Company upon the issuance of such securities (including
options, warrants, rights and convertible or exchangeable debt) less, in each
case, the sum of all payments, fees, commissions and (in the case of Asset
Sales, reasonable and customary) expenses (including, without limitation, the
fees and expenses of legal counsel and investment banking fees and expenses)
incurred in connection with such Asset Sale or sale of Qualified Capital Stock,
and, in the case of an Asset Sale only, less the amount (estimated reasonably
and in good faith by the Company) of income, franchise, sales and other
applicable taxes required to be paid by the Company or any of its respective
Subsidiaries in connection with such Asset Sale in the taxable year that such
sale is consummated or in the immediately succeeding taxable year, the
computation of which shall take into account the reduction in tax liability
resulting from any available operating losses and net operating loss carryovers,
tax credits and tax credit carryforwards, and similar tax attributes.
"New Acquisitions" means the acquisition by the Company or its
subsidiaries of @Entertainment, Inc., A2000 Holding N.V., Time Warner Cable
France S.A., Reseaux Cables de France S.A., Videopole S.A., Kabel Plus, a.s.,
SBS Broadcasting S.A., GelreVision N.V., SKT spol. s.r.o. and NBS Broadband
Services AB, all substantially as described in the Offering Circular (and each
such Person's respective subsidiaries).
"Non-Recourse Indebtedness" means Indebtedness of a Person to the
extent that under the terms thereof and pursuant to applicable law, no personal
recourse could be had against the Company or its Subsidiaries (giving effect to
the designations of such Person as an Unrestricted Subsidiary) for the Payment
of the principal of or interest or premium or other amounts with respect to such
Indebtedness or for any claim based on such Indebtedness and that enforcement
of obligations on such Indebtedness is limited solely to recourse against
interests in specified assets.
"Obligation" means any principal, premium or interest payment, or
monetary penalty, or damages, due by the Company under the terms of the
Securities or this Indenture, including any Liquidated Damages due pursuant to
the terms of the Registration Rights Agreement.
"Offering" means the offering of the Securities by the Company.
22
<PAGE>
"Offering Circular" means the offering memorandum, dated January
14, 2000, pursuant to which the Securities were offered and sold.
"Officers' Certificate" means a certificate signed by a member of
the Company's Management Board or its Supervisory Board, the Chief Executive
Officer or a Vice President, and by the Chief Financial Officer, the Chief
Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary, an
Assistant Secretary or other authorized representative of the Company and
delivered to the Trustee in the form substantially similar to Exhibit E attached
hereto, which shall comply with the Indenture, except in the case of an
authentication order pursuant to Section 3.3, which must only be signed by one
of the above noted persons.
"Opinion of Counsel" means an opinion of counsel in the form
substantially similar to Exhibit F attached hereto, who may be counsel to the
Company, including an employee of the Company.
"Outstanding," when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the
Trustee or delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose
payment or redemption U.S. Dollars in the necessary amount
have been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act
as its own Paying Agent) for the Holders of such Securities;
provided that, if such Securities are to be redeemed, notice
of such redemption has been duly given pursuant to this
Indenture;
(iii) Securities, except to the extent provided
in Sections 12.2 and 12.3, with respect to which the Company
has effected Defeasance and/or Covenant Defeasance as provided
in Article Twelve; and
(iv) Securities which have been paid pursuant to
Section 3.6 or in exchange for or in lieu of which other
Securities
23
<PAGE>
have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands the Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount at maturity of Outstanding Securities have given any request,
demand, authorization, direction, consent, notice or waiver hereunder, and for
the purpose of making the calculations required by TIA Section 313, Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which any
Responsible Officer of the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or such other obligor.
"Parent" means UnitedGlobalCom, Inc. and its successor(s).
"Parent Stock Instrument" means either (a) Indebtedness
(including Disqualified Capital Stock) and Qualified Capital Stock of the
Company that is convertible or exchangeable into, at the option of the Company
or any holder thereof, or secured by, or whose value to the holder thereof is
dependent upon any shares of Parent's Capital Stock that were owned by the
Company or any of its Subsidiaries as of July 30, 1999; provided that such
Indebtedness and Capital Stock of the Company shall have been issued in
consideration of cash, the net proceeds of which shall have been received by the
Company or (b) the Class A Common Stock of Parent owned by the Company or any of
its Subsidiaries as of July 30, 1999 or any like number of shares of Class B
Common Stock of Parent issued in exchange for the shares of the Class A Common
Stock of Parent held as of July 30, 1999.
"Participants" means institutions that have accounts with DTC or
its nominee and with respect to the Regulation S Global Securities, institutions
that have accounts with Euroclear or Cedelbank or their respective nominees.
24
<PAGE>
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and premium, if
any) or interest on any Securities on behalf of the Company.
"Payment Date" means any date on which a payment of principal,
premium, if any, interest (or Liquidated Damages, if any) is due to be paid on
any of the Securities.
"Permitted Indebtedness" means that:
(a) the Company may incur Indebtedness evidenced by the
Securities and issued pursuant to this Indenture and Indebtedness
evidenced by the Senior Notes and issued pursuant to the Senior
Notes Indenture up to the amounts being issued on the original
Issue Date;
(b) the Company may incur Refinancing Indebtedness with respect
to any Indebtedness (including Disqualified Capital Stock),
described in clause (a) or this clause (b) of this definition or
incurred pursuant to clause (1)(ii) of Section 10.11, and any
Subsidiary may incur Refinancing Indebtedness (including
Disqualified Capital Stock), described in this clause (b) or
clause (2)(c) of Section 10.11 and the Company and its
Subsidiaries may incur Refinancing Indebtedness with respect to
Indebtedness which is outstanding on the Issue Date (after giving
effect to the New Acquisitions) (less the amount of any such
Existing Indebtedness repaid on or after the Issue Date or which
was refinanced pursuant to this clause (b));
(c) the Company and its Subsidiaries may incur Indebtedness
solely in respect of bankers acceptances, letters of credit and
performance and surety bonds and completion guarantees (to the
extent that such incurrence does not result in the incurrence of
any obligation to repay any obligation relating to borrowed money
of others), all in the ordinary course of business in accordance
with customary industry practices, in amounts and for the
purposes customary in the Company's industry;
(d) the Company may incur Indebtedness to any Subsidiary, and
any Subsidiary may incur Indebtedness to any other Subsidiary or
to
25
<PAGE>
the Company; provided that in the case of Indebtedness of the
Company, such obligations shall be unsecured and subordinated in
all respects to the Company's obligations pursuant to the
Securities and the Senior Notes and any event that causes such
Subsidiary no longer to be a Subsidiary (including by designation
to be an Unrestricted Subsidiary) shall be deemed to be a new
incurrence of such Indebtedness, if then outstanding, subject to
Section 10.11;
(e) the Company and its Subsidiaries may incur Interest Swap and
Hedging Obligations that are incurred for the purpose of fixing
or hedging interest rate or currency risk with respect to any
fixed or floating rate Indebtedness that is permitted by this
Indenture to be outstanding or any receivable or liability the
payment of which is determined by reference to a foreign
currency; provided that the notional amount of any such Interest
Swap and Hedging Obligation does not exceed the principal amount
of Indebtedness to which such Interest Swap and Hedging
Obligation relates;
(f) the Company and its Subsidiaries may guarantee Indebtedness
of any of the Company's Subsidiaries, provided that the
incurrence of such Indebtedness by such Subsidiary is permitted
under this Indenture; and
(g) Subsidiaries of the Company may issue preferred stock or
Indebtedness to the holders (or their Affiliates) of the common
equity of such Subsidiary on a basis that is substantially
proportionate to their common equity interests (with any
disproportionately large equity interests received by the Company
or a Subsidiary of the Company relative to their respective
contributions being ignored for this purpose).
"Permitted Investment" means:
(a) Cash Equivalents;
(b) intercompany Indebtedness to the extent permitted under
clause (d) of the definition of "Permitted Indebtedness";
26
<PAGE>
(c) an Investment by the Company or a Subsidiary of the Company
in a Person engaged primarily in a Related Business if as a
result of such Investment such Person becomes a Subsidiary of the
Company or is merged with or into the Company or a Subsidiary of
the Company, so long as the surviving entity is the Company or a
Subsidiary of the Company;
(d) an Investment in any Subsidiary of the Company;
(e) other Investments in any Person or Persons engaged primarily
in a Related Business with respect to which the Company maintains
the power to influence or participate in the management of such
Person by virtue of representation on such Person's board or
directors or through a contractual relationship with such Person
or its holders of Capital Stock;
(f) other Investments in any Person or Persons engaged primarily
in a Related Business with respect to which the Supervisory Board
of the Company or of the relevant Subsidiary determines in its
good faith reasonable judgement that the Company or any of its
Subsidiaries will receive as a result of such Investment
commensurate network services benefits (including by becoming a
customer, client, supplier, purchaser or seller of goods or
services of or to such Person or Persons) from the arrangements
entered into as a result of such Investment;
(g) other Investments in any Person or Persons engaged primarily
in a Related Business; provided that, after giving pro forma
effect to each such Investment, the amount of all such
Investments made solely in reliance upon this clause (g) on and
after July 30, 1999 that are Outstanding at any time does not
exceed in the aggregate $100,000,000 (or the foreign currency
equivalent thereof measured on the date of the making of such
Investment), plus, unless such amounts shall have been credited
under clause (3) of Section 10.12 and utilized to make a
Restricted Payment, (w) the amount of the Net Cash Proceeds to
the Company from the sale of Qualified Capital Stock (other than
(i) to a Subsidiary of the Company, and (ii) to the extent
applied in a Qualified Exchange), (x) an amount equal to 50% of
the Net Cash Proceeds from Special Character Asset Sales, (y) an
amount
27
<PAGE>
equal to the Net Cash Proceeds to the Company or any of its
Subsidiaries of any sale of securities constituting a Parent
Stock Instrument (other than (i) to a Subsidiary of the Company,
and (ii) to the extent applied in connection with a Qualified
Exchange) and (z) the amount of Investments made pursuant to this
clause (g) after July 30, 1999 that are returned to the Company
or any Subsidiary on or prior to the date of any such
calculation, which amount shall be the lesser of (i) the amount
of the cash invested plus the value of all noncash investments
(valued at the fair market value at the time of the Investment,
determined in the good faith reasonable judgment of the Company
or the relevant Subsidiary) and (ii) the amount of the Net Cash
Proceeds received plus the value of noncash proceeds received
(valued at the fair market value at the time of the return of
such Investment, deter mined in the good faith reasonable
judgment of the Company or the relevant Subsidiary);
(h) Investments made in the ordinary course of business as
partial or full payment for constructing a network relating
principally to a Related Business of the Company or any
Subsidiary;
(i) Investments solely in the form and consisting of Capital
Stock of the Company (other than Disqualified Capital Stock);
(j) any Investment acquired by the Company or any of its
restricted Subsidiaries (a) in exchange for any other Investment
or accounts receivable held by the Company or any such restricted
Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such
other investment or accounts receivable or (b) as a result of a
foreclosure by the Company or any of its restricted Subsidiaries
with respect to any secured Investment or other transfer of title
with respect to any secured Investment in default;
(k) an Investment in prepaid expenses and lease, utility and
workers' compensation, performance and other similar deposits in
the ordinary course of business;
(l) loans, advances, or extensions of credit to employees,
officers, directors made in the ordinary course of business;
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<PAGE>
(m) the net obligations of any counterparty under Interest Swap
and Hedging Obligations obtained in conformity with industry
practices;
(n) Investments made on or after July 30, 1999 in SBS
Broadcasting S.A. not to exceed the amounts required to be made
by the Company pursuant to the Investment Agreement by and
between, SBS Broadcasting S.A., the Company and United
International Holdings Inc., dated June 29, 1999, relating to the
acquisition by the Company of Equity Interests in SBS
Broadcasting S.A.; and
(o) Investments made on or after July 30, 1999 directly or
indirectly in ARA Cable Services Inc. or ARA Programming &
Distribution Ltd. of Saudi Arabia, not to exceed $75,000,000.
"Permitted Lien" means:
(a) Liens existing on the Issue Date;
(b) Liens securing the Securities and the Senior Notes;
(c) Liens securing Indebtedness, or any agreement (including
any Equity Interest) relating to any property, asset, or business
acquired, of a Person existing at the time such Person becomes a
Subsidiary (including by designation) or is merged with or into
the Company or a Subsidiary or Liens securing Indebtedness
incurred in connection with an Acquisition, provided that such
Liens were in existence prior to the date of such acquisition,
merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any other assets than those of the
Person (or its businesses) being acquired (or so designated);
(d) leases or subleases granted to other Persons in the
ordinary course of business not materially interfering with the
conduct of the business of the Company or any of its Subsidiaries
or materially detracting from the value of the relative assets of
the Company or any Subsidiary;
(e) Liens arising from precautionary Uniform Commercial Code
financing statement filings regarding operating leases entered
into by
29
<PAGE>
the Company or any of its Subsidiaries in the ordinary course of
business;
(f) Liens securing Refinancing Indebtedness incurred to
refinance any Indebtedness that was previously so secured in a
manner no more adverse to the Holders of the Securities than the
terms of the Liens securing such refinanced Indebtedness,
provided that the Indebtedness secured is not increased and the
Lien is not extended to any additional assets or property that
would not have been security for the Indebtedness refinanced;
(g) Liens securing Indebtedness incurred under the Credit
Agreement and other Indebtedness solely of Subsidiaries of the
Company incurred in accordance with the terms of this Indenture;
(h) Liens in favor of the Company or Liens on assets of
Subsidiaries of the Company in favor of other such Subsidiaries;
(i) Liens securing Refinancing Indebtedness that complies with
the definition of "Refinancing Indebtedness";
(j) Liens securing Acquired Indebtedness and Indebtedness
assumed in acquiring Related Assets, provided that such Liens
were not put in place in contemplation of the incurrence by the
Company or its Subsidiaries of such Indebtedness, such Liens do
not extend to any property or assets of the Company or any of
its Subsidiaries other than those acquired in connection
therewith, and the Investment that is the subject of such
acquisition is a Permitted Investment;
(k) statutory liens of carriers, warehousemen, mechanics,
material men, landlords, repairmen or other like Liens arising
by operation of law in the ordinary course of business, provided
that (1) the underlying obligations are not overdue for a
period of more than 30 days, or (2) such Liens are being
contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the
books of the Company in accordance with GAAP; and
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<PAGE>
(l) Liens not otherwise permitted by this Indenture in an amount
not to exceed 5% of the Company's Consolidated Tangible Assets.
"Person" means any Corporation, individual, limited liability
company, joint stock company, joint venture, partnership, limited liability
partnership, unincorporated association, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipally or other
entity.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same Indebtedness as that
evidenced by such particular Security; and, for the purposes of this definition,
any Security authenticated and delivered under Section 3.6 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same Indebtedness as the mutilated, lost, destroyed or
stolen Security.
"Preferred Stock" means any Equity Interest of any class or
classes of a Person (however designated) which is preferred as to payments of
dividends, or as to distributions upon any liquidation or dissolution, over
Equity Interests of any other class of such Person.
"Principals" means Albert M. Carollo, Lawrence F. DeGeorge,
Lawrence J. DeGeorge, Curtis Rochelle, Marian Rochelle, Rochelle Investments,
Ltd. (so long as it is controlled by Curtis or Marian Rochelle), Gene W.
Schneider, G. Schneider Holdings, Co. and The Gene W. Schneider Family Trust (so
long as each is controlled by Gene W. Schneider or trustees appointed by him),
Janet S. Schneider and Mark L. Schneider, and with respect to any such Person
means: (A) any controlling stockholder or 80% (or more) owned Subsidiary of such
Person, or with respect to each individual Person, (i) family partnerships,
Corporations or other entities holding Equity Interests in the Company, the
transferee(s) or the surviving entities or entities solely for the benefit of
such Person or any of the Persons listed in (ii), (iii), (iv) or (v) below, (ii)
such Person's spouse, (iii) such Person's children, grandchildren, stepchildren,
step grandchildren and their spouses, (iv) heirs, legatees and devisees, and (v)
trusts solely for the benefit of any of the foregoing; or (B) any trust
Corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Person and/or such other Persons referred to
in the immediately preceding clause (A).
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"Pro Forma" or "pro forma" shall have the meaning set forth in
Regulation S-X of the Securities Act, unless otherwise specifically stated
herein.
"Purchase Money Indebtedness" of any Person means any Indebtedness
of such Person to any seller or other Person incurred solely to finance the
acquisition (including in the case of a Capitalized Lease Obligation, the
lease), construction, installation or improvement of any after acquired real or
personal tangible property which, in the reasonable good faith judgment of the
Supervisory Board of the Company, is directly related to a Related Business.
"Qualified Capital Stock" means any Capital Stock of the Company
that is not Disqualified Capital Stock.
"Qualified Exchange" means:
(a) any legal defeasance, redemption, retirement, repurchase or
other acquisition of Capital Stock, or Indebtedness of the Company
issued on or after July 30, 1999 with the Net Cash Proceeds
received by the Company from the substantially concurrent sale of
its Qualified Capital Stock or, to the extent used to retire
Indebtedness (other than Disqualified Capital Stock) of the
Company issued on or after July 30, 1999, Subordinated
Indebtedness of the Company,
(b) any exchange of Qualified Capital Stock of the Company for
any Capital Stock or Indebtedness of the Company issued on or
after July 30, 1999, or
(c) any issuance of Subordinated Indebtedness of the Company in
exchange for Indebtedness (other than Disqualified Capital Stock)
of the Company issued on or after July 30, 1999.
"Qualified Institutional Buyer" or "QIB" has the meaning specified
in Rule 144A.
"Redemption Date," when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
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"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Reference Period" with regard to any Person means the full fiscal
quarter ended immediately preceding any date upon which any determination is to
be made pursuant to the terms of the Securities or this Indenture, for which
Consolidated financial statements of the Company are available.
"Refinancing Indebtedness" means Indebtedness (including
Disqualified Capital Stock) (a) issued in exchange for, or the proceeds from
the issuance and sale of which are used substantially concurrently to repay,
redeem, defease, refund, refinance, discharge or otherwise retire for value, in
whole or in part, or (b) constituting an amendment, modification or supplement
to, or a deferral or renewal of ((a) and (b) above are, collectively, a
"Refinancing"), any Indebtedness (including Disqualified Capital Stock and
Refinancing Indebtedness) in a principal amount (or, if issued with an original
issue discount, an original accreted value, determined in accordance with GAAP)
or, in the case of Disqualified Capital Stock, liquidation preference, not to
exceed (after deduction of reasonable and customary fees and expenses incurred
in connection with the Refinancing and the amount of any premium paid in
connection with such Refinancing in accordance with the terms of the documents
governing the Indebtedness (including Disqualified Capital Stock and Refinancing
Indebtedness) refinanced without giving effect to any modification thereof made
in connection with or in contemplation of such refinancing) the lesser of (1)
the principal amount or, in the case of Disqualified Capital Stock, liquidation
preference, of the Indebtedness (including Disqualified Capital Stock and
Refinancing Indebtedness) so Refinanced and (2) if such Indebtedness being
Refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such Refinancing;
provided that (A) such Refinancing Indebtedness shall only be used to refinance
Outstanding Indebtedness (including Disqualified Capital Stock) of such Person
issuing such Refinancing Indebtedness (except that the Company may refinance
Outstanding Indebtedness of a Subsidiary), (B) such Refinancing Indebtedness
shall (x) not have an Average Life shorter than the Indebtedness (including
Disqualified Capital Stock) to be so refinanced at the time of such Refinancing
and (y) in all respects, be no less contractually subordinated or junior, if
applicable, to the rights of Holders of the Securities than was the Indebtedness
(including Disqualified Capital Stock) to be refinanced, (C) such Refinancing
Indebtedness shall have a final stated maturity or redemption date, as
applicable, no earlier than the final stated maturity or redemption date, as
applicable, of the Indebtedness (including Disqualified Capital Stock) to be
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so refinanced, and (D) such Refinancing Indebtedness shall be secured (if
secured) in a manner no more adverse to the Holders of the Securities than the
terms of the Liens (if any) securing such refinanced Indebtedness, including,
without limitation, the amount of Indebtedness secured shall not be increased.
"Registrar" means an office or agency of the Company in London,
where Securities may be presented for registration of transfer or exchange.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the date hereof, between the Initial Purchasers and the Company.
"Registration Statement" means the Registration Statement as
defined in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means January 15 or July 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" has the meaning specified in
Section 3.3.
"Related Assets" means all assets, rights, contractual or
otherwise, and properties, whether tangible or intangible, used or intended for
use in connection with a Related Business; provided that Related Assets shall
not include any Equity Interests or indebtedness of, or interests in, any
Person.
"Related Business" means the business of constructing, creating,
developing, marketing or operating one or more cable, telephone or
communications systems, including, without limitation, any system for
transmitting, or providing service or product for the transmission of, voice,
video or data through transmission facilities, Internet service providers or any
business reasonably related to any of the foregoing and any business conducted
by the Company or any Subsidiary of the Company on the Issue Date; provided that
the determination of what constitutes a Related Business shall be made in good
faith by the Supervisory Board of the Company.
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"Related Business Acquisition" means an Asset Acquisition of
(i) properties or assets to be used in a Related Business, (ii) of the Capital
Stock of any Person that becomes a restricted Subsidiary as a result of such
Asset Acquisition or (iii) of the Capital Stock of any Person that becomes an
Unrestricted Subsidiary as a result of such Asset Acquisition, but only if such
Asset Acquisition would be permitted pursuant to Section 10.12 or as a Permitted
Investment; provided that, in the case of clauses (ii) and (iii), such Person's
assets and properties consist principally of properties or assets that will be
used in a Related Business.
"Replacement Assets" means property or assets that will be used in
a Related Business of the Company or any Subsidiary and Equity Interests of a
Person that becomes a Subsidiary of the Company.
"Responsible Officer" shall mean, when used with respect to the
Trustee, any officer within the corporate trust department of the Trustee,
including any vice-president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee who
customarily performs functions similar to those performed by the Persons who at
the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such person's knowledge of and familiarity with
the particular subject and who shall have direct responsibility for the
administration of this Indenture.
"Restricted Global Security" has the meaning specified in Section
3.3.
"Restricted Investment" means, in one or a series of related
transactions, any Investment, other than other Permitted Investments.
"Restricted Payment" means, with respect to any Person:
(a) the declaration or payment of any dividend or other
distribution in respect of Equity Interests of such Person or any
parent or Subsidiary of such Person,
(b) any payment on account of the purchase, redemption or other
acquisition or retirement for value of Equity Interests of such
Person or any Subsidiary or parent of such Person,
(c) other than with the proceeds from the substantially
concurrent sale of, or in exchange for, Refinancing Indebtedness,
any purchase,
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redemption, or other acquisition or retirement for value of, any
payment in respect of any amendment of the terms of or any
defeasance of, any Subordinated Indebtedness, directly or
indirectly, by such Person or a parent or Subsidiary of such
Person prior to the scheduled maturity, any scheduled repayment of
principal, or scheduled sinking fund payment, as the case may be,
of such Indebtedness and
(d) any Restricted Investment by such Person;
provided, however, that the term "Restricted Payment" does not include (1) any
dividend, distribution or other payment on or with respect to Equity Interests
of a Person or the parent of such Person to the extent payable solely in shares
of Qualified Capital Stock of such Person, or (2) any dividend, distribution or
other payment to the Company or any of its Subsidiaries by the Company or any of
its Subsidiaries, or (3) any payment on account of the exchange of shares of
Common Stock of Parent for a like number of substantially identical (except with
regard to voting rights) shares of Common Stock of Parent, or (4) payments to or
for the account of the Stichting Administratiekantor UPC (the "Foundation") or
its successors of amounts related to taxes payable upon the grant of options to
certain employees in shares of the Company held by the Foundation, provided
that, for purposes of this clause (4), neither the Company nor any of its
Subsidiaries shall be liable to any Person in respect of such amounts, other
than for the payment of such amounts actually received or to be received by it,
to the Foundation.
"Restricted Period" means the period through and including the
40/th/ day after the later of the commencement of the Offering and the Issue
Date of the Initial Securities.
"Restricted Securities" means Restricted Global Securities and
Regulation S Global Securities.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the United States Securities and Exchange Commission.
"Securities" means, collectively, the "Securities" issued under
this Indenture, including the Initial Securities and the Exchange Securities.
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"Securities Act" means the United States Securities Act of 1933,
as amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Discount Notes" means the Company's $1,000,000,000
13 3/4% Senior Discount Notes due 2010 issued pursuant to the Indenture.
"Senior Notes" means the Company's $300,000,000 11 1/2% Senior
Notes due 2010, its $600,000,000 11 1/4% Senior Notes due 2010, its [Euro]
200,000,000 11 1/4% Senior Notes due 2010, to be issued pursuant to the Senior
Notes Indenture.
"Senior Notes Indenture" means one or more Indentures, dated as of
January 20, 2000, between the Company and Citibank, N.A., as trustee, relating
to and governing the terms of the Senior Notes.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" shall have the meaning provided under
Regulation S-X of the Securities Act, as in effect on the Issue Date.
"Special Character Asset Sale" means any Asset Sale solely
consisting of assets and property or interests therein comprising its interests
in chello broadband, UPCtv or Priority Telecom determined by the Company in its
good faith reasonable judgment.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity," when used with respect to any Security, means
the date specified in any Security as the fixed date on which the final payment
of principal and interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company that
is subordinated in right of payment by its terms or the terms of any document or
instrument relating thereto to the Securities, in any respect or when used in
the
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definitions of Restricted Payment or Qualified Exchange has a final stated
maturity on (except for the Securities) or after the Stated Maturity.
"Subsidiary," with respect to any Person, means (1) a Corporation
a majority of whose Equity Interests with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, (2) any other Person (other than a
Corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or indirectly,
at the date of determination thereof has majority ownership interest, or (3) a
partnership in which such Person or a Subsidiary of such Person is, at the time,
a general partner and in which such Person, directly or indirectly, at the date
of determination thereof has a majority ownership interest. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be a Subsidiary of the Company
or of any Subsidiary of the Company. Unless the context requires otherwise,
Subsidiary means each direct and indirect Subsidiary of the Company.
"Supervisory Board" means, with respect to any Person, the
supervisory board of directors of such Person or any committee of the
supervisory board of directors of such Person authorized, with respect to any
particular matter, to exercise the power of the supervisory board of directors
of such Person.
"Tax" or "Taxes" means any and all present or future taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, and all
liabilities with respect thereto, together with any penalties, interest, or
additions thereto.
"Tax Event" means that as a result of any change in or amendment
to the laws, treaties or regulations of any Taxing Authority (or any official or
administrative pronouncement or action or judicial decision) interpreting or
applying such laws, treaties or regulations where such change or amendment is
proposed and becomes effective on or after the Issue Date, in making any payment
due or to become due under the Securities, the Company is or would be required
on the next succeeding payment date to pay Additional Amounts and the payment of
such Additional Amounts cannot be avoided by the use of any reasonable measures
available to the Company.
"Taxing Authority" means any nation or government or any political
subdivision thereof or any agency or instrumentality therein and any entity
exercising
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executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1939 as in force at the date as of which this Indenture was executed, except as
provided in Section 9.5.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Global Security" has the meaning set forth in
Section 3.3(d).
"Unrestricted Securities" means an Unrestricted Global Security
and all other Securities that are not Restricted Securities, including Exchange
Securities.
"Unrestricted Subsidiary" means any subsidiary of the Company that
does not own any Equity Interest of, or own or hold any Lien on any property of,
the Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the
Supervisory Board of the Company); provided that such Subsidiary at the time of
such designation (a) has no Indebtedness other than Non-Recourse Indebtedness;
(b) is not party to any agreement, contract, arrangement or understanding with
the Company or any Subsidiary of the Company, unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Subsidiaries. The Supervisory Board of the Company may
designate any Unrestricted Subsidiary to be a Subsidiary, provided that (1) no
Default or Event of Default is existing or will occur as a consequence thereof
and (2) immediately after giving effect to such designation, on a pro forma
basis, the Company could incur at least $1.00 (or its foreign currency
equivalent) of Indebtedness pursuant to the Debt Incurrence Ratio of Section
10.11.
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Each such designation shall be evidenced by filing with the Trustee a certified
copy of the resolution giving effect to such designation and an Officer's
Certificate certifying that such designation complied with the foregoing
conditions.
"U.S. Government Obligations" means direct non-callable
obligations of, or noncallable obligations guaranteed by, the United States of
America for the payment of which obligation or guarantee the full faith and
credit of the United States of America is pledged.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Wholly Owned Subsidiary" means a Subsidiary all the Equity
Interests of which (other than directors' qualifying shares) are owned by the
Company or one or more Wholly Owned Subsidiaries of the Company.
SECTION 1.2 Compliance Certificates and Opinions. Upon any
------------------------------------
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenant compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 10.9(a)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
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(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3 Form of Documents Delivered to Trustee. In any case
--------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise
of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or Opinion of Counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company stating
that the information with respect to such factual matters is in the possession
of the Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be Consolidated (with
proper identification of each matter covered therein) and form one instrument.
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SECTION 1.4 Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount at maturity and serial numbers of
Securities held by any Person, and the date of holding the same, shall be proved
by the Security Register.
(d) If the Company shall solicit from the Holders of Securities
any request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, by or pursuant to a Board Resolution, fix
in advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation
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is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date;
provided that no such authorization, agreement or consent by the Holders on such
record date shall be deemed effective unless it shall become effective pursuant
to the provisions of this Indenture.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
SECTION 1.5 Notices. Any notice or communication shall be
-------
sufficiently given if in writing and delivered in person, by facsimile and
confirmed by overnight courier, or mailed by first-class mail addressed as
follows:
if to the Company:
United Pan-Europe Communications N.V.
P.O. Box 74763
1070 BT Amsterdam
The Netherlands
Attention: General Counsel and Treasurer
Facsimile: 31 20 778 9841
Telephone: 31 20 778 9840
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with a copy to:
Holme, Roberts & Owen LLP
Heathcoat House
20 Savile Row
London W1X 1AE
England
Attention: Paul G. Thompson
Facsimile: 44 171 287 9344
Telephone: 44 171 494 5600
if to the Trustee or Paying Agent:
Citibank, N.A.
5 Carmelite Street
London EC4Y 0PA
copies of notices to the Trustee should also go to:
Citibank, N.A.
11 Old Jewry
London EC2R 8DU
Attention: Global Agency and Trust Services
Facsimile: 44 171 508 3879
Telephone: 44 171 508 3815
if to the Luxembourg Paying and Transfer Agent:
Banque International a Luxembourg
69 route d'Esch
Luxembourg L-2953
c/o the Trustee
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The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to a
Holder including any notice delivered in connection with TIA Section 310(b), TIA
Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed to
him at his address as set forth on the Security Register and shall be
sufficiently given to him if so mailed within the time prescribed. To the extent
required by the TIA, any notice or communication shall also be mailed to any
Person described in TIA Section 313(c).
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders.
Except for a notice to the Trustee, which is deemed given only when received, if
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 1.6 Notice to Holders; Waiver. Where this Indenture
-------------------------
provides for notice of any event to Holders by the Company or the Trustee, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. As long as the Securities are
listed on the Luxembourg Stock Exchange and notice is required by the rules of
the Luxembourg Stock Exchange, such notice shall be sufficiently given by
publication of such notice to Holders of the Securities in English will be in a
leading newspaper having general circulation in Luxembourg (which is expected to
be the Luxembourg Wort) or, if such publication is not practicable, in one other
leading English language daily newspaper with general circulation in Europe,
such newspaper being published on each business day in morning editions, whether
or not it shall be published in Saturday, Sunday or holiday editions. In any
case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any notice
mailed to a Holder in the manner herein prescribed shall be conclusively deemed
to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of
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notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
SECTION 1.7 Effect of Headings and Table of Contents. The
----------------------------------------
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.8 Successors and Assigns. All covenants and agreements
----------------------
in this Indenture by the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 1.9 Separability Clause. In case any provision in this
-------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.10 Benefits of Indenture. Nothing in this Indenture or
---------------------
in the Securities, express or implied, shall give to any Person, other than the
parties hereto, any Paying Agent, any Security Registrar and their successors
hereunder and the Holders any legal or equitable right, remedy or claim under
this Indenture.
SECTION 1.11 Governing Law. This Indenture and the Securities
-------------
shall be governed by and construed in accordance with the law of the State of
New York including without limitation Section 5-1401 and 5-1402 of the New York
General Obligation Law and New York Civil Practice Laws and Rules 327(b), as
applied to contracts made and performed within the State of New York, without
regard to conflicts of law. The Company hereby irrevocably submits to the
jurisdiction of any New York State court sitting in the borough of Manhattan in
the city of New York or any federal court sitting in the borough of Manhattan in
the city of New York in respect of any suit, action or proceeding arising out of
or relating to this Indenture and the Securities, and irrevocably accepts for
itself and in respect of its property, generally and unconditionally,
jurisdiction of the aforesaid courts. The
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Company irrevocably waives, to the fullest extent they may effectively do so
under applicable law, trial by jury and any objection which they may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
bought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Nothing
herein shall affect the right of the Trustee or any Holder to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Company in any other jurisdiction.
SECTION 1.12 Conflict with Trust Indenture Act. Prior to the
---------------------------------
issuance of the Exchange Securities or the effectiveness of the Shelf
Registration Statement, the Trust Indenture Act shall apply as a matter of
contract to this Indenture for purposes of interpretation, construction and
defining the rights and obligations hereunder. Upon the issuance of the
Exchange Securities or the effectiveness of the Shelf Registration Statement,
this Indenture shall be subject to the provisions of the Trust Indenture Act
that are required to be part of this Indenture and shall, to the extent
applicable, be governed by such provisions. If any provision hereof limits,
qualifies or conflicts with any provision of the Trust Indenture Act or another
provision which is required or deemed to be included in this Indenture by any of
the provisions of the Trust Indenture Act, such provision or requirement of the
Trust Indenture Act shall control.
If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or
excluded, as the case may be.
SECTION 1.13 Legal Holidays. In any case where any Interest
--------------
Payment Date, Redemption Date, or Stated Maturity or Maturity of any Security
shall not be a Business Day at a place of payment, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of principal of
(or premium, if any) or interest need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date or at the Stated Maturity or
Maturity; provided that no interest shall accrue solely by virtue of such delay
for the period from and after such Interest Payment Date, Redemption Date,
Stated Maturity or Maturity, as the case may be.
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SECTION 1.14 No Personal Liability of Board Members, Officers,
------------------------------------------------
Employees and Shareholders. No board member, director, officer, employee, agent,
- --------------------------
authorized representative, incorporator or shareholder of the Company, as such,
shall have any liability for any obligations of the Company under the Securities
or this Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation, solely by reason of its status as a board
member, director, officer, employee, agent, authorized representative,
incorporator or shareholder of the Company. By accepting a Security, the Trustee
on behalf of each Holder waives and releases all such liability (but only such
liability). The waiver and release are part of the consideration for issuance of
the Securities.
SECTION 1.15 Independence of Covenants. All covenants and
-------------------------
agreements in this Indenture shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of a Default if
such action is taken or condition exists.
SECTION 1.16 Exhibits. All exhibits attached hereto are by this
--------
reference made a part hereof with the same effect as if herein set forth in
full.
SECTION 1.17 Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
SECTION 1.18 Duplicate Originals. The parties may sign any
-------------------
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
SECTION 1.19 Agent for Service; Submission to Jurisdiction;
---------------------------------------------
Waiver of Immunities. By the execution and delivery of this Indenture, the
- --------------------
Company (i) acknowledges that it has, by separate written instruments,
designated and appointed CT Corporation System, 1633 Broadway, New York, NY
10019 ("CT Corporation System") (and any successor entity), as its authorized
agent upon which process may be served in any suit or proceeding arising out of
or relating to this Indenture that may be instituted in any federal or state
court in the Borough of Manhattan, City of New York, State of New York or
brought under federal or state securities laws, and represent and warrant that
CT Corporation System has accepted such designation, (ii) submits to the
jurisdiction of any such court in any such suit or
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proceeding and (iii) agrees that service of process upon CT Corporation System
and written notice of said service to the Company, in accordance with Section
1.5 shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. The Company further agrees to take any
and all action, including the execution and filing of any and all such documents
and instruments, as may be necessary to continue such designation and
appointment of CT Corporation System in full force and effect for as long as any
of the Securities remain Outstanding (subject to the limitation set forth in
clause (i)); provided, however, that the Company may, and to the extent CT
Corporation System ceases to be able to be served on the basis contemplated
herein shall, by written notice to the Trustee, designate such additional or
alternative agent for service of process under this Section 1.19 that (i)
maintains an office located in the Borough of Manhattan City of New York, State
of New York, and (ii) is either (x) United States counsel for the Company or (y)
a corporate service company which acts as agent for service of process for other
persons in the ordinary course of its business. Such written notice shall
identify the name of such agent for service of process and the address of the
office of such agent for service of process in the Borough of Manhattan, City of
New York, State of New York.
To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court of (i) any jurisdiction in which the Company owns
or leases property or assets, (ii) the United States or the State of New York or
(iii) the Netherlands or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property and assets or this
Agreement or any of the Notes or actions to enforce judgments in respect of any
thereof, the Company hereby irrevocably waives such immunity in respect of its
obligations under the above-referenced documents, to the extent permitted by
law.
SECTION 1.20 Judgment Currency. The Company hereby agrees to indemnify
-----------------
the Trustee, its directors, its officers and each person, if any, who controls
the Trustee within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any loss incurred by such person as a result of any
judgment or order being given or made against the Company for any U.S. Dollar
amount due under this Agreement and such judgment or order being expressed and
paid in a currency (the "Judgment Currency") other than U.S. Dollars and as a
result of any variation as between (i) the rate of exchange at which the U.S.
Dollar amount is converted into the Judgment Currency for the purpose of such
judgment or order and (ii) the spot rate of exchange in The City of New York at
which such party on the
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date of payment of such judgment or order is able to purchase U.S. Dollars with
the amount of the Judgment Currency actually received by such party. The
foregoing indemnity shall continue in full force and effect notwithstanding any
such judgment or order as aforesaid. The term "spot rate of exchange" shall
include any premiums and costs of exchange payable in connection with the
purchase of, or conversion into, U.S. Dollars.
ARTICLE II
SECURITY FORMS
SECTION 2.1 Forms Generally. The Securities and the Trustee's
---------------
certificate of authentication with respect thereto shall be in substantially the
form set forth in Exhibit A hereto with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or system on which the Securities may
be listed or eligible for trading or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of the Securities. Any portion of the text of any Security may be set
forth on the reverse thereof, with an appropriate reference thereto on the face
of the Security.
The Certificated Securities shall be printed, lithographed or
engraved on steel-engraved borders or may be produced in any other manner
permitted by the rules of any securities exchange or system on which the
Securities may be listed or eligible for trading, all as determined by the
managing directors, officers and authorized representatives of the Company
executing such Securities, as evidenced by their execution of such Securities.
ARTICLE III
THE SECURITIES
SECTION 3.1 Title and Terms. The aggregate principal amount at
---------------
maturity of Securities which may be authenticated and delivered under this
Indenture is initially limited to $1,000,000,000, except for Securities
authenticated and
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delivered upon registration of, transfer of, in exchange for, or in lieu of,
other Securities pursuant to Section 3.4, 3.5, 3.6, 9.6, 10.10, 10.16 or 11.8,
and except that such amount may be greater as required by the occurrence of an
Interest Rate Adjustment Event in accordance with the terms of this Indenture.
The Initial Securities shall be known and designated as the
"$1,000,000,000 13 3/4% Senior Discount Notes Due 2010" and the Exchange
Securities shall be known as the "$1,000,000,000 13 3/4% Series B Senior
Discount Notes." The final Stated Maturity of the Securities shall be February
1, 2010. Except as set forth in the next paragraph of this Section 3.1, the
Accreted Value of the Securities will accrete at a rate of 13 3/4% per annum,
until they reach their principal amount at maturity on February 1, 2005. Except
as set forth in the next paragraph of this Section 3.1, interest on the
Securities will accrue at a rate of 13 3/4% per annum from February 1, 2005 or
from the most recent Interest Payment Date to which cash interest has been paid
or duly provided for, and will be payable semiannually in arrears on February 1
and August 1 of each year, commencing August 1, 2005 to the Holders of record on
the immediately preceding Regular Record Date. Interest on the Securities will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
In the event that, at any time prior to 180 days following the Issue
Date, the Company (x) issues or sells, or (y) offers or negotiates to issue or
sell, for cash, any debt securities (other than debt securities convertible or
exchangeable into Capital Stock of the Company) to Qualified Institutional
Buyers who, as a regular part of their business, purchase debt securities
comparable to the Securities or the Senior Notes (any of the events described in
(x) or (y) at any time during such 180 day period, an "Interest Rate Adjustment
Event"), the rate of accretion of Accreted Value otherwise applicable to the
Securities shall, on and after the date of such Interest Rate Adjustment Event,
be increased by 25 basis points such that on and after the date of such Interest
Rate Adjustment Event, the Accreted Value of the Securities will accrete at a
rate of 14% per annum from the date of such Interest Rate Adjustment Event until
the Securities reach their principal amount at maturity on February 1, 2005. If
an Interest Rate Adjustment Event has occurred, interest payable in cash on the
Securities will accrue at a rate of 14% per annum from February 1, 2005 or from
the most recent Interest Payment Date to which cash interest has been paid or
duly provided for, and will be payable semiannually in arrears on February 1 and
August 1 of each year, commencing August 1, 2005 to the Holders of record on the
immediately preceding Regular Record Date.
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Promptly following the occurrence of an Interest Rate Adjustment
Event, the Company shall give notice of the occurrence thereof to the Trustee,
to the Paying Agent and to each Holder of Securities in the manner provided for
in Section 1.6. Such notice shall include (a) the adjusted principal amount at
maturity on February 1, 2005, setting forth the calculation thereof in
reasonable detail and (b) the amount to be paid to the Holders of record as of
each Regular Record Date immediately prior to each Interest Payment Date
beginning August 1, 2005.
Principal of, premium, if any, and interest on the Securities will
be payable, and the Securities may be exchanged or transferred, at the office or
agency of the Company in The City of New York and in London, which, unless
otherwise provided by the Company, will be the offices of the Trustee. At the
option of the Company, interest may be paid by check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Security
Register.
The Securities shall be redeemable as provided in Article Eleven.
At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and certain
Events of Default thereunder may be defeased as provided in Article Twelve.
The Securities will be general, senior, unsecured obligations of
the Company, ranking pari passu in right of payment with each other.
SECTION 3.2 Denominations. The Securities (including any Global
-------------
Security) shall be issuable only in registered form without coupons and only in
denominations of US$1,000 principal amount at maturity (or such greater amount
required as a result of the occurrence of an Interest Rate Adjustment Event) or
any integral multiple of US$1,000 principal amount at maturity above such amount
(or such greater amount required as a result of the occurrence of an Interest
Rate Adjustment Event). The Securities shall not be issuable in bearer form. No
service charge shall be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
SECTION 3.3 Execution, Authentication, Delivery and Dating.
----------------------------------------------
(a) The Securities shall be executed on behalf of the Company by
its Chief Executive Officer, its President, a Vice President or a managing
director
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(being an executive officer of the Company with due authority granted by the
management board of the Company to execute Securities) of the Company. The
signature of any of these officers or directors on the Securities may be manual
or facsimile signatures of the present or any future such authorized officer or
director and may be imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers or directors of the Company
shall bind the Company, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of
such Securities or did not hold such offices at the date of such Securities. In
addition, any Security may be signed on behalf of the Company by such Persons
as, at the actual date of the execution of such Security, shall be the proper
officers or directors of the Company, although at the date of such Security or
of the execution of this Indenture any such Person was not such officer or
director.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
Each Security shall be dated the date of its authentication. No
Security shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security a certificate
of authentication substantially in the form provided for herein duly executed by
the Trustee by manual signature of an authorized signatory, and such certificate
upon any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and is entitled to
the benefits of this Indenture.
On the Issue Date the Trustee shall authenticate Initial
Securities for original issue in the aggregate principal amount at maturity not
to exceed (except in the case of an Interest Rate Adjustment Event)
$1,000,000,000 upon a written order of the Company in the form of an Officer's
Certificate. Such order shall specify the amount of the Initial Securities to be
authenticated and the date on which the original issue of Initial Securities is
to be authenticated. In addition, the Trustee shall authenticate Exchange
Securities for original issue in the aggregate principal amount at maturity of
up to $1,000,000,000 (or such greater amount that may be required by the
occurrence of an Interest Rate Adjustment Event in compliance with the terms of
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this Indenture) upon a written order of the Company in the form of an Officer's
Certificate, provided that such Exchange Securities shall be issuable only upon
the valid surrender for cancellation of Initial Securities of a like aggregate
principal amount at maturity in accordance with the Registration Rights
Agreement. The Officer's Certificate shall specify the amount of Exchange
Securities to be authenticated and the date on which the Exchange Securities
are to be authenticated. Upon the written order of the Company in the form of an
Officer's Certificate, the Trustee shall authenticate Securities in substitution
of Securities originally issued to reflect any name change of the Company.
(b) The terms and provisions contained in the form of Securities
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
(c) Restricted Global Securities. (i) The Initial Securities
----------------------------
offered and sold in reliance on Rule 144A shall be issued in the form of one or
more global securities (the "Restricted Global Security") in definitive, fully
registered form without interest coupons, with such applicable legends as are
provided for in Exhibit A hereto, except as otherwise permitted herein.
(ii) Each Restricted Global Security
shall be registered in the name of DTC or its nominee
and deposited with the Trustee, at its Corporate Trust
Office, as custodian for DTC, duly executed by the
Company and authenticated by the Trustee as herein after
provided. The aggregate principal amount at maturity of
a Restricted Global Security may from time to time be
increased or decreased by adjustments made on the
records of the Trustee, as custodian for DTC, in
connection with a corresponding decrease or increase in
the aggregate principal amount at maturity of a Security
that is a Regulation S Global Security (as defined
below) or a Security that is an Unrestricted Global
Security (as defined below), as hereinafter provided.
(d) Regulation S Global Securities. (i) Initial Securities
------------------------------
offered and sold in reliance on Regulation S shall be initially issued in the
form of one or more Global Securities in definitive, fully registered form
without interest coupons, with such applicable legends as are provided for in
Exhibit A hereto, except as otherwise permitted herein. Until such time as the
Restricted Period shall have
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terminated, such Global Securities shall be referred to herein as the
"Regulation S Global Security." After such time as the Restricted Period shall
have terminated, such Regulation S Global Securities shall be referred to
herein, as the "Unrestricted Global Securities."
(ii) Each Regulation S Global Security and
Unrestricted Global Security shall be registered in the
name of DTC or its nominee and deposited with the
Trustee, at its Corporate Trust Office, as custodian for
DTC, duly executed by the Company and authenticated by
the Trustee as hereinafter provided, for credit to the
respective accounts at DTC of the depositaries for
Euroclear or Cedelbank. The aggregate principal amount
at maturity of each Regulation S Global Security (or
Unrestricted Global Security) may from time to time be
increased or decreased by adjustments made on the
records of the Trustee, as custodian for DTC, in
connection with a corresponding decrease or increase in
the aggregate principal amount at maturity of a
Restricted Global Security, as hereinafter provided.
(e) The Exchange Securities which are issued in exchange for
Initial Securities shall be issued initially in the form of one or more
permanent Global Securities in definitive, fully registered form without
interest coupons, substantially in the form set forth in Exhibit A, deposited
with the Trustee, as custodian for DTC and shall bear the applicable legends
relating to Global Securities set forth in Exhibit A that are required to appear
on such Securities. Exchange Securities shall constitute Unrestricted
Securities.
(f) In case the Company, pursuant to Article Eight, shall be
Consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount at
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maturity; and the Trustee, upon Company Request of the successor Person, shall
authenticate and deliver Securities as specified in such request for the purpose
of such exchange. If Securities shall at any time be authenticated and delivered
in any new name of a successor Person pursuant to this Section in exchange or
substitution for or upon registration of transfer of any Securities, such
successor Person, at the option of the Holders but without expense to them,
shall provide for the exchange of all Securities at the time Outstanding for
Securities authenticated and delivered in such new name.
SECTION 3.4 Temporary Securities. Pending the preparation of
--------------------
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 10.2, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount at maturity of definitive Securities of authorized
denominations. Until so exchanged, the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 3.5 Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office and in any other office or
agency designated pursuant to Section 10.2 being herein sometimes referred to as
the "Security Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities and
of transfers and exchange of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as security registrar (the
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"Security Registrar") for the purpose of registering Securities and transfers
and exchanges of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 10.2, the Company
shall execute, the Trustee shall authenticate and deliver, and the Security
Registrar shall register, if the requirements, of such transfer are met, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount at maturity.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like currency and aggregate
principal amount at maturity (including an exchange of Initial Securities for
Exchange Securities), upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, the Trustee shall authenticate and deliver, and the
Security Registrar shall register, the Securities which the Holder making the
exchange is entitled to receive, provided that no exchange of Initial Securities
for Exchange Securities shall occur until an Exchange Registration Statement
shall have been declared effective by the SEC (confirmed in an Officer's
Certificate) and that the Initial Securities to be exchanged for the Exchange
Securities shall be cancelled by the Trustee.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same Indebtedness, and entitled to the same benefits under this Indenture,
as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer, in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange or redemption of Securities, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 3.4, 9.6, 10.10, 10.16 or
11.8 not involving any transfer.
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The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the selection of Securities to be redeemed under Section
11.4 and ending at the close of business on the day of such mailing of the
relevant notice of redemption or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities. If
------------------------------------------------
(i) any mutilated Security is surrendered to the Trustee or (ii) the Company and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Security, and there is delivered to the Company and the Trustee
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon Company Order the Trustee shall authenticate and deliver, in exchange
for any such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount at maturity, bearing
a number not contemporaneously Outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 3.6 in lieu of
any mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section 3.6 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
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SECTION 3.7 Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of the Company maintained for such purpose pursuant to Section 10.2;
provided, however, that each installment of interest may at the Company's option
be paid (i) by mailing a check for such interest, payable to or upon the written
order of the Person entitled thereto pursuant to Section 3.8, to the address of
such Person as it appears in the Security Register, or (ii) by wire transfer of
such interest in immediately available funds to an account located in the United
States maintained by the DTC.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the Regular Record Date by virtue
of having been such Holder, and such defaulted interest and (to the extent
lawful) interest on such defaulted interest at the rate borne by the Securities
(such defaulted interest and interest thereon herein collectively called
"Defaulted Interest") must be paid by the Company, at its election in each case,
as provided in paragraph (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of U.S. Dollars equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such U.S. Dollars when deposited to be held in trust for the benefit of
the Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less than 10
days prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date, and in the name
and at the expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be given in the
manner provided for in Section 1.6, not less than 10 days prior to such Special
Record Date.
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Notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so given, such Defaulted Interest shall be paid to the
Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following paragraph(2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any securities
exchange or system on which the Securities may be listed or eligible for
trading, and upon such notice as may be required by such exchange or system, if,
after written notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8 Persons Deemed Owners. Prior to the due presentment
---------------------
of a Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name such
Security is registered as the owner of such Security for the purpose of
receiving payment of principal or Accreted Value of (and premium, if any) and
(subject to Sections 3.5 and 3.7) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 3.9 Cancellation. All Securities surrendered for payment,
------------
redemption, registration of transfer or exchange shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver to
the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the
Company has not issued and sold, and all Securities so delivered shall be
promptly cancelled by the Trustee. If the Company shall so acquire any of the
Securities, however, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation. No Securities
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shall be authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be disposed of by the Trustee in
accordance with its customary procedures and certification of their disposal
delivered to the Company unless by Company Order the Company shall direct that
cancelled Securities be returned to it.
SECTION 3.10 Computation of Interest. Interest on the Securities
-----------------------
shall be computed on the basis of a 360-day year comprised of twelve 30-day
months.
SECTION 3.11 "CUSIP" and/or "ISIN" Numbers. The Company in issuing
-----------------------------
the Securities may use a "CUSIP" and/or "ISIN" number (if then generally in
use), and if so, the Trustee shall use "CUSIP" and/or "ISIN" numbers in notices
of redemption or exchange as a convenience to Holders; provided, however, that
any such notice may state that no representation is made as to the correctness
or accuracy of such numbers either as printed in the notice or on the
Securities, and that reliance may be placed only on the other identification
numbers printed on the Securities. The Company shall promptly notify the Trustee
in writing of any change in the "CUSIP" or "ISIN" numbers of the Securities.
SECTION 3.12 Book-Entry Provisions for Global Securities, Certificated
---------------------------------------------------------
Securities.
- -----------
Except as indicated below in this Section 3.12, the Securities shall
be represented only by Global Securities. The Global Securities shall be
deposited with a Depositary for such Securities (and shall be registered in the
name of such Depositary or its nominee). The Depositary for the Securities
shall be DTC unless the Company appoints a successor Depositary by delivery of a
Company Order to the Trustee specifying such successor Depositary.
All payments on a Global Security will be made to DTC or its nominee,
as the case may be, as the registered owner and Holder of such Global Security.
The Company will be fully discharged by payment to or to the order of such
Depositary from any responsibility or liability in respect of each amount so
paid. Upon receipt of any such payment in respect of a Global Security, DTC will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount at maturity of such
Global Security as shown on the records of DTC.
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Unless and until it is exchanged in whole or in part for Certificated
Securities, a Global Security may not be transferred except as a whole by the
relevant Depositary or nominee thereof to another nominee of the Depositary or
to a successor of the Depositary or a nominee of such successor.
Owners of beneficial interests in Global Securities shall be entitled
or required, as the case may be, but only under the circumstances described in
this Section 3.12, to receive physical delivery of Certificated Securities.
Interests in a Global Security shall be exchangeable or transferable,
as the case may be, for Certificated Securities if (i) DTC notifies the Company
that it is unwilling or unable to continue as Depositary for such Global
Security, or DTC ceases to be a "Clearing Agency" registered under the United
States Securities Exchange Act of 1934, and a successor depositary is not
appointed by the Company within one hundred and twenty (120) days or (ii) an
Event of Default has occurred and is continuing with respect thereto and the
owner of a beneficial interest therein requests such exchange or transfer. Upon
the occurrence of any of the events described in the preceding sentence, the
Company shall cause the appropriate Certificated Securities to be delivered to
the owners of beneficial interests in the Global Securities or the Participants
in DTC, Euroclear or Cedelbank through which such owners hold their beneficial
interest. Certificated Securities shall be exchange able or transferable for
interests in other Certificated Securities as described herein.
SECTION 3.13 Transfer and Exchange of Securities.
-----------------------------------
(a) Obligations with Respect to Transfers and Exchanges of
------------------------------------------------------
Securities. Upon surrender for registration of transfer of any Security of a
- ----------
series to the appropriate Registrar, and subject to the other provisions of this
Section 3.13, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of such series of any authorized denominations and of a like
aggregate principal amount at maturity.
At the option of the Holder, and subject to the other provisions of
this Section 3.13, Securities of any series may be exchanged for other
Securities of such series of any authorized denominations and of a like
aggregate principal amount at maturity, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, and subject to the other provisions of this Section 3.13, the
Company shall execute, and the Trustee shall
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authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Indebtedness, and subject to the other provisions of this Section 3.13, entitled
to the same benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company or the appropriate Registrar and be duly executed by
the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or governmental charge payable in connection with any
registration of transfer or exchange of Securities.
(b) Transfer and Exchange of Global Securities. Notwithstanding
------------------------------------------
any provisions of this Indenture or the Securities, transfers of a Global
Security, in whole or in part, transfers and exchanges of interests therein of
the kinds described in clauses (ii), (iii) and (iv) below and exchange of
interests in Global Securities or of other Securities as described in clause (v)
below, shall be made only in accordance with this Section 3.13(b). Transfers and
exchanges subject to this Section 3.13 shall also be subject to the other
provisions of this Indenture that are not inconsistent with this Section 3.13.
(i) General. A Global Security may not be
-------
transferred, in whole or in part, to any Person other
than DTC or a nominee thereof or a successor to DTC or
its nominee, and no such transfer to any such other
Person may be registered; provided that this clause (i)
shall not prohibit any transfer of a Security that is
issued in exchange for a Global Security but is not
itself a Global Security. No transfer of a Security of
any series to any Person shall be effective under this
Indenture or the Securities of such series unless and
until such Security has been registered in the name of
such Person. Nothing in this Section 3.13(b)(i) shall
prohibit or render ineffective
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any transfer of a beneficial interest in a Global
Security effected in accordance with the other
provisions of this Section 3.13(b).
(ii) Restricted Global Security to
-----------------------------
Regulation S Global Security. If the Holder of a
----------------------------
beneficial interest in a Restricted Global Security of
any series wishes at any time to transfer such interest
to a Person who wishes to take delivery thereof in the
form of a beneficial interest in a Regulation S Global
Security of such series, such transfer may be effected,
subject to the rules and procedures of DTC, Euroclear
and Cedelbank, in each case to the extent applicable
(the "Applicable Procedures"), only in accordance with
the provisions of this Section 3.13(b)(ii). Upon
receipt by the Registrar of (A) written instructions
given in accordance with the Applicable Procedures
from an Agent Member directing the Registrar, to credit
or cause to be credited to a specified Agent Member's
account a beneficial interest in a Regulation S Global
Security in a principal amount at maturity equal to
that of the beneficial interest in a Restricted Global
Security to be so transferred; (B) a written order
given in accordance with the Applicable Procedures
containing information regarding the account of the
Agent Member to be credited with, and the account of
the Agent Member to be debited for, such beneficial
interest; and (C) a certificate in substantially the
form set forth in Exhibit C given by the Holder of such
beneficial interest, the principal amount at maturity
of a Restricted Global Security shall be reduced, and
the principal amount at maturity of a Regulation S
Global Security shall be in creased, by the principal
amount of the beneficial interest in a Restricted
Global Security to be so transferred, in each case by
means of an appropriate adjustment on the records of
the Registrar, and the Registrar shall instruct DTC or
its authorized representative to make a corresponding
adjustment to its records and to credit or cause to be
credited to the account of the Person specified in such
instructions a beneficial interest in a Regulation S
Global Security having a principal amount at maturity
equal to the amount so transferred.
(iii) Restricted Global Security to
-----------------------------
Unrestricted Global Security. If the Holder of a
----------------------------
beneficial interest in a Restricted Global Security
of any series wishes at any time to transfer such
interest to a Person who wishes to take delivery
thereof in the form of
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<PAGE>
a beneficial interest in an Unrestricted Global
Security of such series, such transfer may be
effected, subject to the Applicable Procedures,
only in accordance with this Section 3.13(b)(iii).
Upon receipt by the Registrar, of (A) written
instructions given in accordance with the
Applicable Procedures from an Agent Member
directing the Registrar to credit or cause to be
credited to a specified Agent Member's ac count a
beneficial interest in an Unrestricted Global
Security in a principal amount at maturity equal to
that of the beneficial interest in a Restricted
Global Security to be so transferred, (B) a written
order given in accordance with the Applicable
Procedures containing information regarding the
account of the Agent Member to be credited with,
and the account of the Agent Member to be debited
for, such beneficial interest, and (C) a
certificate in substantially the form set forth in
Exhibit C given by the Holder of such beneficial
interest, the principal amount at maturity of the
Restricted Global Security shall be reduced, and
the principal amount at maturity of an Unrestricted
Global Security shall be increased, by the
principal amount at maturity of the beneficial
interest in a Restricted Global Security to be so
transferred, in each case by means of an
appropriate adjustment on the records of the
Registrar and the Registrar shall instruct DTC or
its authorized representative to make a
corresponding adjustment to its records and to
credit or cause to be credited to the account of
the Person specified in such instructions a
beneficial interest in an Unrestricted Global
Security having a principal amount equal to the
amount at maturity so transferred.
(iv) Regulation S Global Security or
-------------------------------
Unrestricted Global Security to Restricted Global
-------------------------------------------------
Security. If the Holder of a beneficial interest in
--------
a Regulation S Global Security of any series or an
Unrestricted Global Security of any series wishes
at any time to transfer such interest to a Person
who wishes to take delivery thereof in the form of
a beneficial interest in a Restricted Global
Security of such series, such transfer may be
effected, subject to the Applicable Procedures,
only in accordance with this Section 3.13(b)(iv).
Upon receipt by the Registrar of (A) written
instructions given in accordance with the
Applicable Procedures from an Agent Member
directing the Registrar to credit or cause to be
credited to a specified Agent Member's account a
beneficial interest in a Restricted Global Security
in a principal amount at maturity equal to that of
the
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<PAGE>
beneficial interest in a Regulation S Global
Security or an Unrestricted Global Security to be
so transferred, (B) a written order given in
accordance with the Applicable Procedures
containing information regarding the account of the
Agent Member to be credited with, and the account
of the Agent Member to be debited for, such
beneficial interest, and (C) with respect to a
transfer of a beneficial interest in a Regulation S
Global Security (but not an Unrestricted Global
Security) to a Person whom the transferor
reasonably believes is a QIB, a certificate in
substantially the form set forth in Exhibit D given
by the Holder of such beneficial interest, the
principal amount at maturity of a Restricted
Global Security shall be increased, and the
principal amount at maturity of a Regulation S
Global Security or an Unrestricted Global Security
shall be reduced, by the principal amount at
maturity of the beneficial interest in a Restricted
Global Security to be so transferred, in each case
by means of an appropriate adjustment on the
records of the Registrar and the Registrar shall
instruct DTC or its authorized representative to
make a corresponding adjustment to its records and
to credit or cause to be credited to the account of
the Person specified in such instructions a
beneficial interest in the Re stricted Global
Security having a principal amount at maturity
equal to the amount so transferred.
(v) Exchanges of Global Security for
--------------------------------
Non-Global Security. In the event that a Global
-------------------
Security or any portion thereof is exchanged for
Securities other than Global Securities, such other
Securities may in turn be exchanged (on transfer or
otherwise) for Securities that are not Global
Securities or for beneficial interests in a Global
Security (if any is then Outstanding) only in
accordance with such procedures, which shall be
substantially consistent with the provisions of
clauses (i) through (iv) above and (vi) below
(including the certification requirements intended
to insure that transfers and exchanges of
beneficial interests in a Global Security comply
with Rule 144A, Rule 144 or Regulation S, as the
case may be) and any Applicable Procedures, as may
be from time to time adopted by the Company and the
Trustee.
(vi) Interest in Regulation S Global
-------------------------------
Security to be Held Through Euroclear or Cedelbank.
--------------------------------------------------
Until the termination of the Restricted Period with
respect thereto, interests in a Regulation S
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<PAGE>
Global Security may be held only through Agent
Members acting for and on behalf of Euroclear and
Cedelbank, provided that this clause (vi) shall not
prohibit any transfer in accordance with Section
3.13(b)(iv) hereof.
(c) Legends. Each Restricted Security and Global Security issued
-------
hereunder shall, upon issuance, bear the legends set forth in Exhibit A
hereto that are required to be applied to such a Security and such required
legends shall not be removed from such Security except as provided in the
next sentence or Section 3.13(e). The legend required for a Restricted
Security may be removed from a Security if there is delivered to the
Company and the appropriate Registrar such satisfactory evidence, which may
include an opinion of independent counsel licensed to practice law in the
State of New York, as may be reasonably required by the Company that
neither such legend nor the restrictions on transfer set forth therein are
required to ensure that transfers of such Security will not violate the
registration requirements of the Securities Act. Upon provision of such
satisfactory evidence, the Trustee, at the direction of the Company, shall
authenticate and deliver in exchange for such Security another security or
securities having an equal aggregate principal amount at maturity that does
not bear such legend. If such a legend required for a Restricted Security
has been removed from a Security as provided above, it shall not be a
Restricted Security and no other Security issued in exchange for all or any
part of such Security shall bear such legend, unless the Company has
reasonable cause to believe that such other security is a "restricted
security" within the meaning of Rule 144 and instructs the Trustee in
writing to cause a legend to appear thereon.
(d) Global Securities. The provisions of clauses (i), (ii),
-----------------
(iii), and (iv) below shall apply only to Global Securities;
(i) General. Each Global Security authenticated
-------
under this Indenture shall be registered in the name of the
appropriate Depositary or a nominee thereof and delivered to
such Depositary or a nominee thereof or custodian therefor.
(ii) Transfer to Persons other than Depositary.
-----------------------------------------
Notwithstanding any other provision in this Indenture or the
Securities, no Global Security may be exchanged in whole or
in part for Securities registered, and no transfer of a
Global Security in whole or in part may be registered, in the
name of any person other than the appropriate Depositary or a
nominee thereof unless (A) DTC notifies
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<PAGE>
the Company that it is unwilling or unable to continue as
Depositary for such Global Security, or DTC ceases to be a
"Clearing Agency" registered under the United States
Securities Exchange Act of 1934, and a successor depositary
is not appointed by the Company within one hundred and twenty
(120) days or (B) an Event of Default has occurred and is
continuing with respect thereto and the owner of a beneficial
interest therein requests such exchange or transfer. Any
Global Security exchanged pursuant to clause (A) above shall
be so exchanged in whole and not in part and any Global
Security ex changed pursuant to clause (B) above may be
exchanged in whole or from time to time in part as directed
by DTC. Any Security issued in exchange for a Global Security
or any portion thereof shall be a Global Security, provided
that any such Security so issued that is registered in the
name of a Person other than the appropriate Depositary or a
nominee thereof shall not be a Global Security.
(iii) Global Security to Certificated Security.
----------------------------------------
Securities issued in exchange for a Global Security or any
portion thereof pursuant to clause (ii) above shall be issued
in definitive, fully registered form without interest
coupons, shall have an aggregate principal amount at maturity
equal to that of such Global Security or portion thereof to
be so exchanged, shall be registered in such names and be in
such authorized denominations as the appropriate Deposi tary
shall designate and shall bear any legends required
hereunder. Any Global Security to be exchanged in whole shall
be surrendered by the appropriate Depositary to the Security
Registrar. With regard to any Global Security to be exchanged
in part, either such Global Security shall be so surrendered
for exchange or if the Trustee is acting as custodian for DTC
or its nominee with respect to such Global Security, the
principal amount at maturity thereof shall be reduced, by an
amount equal to the portion thereof to be so ex changed, by
means of an appropriate adjustment made on the records of the
Trustee, as Authenticating Agent. Upon any such surrender or
adjustment, the Trustee shall authenticate and deliver the
Security issuable on such exchange to or upon the order of
the Depositary or an authorized representative thereof.
(iv) In the event of the occurrence of any of
the events specified in clause (ii) above, the Company will
promptly
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<PAGE>
make available to the Trustee a supply of Certificated
Securities in definitive, fully registered form, without
interest coupons, sufficient to meet the Trustee's
requirements hereunder.
(v) No Rights of Agent Members in Global
------------------------------------
Security. No Agent Member of any Depositary nor any other
--------
Persons on whose behalf Agent Members may act shall have any
rights under the Indenture with respect to any Global
Security, or under any Global Security, and each Depositary
or its nominee, as the case may be, may be treated by the
Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner and Holder of such Global
Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other
authorization furnished by the applicable Depositary or such
nominee, as the case may be, or impair, as between DTC,
Euroclear and Cedelbank, their respective Agent Members and
any other person on whose behalf an Agent Member may act, the
operation of customary practices of such Persons governing
the exercise of the rights of a Holder of any Security.
SECTION 3.14 Special Transfer Provisions.
---------------------------
(a) Transfers to Institutional Accredited Investors. If
-----------------------------------------------
Securities are being transferred to an Institutional Accredited Investor, the
Securities shall be accompanied by delivery of a transferee certificate for
Institutional Accredited Investors substantially in the form of Exhibit G hereto
and an opinion of counsel reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the Securities Act.
(b) Other Transfers. If a Holder proposes to transfer a Security
---------------
pursuant to any exemption from the registration requirements of the Securities
Act other than as provided for above, the Security Registrar shall only register
such transfer or exchange if such transferor delivers to the Security Registrar
and the Trustee an Opinion of Counsel satisfactory to the Company and the
Security Registrar that such transfer is in compliance with the Securities Act
and the terms of this Indenture; provided that the Company may, based upon the
opinion of its counsel, instruct the Security Registrar by a Company Order not
to register such
69
<PAGE>
transfer in any case where the proposed transferee is not a QIB, an
Institutional Accredited Investor or a non-U.S. Person.
(c) General. By its acceptance of any Security bearing Legends, each
-------
Holder of such a Security acknowledges the restrictions on transfer of such
Security set forth in this Indenture and in the Legends and agrees that it will
transfer such Security only as provided in this Indenture.
The Security Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.12 or this Section
3.14 for a period of two years, after which time such letters, notices and other
written communications shall at the written request of the Company be delivered
to the Company. The Company shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable time
upon the giving of reasonable prior written notice to the Security Registrar.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall upon Company Request cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of Securities expressly provided
for herein or pursuant hereto) and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture when
(1) either
(a) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.6 and (ii) Securities
for whose payment U.S. Dollars has theretofore been deposited in trust with
the Trustee or any Paying Agent or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust
as provided in Section 10.3) have been delivered to the Trustee for
cancellation; or
70
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(b) (i) all such Securities not theretofore delivered to the Trustee
for cancellation have become due and payable, or (ii) the Company has given
irrevocable and unconditional notice of redemption for all of the
Outstanding Securities within 60 days of such notice pursuant to the
redemption provisions of this Indenture,
and the Company, in the case of (i) or (ii) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose an amount sufficient to pay and discharge the
entire Indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and accrued
interest (and Liquidated Damages, if any,) to the date of such deposit;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
(3) the Company has delivered irrevocable instructions to the Trustee
to apply the deposited U.S. Dollars toward the payment of the Securities at
Maturity or the Redemption Date, as the case may be, which must be within 60
days thereof;
(4) the Holders of the Securities have a valid, perfected, exclusive
security interest in such trust; and
(5) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7 and, if U.S. Dollars
shall have been deposited with the Trustee pursuant to clause(1)(b) of this
Section 4.1, the obligations of the Trustee under Section 4.2 and the last
paragraph of Section 10.3 shall survive.
SECTION 4.2 Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and
71
<PAGE>
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default. "Event of Default," wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest (or Liquidated Damages if
any) on any Security when it becomes due and payable, and continuance of such
default for a period of 30 days;
(2) default in the payment of the principal of, Accreted Value of or
premium, if any, on any Security as and when the same becomes payable at its
Maturity, or upon redemption, by acceleration or otherwise, including, without
limitation, payment of the Change of Control Purchase Price or the Asset Sale
Offer Price, or otherwise on Securities validly tendered and not properly
withdrawn pursuant to a Change of Control Offer or Asset Sale Offer, as
applicable; or
(3) failure to perform any other covenant or agreement of the Company
under this Indenture or Securities and, except for the provisions under Section
10.10, 10.16, Article Eight and Section 10.12, continued for 30 days after
written notice to the Company by the Trustee or to the Company and the Trustee
by Holders of at least 25% in aggregate principal amount at maturity of the
Outstanding Securities;
(4) a default in Indebtedness of the Company or any of its
Subsidiaries with an aggregate amount Outstanding in excess of $50,000,000 (or
its foreign currency equivalent) (a) resulting from the failure to pay principal
at maturity
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or otherwise at the end of any applicable grace period for such payment pursuant
to the original terms of such Indebtedness or (b) as a result of which the
maturity of such Indebtedness has been accelerated prior to its stated maturity;
or
(5) the rendering of a final judgment or final judgments not covered
by insurance in an amount in excess of $50,000,000 (or its foreign currency
equivalent) at any one time against the Company or any of its Subsidiaries by a
court or courts of competent jurisdiction, which judgment or judgments remain
unbonded, undischarged or unstayed for a period of 60 days after the date on
which the right to appeal all such judgments has expired; or
(6) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or any
Significant Subsidiary or any other applicable federal, state or foreign law, or
appointing a receiver, liquidator, assignee, trustee or sequestrator (or other
similar official) of the Company or any Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or
(7) the institution by the Company or any Significant Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the U.S. Federal Bankruptcy Code or any other applicable federal, state or
foreign law, or the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee or sequestrator (or
other similar official) of the Company or any Significant Subsidiary or of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the admission by it in writing of its inability to pay
its Indebtedness generally as they become due.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. If an
--------------------------------------------------
Event of Default (other than an Event of Default specified in Section 5.1(6) or
5.1 (7) relating to the Company) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount at
maturity of the Outstanding Securities may declare the Accreted Value and
accrued interest (and Liquidated Damages, if any) of all the Securities to be
due and payable
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immediately by a notice in writing to the Company (and to the Trustee if given
by Holders) (an "Acceleration Notice"), and upon any such declaration such
Accreted Value, accrued interest (and Liquidated Damages, if any) shall become
immediately due and payable. If an Event of Default specified in Section 5.1(6)
or 5.1(7) relating to the Company occurs and is continuing, then the Accreted
Value and accrued interest (and Liquidated Damages, if any) of all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article Five, the Holders of a
majority in principal amount at maturity of the Outstanding Securities, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Outstanding Securities,
(B) all unpaid Accreted Value of (and premium, if any, on) any
Outstanding Securities which has become due otherwise than by such declaration
of acceleration, and interest on such unpaid Accreted Value at the rate borne by
the Securities,
(C) to the extent that payment of such interest is lawful,
interest on overdue interest at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and
(2) all existing Events of Default, other than the non-payment of
amounts of Accreted Value, (or premium, if any,) and interest on the Securities
which have become due solely by such declaration of acceleration, and except a
Default with respect to any provision requiring a supermajority approval to
amend, which Default may only be waived by such a supermajority, have been cured
or waived as provided in Section 5.13.
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No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee. The Company covenants that if
- -------
(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the Accreted Value of (or
premium, if any, on) any Security at the Maturity thereof, the Company will,
upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of
such Securities the whole amount then due and payable on such Securities for
Accreted Value (and premium, if any) and interest, and interest on any overdue
Accreted Value (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate borne by the Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4 Trustee May File Proofs of Claim. In case of the pendency
--------------------------------
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the
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Company or any other obligor upon the Securities or the property of the Company
or of such other obligor or their creditors, the Trustee (irrespective of
whether the principal of the Securities shall then be due and payable as herein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of overdue Accreted
Value, premium, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of Accreted
Value (and premium, if any) and interest (and Liquidated Damages, if any)
owing and unpaid in respect of the Securities and to file such other papers
or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator or sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 5.5 Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities. All rights of action and claims under this Indenture or the
- ----------
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such
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proceeding instituted by the Trustee shall be brought in its own name and as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee and its agents and counsel, be for the ratable benefit
of the Holders of the Securities in respect of which such judgment has been
recovered.
SECTION 5.6 Application of Money Collected. Any money collected by
------------------------------
the Trustee pursuant to this Article Five shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of Accreted Value (or premium, if any) or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 6.7;
SECOND: To the payment of the amounts then due and unpaid for Accreted
Value of (and premium, if any) and interest (and Liquidated Damages, if any) on
the Securities in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for Accreted Value (and
premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 5.7 Limitation on Suits. No Holder of any Securities shall
-------------------
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(1) the Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal amount at
maturity of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) the Trustee is indemnified and/or secured (whether by payment in
advance or otherwise) to its reasonable satisfaction;
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(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority or
more in aggregate principal amount at maturity of the Outstanding Securities; it
being understood and intended that no one or more Holders shall have any right
in any manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders, or to
obtain or to seek to obtain priority or preference over any other Holders or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal and ratable benefit of all the Holders.
SECTION 5.8 Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest. Notwithstanding any other provision in this Indenture,
- --------------------
the Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment as provided herein (including, if applicable,
Article Twelve) and in such Security of the Accreted Value of (and premium, if
any) and (subject to Section 3.7) interest (and Liquidated Damages, if any) on
such Security on the respective Stated Maturities expressed in such Security
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 5.9 Restoration of Rights and Remedies. If the Trustee or
----------------------------------
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative. Except as otherwise
------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in the last paragraph of Section 3.6, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and
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remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Trustee or of any Holder of any Security to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Five or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 5.12 Control by Holders. The Holders of not less than a
------------------
majority in aggregate principal amount at maturity of the Outstanding Securities
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders not consenting
unless it has received indemnity reasonably satisfactory to it.
SECTION 5.13 Waiver of Past Defaults. The Holders of a majority in
-----------------------
aggregate principal amount at maturity of the Outstanding Securities may on
behalf of the Holders of all the Securities waive any past Default hereunder and
its consequences, except a Default
(1) in respect of the payment of the principal of, Accreted Value of
(or premium, if any), or interest (and Liquidated Damages, if any) on any
Security, or
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(2) in respect of a covenant or provision hereof which cannot be
modified or amended without the approval of a supermajority, which Default may
only be waived by such a supermajority; or
(3) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 5.14 Waiver of Stay or Extension Laws. The Company
--------------------------------
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law and covenants
that it shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1 Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and
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conforming to the requirements of this Indenture; but, in the case of any such
certificates or opinions which by any provision hereof are specifically required
to be furnished to the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they reasonably conform to the requirements of
this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own grossly negligent action, its own grossly
negligent failure to act or its own willful misconduct, except that
(1) this paragraph (c) shall not be construed to limit the effect of
paragraph (a) of this Section 6.1;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the Trustee
was grossly negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of
the Holders of the requisite amount of the Outstanding Securities relating to
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or indemnity reasonably satisfactory to it against such
risk or liability is not assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
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SECTION 6.2 Notice of Default. Within 60 days after being notified
-----------------
or becoming aware of the occurrence of any Default hereunder, the Trustee shall
transmit, in the manner and to the extent provided in TIA Section 313(c), notice
of such Default hereunder known to any Responsible Officer of the Trustee,
unless such Default shall have been cured or waived; provided, however, that,
except in the case of a Default in the payment of the Accreted Value of (or
premium, if any) or interest on any Security, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders.
SECTION 6.3 Certain Rights of Trustee. Subject to Section 6.1 and
-------------------------
to the provisions of TIA Sections 315(a) through 315(d):
(1) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of Indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Supervisory Board of the Company may be sufficiently evidenced by a Board
Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
receive and conclusively rely upon an Officers' Certificate and/or an Opinion of
Counsel;
(4) the Trustee may consult with counsel and other professional
advisers and the written advice of such counsel or advisers or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
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(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless the Trustee is indemnified
and/or secured (whether by payment in advance or otherwise) to its reasonable
satisfaction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of Indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, nominees,
custodians, delegates or attorneys and the Trustee shall not be responsible for
supervising the actions of such agent, nominee, custodian, delegate or attorney,
nor for any misconduct or negligence on the part of any agent, nominee,
custodian, delegate or attorney appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture; and
(9) the Trustee shall be entitled to assume that there has been no
Event of Default and that the Company has complied with all of its obligations
hereunder, unless a Responsible Officer of the Trustee has knowledge to the
contrary thereof.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not assured to it.
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SECTION 6.4 Trustee Not Responsible for Issuance of Securities.
--------------------------------------------------
The Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Securities, except that the Trustee represents that it
is duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder. The Trustee shall not be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 6.5 May Hold Securities. The Trustee, any Paying Agent,
-------------------
any Security Registrar or any other agent of the Company or of the Trustee, in
its individual or any other capacity, may become the owner or pledgee of
Securities and, subject to TIA Sections 310(b) and 311, may otherwise deal with
the Company with the same rights it would have if it were not Trustee, Paying
Agent, Security Registrar or such other agent.
SECTION 6.6 Money Held in Trust. Money held by the Trustee in
-------------------
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
SECTION 6.7 Compensation and Reimbursement. The Company agrees:
------------------------------
(1) to pay to the Trustee from time to time compensation for all
services rendered by it hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust) as agreed in writing between the Company and the Trustee;
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to the Trustee's gross negligence or bad
faith; and
(3) to indemnify the Trustee and its directors, officers, employees
and agents for, and to hold them harmless against, any loss, liability or
expense (including counsel's fees and expenses) without gross negligence or bad
faith on the part of any of them, arising out of or in connection with the
acceptance or
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administration of this trust, including the costs and expenses of defending
itself or themselves against any claim or liability in connection with the
exercise or performance of any of its or their powers or duties hereunder.
Upon the occurrence of an Event of Default or a potential Event of
Default or upon the Trustee being required, or considering it necessary, to
undertake duties outside the usual scope of a Trustee, the Trustee will be
entitled to charge additional fees as agreed upon in writing with the Company.
The obligations of the Company under this Section 6.7 to compensate
the Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional Indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture or the earlier resignation or removal of the
Trustee. As security for the performance of such obligations of the Company,
the Trustee shall have a claim prior to the Securities upon all property and
funds held or collected by the Trustee as such.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(6) or (7), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation for such services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section 6.7 shall survive the termination of
this Indenture or the earlier resignation or removal of the Trustee.
SECTION 6.8 Corporate Trustee Required; Eligibility; Conflicting
----------------------------------------------------
Interests.
- ---------
(a) There shall be at all times a Trustee hereunder which shall be
subject to and comply with the provisions of Section 310(a)(1) of the Trust
Indenture Act and shall have a combined capital and surplus of at least
$50,000,000. If such Corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of federal, state, territorial
or District of Columbia supervising or examining authority, then, for the
purposes of this Section 6.8, the combined capital and surplus of such
Corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
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6.8, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article Six.
(b) The Trustee shall be subject to and comply with Section 310(b) of
the Trust Indenture Act.
SECTION 6.9 Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10.
(b) The Trustee may resign at any time by giving 60 days' written
notice thereof to the Company and without assigning any reason thereto or being
responsible for any costs or expenses occasioned thereby. If the instrument of
acceptance by a successor Trustee required by Section 6.10 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may on behalf of the Company, appoint in its
place a reputable financial institution and the Company shall not unreasonably
object to such appointment or may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in aggregate principal amount at maturity of the
Outstanding Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any Holder
who has been a bona fide Holder of a Security for at least six months, (in the
case of Global Securities, as evidenced in writing to the Trustee by the
relevant Depositary or Euroclear or Cedelbank), or
(2) the Trustee shall cease to be eligible under Section 6.8(a) and
shall fail to resign after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six months
(in the case of
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Global Securities, as evidenced in writing to the Trustee by the relevant
Depositary or Euroclear or Cedelbank), or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i)the Company, by a Board Resolution, may
remove the Trustee or (ii)subject to TIA Section 315(e), any Holder who has been
a bona fide Holder of a Security for at least six months, (in the case of Global
Securities, as evidenced in writing to the Trustee by the relevant Depositary or
Euroclear or Cedelbank), may on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in aggregate principal amount at maturity of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months, (in the case of Global Securities, as evidenced in writing to the
Trustee by the relevant Depositary or Euroclear or Cedelbank), may on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 1.6. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
(g) The retiring Trustee shall not be liable for any of the acts or
omissions of any successor Trustee appointed hereunder.
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SECTION 6.10 Acceptance of Appointment by Successor. Every
--------------------------------------
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its fees, costs, expenses,
charges and any other amounts owed to it hereunder, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.11 Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business. Any Corporation into which the Trustee may be merged or converted or
- --------
with which it may be Consolidated, or any Corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
Corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such Corporation shall be otherwise qualified and eligible under
this Article Six, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities. In case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee.
In all such cases such certificates shall have the full force and effect which
this Indenture provides that the certificate of authentication of the Trustee
shall have; provided, however, that the right to adopt the certificate of
authentication of any predecessor
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Trustee or to authenticate Securities in the name of any predecessor Trustee
shall apply only to its successor or successors by merger, conversion or
consolidation.
SECTION 6.12 Trustee Acting in Other Capacities. To the extent that
-----------------------------------
the Trustee, Banque Internationale a Luxembourg or any other Person appointed
hereunder as Trustee or Paying Agent is acting as Securities Registrar,
Depositary or Paying Agent hereunder, the rights, privileges, immunities and
indemnities set forth in this Article Six shall apply to the Trustee in the
additional capacities listed above.
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 Disclosure of Names and Addresses of Holders. Every
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Holder of Securities, by receiving and holding the same, agrees with the Company
and the Trustee that none of the Company or the Trustee or any agent of either
of them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with TIA
Section 3.12, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under TIA Section 312(b).
SECTION 7.2 Reports by Trustee. Within 60 days after May 30 of
------------------
each year commencing with the first May 30 after the first issuance of
Securities, the Trustee shall transmit to the Holders, in the manner and to the
extent provided in TIA Section 313(c), a brief report dated as of such May 30 if
required by TIA Section 313(a).
SECTION 7.3 Reports by Company. The Company shall file with the
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Trustee and deliver to the Holders of Securities the reports and other
information required to be provided by it pursuant to Section 10.8.
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ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or Persons or
(ii) directly or indirectly, sell, lease, convey or transfer all or
substantially all of its assets (computed on a Consolidated basis) to any other
Person or group of affiliated Persons, unless:
(1) either (a) the Company is the continuing entity or (b) the
resulting, surviving or transferee entity is a Corporation organized under the
laws of The Netherlands or of the United States of America or any state or the
District of Columbia, any member of the European Economic Area or Switzerland
and expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Securities and this Indenture;
(2) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such transaction;
(3) unless such transaction is solely the merger of the Company and
one of its previously existing Wholly Owned Subsidiaries and which transaction
is not in connection with any other transaction, immediately after giving effect
to such transaction, on a pro forma basis, the Consolidated resulting, surviving
or transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio set forth
in Section 10.11 or, if not, the Leverage Ratio would immediately thereafter be
no greater than the Leverage Ratio immediately prior thereto;
(4) each Subsidiary Guarantor, unless such Subsidiary Guarantor is
the Person with which the Company has entered into a transaction under this
section, shall have by amendment to its Guarantee of the Securities confirmed
that its Guarantee of the Securities shall apply to the obligations of the
Company or the surviving entity in accordance with the Securities and this
Indenture; and
(5) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each in form attached hereto as Exhibits F and G
respectively, stating that such consolidation, merger, conveyance, transfer,
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lease or acquisition and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture, complies with this Article
and that all conditions precedent herein provided for relating to such
transaction have been complied with, and, with respect to such Officers'
Certificate.
For purposes of this Section 8.1, the transfer (by lease, assignment,
sale or otherwise) of all or substantially all of the properties and assets of
one or more Subsidiaries, the Company's interest in which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
SECTION 8.2 Successor Substituted. Upon any consolidation of the
---------------------
Company with or merger of the Company with or into any other Corporation or any
conveyance, transfer or lease of the properties and assets of the Company
substantially as an entirety to any Person or Persons in accordance with Section
8.1, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and (except in the case of a lease) be substituted for, and may exercise
every right and power of, the Company under this Indenture with the same effect
as if such successor Person had been named as the Company herein, and, in the
event of any such conveyance or transfer (except in the case of a lease), the
Company shall be discharged of all obligations under this Indenture and the
Securities except with respect to any obligations that arise from, or are
related to, such transaction.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Indentures Without Consent of Holders. Without the
-------------------------------------
consent of any Holders, the Company, when authorized by a Board Resolution, and
the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form and substance satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company contained
herein and in the Securities; or
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(2) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company; or
(3) to add any additional Events of Default; or
(4) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section 6.10;
or
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this
Indenture; provided that such action shall not adversely affect the interests of
the Holders in any material respect; or
(7) to provide for collateral securing the Company's obligations
under this Indenture and the Securities; or
(8) to provide for Guarantees by any other Person of the Company's
obligations pursuant to this Indenture and the Securities;
provided such actions shall not adversely affect the interests of Holders in any
material respect.
SECTION 9.2 Indentures with Consent of Holders. With the consent
----------------------------------
of the Holders of not less than a majority in aggregate principal amount at
maturity of the Outstanding Securities, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Holders under this Indenture; provided, however, that:
(i) no such modification may, without the consent of Holders of at
least 66 2/3% in aggregate principal amount at maturity of Outstanding
Securities, modify the provisions of Section 10.10
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(including the defined terms used therein) in a manner adverse to the
Holders; and
(ii) no such modification shall, without the consent of the Holder of
each Outstanding Security affected thereby:
(1) change the Stated Maturity of any Security, or reduce the
principal amount or Accreted Value at maturity thereof or the rate of accretion
or interest (or extend the time for payment of interest, if any) thereon or any
premium payable upon the redemption thereof at the option of the Company, or
change the place of payment where, or the coin or currency in which, any
Security or any premium or the interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption at the option of the Company, on
or after the Redemption Date), or reduce the Change of Control Purchase Price or
the Asset Sale Offer Price after the corresponding Change of Control or Asset
Sale has occurred or alter the provisions (including the defined terms used
therein) regarding the right of the Company to redeem the Securities in a manner
adverse to the Holders, or
(2) reduce the percentage in principal amount at maturity of the
Outstanding Securities, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in this Indenture, or
(3) modify any of the waiver provisions, except to increase any
required percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of each
Outstanding Security affected thereby, or
(4) cause the Securities to become subordinate in right of payment to
any other Indebtedness.
It shall not be necessary for any Act of Holders under this Section
9.2 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.3 Execution of Indentures. In executing, or accepting
-----------------------
the additional trusts created by, any supplemental indenture permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall receive, and shall be fully protected in relying
upon, an Opinion of Counsel
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stating that the execution of such supplemental indenture is permitted by this
Indenture and an Officers' Certificate stating that all conditions precedent to
the execution of such supplemental indenture have been fulfilled. The Trustee
may, but shall not be obligated to, enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
SECTION 9.4 Effect of Indentures. Upon the execution of any
--------------------
supplemental indenture under this Article Nine, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.5 Conformity with Trust Indenture Act. Every
-----------------------------------
supplemental indenture executed pursuant to this Article Nine shall conform as a
matter of contract or law to the requirements of the Trust Indenture Act as then
in effect.
SECTION 9.6 Reference in Securities to Indentures. Securities
-------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article Nine may bear a notation in form approved by the
Trustee and the Company as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee and the Company, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
SECTION 9.7 Notice of Indentures. Promptly after the execution by
--------------------
the Company and the Trustee of any supplemental indenture pursuant to the
provisions of Section 9.2, the Company shall give notice thereof to the Holders
of each Outstanding Security affected, in the manner provided for in Section
1.6, setting forth in general terms the substance of such supplemental
indenture.
ARTICLE X
COVENANTS
SECTION 10.1 Payment of Principal, Premium, if Any, and Interest.
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(1) The Company covenants and agrees for the benefit of the Holders that it
shall
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duly and punctually pay the principal or Accreted Value of (and premium, if any)
and interest on the Securities in accordance with the terms of the Securities
and this Indenture.
(2) For the purpose set forth in paragraph (1) above, the Company
shall, no later than 10:00 a.m., New York time, on the Business Day first
preceding each Payment Date, transfer to an account specified by the Trustee
such amount in immediately available and freely transferable U.S. Dollar funds
as shall be sufficient for the purposes of the payment of principal of (and
premium, if any) and interest (and Liquidated Damages, if any) due to be paid on
the Securities on that date.
(3) The Company shall ensure that not later than the second Business
Day immediately preceding the date on which any payment is to be made to the
Trustee pursuant to this Section 10.1, the Company shall procure that a copy of
an irrevocable payment instruction to the bank through which the payment is to
be made shall be sent to the Trustee.
(4) Unless and until the full amount of any payment due on the
Securities has been made to the Trustee, or unless and until the Trustee is
satisfied that such payment will be made, neither it nor the other Paying Agents
shall be bound to make payments in respect of the Securities hereunder.
(5) If the Trustee or a Paying Agent pays any amounts to the Holders
or to any other Agent at a time when it has not received payment in full from
the Company in respect of such Securities, the Company shall, in addition to
paying amounts due under Section 10.1(2), pay to the Trustee on demand interest
thereon at such a rate as the Trustee shall certify as the aggregate of 1% per
annum and the cost of funding any such payment made by it (as determined by the
Trustee) until the receipt in full by the Trustee of the funds due to it
pursuant to Section 10.1(2).
SECTION 10.2 Maintenance of Office or Agency. The Company shall
-------------------------------
maintain in The City of New York and London, and for so long as the Securities
are listed on the Luxembourg Stock Exchange, in Luxembourg, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands (other than service of process) to or upon the Company in respect of
the Securities and this Indenture may be served. The Corporate Trust Office of
the Trustee shall be such office or agency of the Company, unless the Company
shall designate and maintain some other office or agency for one or more
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of such purposes. The Company shall give prompt written notice to the Trustee of
any change in the location of any such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company hereby initially designates (1) the Trustee at its address
set forth in Section 1.5 hereof as its office or agency in London and Citibank
N.A. (New York branch), 111 Wall Street, New York, New York as its office or
agency in New York, for such purposes, (ii) Banque Internationale a Luxembourg,
at its office or agency in Luxembourg for such purposes and (iii) the Paying
Agent at its address set forth in Section 1.5 hereof.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Securities
may be presented or surrendered for any or all such purposes and may from time
to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York and, for so
long as the Securities are listed on the Luxembourg Stock Exchange, in
Luxembourg, for such purposes. The Company shall give prompt written notice to
the Trustee of any such designation or rescission and any change in the location
of any such other office or agency.
SECTION 10.3 Money for Security Payments to Be Held in Trust. If
-----------------------------------------------
the Company shall at any time act as its own Paying Agent, it shall, on or
before each due date of the principal or Accreted Value of (or premium, if any)
or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal or
Accreted Value of (or premium, if any) or interest so becoming due until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and shall promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it shall, on or before each due date of the principal or Accreted
Value of (or premium, if any) or interest on any Securities, deposit with a
Paying Agent a sum sufficient to pay the principal or Accreted Value (and
premium, if any) or interest so becoming due, such sum to be held in trust for
the benefit of the Persons entitled to
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such principal or Accreted Value, premium or interest, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of such
action or any failure so to act.
The Company shall cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.3,
that such Paying Agent shall:
(1) hold all sums held by it for the payment of the principal or
Accreted Value of, premium, if any, or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal or
Accreted Value, premium, if any, or interest, of which it is aware;
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith act under the direction of the Trustee
and pay to the Trustee all sums so held in trust by such Paying Agent; and
(4) indemnify the Trustee and its officers, directors, employees and
agents against any loss, cost or liability caused by, or incurred as a result
of, such Paying Agent's acts or omissions.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal or Accreted Value of,
premium, if any, or interest on any Security and remaining unclaimed for two
years after such principal or Accreted Value, premium or interest has become due
and payable shall be paid to the Company on Company Request, or (if then held by
the
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Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York and in London,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
SECTION 10.4 Corporate Existence. Subject to Article Eight, the
-------------------
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect the corporate existence, rights (charter and statutory)
and franchises of the Company and each Subsidiary; provided, however, that the
Company shall not be required to preserve, with respect to the Company, any such
right or franchise or, with respect to any Subsidiary (subject to all the other
covenants in this Indenture), any such corporate existence, right or franchise,
if the Supervisory Board of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries as a whole and that the loss thereof is not disadvantageous in
any material respect to the Holders.
SECTION 10.5 Payment of Taxes and Other Claims. The Company shall
---------------------------------
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary and (b) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any Subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
SECTION 10.6 Maintenance of Properties. The Company shall cause all
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properties owned by the Company or any Subsidiary or used or held for use in the
conduct of its business or the business of any Subsidiary to be maintained and
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kept in good condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 10.6 shall prevent the Company from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of the Company, desirable in the conduct of its business or
the business of any Subsidiary and not disadvantageous in any material respect
to the Holders.
SECTION 10.7 Insurance. The Company shall at all times keep all of
----------
its and its Subsidiaries' properties which are of an insurable nature insured
with insurers, believed by the Company to be responsible, against loss or damage
to the extent that property of similar character is usually so insured by
Corporations similarly situated and owning like properties.
SECTION 10.8 Provision of Financial Statements. The Company has
---------------------------------
agreed that, for so long as any Securities remain Outstanding, whether or not
the Company is subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, the Company will deliver to the Trustee and, to each Holder
and to prospective purchasers of Securities identified to the Company, within 15
days after the Company is or would have been (if the Company were subject to
such reporting obligations) required to file such with the SEC, annual and
quarterly financial statements substantially equivalent to financial statements
that would have been included in reports filed with the SEC, if the Company were
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the SEC, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required and, unless the SEC will not accept such reports, file with
the SEC the annual, quarterly and other reports which it is or would have been
required to file with the SEC.
Following the effectiveness of the Registration Statement, the Company
will file with the Trustee, at the time it files them with the SEC, copies of
the annual and quarterly reports and the information, documents and other
reports that the Company is required to file with the SEC under Section 13(a) or
15(d) of the Exchange Act. If the Company ceases to be required to file SEC
reports under the Exchange Act, the Company will nevertheless continue to file
such reports with the
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Trustee. The Company will furnish copies of the SEC reports to investors who
request them in writing.
SECTION 10.9 Statement by Officers as to Default.
-----------------------------------
(a) The Company shall deliver to the Trustee, on the date of delivery
of each quarterly report to be delivered pursuant to Section 10.8, and within 14
days of a request by the Trustee, a brief certificate from the principal
executive officer, principal financial officer or principal accounting officer
as to his or her knowledge of the Company's compliance with all conditions and
covenants under this Indenture. For purposes of this Section 10.9(a), such
compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the Trustee for or the Holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $50,000,000), the Company
shall deliver to the Trustee by registered or certified mail or by facsimile
transmission an Officers' Certificate specifying such event, notice or other
action within five Business Days of its occurrence.
SECTION 10.10 Purchase of Securities upon Change of Control.
---------------------------------------------
(1) (a) Upon the occurrence of a Change of Control, the Company will
be required to make an offer to each Holder to purchase for cash all or a
portion of such Holder's Securities (provided that the principal amount at
maturity of such Securities must be $1,000 (or such greater amount made
necessary as a result of the occurrence of an Interest Rate Adjustment Event) or
an integral multiple thereof) pursuant to the offer described below (the "Change
of Control Offer"), at a purchase price in cash equal to 101% of the Accreted
Value thereof on the purchase date plus accrued and unpaid interest (and
Liquidated Damages, if any) not otherwise included in the Accreted Value to the
date of purchase (the "Change of Control Purchase Price").
(b) Within 10 Business Days following a Change of Control, the
Company must send a notice to each Holder which notice shall govern the terms of
the Change of Control Offer. Such notice shall state, among other things, the
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purchase date, which must be no later than 35 Business Days from the date of the
Change of Control, other than as may be required by law (the "Change of Control
Purchase Date"). The Change of Control Offer shall remain open for 20 Business
Days following its commencement (the "Change of Control Offer Period"). Upon
expiration of the Change of Control Offer Period, the Company shall promptly
purchase all Notes properly tendered in response to the Change of Control Offer.
Holders electing to have a Security purchased pursuant to a Change of Control
Offer will be required to surrender the Security, by delivery of a form entitled
"Option of Holder to Elect Purchase," obtainable from the Trustee or any Paying
Agent substantially in the form of Exhibit H hereto, completed, to the Paying
Agent at the address specified in the notice prior to the close of business on
the third Business Day prior to the Change of Control Purchase Date. The Paying
Agent promptly will pay the Holders of Securities so accepted an amount equal to
the Change of Control Purchase Price (together with accrued and unpaid interest
and Liquidated Damages, if any) and the Trustee promptly will authenticate and
deliver to such Holders a new Security equal in principal amount at maturity to
any unpurchased portion of the Security surrendered. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Purchase Date.
The notice referred to above shall be a written offer (the "Offer")
sent by the Company by first class mail, postage prepaid, to each Holder of
Securities at its address appearing in the Security Register on the date of the
Offer offering to purchase up to the principal amount at maturity of Securities
specified in such Offer at the Change of Control Purchase Price. Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Change of Control Offer which shall be, subject
to any contrary requirements of applicable law, 20 Business Days after the date
of the Offer and a settlement date (the "Change of Control Purchase Date") for
purchase of Securities within five Business Days after the Expiration Date. The
Company shall notify the Trustee in writing at least 15 Business Days, or a
shorter period that is acceptable to the Trustee, prior to the mailing of the
Offer of the Company's obligation to make a Change of Control Offer, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer shall contain
information concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable the Holders to make an informed
decision with respect to the Change of Control Offer, which at a minimum will
include (i) the most recent annual and quarterly financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
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Operations" contained in the documents required to be filed with the Trustee
pursuant to Section 10.8 (which requirements may be satisfied by delivery of the
documents together with the Offer), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of the financial
statements referred to in clause (i) (including a description of the events
requiring the Company to make the Change of Control Offer), (iii) if applicable,
appropriate pro forma financial information concerning the Change of Control
Offer and the events requiring the Company to make the Change of Control Offer
and (iv) any other information required by applicable law to be included
therein. The Offer shall contain all instructions and materials necessary to
enable the Holders to tender Securities pursuant to the Change of Control Offer.
The Offer shall also state:
(a) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(b) the Expiration Date and the Change of Control Purchase Date;
(c) the aggregate principal amount at maturity of the Outstanding
Securities offered to be purchased by the Company in the Change of Control
Offer, including, if less than 100%, the manner by which the amount has been
determined pursuant to the Section hereof requiring the Change of Control Offer
(the "Purchase Amount");
(d) the Change of Control Purchase Price;
(e) that the Holder may tender all or any portion of the Securities
registered in the name of the Holder and that any portion of a Security tendered
must be tendered in an integral multiple of $1,000 (or such greater amount made
necessary as a result of the occurrence of an Interest Rate Adjustment Event)
principal amount at maturity;
(f) the place or places where the Securities are to be surrendered
for tender pursuant to the Change of Control Offer;
(g) that any of the Securities not tendered or tendered but not
purchased by the Company will continue to accrete or accrue interest, as the
case may be;
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(h) that on the Change of Control Purchase Date the Purchase Price
will become due and payable upon the Securities being accepted for payment
pursuant to the Change of Control Offer and that any interest shall cease to
accrue on and after the Change of Control Purchase Date;
(i) that each Holder electing to tender the securities in the
purchase will be required to surrender the Securities at the place or places
specified in the Offer prior to the close of business on the Expiration Date
with the Securities being, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
signed by, the Holder or his attorney duly authorized in writing;
(j) that Holders will be entitled to withdraw all or any portion of
the Securities tendered if the Company or its Paying Agent receives, not later
than the close of business on the Expiration Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount at maturity of
the Securities the Holder tendered, the certificate number of the Securities the
Holder tendered and a statement that such Holder is withdrawing all or a portion
of his tender;
(k) that (i) if the Securities in an aggregate principal amount at
maturity less than or equal to the Purchase Amount are duly tendered and not
withdrawn in the Purchase, the Company shall purchase all the Securities and
(ii) if the Securities in an aggregate principal amount at maturity in excess of
the Purchase Amount are tendered and not withdrawn in the Change of Control
Offer, the Company shall purchase the Securities having an aggregate principal
amount at maturity equal to the Purchase Amount on a pro rata basis with
adjustments that the Company may deem appropriate so that only Securities in
denominations of $1,000 principal amount at maturity or integral multiples
thereof shall be purchased; and
(l) that in the case of any Holder whose Securities are purchased
only in part, the Company shall sign, and the Trustee shall authenticate and
deliver to the Holder of the Securities without service charge, the new Security
or Securities, of any authorized denomination as requested by the Holder, in an
aggregate principal amount at maturity equal to and in exchange for the
unpurchased portion of the Securities so tendered.
Any Offer to Purchase shall be governed by and effected in accordance
with the Offer for such Change of Control Offer.
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The Company will not be required to make an offer to purchase any
series of Securities upon a Change of Control if, before the Change of Control
occurs, it has exercised its right to redeem all of the Securities of such
series as described under Section 11.1.
(2) On or before the Change of Control Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3) cash sufficient to pay the purchase price (together
with accrued and unpaid interest and Liquidated Damages, if any) of all
Securities or portions thereof so accepted and (iii) deliver or cause to be
delivered to the Trustee all Securities so tendered together with an Officers'
Certificate stating the Securities or portions thereof accepted for payment by
the Company.
(3) In the event that the Company makes a Change of Control Offer,
the Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
(4) If the Change of Control Purchase Date hereunder is on or after
an interest payment Record Date and on or before the associated Interest Payment
Date, any accrued and unpaid interest (and Liquidated Damages, if any) due on
such Interest Payment Date will be paid to the Person in whose name a Security
is registered at the close of business on such Record Date, and such interest
(and Liquidated Damages, if applicable) will not be payable to Holders who
tender the Securities pursuant to the Change of Control Offer.
Notwithstanding anything contained in this Indenture to the contrary,
the Company will not, any will not permit any of its Subsidiaries to, incur any
Indebtedness that is contractually subordinate to any other Indebtedness of the
Company unless such Indebtedness is at least as subordinate to the Securities.
SECTION 10.11 Limitation on Incurrence of Additional Indebtedness and
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Disqualified Capital Stock. (1) The Company may not, and may not permit any
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Subsidiary to, directly or indirectly, issue, assume, guaranty, incur, become
directly or indirectly liable with respect to (including as a result of an
Acquisition), or otherwise become responsible for, contingently or otherwise
(individually and collectively, to "incur" or, as appropriate, an
"incurrence"), any
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Indebtedness (including Disqualified Capital Stock and Acquired Indebtedness),
other than Permitted Indebtedness. Notwithstanding the foregoing if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro forma
basis to, such incurrence of Indebtedness; and
(ii) on the date of such incurrence (the "Incurrence Date"), either
(i) the Leverage Ratio of the Company for the Reference Period immediately
preceding the Incurrence Date, after giving effect on a pro forma basis to such
incurrence of such Indebtedness and, to the extent set forth in the definition
of Leverage Ratio, the use of proceeds thereof, would not exceed 7.0 to 1.0 (the
"Debt Incurrence Ratio"), (ii) the Consolidated Coverage Ratio of the Company
for the Reference Period immediately preceding the Incurrence Date, after giving
effect on a pro forma basis to such incurrence of such Indebtedness and, to the
extent set forth in the definition of Consolidated Coverage Ratio, the use of
proceeds thereof, would not be less than 1.75 to 1.0, or (iii) after giving
effect on a pro forma basis to such incurrence of Indebtedness, and, to the
extent used to retire other Indebtedness, the use of proceeds therefrom, the
amount of Indebtedness Outstanding of the Company would not exceed 225% of the
Consolidated Invested Equity Capital of the Company,
then the Company may incur such Indebtedness (including Disqualified Capital
Stock and Acquired Indebtedness).
(2) The foregoing limitations of paragraph (1) of this Section 10.11 will
not prohibit:
(a) if no Event of Default shall have occurred and be continuing, the
incurrence by the Company or its Subsidiaries of Indebtedness in an aggregate
amount incurred and Outstanding at any time pursuant to this subparagraph (a)
(plus any refinancing indebtedness incurred to retire, defease, refinance,
replace or refund such Indebtedness) of up to $400,000,000 (or the equivalent
thereof, at the time of incurrence, in the applicable foreign currencies);
(b) the incurrence by the Company and its Subsidiaries of
Indebtedness pursuant to the Credit Agreement in an aggregate amount incurred
and Outstanding at any time pursuant to this paragraph (b) (plus any refinancing
indebtedness incurred to retire, defease, refinance, replace or refund such
Indebtedness) of up to (Euro)1 billion, minus the amount of any such
Indebtedness (i)
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retired with the Net Cash Proceeds from any Asset Sale applied to reduce
permanently the Outstanding amounts or the commitments with respect to such
Indebtedness pursuant to Section 10.16 or (ii) assumed by a transferee in an
Asset Sale;
(c) the incurrence by any Subsidiary of Indebtedness, if on the
Incurrence Date either (1) the Leverage Ratio of such Subsidiary of the Company
for the Reference Period immediately preceding the Incurrence Date, after giving
effect on a pro forma basis to such incurrence of such Indebtedness and to the
extent set forth in the definition of Leverage Ratio, the use of proceeds
thereof, would be no more than 7.0 to 1.0, or (2) the Consolidated Coverage
Ratio of such Subsidiary for the Reference Period immediately preceding the
Incurrence Date, after giving effect on a pro forma basis to such incurrence of
such Indebtedness and, to the extent set forth in the definition of Consolidated
Coverage Ratio, the use of proceeds thereof, would be no less than 1.75 to
1.00, or (3) after giving effect on a pro forma basis to such incurrence of such
Indebtedness, and, to the extent used to retire other Indebtedness, the use of
proceeds therefrom, the amount of Indebtedness Outstanding of such Subsidiary
would not exceed 225% of the Consolidated Invested Equity Capital of such
Subsidiary, provided in the case of each of clauses (c)(1), (2) and (3), the
net proceeds therefrom are used in a Related Business of the Company or any
affiliated company of the Company, and provided, further, that for the purposes
of this clause (c) a Subsidiary may be a co-obligor or guarantor on such
Indebtedness of another Subsidiary of the Company (A) if such co-obligor or
guarantor Subsidiary owns (either directly or indirectly through one or more
Subsidiaries of the Company) all or a portion of the Equity Interests of the
Subsidiary of the Company that incurred such Indebtedness, (B) if all or a
portion of the Equity Interests of such co-obligor or guarantor Subsidiary is
owned (either directly or indirectly through one or more Subsidiaries of the
Company) by the Subsidiary that incurred such Indebtedness or (C) if such co-
obligor or guarantor Subsidiary owns (either directly or indirectly through one
or more Subsidiaries of the Company) all or a portion of the business that will
use the proceeds of such Indebtedness; and
(d) if no Event of Default shall have occurred and be continuing, the
incurrence by Subsidiaries of the Company of Indebtedness pursuant to the
Existing Agreements up to, but not in excess of the maximum applicable amounts
of Indebtedness available for borrowing pursuant to the terms of each such
Existing Agreement as in effect on the date of the Indenture; provided that, in
determining
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the maximum applicable amounts available, it shall be assumed that the Company
satisfies any applicable conditions to borrowing.
Indebtedness (including Disqualified Capital Stock) of any Person which is
Outstanding at the time such Person becomes a Subsidiary of the Company
(including upon designation of any subsidiary or other Person as a Subsidiary)
or is merged with or into or Consolidated with the Company or a Subsidiary of
the Company shall be deemed to have been incurred at the time such Person
becomes such a Subsidiary of the Company or is merged with or into or
Consolidated with the Company or a Subsidiary of the Company, as applicable.
Upon each incurrence, the Company may designate pursuant to which provision
of this Section 10.11 such Indebtedness is being incurred and such Indebtedness
shall not be deemed to have been incurred or Outstanding under any other
provision of this Section 10.11, except as stated otherwise in the foregoing
provisions.
SECTION 10.12 Limitation on Restricted Payments. (1) The Company may
---------------------------------
not, and may not permit any of its Subsidiaries to, directly or indirectly, make
any Restricted Payment if, after giving effect to such Restricted Payment on a
pro forma basis:
(A) a Default or an Event of Default shall have occurred and be continuing,
(B) the Company is not permitted to incur at least $1.00 (or its foreign
currency equivalent) of additional Indebtedness pursuant to the Debt Incurrence
Ratio in Section 10.11, or
(C) the aggregate amount of all Restricted Payments made by the Company and
its Subsidiaries, including after giving effect to such proposed Restricted
Payment, on and after July 30, 1999, would exceed, without duplication (and
except to the extent otherwise credited pursuant to clause (g) of the definition
of "Permitted Investment"), the sum of:
(a) (i) the amount of the cumulative Consolidated EBITDA of the
Company, if positive, less 150% of the cumulative Consolidated Fixed Charges of
the Company, for the period (taken as one accounting period), commencing on the
first day of the first full fiscal quarter commencing after July 30, 1999, to
and
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including the last day of the fiscal quarter ended immediately prior to the date
of each such calculation for which Consolidated financial statements of the
Company are available, provided that such sum shall not be deemed to result in
an amount less than zero for purposes of any calculation pursuant to this clause
(C)(a)(i); or (ii) if such cumulative Consolidated EBITDA of the Company is zero
or less, then the amount of such cumulative Consolidated EBITDA for such period;
plus
(b) the aggregate Net Cash Proceeds received by the Company from
the sale of its Qualified Capital Stock (other than (i) to a Subsidiary of the
Company and (ii) to the extent applied in connection with a Qualified Exchange),
after July 30, 1999; plus
(c) to the extent that any Investment (other than a Permitted
Investment) that was made after July 30, 1999 is sold for cash or Cash
Equivalents or otherwise liquidated or repaid for cash or Cash Equivalents, the
amount of cash or Cash Equivalents received by the Company, but only to the
extent of the lesser of (i) the cash or Cash Equivalents transferred as a return
of capital with respect to such Investment and (ii) the initial amount of such
Investment (in either case, less the cost of disposition, if any); plus
(d) in the event an Unrestricted Subsidiary is designated as a
Subsidiary, an amount equal to fair market value, at such time, of the
Investment of the Company and its Subsidiaries made after July 30, 1999;
provided, however, that such amount shall not exceed the amount of Investments
previously made in such Subsidiary that were counted as Restricted Payments
pursuant to this covenant.
(2) (a) The foregoing clauses (B) and (C) of Section 10.12(1),
however, will not prohibit: (i) any dividend, distribution or payment of
dividends on Disqualified Capital Stock permitted by Section 10.11; and (ii) any
repurchase by the Company of any shares of any class or options to acquire such
shares from any current, future or former directors, officers or employees of
the Company or any of its Subsidiaries or Affiliates, provided that the
aggregate amount of all the repurchases made under this clause shall not exceed
$10,000,000 in any twelve-month period (with unused amounts in any calendar year
being carried over to succeeding calendar years subject to a maximum (without
giving effect to the following proviso) of $14,000,000 in any calendar year);
provided, further, that such amount in any calendar year may be increased by an
amount not to exceed (1) the cash proceeds from the sale of Capital Stock of the
Company to its Supervisory Board members, management board members or officers
of the Company and its
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Subsidiaries that occurs after July 30, 1999, plus (2) the cash proceeds of key
man life insurance policies received by the Company and its Subsidiaries after
July 30, 1999;
and (b) the foregoing clauses (A), (B) and (C) of Section 10.12(1) will not
prohibit:
(i) any dividend, distribution or other payments by any Subsidiary
of the Company on its Equity Interests that is paid pro rata to all holders of
such Equity Interests;
(ii) a Qualified Exchange;
(iii) the payment of any dividend on Qualified Capital Stock within
60 days after the date of its declaration if such dividend could have been made
on the date of such declaration in compliance with the foregoing provisions; or
(iv) the payment of dividends by the Company in cash or Qualified
Capital Stock pursuant to the terms of any Parent Stock Instrument that is
incurred or issued (as applicable) in compliance with this Indenture.
The full amount of any Restricted Payment made pursuant to paragraphs
2(a)(i), (ii) and 2(b)(i), (iii) and (iv), but not pursuant to paragraph
2(b)(ii), however, will be counted as Restricted Payments made for purposes of
the calculation of the aggregate amount of Restricted Payments available to be
made referred to in Section 10.12(1)(C).
For purposes of this section, the amount of any Restricted Payment
made or returned, if other than in cash, shall be the fair market value thereof,
as determined in the good faith reasonable judgment of the Company's Supervisory
Board, unless stated otherwise, at the time made or returned, as applicable.
Additionally, on the date of each Restricted Payment, the Company shall deliver
an Officers' Certificate to the respective Trustee describing in reasonable
detail the nature of such Restricted Payment, stating the amount of such
Restricted Payment, stating in reasonable detail the provisions of this
Indenture pursuant to which such Restricted Payment was made and certifying that
such Restricted Payment was made in compliance with the terms of this Indenture.
SECTION 10.13 Limitation on Dividend and Other Payment Restrictions
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Affecting Subsidiaries. (1) The Company may not, and may not permit
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any Subsidiary to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any consensual restriction on the ability of any
Subsidiary:
(i) to pay dividends, in cash or otherwise, or make any other
distributions to or on behalf of or pay any obligation to or on behalf of the
Company or any Subsidiary of the Company;
(ii) to make or pay loans or advances to or on behalf of the Company
or any Subsidiary of the Company; or
(iii) to transfer property or assets to or on behalf of the Company
or any Subsidiary of the Company,
except:
(a) restrictions imposed by the Securities or the Senior Notes or
the Indenture or the Senior Notes Indenture or by other Indebtedness of the
Company ranking pari passu with the Securities and the Senior Notes, provided
that such restrictions are no more restrictive than those imposed by the
Indenture and the Securities;
(b) restrictions imposed by applicable law;
(c) restrictions under Indebtedness outstanding on July 30, 1999,
including pursuant to the Credit Agreement;
(d) restrictions under any Acquired Indebtedness not incurred in
violation of the Indenture or any agreement (including any Equity Interest)
relating to any property, asset, or business acquired by the Company or any of
its Subsidiaries, which restrictions in each case existed at the time of
acquisition, were not put in place in connection with or in anticipation of such
acquisition, and are not applicable to any Person, other than the Person
acquired, or to any property, asset or business, other than the property, assets
and business so acquired;
(e) any such restriction or requirement imposed by Indebtedness
incurred under the Credit Agreement pursuant to Section 10.11, provided that
such restriction or requirement is no more restrictive than that imposed by the
Credit Agreement as of July 30, 1999;
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(f) with respect solely to a Subsidiary of the Company imposed
pursuant to a binding agreement which has been entered into for the sale or
disposition of all or substantially all of the Equity Interests or assets of
such Subsidiary, provided that such restrictions apply solely to the Equity
Interests or assets of such Subsidiary which are being sold;
(g) restrictions under Purchase Money Indebtedness not incurred in
violation of the Indenture, provided that such restrictions relate only to the
property financed with such Indebtedness;
(h) with respect to any Subsidiary, restrictions contained in the
terms of any Indebtedness incurred in compliance with the Indenture, or any
agreement pursuant to which such Indebtedness was issued, if (A) the encumbrance
or restriction applies only in the event of a payment default or a default with
respect to a financial covenant contained in such Indebtedness or agreement, (B)
the Company shall have reasonably determined that the encumbrance or restriction
is not materially more disadvantageous to the Holders of the Securities than is
customary in comparable financings, and (C) the Company shall have reasonably
determined that any such encumbrance or restriction will not materially affect
the Company's ability to make principal or interest payments on the Securities;
and
(i) in connection with and pursuant to permitted Refinancings,
replacements of restrictions imposed pursuant to clauses (a), (c), (d), or (g),
or this clause (i), of this paragraph that are not more restrictive than those
being replaced and do not apply to any other Person or assets than those that
would have been covered by the restrictions in the Indebtedness so refinanced.
(2) Notwithstanding the provisions of Section 10.13(1), (a)
customary provisions restricting subletting, assignment or transfer of any
lease, license, conveyance, or similar document or instrument entered into in
the ordinary course of business, consistent with industry practice and (b) any
asset or property subject to a Lien which is not prohibited to exist with
respect to such asset pursuant to the terms of this Indenture may be subject to
customary restrictions on the transfer or disposition thereof pursuant to such
Lien.
SECTION 10.14 Limitation on Liens Securing Indebtedness. The
-----------------------------------------
Company may not, and may not permit any Subsidiary to, create, incur, assume or
suffer to exist any Lien of any kind, other than Permitted Liens, upon any of
their respective assets now owned or acquired on or after the date of this
Indenture or
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upon any income or profits therefrom securing any Indebtedness of the Company,
unless the Company provides, and causes its Subsidiaries to provide,
concurrently therewith, that the Securities are equally and ratably so secured;
provided that if such Indebtedness is Subordinated Indebtedness, the Lien
securing such Subordinated Indebtedness shall be subordinate and junior to the
Lien securing the Securities with the same relative priority as such
Subordinated Indebtedness shall have with respect to the Securities.
SECTION 10.15 Limitation on Issuances of Guarantees by Subsidiaries.
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(1) Notwithstanding the other provisions of this Indenture, the Company may not
permit any Subsidiary to, directly or indirectly, Guarantee any Indebtedness of
the Company (other than Indebtedness incurred pursuant to the Credit Agreement
in accordance with the terms of this Indenture) ("Guaranteed Indebtedness"),
then such Subsidiary must become a Guarantor (a "Subsidiary Guarantor") of the
Securities on a basis such that the Subsidiary's Guarantee of the Securities
shall stand in substantially the same relative ranking in right of payment to
the guarantee of such other Indebtedness as the Securities stand in relative
ranking to such other Indebtedness; provided that this paragraph shall not be
applicable to any guarantee by any Subsidiary that (a) existed at the time such
Person became a Subsidiary of the Company and (b) was not incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary of the Company.
(2) Subsidiary Guarantees shall be automatically released upon (i)
the sale or other disposition of all or substantially all of the Company's and
its Subsidiaries' beneficial interest in the Equity Interests or assets of such
Subsidiary Guarantor, provided that thereafter such Subsidiary Guarantor shall
cease to be a Subsidiary of the Company, (ii) the consolidation or merger of any
such Subsidiary Guarantor with any Person other than the Company or a Subsidiary
of the Company if, as a result of such consolidation or merger, such Subsidiary
Guarantor ceases to be a Subsidiary of the Company (and shall not be a
Subsidiary of the successor to the Company), (iii) a Legal Defeasance, or (iv)
the unconditional and complete release of such Subsidiary Guarantor from its
Guarantee of all Guaranteed Indebtedness.
SECTION 10.16 Limitation on Sale of Assets and Subsidiary Stock.
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(1) The Company may not, and may not permit any Subsidiary to, in one
or a series of related transactions, convey, sell, transfer, assign or otherwise
dispose of, directly or indirectly, any of the Company's or such Subsidiary's
property, business or assets (including by merger or consolidation in the case
of a Subsidiary
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of the Company), and including any sale or other transfer or issuance of any
Equity Interests of any Subsidiary of the Company, whether by the Company or a
Subsidiary or through the issuance, sale or transfer of Equity Interests by a
Subsidiary of the Company, and including any sale and leaseback transaction (any
of the foregoing, an "Asset Sale"), unless:
(A) (1) the amount equal to the Net Cash Proceeds therefrom (the
"Asset Sale Offer Amount") is applied
(i) within 360 days (1,825 days in the case of an Asset
Sale resulting from the underwritten public sale of equity securities of
chello broadband or 540 days in the case of any other Special Character
Asset Sale) after the date of such Asset Sale to the optional redemption of
the Securities in accordance with the terms of the Indenture and other
Indebtedness of the Company ranking pari passu in right of payment with the
Securities and with similar provisions requiring the Company to redeem such
Indebtedness with the proceeds from such Asset Sale, pro rata in proportion
to the respective principal amounts (or accreted values in the case of
Securities and other Indebtedness issued with original issue discount) of
the Securities and such other Indebtedness then Outstanding, or
(ii) within 360 days (1,825 days in the case of an Asset
Sale resulting from the underwritten public sale of equity securities of
chello broadband or 540 days in the case of any other Special Character
Asset Sale) after the date of such Asset Sale to the repurchase of the
Securities and such other Indebtedness ranking pari passu in right of
payment with the Securities and with similar provisions requiring the
Company to make an offer to purchase such Indebtedness with the proceeds
from such Asset Sale pursuant to a cash offer (subject only to conditions
required by applicable law, if any) pro rata in proportion to the
respective principal amounts (or accreted values in the case of Securities
and other Indebtedness issued with original issue discount) of the
Securities and such other Indebtedness then Outstanding (the "Asset Sale
Offer") at a purchase price of 100% of principal amount (or accreted value
in the case of Indebtedness issued with original issue discount) (the
"Asset Sale Offer Price") together with accrued and unpaid interest and
Liquidated Damages, if any, to the date of payment, made within 360 days
(1,825 days in the case of an Asset Sale resulting from the underwritten
public sale of equity securities of chello
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broadband or 540 days in the case of any other Special Character Asset
Sale) of such Asset Sale, or
(iii) within 360 days (1,825 days in the case of an Asset Sale
resulting from the underwritten public sale of equity securities of chello
broadband or 540 days in the case of any other Special Character Asset
Sale), to the repayment of Indebtedness then Outstanding pursuant to the
Credit Agreement or, if required by the terms of such Indebtedness, of
Indebtedness issued by a Subsidiary of the Company (in respect of which
Indebtedness the Company is not a direct or contingent obligor except by
virtue of the Company's pledge of Equity Interests of, and other interests
of or claim on, such Subsidiary or the Company's guarantee of such
Subsidiary's Indebtedness to the extent, in either case, the recourse
against the Company is limited to such Equity Interests or claim), or
(2) within 360 days (1,825 days in the case of an Asset Sale
resulting from the underwritten public sale of equity securities of chello
broadband or 540 days in the case of any other Special Character Asset Sale)
following such Asset Sale, the Asset Sale Offer Amount is invested in assets and
property which in the good faith reasonable judgment of the Company will
immediately constitute or be a part of a Related Business of the Company or such
Subsidiary (if it continues to be a Subsidiary) immediately following such
transaction or is used to make Permitted Investments in the Company or a
Subsidiary of the Company (other than Cash Equivalents or securities of the
Company or any Person controlling the Company except as permitted by the
Indenture), provided that (i) 50% of the Net Cash Proceeds from Special
Character Asset Sales and 100% of the net proceeds from any Asset Sale of an
Investment made in reliance on clause (g) of the definition of "Permitted
Investments" may be reinvested in any Permitted Investment (other than, in
either case, Cash Equivalents or securities of the Company or any Person
controlling the Company except as permitted by the Indenture) which in the good
faith reasonable judgment of the Company will immediately constitute or be a
part of a Related Business and (ii) 100% of the net proceeds from an Asset Sale
constituting the sale of an Investment in any Person (excluding a Person that
would be Consolidated with the Company under GAAP and excluding Related Assets
of the Company or any of its Subsidiaries) in which the Company or any of its
Subsidiaries has an Equity Interest may be reinvested in Investments permitted
by clause (e) or (f) of the definition of "Permitted Investments,"
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(B) at least 75% of the total consideration for such Asset Sale
or series of related Asset Sales consists of cash, Cash Equivalents, Replacement
Assets or the assumption of Indebtedness of a Subsidiary. For purposes of this
subparagraph (B), total consideration received means the total consideration
received for such Asset Sales, minus the amount of (a) Purchase Money
Indebtedness secured solely by the assets sold and assumed by a transferee,
provided that the Company and the Subsidiaries are released from any obligation
in connection therewith; and (b) property that within 30 days of such Asset Sale
is converted into cash or Cash Equivalents, provided that such cash and Cash
Equivalents shall be treated as Net Cash Proceeds attributable to the original
Asset Sale for which such property was received,
(C) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect to, on a pro forma
basis, such Asset Sale, and
(D) in the case of a transaction or series of related
transactions exceeding $15,000,000 (or the foreign currency equivalent on the
date of the transaction) of consideration to any party thereto, the Supervisory
Board of the Company determines in its good faith reasonable judgment that the
Company or such Subsidiary, as applicable, receives fair market value for such
Asset Sale.
(2) An acquisition of Securities pursuant to an Asset Sale Offer may
be deferred until the accumulated Net Cash Proceeds from Asset Sales not applied
to the uses set forth in 1(a)(i), (iii), or 1(b) above (the "Excess Proceeds")
exceeds $50,000,000 (or the foreign currency equivalent thereof), provided that,
in the case of an Asset Sale by a Subsidiary of the Company that is not a Wholly
Owned Subsidiary, only the Company's and its Subsidiaries' pro rata portion of
such Net Cash Proceeds shall constitute Net Cash Proceeds subject to the
provisions of this Section 10.16. Each Asset Sale Offer shall remain open for
20 Business Days following its commencement (the "Asset Sale Offer Period").
Upon expiration of the Asset Sale Offer Period, the Company shall apply the
Asset Sale Offer Amount, plus an amount equal to accrued and unpaid interest and
Liquidated Damages, if any, to the purchase of all Indebtedness properly
tendered (on a pro rata basis if the Asset Sale Offer Amount is insufficient to
purchase all Indebtedness so tendered) at the Asset Sale Offer Price (together
with accrued interest and Liquidated Damages, if any). To the extent that the
aggregate amount of Securities and such other pari passu Indebtedness tendered
pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount, the
Company may apply any remaining Net Cash Proceeds to any
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purpose consistent with this Indenture, and following the consummation of each
Asset Sale Offer the Excess Proceeds amount shall be reset to zero.
Notwithstanding, and without complying with, the foregoing provisions
of this Section 10.16:
(u) the Company and its Subsidiaries may, in the ordinary course
of business, (a) convey, sell, transfer, assign or otherwise dispose of
inventory and other assets acquired and held for resale in the ordinary
course of business and (b) liquidate and otherwise dispose of Cash
Equivalents;
(v) the Company and its Subsidiaries may convey, sell, transfer,
assign or otherwise dispose of property, businesses, or assets pursuant to
and in accordance with Article Eight.
(w) the Company and its Subsidiaries may sell or dispose of
damaged, worn out or other obsolete personal property in the ordinary
course of business so long as such property is no longer necessary for the
proper conduct of the business of the Company or such Subsidiary, as
applicable, and the Company and its Subsidiaries may replace personal
property in the ordinary course of business so long as the replacement
property is necessary for the proper conduct of the business of the Company
or such Subsidiary, as applicable, and sell or dispose of such replaced
property in the ordinary course;
(x) the Company and its Subsidiaries may convey, sell, transfer,
assign or otherwise dispose of property, businesses, or assets to the
Company or any of its Subsidiaries;
(y) the Company and each of its Subsidiaries may surrender or
waive contract rights or settle, release or surrender contract, tort or
other claims of any kind in the ordinary course of business or grant Liens
not otherwise prohibited by the Indenture;
(z) the Company and its Subsidiaries may exchange assets for
property, businesses, or assets held by any Person (including by merger or
consolidation in the case of a Subsidiary of the Company); provided that
(a) property, businesses and assets, which in one or
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a series of related transactions exceeds $15,000,000 in value, received by
the Company or such Subsidiaries in any such exchange in the good faith
reasonable judgment of the Supervisory Board of the Company will
immediately constitute, be a part of, or be used in, a Related Business of
the Company or such Subsidiaries, (b) the Supervisory Board of the Company
has determined that the terms of any exchange, which in one or a series of
related transactions exceeds $15,000,000 in fair market value, are fair and
reasonable, and (c) any cash or Cash Equivalents received by the Company or
any Subsidiary in such exchange shall be treated as having been received as
a result of an Asset Sale.
All Net Cash Proceeds from an Event of Loss shall be used all within the
period and as otherwise provided above in clause (1) of the first paragraph of
this Section 10.16.
(3) Any Asset Sale Offer shall be made in compliance with all
applicable laws, rules, and regulations, including, if applicable, Regulation
14E of the Exchange Act and the rules and regulations thereunder and all other
applicable Federal and state securities laws. To the extent that the provisions
of any applicable securities laws, rules, or regulations conflict with the
provisions of this section, compliance by the Company or any of its subsidiaries
with such laws, rules or regulations shall not in and of itself cause a breach
of its obligations under this section.
(4) If the payment date in connection with an Asset Sale Offer
hereunder is on or after an interest payment Record Date and on or before the
associated Interest Payment Date, any accrued and unpaid interest (and
Liquidated Damages, if any, due on such Interest Payment Date) will be paid to
the Person in whose name a Security is registered at the close of business on
such Record Date, and such interest (or Liquidated Damages, if applicable) will
not be payable to Holders who tender Securities pursuant to such Asset Sale
Offer.
SECTION 10.17 Limitation on Transactions with Affiliates. The Company
------------------------------------------
may not, and may not permit any Subsidiary on or after the Issue Date to, enter
into any contract, agreement, arrangement or transaction with any Affiliate of
the Company (an "Affiliate Transaction"), or any series of related Affiliate
Transactions, other than Exempted Affiliate Transactions,
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(1) unless it is determined by the Supervisory Board as evidenced by
a Board Resolution that the terms of such Affiliate Transaction are fair and
reasonable to the Company and no less favorable to the Company than could have
been obtained in an arm's length transaction with a non-Affiliate, and
(2) if involving consideration to either party in excess of
$15,000,000 (or its foreign currency equivalent), unless such Affiliate
Transaction(s) is evidenced by an Officers' Certificate addressed and delivered
to the Trustee certifying that such Affiliate Transaction (or Affiliate
Transactions) has been approved by a majority of the members of the Supervisory
Board of the Company that are disinterested in such transaction, if there are
any directors who are so disinterested, and
(3) if involving consideration to either party in excess of
$15,000,000 or $30,000,000 if there are disinterested directors (or in each case
its foreign currency equivalent), unless in addition the Company, prior to the
consummation thereof, obtains a written favorable opinion as to the fairness of
such transaction to the Company from a financial point of view from an
independent investment banking firm of national reputation in the United States
or, if pertaining to a matter for which such investment banking firms do not
customarily render such opinions, an appraisal or valuation firm of national
reputation in the United States.
SECTION 10.18 Additional Amounts. All payments made by the Company
------------------
under or with respect to the Securities will be made free and clear of and
without withholding or deduction for or on account of any present or future
Taxes imposed or levied by or on behalf of any Taxing Authority within The
Netherlands, or within any other jurisdiction in which the Company is organized
or engaged in business, or any other jurisdiction if payments on the Securities
are made from within such jurisdiction (each of the above, a "Relevant Taxing
Jurisdiction"), unless the Company is required to withhold or deduct Taxes by
law or by the interpretation or administration thereof.
If the Company is required to withhold or deduct any amount for or on
account of Taxes (other than any estate, inheritance, gift, sales, excise,
transfer, wealth or personal property tax, or any similar non-income tax,
assessment or governmental charge) imposed by a Taxing Authority within a
Relevant Taxing Jurisdiction, from any payment made under or with respect to the
Securities, the Company will pay such additional amounts ("Additional Amounts")
as may be necessary so that the net amount received by each Holder of Securities
(including
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Additional Amounts) after such withholding or deduction (including any
withholding or deduction in respect of such Additional Amounts) will not be less
than the amount the Holder would have received if such Taxes had not been
withheld or deducted; provided that no such Additional Amounts shall be payable
with respect to a payment made to a Holder with respect to any Tax or portion
thereof that would not have been imposed, payable or due:
(1) but for the existence of any present or former connection between
the Holder (or the beneficial owner of, or person ultimately entitled to obtain
an interest in, such Securities) and The Netherlands or other jurisdiction in
which the Company is organized or engaged in business other than the holding of
the Securities;
(2) but for the failure of the Holder to use its reasonable best
efforts to comply upon written notice by the Company delivered 60 days prior to
any payment date with a request by the Company to satisfy any certification,
identification or other reporting requirements which shall include any
applicable forms or instructions whether imposed by statute, treaty, regulation
or administrative practice concerning the nationality or residence of the Holder
or the connection of the Holder with The Netherlands or other jurisdiction in
which the Company is organized or engaged in business:
(i) provided that Holder's failure to comply with the 60 day
requirement described above shall not relieve the Company of the Company's
obligation to pay Additional Amounts if the Holder's application for any
requested certification, identification or other reporting requirement
remains Outstanding or is otherwise pending and the Holder continues to use
its reasonable best efforts to obtain such information;
(ii) provided, further, that the Company shall pay any Additional
Amounts not paid on any payment date as a result of the operation of this
clause (2) upon the satisfaction of the relevant certification,
identification or other reporting requirements within 30 days after such
payment date, provided that the Company shall not, as a result of such
satisfaction occurring after the payment date, have already irrevocably
paid to the relevant taxing authority the withheld or deducted amount in
respect of which such Additional Amounts would have been payable;
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(3) but for the failure of the Holder (or the beneficial individual
owner of, or individual ultimately entitled to obtain an interest in, such
Securities) who is an individual citizen or resident of a member state of the
European Union to comply with a written notice by the Company delivered 60 days
prior to any payment date with a request by the Company to provide any
certification, identification or other reporting requirement, whether imposed by
statute, treaty, regulation or administrative practice, if such action would
otherwise eliminate the requirement for the withholding or deduction of Taxes;
or
(4) if the beneficial owner of, or person ultimately entitled to
obtain an interest in, such Securities had been the Holder of the Securities and
would not be entitled to the payment of Additional Amounts (excluding the impact
of book entry procedures by the Depository).
In addition, Additional Amounts will not be payable with respect to
any Tax which is payable and so paid otherwise than by withholding or deduction
from payments of, or in respect of principal of, or any interest or Liquidated
Damages on, the Securities. The Company will remit the full amount of any
withholdings or deductions for or on account of Taxes to the relevant Taxing
Authority in accordance with applicable law. The Company will make reasonable
efforts to obtain certified copies of tax receipts evidencing the payment of any
Taxes so deducted or withheld from each Taxing Authority imposing such Taxes.
The Company will furnish to the Holders, within 60 days after the date the
payment of any Taxes so deducted or withheld are due pursuant to applicable law,
either certified copies of tax receipts evidencing such payment by the Company
or, if such receipts are not obtainable, other evidence of such payments by the
Company. At least 30 days prior to each date on which any payment under or with
respect to the Securities is due and payable, if the Company will be obligated
to pay Additional Amounts with respect to such payment, the Company will deliver
to the respective Trustee an Officers' Certificate stating (i) the fact that
such Additional Amounts will be payable, (ii) the amounts so payable and (iii)
such other information necessary to enable the Trustee to pay such Additional
Amounts to the Holders of Securities on the Interest Payment Date.
Wherever in this Indenture there is mentioned, in any context, the payment
of amounts based upon the principal amount at maturity of the Securities or of
principal, Accreted Value, premium, if any, interest or Liquidated Damages, if
any, or of any other amount payable under or with respect to any of the
Securities, such
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mention shall be deemed to include mention of the payment of Additional Amounts
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof.
SECTION 10.19 Waiver of Stay, Extension or Usury Laws. The Company
---------------------------------------
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law or any usury law or other law, which
would prohibit or forgive the Company from paying all or any portion of the
principal of and/or interest, if any, on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 10.20 Limitation on Lines of Business. Neither the Company
-------------------------------
nor any of its Subsidiaries shall directly or indirectly engage to any
substantial extent in any line or lines of business activity other than that
which, in the reasonable good faith judgment of the Supervisory Board, is a
Related Business.
SECTION 10.21 Limitation on Status as an Investment Company. The
---------------------------------------------
Company and its Subsidiaries shall not take any action or conduct their business
and operations in such a way as would cause them to be required to register as
an "investment company" (as that term is defined in the Investment Company Act
of 1940, as amended), or would otherwise cause them to become subject to
regulation under the Investment Company Act.
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ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1 Right of Redemption.
-------------------
(1) Optional Redemption of the Securities
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time or from time to time on or after February 1, 2005,
upon not less than 30 nor more than 60 days' prior notice, at the redemption
prices (expressed as a percentage of Accreted Value thereof) set forth below,
plus accrued and unpaid interest (and Liquidated Damages, if any,) thereon, if
any, to the date of redemption:
YEAR Security Redemption Price
---- -------------------------
2005............................................ 106.875%
2006............................................ 104.583%
2007............................................ 102.292%
2008 and thereafter............................. 100.000%
The Company will publish a redemption notice in accordance with the
procedures described under Section 1.6.
(2) Redemption Upon Equity Offering
Prior to February 1, 2003, upon an Equity Offering of Common Stock for
cash of the Company, up to 35% of the aggregate principal amount of the
Securities may be redeemed at the Company's option within 90 days of such Equity
Offering, on not less than 30 days, but not more than 60 days', notice to each
Holder of the Securities to be redeemed, with cash in an amount not in excess of
the Net Cash Proceeds of such Equity Offering, at a redemption price equal to
113.75% of the Accreted Value thereof together with accrued and unpaid interest
and Liquidated Damages, if any, thereon to the Redemption Date; provided,
however, that immediately following such redemption not less than 65% of the
aggregate principal amount at maturity of the Securities originally issued (as
may be increased as a result of the occurrence of an Interest Rate Adjustment
Event) remain Outstanding and
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provided, further, that such redemption shall occur within 90 days after the
date of the closing of such Equity Offering.
(3) Redemption For Changes In Withholding Taxes
The Company may, at its option, redeem all, but not less than all, of
the Securities then Outstanding, in each case at 100% of the Accreted Value
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
Redemption Date, if a Tax Event has occurred and is continuing. Notice of any
such redemption must be given within not less than 30 days nor more than 60 days
prior to the redemption date. No redemption pursuant to this paragraph (3) may
be made unless, prior to the publication of any notice of redemption as a result
of a Tax Event, the Company delivers to the Trustee (i) an Officer's Certificate
stating that a Tax Event has occurred (irrespective of whether the amendment or
change is then effective), describing the facts leading thereto and stating that
the Company cannot avoid the requirement to pay Additional Amounts by taking
reasonable measures available to it and (ii) an opinion of counsel reasonably
acceptable to the Trustee to the effect that the Company is or will become
obligated to pay Additional Amounts as a result of such change or amendment.
(4) Mandatory Redemption
The Company is not required to make mandatory redemption payments or
sinking fund payments with respect to the Securities.
SECTION 11.2 Applicability of Article. Redemption of Securities at
------------------------
the election of the Company or otherwise, as permitted or required by any
provision of this Indenture, shall be made in accordance with such provision and
this Article Eleven.
SECTION 11.3 Election to Redeem; Notice to Trustee. The election of
-------------------------------------
the Company to redeem any Securities pursuant to Section 11.1 shall be evidenced
by a Board Resolution. In case of any redemption at the election of the Company,
the Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount at maturity of
Securities to be redeemed and shall deliver to the Trustee such documentation
and records as shall enable the Trustee to select the Securities to be redeemed
pursuant to Section 11.4.
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SECTION 11.4 Selection by Trustee of Securities to Be Redeemed. If
-------------------------------------------------
less than all the Securities are to be redeemed, the particular Securities to be
redeemed shall be selected not more than 30 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities not previously called for
redemption pro rata, by lot or by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal amount at maturity of Securities; provided, however, that no
such partial redemption shall reduce the portion of the principal amount at
maturity of a Security not redeemed to less than $1,000 (or such greater amount
made necessary as a result of the occurrence of an Interest Rate Adjustment
Event).
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount at maturity thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount at maturity of such Security which has been or is to be
redeemed.
SECTION 11.5 Notice of Redemption. Notice of redemption shall be
--------------------
given in the manner provided for in Section 1.6 not less than 30 nor more than
60 days prior to the Redemption Date, to each Holder of Securities to be
redeemed.
Each notice of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 11.7, if any,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of a partial redemption, the principal amount
at maturity) of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, that on and
after the Redemption Date, upon surrender of such Security, the Holder will
receive,
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without charge, a new Security or Securities of authorized denominations for the
principal amount at maturity thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section 11.7)
will become due and payable upon each such Security, or the portion thereof, to
be redeemed, and that interest thereon will cease to accrue and that the
Accreted Value of the Securities will cease to increase on and after said date,
and
(6) the place or places where such Securities are to be presented and
surrendered for payment of the Redemption Price and accrued interest, if any.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.6 Deposit of Redemption Price. Prior to any Redemption
---------------------------
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3) an amount of U.S. Dollars sufficient to pay the
Redemption Price of, and accrued interest on, all the Securities which are to be
redeemed on that date.
SECTION 11.7 Securities Payable on Redemption Date. Notice of
-------------------------------------
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified (together with accrued interest and Liquidated Damages, if
any, to the Redemption Date), and from and after such date (unless the Company
shall default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest, if any, to the
Redemption Date; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal or Accreted Value (and premium,
if
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any) shall, until paid, accrete or bear interest from the Redemption Date at the
rate of accretion of or interest rate borne by the Securities.
SECTION 11.8 Securities Redeemed in Part. Any Security which is to be
---------------------------
redeemed only in part shall be surrendered at the office or agency of the
Company maintained for such purpose pursuant to Section 10.2 (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holder's attorney duly authorized in writing),
and the Company shall execute, and the Trustee shall authenticate and deliver to
the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in
aggregate principal amount at maturity equal to and in exchange for the
unredeemed portion of the principal amount at maturity of the Security so
surrendered.
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1 Company's Option to Effect Defeasance or Covenant
-------------------------------------------------
Defeasance. The Company may, at its option by Board Resolution, at any time
- ----------
prior to the Stated Maturity of the Securities, with respect to the Securities,
elect to have either Section 12.2 or Section 12.3 be applied to all Outstanding
Securities upon compliance with the conditions set forth below in this Article
Twelve.
SECTION 12.2 Defeasance and Discharge. Upon the Company's exercise
------------------------
under Section 12.1 of the option applicable to this Section 12.2, the Company
shall be deemed to have been discharged from its obligations with respect to all
Outstanding Securities on the date the conditions set forth in Section 12.4 are
satisfied (hereinafter, "Defeasance"). For this purpose, Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the Outstanding Securities, which shall thereafter
be deemed to be "Outstanding" only for the purposes of Section 12.5 and the
other Sections of this Indenture referred to in clauses (A) and (B) below, and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of
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Outstanding Securities to receive, solely from the trust fund described in
Section 12.4 and as more fully set forth in such Section, payments in respect of
the principal or Accreted Value of, premium, if any, and interest (and
Liquidated Damages, if any) on such Securities when such payments are due and
any rights of the Holders with respect to such amounts, (B) the Company's
obligations with respect to such Securities under Sections 3.4, 3.5, 3.6, 10.2
and 10.3; (C) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (D) this Article Twelve. Subject to compliance with this Article
Twelve, the Company may exercise its option under this Section 12.2
notwithstanding the prior exercise of its option under Section 12.3 with respect
to the Securities.
SECTION 12.3 Covenant Defeasance. Upon the Company's exercise under
-------------------
Section 12.1 of the option applicable to this Section 12.3, the Company shall be
released from its obligations under any covenant contained in Section 8.1 and in
Sections 10.8 through 10.18 with respect to the Outstanding Securities
("Covenant Defeasance") on and after the date the conditions set forth below are
satisfied, and the Securities shall thereafter be deemed not to be "Outstanding"
for the purposes of any direction, waiver, consent or declaration or Act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "Outstanding" for all other purposes hereunder.
For this purpose, Covenant Defeasance means that, with respect to the
Outstanding Securities, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section
5.1(3), 5.1(4) and 5.1(5), but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby.
SECTION 12.4 Conditions to Defeasance or Covenant Defeasance. The
-----------------------------------------------
following shall be the conditions to application of either Section 12.2 or
Section 12.3 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another Trustee satisfying the requirements of
Section 6.8 who shall agree to comply with the provisions of this Article Twelve
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities: (A) U.S. legal tender (with
respect to the Securities), or
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(B) U.S. Government Obligations (with respect to the Securities) or (C) a
combination thereof, sufficient, in the opinion of a firm of independent public
accountants that is nationally recognized in the United States expressed in a
written certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or other qualifying Trustee) to pay
and discharge, the principal or Accreted Value of (and premium, if any) and
interest on the Outstanding Securities on the Stated Maturity (or Redemption
Date, if applicable) of such principal or Accreted Value (and premium, if any)
or installment of interest; provided that the Holders of Securities must have a
valid, perfected, exclusive security interest in such trust.
(2) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as paragraphs (6) and (7) of
Section 5.1 are concerned, at any time during the period ending on the 91st day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period).
(3) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries is bound.
(4) In the case of an election under Section 12.2, the Company shall
have delivered to the Trustee an opinion of counsel reasonably acceptable to the
Trustee stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since the date of
this Indenture, there has been a change in the applicable U.S. Federal income
tax law, in either case to the effect that, and based thereon such opinion shall
confirm that, the Holders of the Outstanding Securities will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
Defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
Defeasance had not occurred.
(5) In the case of an election under Section 12.3, the Company shall
have delivered to the Trustee an opinion of counsel reasonably acceptable to the
Trustee to the effect that (i) the Holders of the Outstanding Securities will
not recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to U.S. federal income
tax on the
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same amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of such Outstanding Securities over any other of the
Company's creditors or with the intent of defeating, hindering, delaying or
defrauding any other of the Company's creditors or others; and
(7) The Company shall have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent provided for relating to
either the Defeasance under Section 12.2 or the Covenant Defeasance under
Section 12.3 (as the case may be) have been complied with; and, in the case of
the opinion of counsel, that paragraphs (1) (with respect to the validity and
perfection of the security interest), (2), (3) and (5) of this Section 12.4 have
been complied with, and the Company shall have delivered to the Trustee an
Officers' Certificate, subject to such qualifications and exceptions as the
Trustee deems appropriate, to the effect that, assuming no Holder of the
Securities is an insider of the Company, the trust funds will not be subject to
the effect of any applicable Federal bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally.
SECTION 12.5 Deposited Money and U.S. Government Securities to Be
----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the
- ---------------------------------------------
last paragraph of Section 10.3, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
Trustee, collectively for purposes of this Section 12.5, the "Trustee") pursuant
to Section 12.4 in respect of the Outstanding Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal or Accreted Value, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee and (if applicable)
its officers, directors, employees and agents against any tax, fee or other
charge imposed on or assessed against the U.S. Government Securities deposited
pursuant to Section 12.4 or the principal and interest received in respect
thereof other than any
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such tax, fee or other charge which by law is for the account of the Holders of
the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 12.4 which, in the opinion of a firm of independent public accountants
that is nationally recognized in the United States expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
Defeasance or Covenant Defeasance, as applicable, in accordance with this
Article Twelve.
SECTION 12.6 Reinstatement. If the Trustee or any Paying Agent is
-------------
unable to apply any money in accordance with Section 12.5 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Company's obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 12.2 or 12.3, as the case may be, until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 12.5; provided, however, that if the Company makes any
payment of principal or Accreted Value of, premium, if any, or interest on any
Security following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money held by the Trustee or Paying Agent.
130
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed all as of the day and year first above written.
UNITED PAN-EUROPE COMMUNICATIONS N.V.
By:____________________________________
Name:__________________________________
Title:_________________________________
Citibank, N.A. (London Branch), Trustee
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
EXHIBIT A
[FORM OF SECURITIES]
[If a Global Security, then insert:] THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC"), EUROCLEAR OR
CEDELBANK (EACH, A "DEPOSITARY") OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR
DEPOSITARY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN A DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY A DEPOSITARY TO A NOMINEE
OF A DEPOSITARY OR BY A NOMINEE OF A DEPOSITARY TO A DEPOSITARY OR ANOTHER
NOMINEE OF A DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
[If a Global Security, then insert:] UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF A DEPOSITARY, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF SUCH DEPOSITARY OR A NOMINEE OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF A DEPOSITARY (AND
ANY PAYMENT IS MADE TO ITS NOMINEE OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF A DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, A NOMINEE OF A DEPOSITARY, HAS AN INTEREST HEREIN.
[If a Restricted Global Security, then insert:] THIS SECURITY (OR ITS
PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION
A-1
<PAGE>
OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. BY ITS ACCEPTANCE HEREOF, THE HOLDER: (1)
REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A")) (A "QIB"), OR IS OTHERWISE ACQUIRING
THIS SECURITY PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE
DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE
144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR ANY PREDECESSOR OF THIS SECURITY) OR
THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE,
IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION
TERMINATION DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A QIB AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO PERSONS
THAT ARE NOT U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH THE REQUIREMENTS OF REGULATION S UNDER THE
SECURITIES ACT ("REGULATION S") OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. OFFERS, SALES OR OTHER TRANSFERS OF THIS SECURITY UNDER CLAUSES
(C), (D) AND (E) ABOVE ARE SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT
PRIOR TO ANY SUCH OFFERS, SALES OR OTHER TRANSFERS TO
A-2
<PAGE>
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S.
[If a Regulation S Security, then insert:] THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, PRIOR TO THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE
PERIOD (DEFINED AS 40 DAYS AFTER THE ISSUE DATE WITH RESPECT TO THE SECURITIES)
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT
(A)(1) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF
REGULATION S OR (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES. BY ITS ACCEPTANCE HEREOF, THE HOLDER AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND.
THIS SECURITY MAY NOT BE OFFERED, TRANSFERRED OR SOLD AS PART OF ITS
INITIAL DISTRIBUTION, OTHER THAN TO INDIVIDUALS OR LEGAL ENTITIES, SITUATED IN
OR OUTSIDE THE NETHERLANDS, WHO OR WHICH TRADE OR INVEST IN SECURITIES IN THE
CONDUCT OF THEIR PROFESSION OR BUSINESS (WHICH INCLUDES BANKS, BROKERS, DEALERS,
INSURANCE COMPANIES, PENSION FUNDS, OTHER INSTITUTIONAL INVESTORS AND OTHER
PARTIES (INCLUDING TREASURY DEPARTMENTS OF COMMERCIAL ENTERPRISE AND FINANCE
COMPANIES OR GROUPS), WHICH REGULARLY TRADE OR INVEST IN SECURITIES).
A-3
<PAGE>
THIS SECURITY HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES. UPON REQUEST, THE COMPANY WILL PROMPTLY MAKE
AVAILABLE THE FOLLOWING INFORMATION TO HOLDERS OF THIS SECURITY: THE ISSUE
PRICE; THE AMOUNT OF ORIGINAL ISSUE DISCOUNT; THE ISSUE DATE; AND THE YIELD TO
MATURITY OF THIS SECURITY. HOLDERS SHOULD CONTACT UNITED PAN-EUROPE
COMMUNICATIONS N.V., P.O. BOX 74763, 1070 BT AMSTERDAM, THE NETHERLANDS,
ATTENTION: ANTON M. TUIJTEN, GENERAL COUNSEL.
A-4
<PAGE>
United Pan-Europe Communications N.V.
$1,000,000,000
13 3/4% Senior Discount Notes Due 2010
[CUSIP][ISIN][Common Code]: [_]
No. [_] $ [_]
United Pan-Europe Communications N.V., a public company with
limited liability organized and existing under the laws of The
Netherlands (the "Company," which term includes any successor
corporation), for value received, hereby promises to pay to the
registered holder, Cede & Co., as nominee of The Depository Trust
Company or registered assigns, the principal sum of [ ] DOLLARS, which
amount includes amortization of original issue discount, on February
1, 2010.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this
place.
A-5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be signed manually or by facsimile by its duly authorized officer.
Dated: January 20, 2000
UNITED PAN-EUROPE COMMUNICATIONS N.V.
By: ________________________________
Authorized Signatory
A-6
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: January 20, 2000
This is one of the Securities referred to in the
within-mentioned Indenture.
CITIBANK, N.A.
Not in its individual capacity, but solely as Trustee
By: _____________________________________
Authorized Signatory
A-7
<PAGE>
[REVERSE OF NOTE]
UNITED PAN-EUROPE COMMUNICATIONS N.V.
$1,000,000,000
13 3/4% SENIOR DISCOUNT NOTE DUE 2010
1. Method of Payment. The initial Accreted Value will increase at the
-----------------
rate of 13 3/4% per annum, compounded semi-annually, on the Securities. Payment
of the principal of, or premium, if any, on the Securities or such lesser amount
payable upon the acceleration of the maturity of the Securities will include
accrued amortization of original issue discount. Interest payable in cash will
commence to accrue on February 1, 2005, and will be payable semi-annually in
arrears on each February 1 and August 1, commencing on August 1, 2005. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Interest will be paid upon overdue principal and premium, and interest, if any,
compounded semi-annually from the due date at the rate borne by the Securities
to the extent such payment is lawful.
In the event that, at any time prior to 180 days following the Issue
Date, the Company (x) issues or sells, or (y) offers or negotiates to issue or
sell, for cash, any debt securities (other than debt securities convertible or
exchangeable into Capital Stock of the Company) to Qualified Institutional
Buyers who, as a regular part of their business, purchase debt securities
comparable to the Securities or the Senior Notes (any of the events described in
(x) or (y) at any time during such 180 day period, an "Interest Rate Adjustment
Event"), the rate of accretion of Accreted Value otherwise applicable to the
Securities shall, on and after the date of such Interest Rate Adjustment Event,
be increased by 25 basis points such that on and after the date of such Interest
Rate Adjustment Event, the Accreted Value of the Securities will accrete at a
rate of 14% per annum from the date of such Interest Rate Adjustment Event until
the Securities reach their principal amount at maturity on February 1, 2005. If
an Interest Rate Adjustment Event has occurred, interest payable in cash on the
Securities will accrue at a rate of 14% per annum from February 1, 2005 or from
the most recent Interest Payment Date to which cash interest has been paid or
duly provided for, and will be payable semiannually in arrears on February 1 and
August 1 of each year, commencing August 1, 2005 to the Holders of record on the
immediately preceding Regular Record Date.
A-8
<PAGE>
Promptly following the occurrence of an Interest Rate Adjustment
Event, the Company shall give notice of the occurrence thereof to the Trustee,
to the Paying Agent and to each Holder of Securities in the manner provided for
in Section 1.6 of the Indenture. Such notice shall include (a) the adjusted
principal amount at maturity on February 1, 2005, setting forth the calculation
thereof in reasonable detail and (b) the amount to be paid to the Holders of
record as of each Regular Record Date immediately prior to each Interest Payment
Date beginning August 1, 2005.
The Holder must surrender this Security to a Paying Agent to collect
payments. The principal of, Accreted Value, interest and premium, if any, on
this Security will be payable at the office or agency of the Company maintained
for such purpose within the City and State of New York or, at the option of the
Company, payment may be made by check mailed to the Holders of the Securities at
their respective addresses set forth in the register of Holders of Securities.
Until otherwise designated by the Company, the Company's office or agency in New
York will be the office of the Trustee maintained for such purpose. All
payments shall be in coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts.
2. Paying Agent and Registrar. Initially, Citibank, N.A. (London
--------------------------
Branch) (the "Trustee") and Citibank, N.A. (New York Branch) will act as Paying
Agent and Registrar and Banque Internationale a Luxembourg will act as Paying
Agent in Luxembourg. The Company may change any Paying Agent or Registrar
without notice. The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Registrar.
3. Indenture. The Company issued $1,000,000,000 13 3/4% Senior
---------
Discount Notes due 2010 under an Indenture dated as of January 20, 2000 (the
"Indenture") between the Company and the Trustee. This is one of an issue of
Securities of the Company issued, or to be issued, under the Indenture. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code (S)(S) 77aaa-77bbbb), as amended from time to time. The Securities are
subject to all such terms, and Holders are referred to the Indenture and such
Act for a statement of them. Capitalized and certain other terms used herein
and not otherwise defined have the meanings set forth in the Indenture. To the
extent of any conflict between the terms of the Securities and the Indenture,
the applicable terms of the Indenture shall govern.
A-9
<PAGE>
4. Additional Amounts. The Company will pay to the Holders of
------------------
Securities such Additional Amounts as may become payable under Section 10.18 of
the Indenture.
5. Optional Redemption of the Securities. The Securities will be
-------------------------------------
redeemable at the option of the Company, in whole or in part, at any time or
from time to time on or after February 1, 2005, upon not less than 30 nor more
than 60 days' prior notice to each Holder of Securities, at the Redemption
Prices (expressed as a percentage of Accreted Value thereof) if redeemed during
the 12- month period beginning on February 1 of the years indicated below, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
Redemption Date:
REDEMPTION
YEAR PRICE
----- ----------------
2005....................... 106.875%
2006....................... 104.583%
2007....................... 102.292%
2008 and thereafter........ 100.000%
6. Redemption Upon Equity Offering. Prior to February 1, 2003, upon
-------------------------------
an Equity Offering of Common Stock for cash of the Company, up to 35% of the
aggregate principal amount at maturity of the Securities may be redeemed at the
Company's option within 90 days of such Equity Offering, on not less than 30
days', but not more than 60 days', notice to each Holder of the Securities to be
redeemed, with cash in an amount not in excess of the Net Cash Proceeds of such
Equity Offering, at a redemption price equal to 113.750% of the Accreted Value
thereof, together with accrued and unpaid interest and Liquidated Damages, if
any, thereon to the Redemption Date; provided, however, that immediately
following such redemption not less than 65% of the aggregate principal amount at
maturity of the Securities originally issued (as may be increased as a result of
an Interest Rate Adjustment Event) remain Outstanding and provided, further,
that such redemption shall occur within 90 days after the date of the closing of
such Equity Offering.
7. Redemption for Changes in Withholding Taxes. The Company may, at
-------------------------------------------
its option, redeem all, but not less than all, of the Securities then
Outstanding, at 100% of the Accreted Value of the Securities redeemed, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
Redemption Date, if a Tax Event has occurred and is continuing.
A-10
<PAGE>
8. Mandatory Redemption. The Company is not required to make
--------------------
mandatory redemption payments or sinking fund payments with respect to the
Securities.
9. Notice of Redemption. Notice of redemption will be mailed within
--------------------
not less than 30 days nor more than 60 days prior to the Redemption Date to each
Holder of Securities to be redeemed at his registered address. On and after the
Redemption Date, unless the Company defaults in making the redemption payment,
interest ceases to accrue, and, if applicable, the Accreted Value will cease to
increase, on Securities or portions thereof called for redemption.
10. Purchase of Securities upon Change of Control. The Indenture
---------------------------------------------
provides that upon the occurrence of a Change of Control and subject to further
limitations contained therein, the Company shall make an offer to purchase
Outstanding Securities in accordance with the procedures set forth in the
Indenture.
11. Registration Rights. Pursuant to a Registration Rights Agreement,
-------------------
dated January 20, 2000, among the Company and the Initial Purchasers named
therein, the Company will be obligated to consummate an Exchange Offer pursuant
to which the Holder of this Security shall have the right to exchange this
Security for notes of a separate series issued under the Indenture which have
been registered under the Securities Act, in like principal amount at maturity
and having substantially identical terms as the Securities. The Holders shall
be entitled to receive certain payments in the event such Exchange Offer is not
consummated ("Liquidated Damages") and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
12. Denominations, Transfer, Exchange. The Securities are in
---------------------------------
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay to it any
taxes and fees required by law or permitted by the Indenture. Under certain
circumstances set forth in the Indenture, the Registrar need not register the
transfer of or exchange any Securities.
13. Persons Deemed Owners. The registered Holder of this Security may
---------------------
be treated as the owner of this Security for all purposes.
A-11
<PAGE>
14. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its written request. After that, all
liability of the Trustee and any such Paying Agent with respect to such money
shall cease.
15. Amendment, Supplement, Waiver, Etc. The Company and the Trustee
-----------------------------------
may, without the consent of the Holders of any Outstanding Securities, amend,
waive or supplement the Indenture or the Securities for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies. Other amendments and modifications of the Indenture or the
Securities may be made by the Company and the Trustee with the consent of the
Holders of not less than a majority of the aggregate principal amount at
maturity of the Outstanding Securities and with other holders of notes of other
series issued under the Indenture, subject to certain exceptions requiring the
consent of the Holders of the particular Securities to be affected.
16. Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make Restricted Payments, make certain Investments,
create or incur Liens, enter into transactions with Affiliates, enter into
agreements restricting the ability of Subsidiaries to pay dividends and make
distributions and on the ability of the Company to merge or consolidate with any
other person or transfer all or substantially all of the Company's assets. Such
limitations are subject to a number of important qualifications and exceptions.
Pursuant to the Indenture, the Company must annually report to the Trustee on
compliance with such limitations.
17. Defaults and Remedies. Events of Default are set forth in the
---------------------
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than certain events of bankruptcy, insolvency or reorganization
affecting the Company) occurs and is continuing, the Trustee or the Holders of
not less than 25% in aggregate principal amount at maturity of the Outstanding
Securities under the Indenture may, by written notice to the Trustee and the
Company, and the Trustee upon the request of the Holders of not less than 25% in
aggregate principal amount at maturity of the Outstanding Securities shall,
declare all principal of and accrued interest on all Securities to be
immediately due and payable and such amounts shall become immediately due and
payable.
18. Trustee Dealings with Company. The Trustee, in its individual or
-----------------------------
any other capacity, may make loans to, accept deposits from, and perform
services
A-12
<PAGE>
for the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.
19. No Recourse Against Others. No board member, director, officer,
--------------------------
employee, agent, authorized representative, incorporator or shareholder of the
Company shall have any liability for any obligations of the Company under the
Securities or the Indenture for a claim based on, in respect of, or by reason
of, such obligations or their creation by reason of his, her or its status as
such. Each Holder of Securities by accepting a Security waivers and releases
all such liability. The waiver and release are part of the consideration for
the issuance of the Securities.
20. Discharge. The Company's obligations pursuant to the Indenture
---------
will be discharged, except for obligations pursuant to certain provisions
thereof, subject to the terms of the Indenture, upon the payment of all the
Securities or upon the irrevocable deposit with the Trustee of U.S. Dollars or
U.S. Government Securities denominated in U.S. Dollars sufficient to pay when
due principal of and interest on the Securities to maturity or redemption.
21. Authentication. This Security shall not be valid until the
--------------
Trustee signs the certificate of authentication on the other side of this
Security.
22. Governing Law. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING WITHOUT
LIMITATION SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW AND
NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B), AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW. THE
COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND
THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH THEY MAY NOW OR
HEREAFTER HAVE TO THE
A-13
<PAGE>
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BOUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE TRUSTEE OR ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION. The Trustee, the Company and the Holders
agree to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to the Indenture or the
Securities.
23. Abbreviations. Customary abbreviations may be used in the name of
-------------
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
24. Currency of Account. U.S. Dollars are the sole currency of
-------------------
account and payment for all sums payable by the Company under the Securities.
25. CUSIP, ISIN and Common Code Numbers. The Company has caused
-----------------------------------
CUSIP, ISIN or Common Code numbers, as applicable, to be printed on the
Securities and the Trustee may use CUSIP, ISIN or Common Code numbers, as
applicable, in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed hereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
United Pan-Europe Communications N.V.
P.O. Box 74763
1070 BT Amsterdam
The Netherlands
Attn: Treasurer
A-14
<PAGE>
FORM OF ASSIGNMENT
If you, the holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Security to:
_______________________________________________________________________________
(Insert assignee's social security or tax ID number)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
of_____________________________________________________________________________
Agent to transfer this Security on the books of the Company. The Agent may
substitute another to act for such agent.
In connection with any transfer of this Security occurring prior to the
date which is the earlier of (i) the date of the declaration by the United
States Securities and Exchange Commission of the effectiveness of a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering resales of this Security (which effectiveness shall not have been
suspended or terminated at the date of the transfer) and (ii) the date two years
(or such shorter period of time as may be permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) after the later of the
original issuance date appearing on the face of this Security (or any
Predecessor Security) or the last date on which the Company or any Affiliate of
the Company was the owner of this Security (or any Predecessor Security), the
undersigned confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer and that:
[Check One]
[_] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
or
A-15
<PAGE>
[_] (b) this Security is being transferred other than in accordance with (a)
above and documents, including a transferee certificate substantially in
the form attached hereto, are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
If neither of the foregoing boxes is checked and, in the case of (b)
above, if the appropriate document is not attached or otherwise furnished to the
Trustee, the Trustee or Registrar shall not be obligated to register this
Security in the name of any person other than the Holder hereof unless and until
the conditions to any such transfer or registration set forth herein and in
Section 3.13 and Section 3.14 of the Indenture shall have been satisfied.
Dated:______________________ Your signature:________________________________
(Sign exactly as your name appears on the other
side of this Security)
By:____________________________________________
NOTICE: To be executed by an executive officer
Signature Guaranteed:___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program acceptable
to the Trustee)
A-16
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A (including the information
specified in Rule 144A(d)(4)) or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:____________________ ______________________________
NOTICE: To be executed by an
executive officer
A-17
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY
<TABLE>
<CAPTION>
Amount of
Amount of increase in Principal Amount
decrease in Principal at maturity
Principal Amount Amount of this
at maturity at maturity Global Security Signature of
of this of this following authorized
Date of Global Global such decrease officer of
Exchange Security Security (or increase) Trustee
- -------------- ------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Initial $
balance as
of
20/1/00
</TABLE>
A-18
<PAGE>
EXHIBIT B
FORM OF TRANSFER CERTIFICATE --
RESTRICTED GLOBAL SECURITY TO
REGULATION S GLOBAL SECURITY
(Transfers pursuant to Sections 3.13(b)(ii) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 13 3/4% Senior Discount Notes
due 2010 (the "Securities")
Reference is hereby made to the Indenture, dated as of January 20, 2000
between the Company and Citibank, N.A., as trustee, (the "Indenture"). Terms
used but not defined herein and defined in Regulation S under the U.S.
Securities Act of 1933 (the "Securities Act") or in the Indenture shall have the
meanings given to them in Regulation S or the Indenture, as the case may be.
This certificate relates to [U.S.$] _____ principal amount at maturity of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
[CUSIP][CINS][ISIN] No(s). ________________________________
CERTIFICATE No(s). _________________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the appropriate Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner.
B-1
<PAGE>
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of an interest in
the Regulation S Global Security. In connection with such transfer, the Owner
hereby certifies that such transfer is being effected in accordance with Rule
904 under the Securities Act and with all applicable securities laws of the
states of the United States and other jurisdictions. Accordingly, the Owner
hereby further certifies as follows:
1. the Owner is not a distributor of the Specified Securities, an
Affiliate of the Company or any such distributor or a person acting on behalf of
any of the foregoing;
2. the offer of the Specified Securities was not made to a person in the
United States;
3 either:
(a) at the time the buy order was originated, the Transferee was
outside the United States or the Owner and any person acting on its behalf
reasonably believed that the Transferee was outside the United States; or
(b) the transaction is being executed in, on or through the
facilities of the Eurobond market, as regulated by the Association of
International Bond Dealers, or another designated offshore securities market and
neither the Owner nor any person acting on its behalf knows that the
transactions have been prearranged with a buyer in the United States;
4. no directed selling efforts have been made in the United States by or
on behalf of the Owner or any Affiliate thereof;
5. if the Owner is a dealer in securities or has received a selling
concession, fee or other remuneration in respect of the Specified Securities,
and the transfer is to occur during the Restricted Period, then the requirements
of Rule 904(c)(1) have been satisfied;
6. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
B-2
<PAGE>
7. upon completion of the transaction, the beneficial interest being
transferred will be held through an Agent Member acting for and on behalf of
Euroclear or Cedelbank.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers under the
Purchase Agreement.
Dated:
________________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:_____________________________________
Name:
Title:
(If the Undersigned is a Corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
B-3
<PAGE>
EXHIBIT C
FORM OF TRANSFER CERTIFICATE --
RESTRICTED GLOBAL SECURITY TO UNRESTRICTED
GLOBAL SECURITY
(Transfers Pursuant to Sections 3.13(b)(iii) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 13 3/4% Senior Discount Notes
due 2010 (the "Securities")
Reference is hereby made to the Indenture, dated as of January 20, 2000
between the Company and Citibank, N.A., as trustee, (the "Indenture"). Terms
used but not defined herein and defined in Regulation S under the U.S.
Securities Act of 1933 (the "Securities Act") or in the Indenture shall have the
meanings given to them in Regulation S or the Indenture, as the case may be.
This certificate relates to [U.S.$] _____ principal amount at maturity of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
[CUSIP][CINS][ISIN] No(s). _________________________
CERTIFICATE No(s). __________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the appropriate Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner.
C-1
<PAGE>
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of an interest in
the Regulation S Global Security. In connection with such transfer, the Owner
hereby certifies that such transfer is being effected in accordance with Rule
904 or Rule 144 under the Securities Act and with all applicable securities laws
of the states of the United States and other jurisdictions. Accordingly, the
Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Specified
Securities, an Affiliate of the Company or any such distributor or a
person acting on behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and any
person acting on its behalf reasonably believed that the
Transferee was outside the United States; or
(i) the transaction is being executed in, on or through
the facilities of the Eurobond market, as regulated by the
Association of International Bond Dealers, or another
designated offshore securities market and neither the Owner
nor any person acting on its behalf knows that the
transactions has been prearranged with a buyer in the United
States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any Affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
C-2
<PAGE>
(F) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring after [date one year after the
latest date of issuance of any of the Specified Securities] and is
being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after [date two years after the
latest date of issuance of any of the Specified Securities] and the
Owner is not, and during the preceding three months has not been, an
Affiliate of the Company.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers under the
Purchase Agreement.
Dated:
___________________________________
(Print the name of the Undersigned,
as such term is defined in the
second paragraph of this
certificate.)
By:________________________________
Name:
Title:
(If the Undersigned is a
Corporation, partnership or
fiduciary, the title of the person
signing on behalf of the
Undersigned must be stated.)
C-3
<PAGE>
EXHIBIT D
FORM OF TRANSFER CERTIFICATE --
REGULATION S GLOBAL SECURITY TO
RESTRICTED GLOBAL SECURITY
(Transfers to QIBs Pursuant to Sections 3.13(b)(iv) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 13 3/4% Senior Discount Notes
due 2010 (the "Securities")
Reference is hereby made to the Indenture, dated as of January 20, 2000
between the Company and Citibank, N.A. as trustee, (the "Indenture"). Terms used
but not defined herein and defined in Regulation S under the U.S. Securities Act
of 1933 (the "Securities Act") or in the Indenture shall have the meanings given
to them in Regulation S or the Indenture, as the case may be.
This certificate relates to [U.S.$] ______ principal amount at maturity of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
[CUSIP][CINS][ISIN] No(s). _________________________
CERTIFICATE No(s). __________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a
D-1
<PAGE>
Global Security, they are held through the appropriate Depositary or an Agent
Member in the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of an interest in
the Restricted Global Security. In connection with such transfer, the Owner
hereby certifies that such transfer is being effected in accordance with Rule
144A under the Securities Act and with all applicable securities laws of the
states of the United States and other jurisdictions. Accordingly, the Owner
hereby further certifies as follows:
(1) the Specified Securities are being transferred to a person that
the Owner and any person acting on its behalf reasonably believe is a
"qualified institutional buyer" within the meaning of Rule 144A, acquiring
for its own account or for the account of a qualified institutional buyer;
and
(2) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner may
be relying on Rule 144A in connection with the transfer.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers under the
Purchase Agreement.
Dated:
________________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:_____________________________________
Name:
Title:
(If the Undersigned is a Corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
D-2
<PAGE>
EXHIBIT E
UNITED PAN-EUROPE
COMMUNICATIONS N.V.
OFFICERS' CERTIFICATE
[Name], [title(s)] of United Pan-Europe Communications N.V., a public
company with limited liability organized and existing under the laws of The
Netherlands (the "Company"), and [name], [title(s)] of the Company, hereby
certify pursuant to Sections ____ and ____ of the Indenture, dated as of January
20, 2000 (the "Indenture"), between the Company and Citibank, N.A., as trustee
(the "Trustee"), that:
(i) he or she has read and understands the provisions of the Indenture and
the definitions relating thereto, (ii) the statements made in this Officers'
Certificate are based upon an examination of the provisions of the Indenture and
upon the relevant books and records of the Company, (iii) in his or her opinion,
he or she has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not the covenants and
conditions of the Indenture relating to the [authentication of the Securities]
[execution of the Indenture] [OTHER] have been complied with and (iv) in his or
her opinion, such covenants and conditions have been complied with.
IN WITNESS WHEREOF, each of the undersigned has executed this Certificate
on this ____ day of ____________, ____.
By: _________________________
Name:
Titles:
By: _________________________
Name:
Titles:
E-1
<PAGE>
EXHIBIT F
[Date]
Citibank, N.A.
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Ladies and Gentlemen:
We have acted as special counsel to United Pan-Europe Communications N.V.,
a public company with limited liability organized and existing under the laws of
The Netherlands (the "Company"), in connection with the [initial issuance and
sale by the Company of $1,000,000,000 aggregate principal amount at maturity of
the Company's 13 3/4% Senior Discount Notes due 2010 (the "Securities"), which
will be issued under an Indenture, dated as of January 20, 2000 (the
"Indenture"), between the Company and Citibank, N.A. as trustee (the
"Trustee")].
This opinion is being furnished to your pursuant to Sections ____ and ____
of the Indenture.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such letter documents. In making our
examination of documents executed by parties other than the Company, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof. As to any
facts material to the opinions expressed herein which we did not independently
establish or verify, we have relied upon oral or written statements or
representations of officers and other representatives of the Company and others.
Pursuant to Sections ____ and ____ of the Indenture, we advise you that in
our opinion:
F-1
<PAGE>
1. We have reviewed Article __ of the Indenture setting forth certain
provisions of general application, and in particular, the pertinent provisions
of Section ___ of the Indenture setting forth the definitions of certain terms,
and Sections ___ and ___ of the Indenture providing that the Trustee is entitled
to receive an Officers' Certificate and an Opinion of Counsel in connection with
any request by the Company to take any action and setting forth certain
requirements with respect to the forms of such documents. We have also reviewed
Article ___ of the Indenture, pertaining to ____.
2. In our opinion, we have made such examination or investigation
(including an examination of the Officers' Certificate of the Company, dated as
of the date hereof, as to the matters addressed in Sections ___ and ___ of the
Indenture) as we deem necessary to enable us to express an informed opinion as
to whether or not the conditions precedent to [the authentication of the
Securities] [the execution of the Indenture] [OTHER] under Section ___ of the
Indenture have been complied with.
3. In our opinion, the conditions precedent to be satisfied with respect
to the [authentication of the Securities] [execution of the Indenture] [OTHER]
under Section __ of the Indenture have been complied with.
Members of our firm are admitted to the bar in the States of ______ and New
York, and we do not express any opinion as to the laws of any jurisdiction other
than the laws of such States and the General Corporation Law of the State of
Delaware and the laws of the United States of America.
This opinion is furnished to you solely for your benefit in connection with
the [authentication of the Securities] [execution of the Indenture] [OTHER] and
is not to be relied upon by any other person without our express written
permission.
Very truly yours,
F-2
<PAGE>
EXHIBIT G
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
(Transfers Pursuant to Section 3.14(a) of the Indenture)
Citibank, N.A.
as Trustee
5 Carmelite Street
London EC4Y 0PA
Attention: Global Agency & Trust Services
Re: United Pan-Europe Communications N.V. 13 3/4% Senior Discount Notes
due 2010 (the "Securities")
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of January 20,
2000 between the Company and Citibank, N.A. as trustee (the "Indenture"). Terms
used but not defined herein have the meanings given to them in the Indenture.
This certificate relates to [U.S. $] ___ principal amount at maturity
of Securities, which are evidenced by the following certificate(s) (the
"Securities"):
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and may not be
sold except as permitted in the following sentence. We understand and agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, (x) that such Securities are being offered only in a
transaction not involving any public offering within two years after the date of
the original issuance of the Securities or if within three months after we cease
to be an affiliate (within the meaning of Rule 144 under the Securities Act) of
the Company, such Securities may be resold, pledged or transferred only (i) to
the Company, (ii) so long as the Securities are eligible for resale pursuant to
Rule 144A under the Securities Act ("Rule 144A"), to a person whom we reasonably
believe is a "qualified institution buyer" (as defined in Rule 144A) ("QIB")
that purchases for its own account or for the account of a QIB to whom notice is
given that the resale, pledge or transfer is being made in reliance on Rule 144A
(as indicated
G-1
<PAGE>
by the box checked by the transferor on the Certificate of Transfer on the
reverse of the certificate for the Securities), (iii) in an offshore transaction
in accordance with Regulation S under the Securities Act (as indicated by the
box checked by the transferor on the Certificate of Transfer on the reverse of
the Note if the Note is not in book-entry form), and, if such transfer is being
effected by certain transferors prior to the expiration of the "40-day
distribution compliance period" (within the meaning of Rule 903(b)(2) of
Regulation S under the Securities Act), a certificate that may be obtained from
the Trustee is delivered by the transferee, (iv) to an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act (as indicated by the box checked by the transferor on the
Certificate of Transfer on the reverse of the certificate for the Securities)
which has certified to the Company and the Trustee for the Securities that it is
such an accredited investor and is acquiring the Securities for investment
purposes and not for distribution (provided that no Securities purchased from a
foreign purchaser or from any person other than a QIB or an institutional
accredited investor pursuant to this clause (iii) shall be permitted to transfer
any Securities so purchased to an institutional accredited investor pursuant to
this clause (iv) prior to the expiration of the "applicable restricted period"
(within the meaning of Regulation S under the Securities Act), (v) pursuant to
an exemption from registration under the Securities Act provided by Rule 144 (if
applicable) under the Securities Act, or (vi) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States, and we will
notify any purchaser of the Securities from us of the above resale restriction,
if then applicable. We further understand that in connection with any transfer
of the Securities by us that the Company and the Trustee for the Securities may
request, and if so requested we will furnish, such certificates, legal opinions
and other information as they may reasonably require to confirm that any such
transfer complies with the foregoing restrictions.
2. We are able to fend for ourselves in the transactions
contemplated by this Offering Circular, we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and any accounts for which we
are acting are each able to bear the economic risk of our or its investment and
can afford the complete loss of such investment.
3. We understand that the Company, Donaldson, Lufkin & Jenrette
International and the other Initial Purchasers named as such in the Offering
Circular as the initial purchasers of the Securities ("Initial Purchasers"), and
others will rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and we agree that if any of the acknowledgments,
representations and
G-2
<PAGE>
warranties deemed to have been made by us by our purchase of Securities, for our
own account or of one or more accounts as to each of which we exercise sole
investment discretion, are no longer accurate, we shall promptly notify the
Company and the Initial Purchasers.
4. We are acquiring the Securities purchased by us for investment
purposes and not for distribution of our own account or for one or more accounts
as to each of which we exercise sole investment discretion and we are or such
account is an institutional "accredited investor" (as defined in rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act).
5. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
___________________________________
(Name of Purchaser)
By:________________________________
Date:______________________________
G-3
<PAGE>
EXHIBIT H
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 10.10 of the Indenture, check the box:
[_] Section 10.10
If you wish to have a portion of this Security purchased by the Company
pursuant to Section 10.10 of the Indenture, state the amount:
[$ (multiple of $1000)]
[(Euro dollar) (multiple of Euro dollar 1000)]
Dated:_____________ Your Signature:________________________________________
(Sign exactly as your name appears on the other side of
this Security)
Signature Guaranteed:___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program acceptable to
the Trustee)
H-1
<PAGE>
Exhibit 12.1
Exhibit
Ratio of Combined Fixed Charges and Preferred Stock Dividends (000's)
<TABLE>
<CAPTION>
Predecessor
Interest
-----------
Six Months Six Months -------------------------------------------
Ended Ended Years Ended December 31,
June 30, December 31, -------------------------------------------
1995 1995 1996 1997 1998 1999
----------- ------------ ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) from continuing operations 9,574 (72,171) (40,211) (82,154) (255,579) (784,298)
ADD BACK:
Income tax benefit (expense) - (70) 231 (748) 551 (1,822)
Minority interest - 87 1,002 (69) (523) (1,651)
Equity in losses of affiliates, net 1,044 14,410 13,936 11,552 28,962 29,760
----------- ------------ ------- -------- -------- --------
Total Fixed Charges 1,044 14,427 15,169 10,735 28,990 26,287
Adjusted Earnings 10,618 (7,744) (25,042) (71,419) (226,589) (758,011)
Fixed Charges - 9,020 17,464 32,108 47,355 186,408
----------- ------------ ------- -------- -------- --------
Ratio of Earnings to Fixed Charges - - - - - -
=========== ============ ======= ======== ======== ========
Coverage Deficiency - (16,764) (42,506) (103,528) (273,944) (944,419)
=========== ============ ======= ======== ======== ========
</TABLE>
<PAGE>
Exhibit 21.1
UPC Subsidiaries
Entity Jurisdiction
chello broadband Australia ppt....................................Australia
Telekabel Fernsehnetz Klagenfurt Betriebsgesellschaft mbH.........Austria
Telekabel-Fernsehnetz Wiener Neustadt/Neunkirchen
Betriebsgesellschaft mbH..........................................Austria
Telekabel Wien GmbH...............................................Austria
Telekabel Fernsehnetz Graz Betriebsgesellschaft mbH...............Austria
Telekabel-Fernsehnetz Region Baden Betriebsgesellschaft mbH.......Austria
chello broadband GmbH.............................................Austria
Priority Wireless Telecommunications GmbH.........................Austria
chello broadband Belgium SA/NV....................................Belgium
UPC Belgium S.A...................................................Belgium
chello broadband Brasil Ltda......................................Brazil
UCI Enterprises Inc...............................................Colorado
UPC Iberian Progamming, Inc.......................................Colorado
UPC Aviation, Inc.................................................Colorado
UPC Romania, Inc..................................................Colorado
United International Investments..................................Colorado G.P.
Melita Partnership................................................Delaware
Mozaic Entertainment, Inc.........................................Delaware
Poland Communications, Inc........................................Connecticut
Kabel Net Holding A.S.............................................Czech Republic
Kabel Net Brno A.S................................................Czech Republic
Kabel Plus A.S....................................................Czech Republic
ScatNet spol SRO..................................................Czech Republic
Besy Praha SRO....................................................Czech Republic
Czech Link SRO....................................................Czech Republic
<PAGE>
Exhibit 21.1
Trade A Technology AS.............................................Czech Republic
Kabel Plus Tel AS.................................................Czech Republic
Kabel Plus Rodina SRO.............................................Czech Republic
Kabel Plus Severni Cechy AS.......................................Czech Republic
Kabel Plus Vychodni AS............................................Czech Republic
Kabel Plus CB AS..................................................Czech Republic
Kabel Plus Severni Morava AS......................................Czech Republic
Kabel Plus Stredni Morava AS......................................Czech Republic
Kabel Plus Jizni Morava AS........................................Czech Republic
Kabel Plus Praha AS...............................................Czech Republic
UII Management....................................................Delaware G.P.
UIH Romania Ventures, Inc.........................................Delaware
Kabelkom Management Co............................................Delaware G.P.
Kabelkom Holding Co...............................................Delaware G.P.
@Entertainment, Inc...............................................Delaware
@Entertainment Programming, Inc...................................Delaware
UPC Aviation Services, Inc........................................Colorado
Ibercom, Inc......................................................Delaware
chello broadband USA, Inc.........................................Delaware
UPC Staffing, Inc.................................................Delaware
MediaReseaux S.A..................................................France
UPC France S.A....................................................France
chello broadband S.A.R.L..........................................France
Sud Ouest Videopole...............................................France
Sud Est Videopole.................................................France
Herault Videopole Holding S.A.....................................France
Videopole Services................................................France
<PAGE>
Exhibit 21.1
Videopole Assistance....................................................France
Videopole Publication...................................................France
Aorta S.A...............................................................France
A.C.Associes............................................................France
Videopole S.A...........................................................France
Ain Videopole...........................................................France
Ardennes Videopole......................................................France
Atlantique Videopole....................................................France
Aveyron Videopole.......................................................France
Bean Bigore Videopole...................................................France
Intercomm Holding France................................................France
Cablage Dynamique Videopole.............................................France
Citecable Caladois......................................................France
Citecable Centre Bretagne...............................................France
Citecable Auverge.......................................................France
Citecable Essonne.......................................................France
Citecable Saintonge.....................................................France
Citecable Goussainville.................................................France
Citecable Jurassienne...................................................France
Citecable Rhone Aspes...................................................France
Citecable S.A...........................................................France
CiteReseau S.A..........................................................France
Citecable Regions S.A...................................................France
Citecable Est S.A.......................................................France
Citecable Haute-Saone S.A...............................................France
Est Videopole...........................................................France
<PAGE>
Exhibit 21.1
Franche Comte Videopole...................................................France
Investissements Reseaux Participations SA.................................France
Iroise Videopole..........................................................France
Loire Videopole...........................................................France
MediaPartic S.A...........................................................France
Nord Est Cable Carling L'Hopital..........................................France
Nord Est Cable Videopole..................................................France
Nord Videopole............................................................France
Ouest Videopole...........................................................France
Regicom Partenariat.......................................................France
Reseaux Participations S.A................................................France
Reseaux Cables de France S.A..............................................France
Reseaux Cables du Bretagne Sud............................................France
Reseaux Cables du Perigord................................................France
Reseaux Cable du Roannais.................................................France
Reseaux Cable du Pays Yonnais.............................................France
Reseaux Cable Choletais...................................................France
Reseaux Cable du Nivernais................................................France
Reseaux Cables Cote d'Azur................................................France
Reseaux Cables du Hainaut.................................................France
Reseaux Cables de Indres..................................................France
Rhone Vision Cable S.A.S..................................................France
Savoie Videopole..........................................................France
Seine et Marne............................................................France
SIRC Holding SNC..........................................................France
SIRC SNC..................................................................France
SLC Tignes................................................................France
<PAGE>
Exhibit 21.1
Somerco SARL.....................................................France
chello broadband GmbH............................................Germany
UPC Magyarovszag Kft.............................................Hungary
Monor Telefon....................................................Hungary
Sopron Varosi Onallo Kozsolgalati Televizio Kft..................Hungary
Satimax KFT......................................................Hungary
Szabinet KFT.....................................................Hungary
Szolnex KFT......................................................Hungary
chello broadbrand Germany Gmbh...................................Germany
UPC Ireland Ltd..................................................Ireland
Tara Television Ltd..............................................Ireland
Tishdoret........................................................Israel
Melita Cable P.L.C...............................................Malta
UPC Intermediates B.V............................................The Netherlands
UPC Nederland Services B.V.......................................The Netherlands
chello broadband Nederland B.V...................................The Netherlands
Cable Network Zuid-Oost Brabant Holding B.V......................The Netherlands
Cable Network Holding B.V........................................The Netherlands
Priority Telecom N.V.............................................The Netherlands
Priority Telecom Netherlands B.V.................................The Netherlands
Priority Wireless B.V............................................The Netherlands
UPC Nederland N.V................................................The Netherlands
A2000 Holding N.V................................................The Netherlands
Kabeltelevisie Amsterdam B.V.....................................The Netherlands
A2000 Hilversum B.V..............................................The Netherlands
Cable Network Brabant Holding B.V................................The Netherlands
N.V. TeleKabel Beheer............................................The Netherlands
<PAGE>
Exhibit 21.1
N.V. TeleKabel...................................................The Netherlands
TeleKabel Omroep Facilitair Bedrijf B.V..........................The Netherlands
Cable-Networks Austria Holding B.V...............................The Netherlands
Algemene Kabel Exploitatie Maatschappij B.V......................The Netherlands
Belmarken Holding B.V............................................The Netherlands
Interway Holding B.V.............................................The Netherlands
chello broadband Nederland B.V...................................The Netherlands
Binan Investments B.V............................................The Netherlands
U.C.T. - Netherlands B.V.........................................The Netherlands
Stipdon Investments B.V..........................................The Netherlands
UPC Facility B.V.................................................The Netherlands
Zeblas B.V.......................................................The Netherlands
Selasa Holding B.V...............................................The Netherlands
Paruse B.V.......................................................The Netherlands
Bicatobe Investments B.V.........................................The Netherlands
Kabeltelevisie Son en Breugel B.V................................The Netherlands
TeleKabel Hungary N.V............................................The Netherlands
Zomerwind Holding B.V............................................The Netherlands
Uniport Communications B.V.......................................The Netherlands
Cable Network Netherlands Holding B.V............................The Netherlands
Kabeltelevisie Eindhoven N.V.....................................The Netherlands
UPC Programming B.V..............................................The Netherlands
UPC Slovakia Holding B.V.........................................The Netherlands
UPC Czech Holding B.V............................................The Netherlands
UPC Romania Holding B.V..........................................The Netherlands
United Telekabel Holding II B.V..................................The Netherlands
Iberian Programming Services CV..................................The Netherlands
<PAGE>
Exhibit 21.1
Plator Holding B.V...............................................The Netherlands
Nidlo B.V........................................................The Netherlands
Poland Cablevision (Netherlands) B.V.............................The Netherlands
Wizja TV B.V. (fka Sereke Holding B.V.).........................The Netherlands
Gelrevision UPC Holding B.V......................................The Netherlands
UPC Romania V.O.F................................................The Netherlands
ScanInvest I B.V.................................................The Netherlands
UPCtv Holding B.V................................................The Netherlands
UPC Intermediates B.V............................................The Netherlands
Priority Wireless B.V............................................The Netherlands
chello broadband N.V.............................................The Netherlands
chello broadband B.V.............................................The Netherlands
Hungary Holding Co...............................................New York G.P.
United Pan-Europe Communications Norge A.S.......................Norway
chello broadband A.S.............................................Norway
Priority Telecom Norway A.S......................................Norway
Wizja TV Spoka Produkcyjna Sp z o.o..............................Poland
ETV Sp. z o.o....................................................Poland
Gosat-Service Sp.z o.o...........................................Poland
Ground Zero Media Sp. z o.o......................................Poland
At Media Sp. z o.o. Poland.......................................Poland
Kolor-Sat Sp. z o.o..............................................Poland
Mazurska Telewizja Kablowa Sp. z o.o.............................Poland
Opolskie TTT S.A.................................................Poland
Polska Telewizja Kablowa Krakow S.A..............................Poland
Polska Telewizja Kablowa Lublin S.A..............................Poland
Polska Telewizja Kablowa Operator Sp. z o.o......................Poland
<PAGE>
Exhibit 21.1
Polska Telewizja Kablowa S.A. Poland.............................Poland
Polska Telewizja Kablowa Szczecin Sp. z o.o......................Poland
Polska Telewizja Kablowa Warszaw S.A.............................Poland
Otwocka TK SP z.o.o..............................................Poland
Szczecinska Telewizja Kablowa Sp. z o.o..........................Poland
Telkat Sp. z o.o.................................................Poland
TV Kabel Sp. z o.o...............................................Poland
TV-SAT Ursus Sp. z o.o. Poland (in liquidation)..................Poland
Wizja TV Sp. z o.o...............................................Poland
Multicanal Televisao por Cabo, SGPS, Lda.........................Portugal
Intercabo - Televisao por Cabo, SGPS, Lda........................Portugal
Intercabo Centro Televisao por Cabo, S.A.........................Portugal
Intercabo Atlantico - Comunicacoes por Cabo, S.A.................Portugal
Intercabo Norte - Comunicacoes por Cabo, S.A.....................Portugal
Intercabo Capital - Comunicacoes por Cabo, S.A...................Portugal
Eurosat S.R.L....................................................Romania
Multicanal Holdings S.R.L........................................Romania
Control Cable Ventures S.R.L.....................................Romania
Selectronic S.R.L................................................Romania
Diplomatic International Comimpex S.R.L..........................Romania
Trnavatel s r.o..................................................Slovak Republic
UPC Slovensko s r.o..............................................Slovak Republic
KabelTel S.R.O...................................................Slovak Republic
Kabelplus Akiowa Spolocnost SRO..................................Slovak Republic
Kabelplus Vychodne Slovensko SRO.................................Slovak Republic
Kabelplus Bratislava SRO.........................................Slovak Republic
Multicanal TPS SC................................................Spain
<PAGE>
Exhibit 21.1
Mundi Telecom........................................................Spain
chello broadband Sweden AS...........................................Sweden
SBS Broadcasting SA..................................................Sweden
NBS Nordic Broadband Servics AB......................................Sweden
SpaceNet AB..........................................................Sweden
Starport SA..........................................................Sweden
Stjarnan Multimedia Varlden AB.......................................Sweden
StjarnTV AB..........................................................Sweden
StjarnTVnatet AB.....................................................Sweden
Stockholms Kabel TV AB...............................................Sweden
Stockholms Stads Televisions AB......................................Sweden
UPC Zwitzerland AG...................................................Switzerland
Xtra Music Limited...................................................UK
Wizja Television Limited (fka At Entertainment Limited).............UK
chello broadband Limited.............................................UK
UPC Services Ltd.....................................................UK
Tara Television UK...................................................UK
At Entertainment Services Limited....................................UK
Tara Television Global Limited.......................................UK
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
United Pan-Europe Communications N.V.'s 1999 Form 10-K and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> EUROS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 0.9938
<CASH> 1,042,595
<SECURITIES> 0
<RECEIVABLES> 144,239
<ALLOWANCES> (16,754)
<INVENTORY> 66,403
<CURRENT-ASSETS> 1,336,662
<PP&E> 1,908,414
<DEPRECIATION> (194,205)
<TOTAL-ASSETS> 6,802,272
<CURRENT-LIABILITIES> 778,739
<BONDS> 2,743,889
0
0
<COMMON> 435,605
<OTHER-SE> 1,584,595
<TOTAL-LIABILITY-AND-EQUITY> 6,802,272
<SALES> 0
<TOTAL-REVENUES> 447,501
<CGS> 0
<TOTAL-COSTS> (1,026,108)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (186,408)
<INCOME-PRETAX> (786,120)
<INCOME-TAX> 1,822
<INCOME-CONTINUING> (784,298)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (784,298)
<EPS-BASIC> (2.08)
<EPS-DILUTED> (2.08)
</TABLE>
