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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the ten months ended December 31, 1998
or
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from 3/1/98 to 12/31/98
Commission File No. 0-21974
UNITED INTERNATIONAL HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
State of Delaware 84-1116217
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4643 South Ulster Street, #1300
Denver, Colorado 80237
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 770-4001
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $0.01 per 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 10 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.
-----
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 May 3, 1999 was $2,515,083,956.
The number of shares outstanding of the Registrant's common stock as of May 3,
1999 was:
Class A Common Stock - 33,351,410 shares
Class B Common Stock - 9,733,540 shares
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UNITED INTERNATIONAL HOLDINGS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE TEN MONTHS ENDED DECEMBER 31, 1998
Table of Contents
Page
Number
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PART I
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Item 1. Business.......................................................................................... 2
Item 2. Properties........................................................................................ 29
Item 3. Legal Proceedings................................................................................. 29
Item 4. Submission of Matters to a Vote of Security Holders............................................... 30
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................. 31
Item 6. Selected Financial Data........................................................................... 31
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................ 55
Item 8. Financial Statements and Supplementary Data....................................................... 59
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............. 59
PART III
Item 10. Directors and Executive Officers of the Registrant................................................ 110
Item 11. Executive Compensation............................................................................ 110
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................... 110
Item 13. Certain Relationships and Related Transactions.................................................... 110
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................... 111
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ITEM 1. BUSINESS
- ------------------
(a) GENERAL DEVELOPMENT OF BUSINESS
-------------------------------
United International Holdings, Inc. ("UIH" or the "Company") is a leading
broadband communications provider outside the United States. We provide
multi-channel television services in 20 countries worldwide and telephone and
Internet/data services in selected international markets. Our operations are
grouped into three major geographic regions: Europe, Asia/Pacific and Latin
America. Our European operations are held through our approximately 60% owned,
publicly traded subsidiary, United Pan-Europe Communications N.V. ("UPC"), which
is the largest pan-European broadband communications provider (multi-channel
television, telephone and Internet/data) in terms of numbers of subscribers. Our
primary Asia/Pacific operations are CTV Pty Limited and STV Pty Limited
(collectively, "Austar"), which is the largest provider of multi-channel
television services in regional Australia. Our primary Latin American operation
is VTR Hipercable S.A. ("VTRH"), Chile's largest multi-channel television
provider and a growing provider of telephone services. As of December 31, 1998,
our systems passed 9.4 million homes and served 4.4 million basic video
subscribers.
We were formed in 1989 as a Delaware corporation for the purpose of developing,
acquiring and managing foreign multi-channel television, programming and
telephony operations. Recognizing the opportunities that exist to bring
multi-channel television services to countries that have few or none, we have,
since our formation, focused on and invested in multi-channel television systems
outside the United States. In our early years, we acquired primarily minority
ownership interests in systems, which we, nonetheless, actively managed. Having
successfully built and developed many multi-channel television systems around
the world, in 1996 we began focusing our operations on large, majority-owned
systems, with the goal of significantly expanding the scale of our operations
and increasing our financial flexibility. Through a series of transactions, we
acquired controlling interests in all of our large, primary systems, and we
believe we are well-positioned to capitalize on the growth opportunities of our
operating companies. Since 1994, we have increased our total subscriber base at
an average annual rate of approximately 53% from 0.8 million subscribers as of
December 31, 1994 to 4.4 million subscribers as of December 31, 1998.
Our operating companies are currently a combination of highly penetrated, mature
systems that generate stable cash flow and earlier stage businesses. Our primary
goal in the majority of these markets is to capitalize on the opportunity to
increase revenues and cash flows through the introduction of new services such
as tiered programming, pay-per-view, telephone and Internet/data services over
our broadband communications networks. Today, we are a full service provider of
these video, voice and Internet/data services in most of our Western European
markets and New Zealand. We also provide video and voice services, and expect to
provide Internet/data services in the near future, in Chile. Summarized below
are our key accomplishments in this regard:
o over the last three years, we have rebuilt or constructed two-way networks
for approximately 2.2 million homes which are capable of delivering cable
television, telephone and Internet/data services over single broadband
networks,
o we have launched telephone services in a total of seven markets: four in
Western Europe, in Hungary, in New Zealand and in Chile and have
over 138,000 lines in service as of December 31, 1998, and
o we have launched Internet/data services in five markets in Western Europe
and New Zealand and are currently testing Internet service in Chile.
For strategic purposes and, in some cases, because of foreign ownership
restrictions, we have often initially invested in operating systems with local
strategic partners. In some cases, such as in many of our European and
Australian systems, we subsequently acquired our partners' interests in these
systems. Below is a summary of the ownership structure of our three regional
holding companies as well as our interests in our operating companies as of
December 31, 1998. Our interests in such systems are often held by various
holding companies and our voting rights and rights to participate in earnings of
such entities may differ from the interests indicated in the chart below.
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************************************************************************************************************************************
* UIH *
* *
************************************************************************************************************************************
100% * 100% *
*************************************** *******************************************************************************************
* UIH Europe, Inc. * * United International Properties, Inc. *
* ("UIHE") * * ("UIPI") *
*************************************** *******************************************************************************************
* *
* **********************************************
100%(1) * 98.0% * * 100%
*************************************** ********************************************* *********************************************
* UPC * * UIH Asia/Pacific Communications, Inc. * * UIH Latin America, Inc. *
* * * ("UAP") * * ("ULA") *
*************************************** ********************************************* *********************************************
* * *
* * *
*************************************** ********************************************* *********************************************
*Austria: * *Australia: * *Brazil: *
* Telekabel Group 95.0% * * Austar 100.0% * * TV Show Brazil, S.A. ("TVSB") 100.0% *
*Belgium: * * United Wireless Pty Limited * * TV Cabo e Comunicacoes de *
* Radio Public N.V./S.A. * * ("United Wireless") 100.0% * * Jundiai, S.A. ("Jundiai") 46.3% *
* ("TVD") 100.0% * * XYZ Entertainment Pty Limited * *Chile: *
*Czech Republic: * * ("XYZ Entertainment") 50.0% * * VTRH 40.0% (7)*
* Kabel Net Group * *China: * *Mexico: *
* ("KabelNet") 100.0% * * Hunan International TV * * Tele Cable de Morelos, S.A. *
* Ceska Programova * * Communications Company Limited * * de C.V. ("Megapo") 49.0% *
* Spolecnost SRO * * ("HITV") 49.0% (5)* *Peru: *
* ("TV Max") 100.0% * *New Zealand: * * Cable Star S.A. ("Cable Star") 60.0% *
*France: * * Saturn Communications Limited * *Latin American Programming: *
* Mediareseaux Marne S.A. * * ("Saturn") 65.0% * * MGM Networks Latin America *
* ("Mediareseaux") 99.6% * *Philippines: * * LLC ("MGM Networks LA") 50.0% *
*Hungary: * * Philipino Cable Corporation * *********************************************
* Telekabel Hungary BV * * ("PCC") 19.6% (6)*
* ("Telekabel Hungary") 79.3% * *Tahiti: *
* Kabelkom Kabeltelevizio * * Telefenua S.A. ("Telefenua") 90.0% *
* KFT ("Telekabel Hungary * *********************************************
* Programming") 50.0% (2)*
* Monor Telefon Tarsasag, *
* Rt ("Monor") 44.8% *
*Ireland: *
* Tara Television Limited *
* ("Tara") 80.0% *
*Israel: *
* Tevel Israel International *
* Communications Ltd. *
* ("Tevel") 46.6% *
*Malta: *
* Melita Cable TV PLC *
* ("Melita") 50.0% *
*The Netherlands: *
* United Telekabel Holding *
* N.V. ("UTH") 51.0% (3)*
*Norway: *
* Janco Multicom AS *
* ("Janco") 100.0% *
*Romania: *
* Control Cable Ventures SRL *
* ("Control Cable") 100.0% *
* Multicanal Holdings SRL *
* ("Multicanal") 100.0% *
* Eurosat CA-TV SRL *
* ("Eurosat") 51.0% *
*Slovak Republic: *
* Kabeltel SRO ("Kabeltel") 100.0% *
* Trnavatel SRO *
* ("Trnavatel") 75.0% *
*Spain/Portugal: *
* Ibercom, Inc. ("IPS") 33.5% (4)*
***************************************
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(1) As of December 31, 1998, UIHE held all of the voting control of UPC and
owned all of its issued and outstanding shares, including approximately
7.2% of such shares, which had been registered in the name of a foundation
controlled by UIH to support UPC's employee stock option plan. In February
1999, UPC successfully completed an initial public offering selling
approximately 44.6 million of its shares on the Amsterdam Stock Exchange
and NASDAQ National Market System and completed a sale of 1.6 million
shares to a strategic investor, resulting in an ownership interest by UIHE
of approximately 64.3% subsequent to the offering.
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(2) In March, 1999, Time Warner Entertainment Company ("TWE") exercised its
option to acquire UPC's interest in Telekabel Hungary Programming (see Note
3).
(3) On February 17, 1999, UPC acquired the remaining 49.0% of UTH for
euro250,187 (approximately $274,508).
(4) UIPI transferred its interest in IPS to UPC in February 1999.
(5) Pursuant to a memorandum of understanding with AmTec, Inc. ("AmTec") UAP
and AmTec agreed to exchange UAP's interest in HITV for AmTec stock.
Closing on the transaction is expected to occur by the end of 1999, subject
to certain conditions.
(6) UAP currently holds a convertible loan, which upon full conversion would
provide UAP with a 40.0% equity ownership interest in Sun Cable Systems
("Sun Cable"). UIH will hold an effective 19.6% interest in PCC when the
merger between Sun Cable (49.0%) and Sky Cable (51.0%) is completed in
1999.
(7) On April 29, 1999, ULA acquired the remaining ownership interest in VTRH
from its current partners for $268 million, inceasing its ownership
interest to 100%.
EUROPE.
Through our 64.3% owned subsidiary, UPC, we are the largest pan-European
broadband communications provider based on number of subscribers. UPC owns and
operates cable-based communications networks in 10 countries in Europe and in
Israel. UPC provides cable television services in these countries as well as
telephone and/or Internet/data access services in five of these markets. UPC's
primary Western European systems are located in Vienna (Austria); Amsterdam (The
Netherlands); Brussels (Belgium); Oslo (Norway); and suburban Paris (France).
UPC also has systems in Israel, Malta and Eastern Europe.
UPC's systems had 5.6 million homes in their service areas as of December 31,
1998. Of these, 4.7 million homes were passed by the cable in UPC's network and
thus are capable of receiving UPC's services. Approximately 3.4 million of these
homes, or 73.0%, subscribe to UPC's basic video services. UPC has majority
ownership of substantial ownership stakes in all of its Western European
systems. These Western European systems pass 3.1 million homes and have
approximately 2.3 million subscribers. UPC also has majority ownership of most
of its systems outside Western Europe.
In UPC's Western European markets, UPC is upgrading its existing network to two-
way transmission capability. When we upgrade, we replace parts of the coaxial
cable with fiber optic lines and upgrade the remaining coaxial cable so that it
can send signals both to and from the customer's home. This enables UPC to
provide digital video, telephone and Internet/data services. At December 31,
1998, approximately 51.0% of UPC's Western European network was upgraded to
two-way capability and UPC expects approximately 75.0% to be upgraded by year
end 1999. At December 31, 1998, UPC's Western European systems served
approximately 41,200 cable telephone lines and had approximately 24,300 Internet
access subscribers. In UPC's non-Western European markets, UPC is primarily
focused on increasing its subscriber base and its revenue per subscriber chiefly
through marketing, superior programming and, in some cases, the introduction of
new services.
UPC operated from July 1995 to December 1997 as a 50/50 joint venture between
UIH and several subsidiaries of Philips Electronics N.V. (collectively,
"Philips"). At the formation of the joint venture in July 1995, Philips
contributed to us, among other things, its majority interests in cable
television systems in Austria and Belgium, and its minority interests in cable
television systems in France, called Citecable, Germany and The Netherlands,
called "KTE". We contributed our minority interests in cable television systems
in Hungary, Ireland, Israel, Malta, Norway, Spain and Sweden, and our majority
interest in the Czech Republic and Portugese systems, and $78.2 million in cash,
including accrued interest. We also issued to Philips $50.0 million of UIH
common stock. In addition, Philips received convertible notes of UPC totaling
$133.6 million to make up the difference in values between the assets
contributed by us and the assets contributed by Philips.
On December 11, 1997, we acquired the 50.0% of UPC's ordinary shares held by
Philips. As part of this acquisition, we purchased the 3.17 million shares of
our Class A Common Stock and all of UPC's convertible notes held by Philips.
Following this acquisition, and until UPC's initial public offering in February
1999, UPC became essentially a wholly-owned subsidiary of UIH, including
approximately 7.2% of its stock held by a foundation controlled by us to support
UPC's stock option plans to employees.
Since formation, UPC has developed largely through acquisitions. Its major
acquisitions include:
o a 50.0% interest in the "A2000" system in the City of Amsterdam and
four surrounding municipalities in July 1995;
o the remaining 96.2% of the KTE system located in Eindhoven, The
Netherlands, in September 1995;
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o increasing our interest in "Norkabel" (Norway) from 8.3% to 100%,
Kabelkom (Hungary) from 3.9% to effectively 50.0% and the Swedish
system from 2.1% to 25.9% in September 1996;
o all of the Janco cable system in Oslo in two parts in January 1997 and
November 1998;
o 100% of the "Combivisie" cable television systems in the region
surrounding our KTE system in The Netherlands, effective January 1,
1998;
o various interests in Hungarian cable television systems in June 1998,
resulting in a 79.25% interest in Telekabel Hungary, Hungary's largest
cable television operator;
o 100% of the "Telekabel Beheer" cable television system in the
Netherlands in two parts in August 1998 and February 1999;
o an additional 23.3% and 25.0% interests in our Israeli and Maltese
systems, respectively; and
o interests in various programming companies.
UPC has also sold its unconsolidated interests in certain cable television
systems in France (Citecable), Germany, Spain, Sweden and Ireland, and its
consolidated interest in Portugal.
ASIA/PACIFIC.
We are a leading provider of multi-channel television services in Australia and
the Asia/Pacific region. We own and operate multi-channel television systems in
Australia, New Zealand, the Philippines and Tahiti. We currently own
approximately 98.0% of UAP. As of December 31, 1998, our Asia/Pacific systems
passed an aggregate of 2.5 million television homes and had 0.5 million
subscribers. The following provides an overview of our primary operations in the
Asia/Pacific Region:
o AUSTAR (AUSTRALIA). Through our effectively 100% owned business,
Austar, we are the largest provider of multi-channel television
services in regional Australia (outside Australia's six largest
metropolitan areas.) Austar markets a digital direct to home ("DTH")
satellite service and operates "wireless cable" ("MMDS") systems. As
of December 31, 1998, we had 0.3 million subscribers and passed 2.1
million homes in Australia.
o SATURN (NEW ZEALAND). Through our 65% owned subsidiary, Saturn, in
which SaskTel Holdings (New Zealand), Inc. ("Sasktel") owns the
remaining 35%, we currently operate a wireline cable and telephone
system in and around Wellington. As of December 31, 1998, we had
approximately 6,000 cable subscribers (approximately 15% penetration)
and approximately 7,400 telephone subscribers (approximately 20%
penetration) and passed approximately 41,000 homes out of a potential
approximately 141,000 homes.
o XYZ Entertainment (Australia Programming). Through our 50% owned
affiliate, XYZ Entertainment, we are a programming company that
provides five channels to the Australian multi-channel television
market. As of December 31, 1998, XYZ Entertainment had 0.7 million
programming subscribers.
Operations in our Asia/Pacific region have been developed primarily through
acquisitions and the development of the operations of Austar. In 1994, we
acquired, through directly and indirectly held interests, an effective 50.0%
economic interest in two newly-formed companies that constitute Austar. From
December 1995 through October 1996, we increased our economic ownership to
effectively 100% through additional equity contributions and purchases from
other shareholders.
In July 1994, we acquired a 50.0% interest in Saturn, which at the time owned
only a small cable television system outside of Wellington. Since our initial
investment, Saturn has begun construction of a hybrid fiber coaxial ("HFC")
cable and telephony network in the greater Wellington area. In July 1996, we
acquired the remaining 50.0% interest in Saturn in exchange for a 2.0% interest
in UAP. In July 1997, Sasktel purchased a 35.0% equity interest in Saturn.
In October 1994, we and Century Communications Corp. ("Century") formed XYZ
Entertainment, each retaining a 50.0% interest. In June 1995, we and Century
formed the 50/50 joint venture Century United Programming Ventures Pty Limited
("CUPV") to hold our investment in XYZ Entertainment. In September 1995, a 50.0%
interest in XYZ Entertainment was sold to a third party, thereby diluting our
interest in XYZ Entertainment to 25.0%. In September 1998, UAP acquired the
25.0% interest in XYZ Entertainment held by Century, increasing our ownership
interest to 50.0%.
LATIN AMERICA.
We own interests in and operate multi-channel television distribution and
telecommunications systems in Chile, Brazil, Mexico and Peru. As of December 31,
1998 our Latin American systems passed an aggregate of 2.2 million television
homes and had 0.5 million subscribers.
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Our largest operation in Latin America is our Chilean operation, VTRH. Through
VTRH, we are the largest provider of each of wireline cable television, MMDS and
DTH services and a growing provider of telephone services in Chile. Wireline
cable is VTRH's primary business representing approximately 94.4% of our
subscribers while MMDS and DTH represent approximately 3.2% and approximately
2.4%, respectively. We have an estimated 56% market share of the cable
television services market throughout Chile and an estimated 38% market share
within Santiago, Chile's largest city. In 1998, we began the wide-scale roll-out
of residential cable telephone service in six communities contained within
Santiago and one major city outside Santiago and are currently expanding our
efforts to include additional areas throughout Chile.
In September 1996, we and VTR S.A. formed the joint venture VTRH, with each
contributing its respective Chilean multi-channel television assets to VTRH. We
retained a 34.0% interest in this new joint venture until April 29, 1999, when
we acquired VTR S.A.'s interest in VTRH for $268.0 million which includes
repayment of advances from other shareholders, a promissory note from UIH to the
other shareholders and certain other expenses.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
---------------------------------------------
We manage multi-channel television, telephony, Internet/data services and
programming operations in various countries outside the United States through
our subsidiaries and affiliates. For financial information concerning such
business segments, see the footnotes to our financial statements included in
Item 8 "Financial Statements and Supplementary Data."
(c) NARRATIVE DESCRIPTION OF BUSINESS
---------------------------------
SUMMARY OPERATING DATA
In the following table, we show certain operating and financial data for the
systems we own for each of the last two years. When we refer to information as
"Proportionate Data", we mean that we have multiplied the statistic for each
operating system by our percentage ownership of that system.
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As of December 31, 1998
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Homes in Basic Net Long-
GROSS DATA Service Homes Subscribers/ Basic Income Adjusted Term
Area Passed Lines Penetration Revenue (Loss) EBITDA(1) Debt(2)
-------- --------- ------------ ----------- | -------- -------- --------- --------
| (In thousands)(3)
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EUROPE |
- ------ |
Multi-channel TV Subscribers : |
The Netherlands................ 1,521,527 1,487,673 1,396,867 93.9% | $118,437 $ (60,756) $ 32,901 $372,285
Austria........................ 1,073,297 900,350 454,957 50.5% | $ 94,224 $ (4,958) $ 43,089 $ --
Hungary (Telekabel Hungary).... 901,500 510,622 442,567 86.7% | $ 13,834 $ 66 $ 4,988 $ --
Israel......................... 595,000 575,976 402,355 69.9% | $160,966 $ 4,977 $ 88,925 $280,895
Norway......................... 529,924 463,235 323,387 69.8% | $ 46,098 $ (33,390) $ 16,439 $ --
Belgium........................ 133,000 133,000 127,398 95.8% | $ 19,473 $ (8,087) $ 7,022 $ --
Malta.......................... 179,000 162,996 70,363 43.2% | $ 15,698 $ 977 $ 5,930 $ 24,521
Romania........................ 180,000 98,174 61,999 63.2% | $ 1,669 $ -- $ 764 $ --
Czech Republic................. 229,531 151,716 54,153 35.7% | $ 4,779 $ (3,686) $ (1,012) $ --
Hungary (Monor)................ 85,000 68,339 30,623 44.8% | $ 17,800 $ 1,967 $ 11,260 $ 41,312
France......................... 150,000 74,623 29,107 39.0% | $ 4,280 $ (6,992) $ (2,697) $ --
Slovak Republic................ 67,959 37,641 21,044 55.9% | $ 817 $ (1,859) $ (726) $ --
---------- --------- --------- |
Total....................... 5,645,738 4,664,345 3,414,820 |
---------- --------- --------- |
Telephony Lines (4): |
Hungary (Monor)................ 85,000 84,037 69,244 82.4% |
The Netherlands................ 1,521,527 541,613 41,180 7.6% |
---------- --------- --------- |
Total...................... 1,606,527 625,650 110,424 |
---------- --------- --------- |
Programming Subscribers: |
Spain/Portugal (IPS)........... N/A N/A 684,000 N/A | $ 17,099 $ (295) $ 3,431 $ 3,500
Ireland (Tara)................. N/A N/A 597,314 N/A | $ 709 $ (8,615) $ (4,899) $ --
---------- --------- --------- |
Total.......................... N/A N/A 1,281,314 |
---------- --------- --------- |
Data Subscribers: |
Internet....................... N/A N/A 24,338 N/A | $ -- $ (8,370) $ (8,286) $ --
---------- --------- --------- |
ASIA/PACIFIC |
- ------------ |
Multi-channel TV Subscribers: |
Australia (Austar)............. 2,085,000 2,083,108 288,721 13.9% | $ 83,316 $(129,581) $(23,255) $ --
Philippines.................... 600,000 401,818 151,543 37.7% | $ 13,936 $ (7,382) $ 600 $ 3
Tahiti (5)..................... 31,000 20,128 6,125 30.4% | $ 3,411 $ (1,968) $ (49) $ --
New Zealand.................... 141,000 40,950 6,010 14.7% | $ 1,685 $ (9,884) $ (9,763) $ 21,140
---------- --------- --------- |
Total...................... 2,857,000 2,546,004 452,399 |
---------- --------- --------- |
Telephony Lines (4): |
New Zealand.................... 141,000 35,935 7,360 20.5% |
---------- --------- --------- |
Programming Subscribers: |
Australia (XYZ Entertainment).. N/A N/A 699,867 N/A | $ 15,893 $ 1,053 $ 1,337 $ --
---------- --------- --------- |
LATIN AMERICA |
- ------------- |
Multi-channel TV Subscribers: |
Chile.......................... 2,321,000 1,567,871 393,851 25.1% | $119,005 $ (18,076) $ 28,022 $122,392
Mexico......................... 341,600 224,130 54,838 24.5% | $ 10,073 $ 3,080 $ 2,824 $ --
Brazil (Jundiai)............... 70,200 67,845 19,714 29.1% | $ 9,162 $ 521 $ 2,863 $ 129
Brazil (TVSB).................. 437,000 306,000 13,233 4.3% | $ 5,995 $ (2,100) $ (539) $ --
Peru........................... 140,000 57,377 10,023 17.5% | $ 2,076 $ (1,666) $ (1,248) $ --
---------- --------- --------- |
Total...................... 3,309,800 2,223,223 491,659 |
---------- --------- --------- |
Telephony Lines (4): |
Chile.......................... 2,321,000 218,460 20,985 9.6% |
---------- --------- --------- |
Programming Subscribers: |
Latin American................. N/A N/A 3,449,481 N/A | $ 3,671 $ (12,228) $(10,916) $ --
---------- --------- --------- |
TOTAL COMPANY |
- ------------- |
Multi-channel TV Subscribers... 11,812,538 9,433,572 4,358,878 |
========== ========= ========= |
Telephony Lines................ 4,068,527 880,045 138,769 |
========== ========= ========= |
Programming Subscribers........ N/A N/A 5,430,662 |
========== ========= ========= |
Data Subscribers............... N/A N/A 24,338 |
========== ========= ========= |
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As of December 31, 1997
-----------------------------------------------------------------------------------------------
Homes in Basic Net Long-
GROSS DATA Service Homes Subscribers/ Basic Income Adjusted Term
Area Passed Lines Penetration Revenue (Loss) EBITDA(1) Debt(2)
-------- --------- ------------ ----------- | -------- -------- --------- --------
| (In thousands)(3)
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EUROPE |
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Multi-channel TV Subscribers: |
The Netherlands................ 670,393 661,182 608,831 92.1% | $ 64,933 $(18,813) $ 24,716 $269,989
Austria........................ 1,064,000 890,305 435,859 49.0% | $ 86,772 $ (5,713) $ 42,915 $130,508
Hungary (Kabelkom)............. 300,000 290,690 266,775 91.8% | $ 25,706 $ 1,389 $ 7,987 $ --
Israel......................... 360,000 350,392 241,874 69.0% | $ 83,579 $ 13,534 $ 43,223 $ 5,575
Norway......................... 529,924 457,551 319,654 69.9% | $ 43,570 $(35,535) $ 17,578 $ 71,167
Belgium........................ 133,000 133,000 127,529 95.9% | $ 20,553 $ (6,083) $ 8,032 $ --
Malta.......................... 179,000 153,917 58,033 37.7% | $ 12,535 $ 402 $ 5,257 $ 19,973
Romania........................ 150,000 69,620 40,188 57.7% | $ 720 $ 195 $ 456 $ --
Czech Republic................. 271,100 145,650 51,571 35.4% | $ 3,991 $(11,501) $ (3,585) $ --
Hungary (Monor)................ 84,000 60,534 26,231 43.3% | $ 757 $ (504) $ 415 $ --
France......................... 86,000 28,267 6,758 23.9% | $ 1,350 $ (3,807) $ (2,476) $ --
Slovak Republic................ 36,239 22,193 18,476 83.3% | $ 748 $ (660) $ (390) $ --
--------- --------- --------- |
Total....................... 3,863,656 3,263,301 2,201,779 |
--------- --------- --------- |
Telephony Lines (4): |
Hungary (Monor)................ 85,000 84,037 62,224 74.0% | $ 13,646 $ (9,090) $ 7,488 $ 43,614
The Netherlands................ -- -- -- N/A | $ -- $ -- $ -- $ --
--------- --------- --------- |
Total....................... 85,000 84,037 62,224 |
--------- --------- --------- |
Programming Subscribers: |
Spain/Portugal (IPS)........... N/A N/A 485,000 N/A | $ 9,958 $ (7,473) $ (3,347) $ 1,098
Ireland (Tara)................ N/A N/A 361,984 N/A | $ 51 $ (5,864) $ (5,657) $ 1,691
--------- --------- --------- |
Total....................... N/A N/A 846,984 |
--------- --------- --------- |
ASIA/PACIFIC |
- ------------ |
Multi-channel TV Subscribers: |
Australia (Austar)............. 1,635,000 1,589,000 196,205 12.3% | $ 52,945 $(82,077) $(15,936) $ --
Philippines.................... 600,000 175,414 66,112 37.7% | $ 5,697 $ (1,340) $ 1,243 $ --
Tahiti......................... 31,000 20,128 6,304 31.3% | $ 4,118 $ (4,266) $ 229 $ --
New Zealand.................... 141,000 23,518 3,059 13.0% | $ 382 $ (5,244) $ (5,450) $ --
--------- --------- --------- |
Total...................... 2,407,000 1,808,060 271,680 |
--------- --------- --------- |
Programming Subscribers: |
Australia (XYZ Entertainment).. N/A N/A 577,205 N/A | $ 12,095 $ (7,493) $ (4,116) $ --
--------- --------- --------- |
LATIN AMERICA |
- ------------- |
Multi-channel TV Subscribers: |
Chile.......................... 2,321,000 1,478,851 369,187 25.0% | $114,318 $(20,611) $ 21,348 $122,065
Mexico......................... 341,600 173,309 54,349 31.4% | $ 10,483 $ 1,844 $ 2,965 $ 206
Brazil (Jundiai)............... 70,000 55,270 20,278 36.7% | $ 8,571 $ 1,072 $ 2,815 $ 58
Brazil (TVSB).................. 387,000 387,000 11,232 2.9% | $ 6,469 $ (1,753) $ 307 $ --
Peru........................... 140,000 33,179 6,644 20.0% | $ 1,462 $ (1,738) $ (1,154) $ --
--------- --------- --------- |
Total...................... 3,259,600 2,127,609 461,690 |
--------- --------- --------- |
Telephony Lines (4): |
Chile.......................... 25,000 16,676 3,486 20.9% |
--------- --------- --------- |
Programming Subscribers: |
Latin American................. N/A N/A 1,614,650 N/A | $ 369 $(12,490) $(12,580) $ 1,459
--------- --------- --------- |
TOTAL COMPANY |
- ------------- |
Multi-channel TV Subscribers... 9,530,256 7,198,970 2,935,149 |
========= ========= ========= |
Telephony Lines................ 110,000 100,713 65,710 |
========= ========= ========= |
Programming Subscribers........ N/A N/A 3,038,839 |
========= ========= ========= |
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
As of December 31, 1998
-------------------------------------------------------------------------------------------------
Homes in Basic Net Long-
PROPORTIONATE DATA Paid-in Service Homes Subscribers/ Income Adjusted Term
Ownership Area Passed Lines Revenue (Loss) EBITDA(1) Debt(2)
--------- | --------- -------- ------------ | ------- --------- --------- ---------
| | (In thousands) (3)
<S> <C> | <C> <C> <C> | <C> <C> <C> <C>
EUROPE | |
- ------- | |
Multi-channel TV Subscribers: | |
The Netherlands................ 25.5-51.0% | 628,462 612,615 577,490 | $43,641 $ (22,187) $ 12,437 $126,488
Austria........................ 95.0% | 1,019,632 855,333 432,209 | $89,513 $ (4,710) $ 40,935 $ --
Hungary (Telekabel Hungary).... 79.25% | 714,439 404,668 350,734 | $10,964 $ 52 $ 3,953 $ --
Israel......................... 46.6% | 277,270 268,405 187,497 | $75,010 $ 2,319 $ 41,439 $130,897
Norway......................... 100.0% | 529,924 463,235 323,387 | $46,098 $ (33,390) $ 16,439 $ --
Belgium........................ 100.0% | 133,000 133,000 127,398 | $19,473 $ (8,087) $ 7,022 $ --
Malta.......................... 50.0% | 89,500 81,498 35,182 | $ 7,849 $ 489 $ 2,965 $ 12,261
Romania........................ 51.0-100.0%| 165,300 84,209 51,282 | $ 1,473 $ -- $ 707 $ --
Hungary (Monor)................ 44.8% | 38,080 30,616 13,719 | $ 7,974 $ 881 $ 5,045 $ 18,508
France......................... 99.6% | 149,400 74,325 28,991 | $ 4,263 $ (6,964) $ (2,686) $ --
Slovak Republic................ 75.0-100.0%| 62,499 33,380 18,209 | $ 667 $ (1,779) $ (768) $ --
| --------- --------- --------- |
Total...................... | 4,037,037 3,193,000 2,200,251 |
| --------- --------- --------- |
Telephony Lines (4): | |
Hungary (Monor)................ 44.8% | 38,080 37,649 31,021 |
The Netherlands ............... 25.5-51.0% | 628,462 177,765 15,728 |
| --------- --------- --------- |
Total...................... | 666,542 215,414 46,749 |
| --------- --------- --------- |
Programming Subscribers: | |
Spain/Portugal (IPS)........... 33.5% | N/A N/A 229,140 | $ 5,728 $ (99) $ 1,149 $ 1,173
Ireland (Tara)................. 80.0% | N/A N/A 477,851 | $ 568 $ (6,892) $ (3,919) $ --
| --------- --------- --------- |
Total...................... | N/A N/A 706,991 |
| --------- --------- --------- |
Data Subscribers: | |
Internet....................... 25.5-100.0%| N/A N/A 15,956 | $ -- $ (8,370) $ (8,286) $ --
| --------- --------- --------- |
ASIA/PACIFIC | |
- ------------ | |
Multi-channel TV Subscribers: | |
Australia (Austar)............. 98.0% | 2,043,300 2,041,446 282,947 | $81,650 $(126,990) $(22,790) $ --
Philippines.................... 19.2% | 115,200 77,149 29,096 | $ 2,676 $ (1,417) $ 115 $ 1
Tahiti (5)..................... 88.2% | 27,342 17,753 5,402 | $ 3,009 $ (1,736) $ (43) $ --
New Zealand.................... 63.7% | 89,817 26,085 3,828 | $ 1,074 $ (6,296) $ (6,219) $ 13,466
| --------- --------- --------- |
Total...................... | 2,275,659 2,162,433 321,273 |
| --------- --------- --------- |
Telephony Lines (4): | |
New Zealand.................... 63.7% | 89,817 22,891 4,688 |
| --------- --------- --------- |
Programming Subscribers: | |
Australia (XYZ Entertainment).. 49.0% | N/A N/A 342,935 | $ 7,787 $ 516 $ 655 $ --
| --------- --------- --------- |
LATIN AMERICA | |
- ------------- | |
Multi-channel TV Subscribers: | |
Chile.......................... 34.0% | 789,140 533,076 133,909 | $40,462 $ (6,146) $ 9,527 $ 41,613
Mexico......................... 49.0% | 167,384 109,824 26,871 | $ 4,936 $ 1,509 $ 1,384 $ --
Brazil (Jundiai)............... 46.3% | 32,503 31,412 9,128 | $ 4,242 $ 241 $ 1,326 $ 60
Brazil (TVSB).................. 100.0% | 437,000 306,000 13,233 | $ 5,995 $ (2,100) $ (539) $ --
Peru........................... 60.0% | 84,000 34,426 6,014 | $ 1,245 $ (1,000) $ (749) $ --
| --------- --------- --------- |
Total...................... | 1,510,027 1,014,738 189,155 |
| --------- --------- --------- |
Telephony Lines (4): | |
Chile.......................... 34.0% | 789,140 74,276 7,134 |
| --------- --------- --------- |
Programming Subscribers: | |
Latin American................. 50.0% | N/A N/A 1,724,741 | $ 1,835 $ (6,114) $ (5,458) $ --
| --------- --------- --------- |
TOTAL COMPANY | |
- ------------- | |
Multi-channel TV Subscribers... | 7,822,723 6,370,171 2,710,679 |
| ========= ========= ========= |
Telephony Lines................ | 1,545,499 312,581 58,571 |
| ========= ========= ========= |
Programming Subscribers........ | N/A N/A 2,774,667 |
| ========= ========= ========= |
Data Subscribers............... | N/A N/A 15,956 |
| ========= ========= ========= |
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
As of December 31, 1997
-------------------------------------------------------------------------------------------------
Homes in Basic Net Long-
PROPORTIONATE DATA Paid-in Service Homes Subscribers/ Income Adjusted Term
Ownership Area Passed Lines Revenue (Loss) EBITDA(1) Debt(2)
--------- | --------- -------- ------------ | ------- --------- --------- ---------
| | (In thousands) (3)
<S> <C> | <C> <C> <C> | <C> <C> <C> <C>
EUROPE | |
- ------ | |
Multi-channel TV Subscribers: | |
The Netherlands................ 50.0-100% | 384,393 378,312 349,751 | $37,961 $ (9,818) $ 15,740 $156,734
Austria........................ 95.0% | 1,010,800 845,790 414,066 | $82,433 $ (5,428) $ 40,769 $123,983
Hungary (Kabelkom)............. 50.0% | 150,000 145,345 133,388 | $12,853 $ 695 $ 3,994 $ --
Israel......................... 23.3% | 83,880 81,641 56,357 | $19,474 $ 3,153 $ 10,071 $ 1,299
Norway......................... 87.3% | 462,624 399,442 279,058 | $38,037 $(31,022) $ 15,346 $ 62,129
Belgium........................ 100.0% | 133,000 133,000 127,529 | $20,553 $ (6,083) $ 8,032 $ --
Malta.......................... 25.0% | 44,750 38,479 14,508 | $ 3,134 $ 101 $ 1,314 $ 4,993
Romania........................ 90.0-100.0%| 143,000 67,498 39,428 | $ 909 $ 247 $ 575 $ --
Czech Republic................. 100.0% | 271,100 145,650 51,571 | $ 3,991 $(11,501) $ (3,585) $ --
Hungary (Monor)................ 46.3% | 38,892 28,027 12,145 | $ 351 $ (234) $ 192 $ --
France......................... 99.6% | 85,656 28,154 6,731 | $ 1,344 $ (3,792) $ (2,466) $ --
Slovak Republic................ 75.0-100.0%| 30,779 18,030 14,987 | $ 604 $ (533) $ (455) $ --
| --------- --------- --------- |
Total....................... | 2,838,874 2,309,368 1,499,519 |
| --------- --------- --------- |
Telephony Lines (4): | |
Hungary (Monor)................ 46.3% | 39,355 38,909 28,810 | $ 6,318 $ (4,209) $ 3,467 $ 20,193
The Netherlands ............... 50.0-100% | -- -- -- | $ -- $ -- $ -- $ --
| --------- --------- --------- |
Total....................... | 39,355 38,909 28,810 |
| --------- --------- --------- |
Programming Subscribers: | |
Spain/Portugal (IPS)........... 33.5% | N/A N/A 162,475 | $ 3,336 $ (2,503) $ (1,121) $ 368
Ireland (Tara)................. 75.0% | N/A N/A 271,488 | $ 38 $ (4,398) $ (4,243) $ 1,268
| --------- --------- --------- |
Total....................... | N/A N/A 433,963 |
| --------- --------- --------- |
ASIA/PACIFIC | |
- ------------ | |
Multi-channel TV Subscribers: | |
Australia (Austar)............. 98.0% | 1,602,300 1,557,220 192,281 | $51,886 $(80,435) $(15,617) $ --
Philippines.................... 39.2% | 235,200 68,762 25,916 | $ 2,233 $ (525) $ 487 $ --
Tahiti......................... 88.2% | 27,342 17,753 5,560 | $ 3,632 $ (3,763) $ 202 $ --
New Zealand.................... 63.7% | 89,817 14,981 1,949 | $ 244 $ (3,340) $ (3,471) $ --
| --------- --------- --------- |
Total....................... | 1,954,659 1,658,716 225,706 |
| --------- --------- --------- |
Programming Subscribers: | |
Australia (XYZ Entertainment).. 24.5% | N/A N/A 141,415 | $ 2,963 $ (1,836) $ (1,009) $ --
| --------- --------- --------- |
LATIN AMERICA | |
- ------------- | |
Multi-channel TV Subscribers: | |
Chile.......................... 34.0% | 789,140 502,809 125,524 | $38,868 $ (7,008) $ 7,258 $ 41,502
Mexico......................... 49.0% | 167,384 84,921 26,631 | $ 5,137 $ 904 $ 1,453 $ 101
Brazil (Jundiai)............... 46.3% | 32,410 25,590 9,389 | $ 3,968 $ 496 $ 1,303 $ 27
Brazil (TVSB).................. 40.0% | 154,800 154,800 4,493 | $ 2,588 $ (701) $ 123 $ --
Peru........................... 99.2-100.0%| 139,120 32,962 6,602 | $ 1,452 $ (1,726) $ (1,145) $ --
| --------- --------- --------- |
Total....................... | 1,282,854 801,082 172,639 |
| --------- --------- --------- |
Telephony Lines (4): | |
Chile.......................... 34.0% | 8,500 5,670 1,185 |
| --------- --------- --------- |
Programming Subscribers: | |
Latin American................. 50.0% | N/A N/A 807,325 | $ 185 $ (6,245) $ (6,290) $ 730
| --------- --------- --------- |
TOTAL COMPANY | |
- ------------- | |
Multi-channel TV Subscribers... | 6,076,387 4,769,166 1,897,864 |
| ========= ========= ========= |
Telephony Lines................ | 47,855 44,579 29,995 |
| ========= ========= ========= |
Programming Subscribers........ | N/A N/A 1,382,703 |
| ========= ========= ========= |
</TABLE>
10
<PAGE>
(1) 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 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. 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
Adjusted EBITDA in the same manner.
(2) The amounts disclosed herein represent unconsolidated debt. Consolidated
debt is included in the consolidated financial statements in Item
8 "Financial Statements and Supplementary Data".
(3) The financial information presented above has been taken from unaudited
financial information of the respective operating companies that were
providing service as of December 31, 1998. Certain information presented
above has been derived from financial statements prepared in accordance
with foreign generally accepted accounting principles which differ from
U.S. generally accepted accounting principles. In addition, certain amounts
have been converted to U.S. dollars using the December 31, 1998 exchange
rates for the convenience translation.
(4) Financial information for telephony is included in multi-channel TV
information above.
(5) The revenue, net loss and Adjusted EBITDA figures are as of September 30,
1998. Tahiti was deconsolidated as of October 1, 1998.
11
<PAGE>
EUROPEAN OPERATIONS
UPC owns and operates cable-based communications networks in 10 countries in
Europe and in Israel. UPC provides cable television services in these countries
as well as telephone and/or Internet/data services in five of these markets.
UPC's primary Western European systems are located in Vienna (Austria);
Amsterdam (The Netherlands); Brussels (Belgium); Oslo (Norway); and suburban
Paris (France"). UPC also has systems in Israel, Malta and Eastern Europe.
Since 1994, UPC has been upgrading its Western European cable television
infrastructure to enable UPC to provide digital video, telephone and
Internet/data services. When it upgrades, UPC replaces parts of the coaxial
cable with fiber optic lines and upgrades the remaining coaxial cable so that it
can send signals both to and from the customer's home. As of September 30, 1998,
UPC's systems had approximately 4,400 Kilometers of high-capacity active fiber
optic infrastructure supporting more than 35,340 kilometers of coaxial
distribution cable. Approximately 25,200 kilometers of this coaxial cable can
send signals both to and from the customer's home. As of December 31, 1998, 51%
of the UPC's Western European network was upgraded to two-way capability and UPC
expects 75% to be upgraded by year end 1999. As of December 31, 1998, UPC's
Western European systems served approximately 41,200 cable telephone lines and
had approximately 24,300 Internet access subscribers. In UPC's non-Western
European markets, UPC is primarily focused on increasing its subscriber base and
its revenue per subscriber chiefly though marketing, superior programming and,
in some cases, the introduction of new services.
UPC GROWTH STRATEGY. UPC's goal is to increase the number of its subscribers to
a pan-European basis and in Israel and to increase its revenue per subscriber.
Key elements of its strategy to achieve this goal are:
o INCREASE AVERAGE MONTHLY REVENUE PER SUBSCRIBER. UPC plans to increase
its average revenue per video subscriber by developing its expanded
basic tier service, pay-per-view and audio-only program offerings. As
of December 31, 1998, UPC's average revenue per subscriber (weighted
by the number of subscribers) for its more mature Western European
systems was $10.60 per month compared to $35.35 and $38.25 as
experienced in the United Kingdom for the year ended December 31, 1997
and the United States for the nine months ended September 30, 1998,
respectively.
o INTRODUCE NEW SERVICES OVER EXISTING NETWORK. UPC has recently
introduced telephone and Internet/data access services over most of
its cable network in Western Europe. UPC's telephone and Internet/data
services are marketed under the brand names "Priority Telecom" and
"Chello Broadband" respectively. Priority Telecom is UPC's branded
telephone service and one of the only telephone providers currently
competing with incumbent operators in Europe's residential telephone
market. Chello Broadband is the largest pan-European high speed
Internet operator with the capacity to provide turnkey infrastructure
and content solutions for both UPC and non-UPC cable systems. UPC
believes that these services will increase its revenue per subscriber
and the operating leverage of its systems.
o CONTINUE TO ACQUIRE AND INCREASE OWNERSHIP PERCENTAGE IN STRATEGIC
SYSTEMS. UPC plans to continue to acquire multi-channel cable
television systems near its current systems and to selectively expand
to other European markets.
UPC VIDEO DISTRIBUTION. We own and operate established cable television systems
and are constructing new systems through UPC. At December 31, 1998, UPC's
operating systems had approximately 3.4 million subscribers to its basic tier
video services. Video distribution services accounted for approximately 92.7 %
of our consolidated revenue in 1998. An average of 73.2% of the homes passed by
our systems subscribe to our basic tier video services. We offer our subscribers
some of the most advanced analog video services available today and a large
choice of FM radio programs. In addition, because many of our European
operations are two-way capable, we have been able to add more services. In many
systems, for example, we have introduced impulse pay-per-view services, which
enable subscribers to our expanded basic tier to select and purchase programming
services, such as movies and special events, directly by remote control.
UPC VIDEO PROGRAMMING. Popular programming is another key factor for increasing
UPC's video services revenue. We believe it will also be a potential source of
additional revenue from sales to other cable television operators and satellite
companies in Europe. We have enhanced our existing, and are continuing to
develop and acquire new ownership interests in, programming services.
12
<PAGE>
We are involved in several country-specific programming ventures including
creating channels for Israel and Malta. Together, these programming ventures
have developed channels in key genres including sports, children, documentary
and movies, which are subtitled or dubbed in the local language.
We recently transferred our 75.0% interest in Tara and our 33.5% interest in IPS
to UPC. Tara provides Irish general entertainment programming to the U.K.
markets. IPS produces a movie channel, a documentary channel, a children's
channel and a music channel for the Spanish and Portuguese markets. As of
December 31, 1998, Tara and IPS sold programming content to non-UPC cable
operators serving an aggregate of 1.4 million subscribers.
UPC TELEPHONE SERVICES: PRIORITY TELECOM. We believe that our existing customer
base and upgraded network give us a unique opportunity to provide telephone
service in Europe. We plan to offer Priority Telecom in our Austrian, Dutch,
French and Norwegian systems. We also plan to develop national and international
long distance voice and data services. Our operating companies are licensed to
provide telephone services in Austria, France, Hungary, The Netherlands and
Norway.
A2000 began offering cable telephone services in July 1997 on a trial basis in
Purmerend, a town outside Amsterdam, and since then has begun to offer these
services to its customers in Hilversum, Zaanstad and part of Amsterdam. In
November 1998, we launched Priority Telecom's cable telephone service on a trial
basis in Vienna and in March 1999 in our Mediareseaux system in suburban Paris
and in Oslo, Norway.
UPC is negotiating to connect its local fiber networks, primarily through
interconnections and capacity leases with other new telecommunications service
providers, to provide long-distance telephone services across several European
markets.
A2000 has entered into an interconnect agreement covering all of A2000's homes
and businesses passed that will be capable of receiving telephone service.
Similarly, each of Telekabel Group's largest subsidiary, "Telekabel Wien",
Janco, UTH and Mediareseaux has completed an interconnect agreement with the
national incumbent telecommunications service provider covering all of their
homes and businesses passed by cable in their networks. Even with interconnect
arrangements secured, we may still experience difficulty operating under them.
In our A2000 system, for example, quantity at the interconnection have lowered
the quality of A2000's telephone service. In Austria, while Telekabel Wien
secured the interconnect arrangement with the support of the Austrian
telecommunications regulator, the Austrian incumbent telecommunication operator
is challenging the arrangement in the Austrian courts.
Cable telephone service in The Netherlands to areas outside of the A2000 systems
will be provided by UTH. The rollout for these areas is scheduled to begin
during the second half of 1999. Priority Telecom launched its service on a trial
basis in Vienna in November 1998, and in suburban Paris and Oslo, in March 1999.
It intends to launch service to business and residential areas in Vienna passing
approximately 100,000 homes in early 1999. Priority Telecom's service is
scheduled to be rolled out in Vienna to an additional 500,000 homes during the
first half of 1999, with plans to offer the service to the balance of the
approximately 83,000 remaining homes passed in Vienna capable of receiving the
service by the end of 1999.
In addition to our cable telephone operations, our Monor system has offered
traditional telephone services since December 1994 and as of December 31, 1998,
had approximately 69,240 traditional telephone lines. UTH's 80.0% subsidiary
Uniport offers a carrier select telephone service and had approximately 20,500
subscribers at December 31, 1998.
Priority Telecom will face competition in its markets from incumbent
telecommunications operators and other competitive operators that have
substantially more experience in providing, and significantly greater resources
devoted to, telephone services. In addition, we will depend on interconnect
arrangements provided by incumbent telecommunications operators. We believe,
however, that our strategy for Priority Telecom will allow us to compete
effectively with incumbent telecommunications operators and any other local loop
providers who subsequently enter the market.
UPC INTERNET/DATA SERVICES: High Speed Access and Chello Broadband. We have
launched a cable modem-based, high speed Internet access service in Austria,
Belgium, The Netherlands and Norway called Chello Broadband. The launch of
Chello Broadband in our upgraded Western European markets is scheduled to begin
during early 1999. As of December 31, 1998, we had approximately 23,200
residential and more than 1,140 business cable modem Internet access
subscribers.
13
<PAGE>
We have launched a residential and business cable modem-based, high-speed
Internet access service in Austria, Belgium, The Netherlands and Norway. We have
marketed our current Internet service as a high speed Internet access product
excluding many of the value-added services that Chello Broadband expects to
provide. Marketing efforts for our Internet access service have been limited to
date but we intend to implement a more substantial brand marketing program from
the launch of Chello Broadband's service. The launch of Chello Broadband in our
upgraded Western European markets is scheduled to begin during the first quarter
of 1999.
The Internet services business in Europe is highly competitive. We believe,
however, that our strategy for Chello Broadband, which encompasses competitive
pricing and superior service combined with high speed access and compelling
content, will mitigate the effects of competition from other Internet service
providers in its markets. We currently compete with traditional dial-up Internet
service providers and other providers (including many incumbent
telecommunications service providers) and expect that Chello Broadband will face
competition from other broadband cable modem service providers, such as @Home
and Roadrunner as they move to the European market. In the future, we expect
competition from providers using other broadband technologies.
AUSTRIA: TELEKABEL GROUP
OVERVIEW. UPC owns 95.0% 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 40.0%
of the market. Telekabel Wien, which serves Vienna and represents approximately
87.0% 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.
In early 1992, Telekabel Wien initiated the rebuild and upgrade of its existing
cable network in Vienna. The upgrade, which is expected to be 75.0% complete by
the end of 1999, was approximately 57.0% complete and passed approximately
516,700 homes as of December 31, 1998. UPC is are expanding Telekabel Group's
service offerings as its network is upgraded to full two-way capability. The
upgraded network enabled Telekabel Group to launch an expanded basic tier,
impulse pay-per-view services and Internet/data services in 1997. Telekabel
Group was the first Austrian cable television company to offer tiered and
pay-per-view services when it launched such services in Vienna.
Telekabel Group launched an Internet access service in September 1997 and had
approximately 9,050 Internet access subscribers as of December 31, 1998, with
current average additions of 1,300 customers per month. It plans to introduce
the Chello Broadband service in 1999. In addition, Telekabel Group launched
Priority Telecom's cable telephone service in Vienna on a trial basis in
November 1998. Following intervention of regulatory authorities on behalf of
Telekabel Group, Telekabel Group entered into an interconnect arrangement with
"PTA", the national incumbent telecommunications service operator, in November
1998.
PROGRAMMING. Telekabel Group offers basic subscribers 32 channels of cable
programming, including substantially all of the broadcast channels from Austria
and Germany, as well as CNN, Super Channel, MTV, an informational channel, Tips
and Hits, Telekino Heute and Vienna cable text. Telekabel Group launched an
expanded basic tier in May 1997 by providing subscribers, whose homes are passed
by the upgraded network, an advanced analog decoder box, the cost of which is
provided for in the monthly rate. The expanded basic tier currently provides
seven channels of additional programming. In conjunction with the launch of this
tier, Telekabel Group launched an impulse pay-per-view service with up to ten
channels of programming.
COMPETITION. Telekabel Group's cable systems compete with a DTH satellite
service that is available throughout Austria. Currently, DTH satellite service
penetration of the Austrian market is approximately 35.0% and is concentrated
primarily in the rural areas of the country. There is less competition from DTH
satellite service in Vienna where we estimate that the penetration is
approximately 8.0%. Competition in the Internet/data business in Austria is
intensifying. PTA is promoting its high speed lines and a number of other
companies recently have entered, or are expected to enter, the market. Upon
launch of its telephone service in Vienna, Telekabel Group began competing with
PTA. New facilities-based competitors in Telekabel Group's operating areas
include United Telekom Austria, Tele.ring and Citykom. In addition, there are
three wireless telephone providers in Telekabel Group's operating areas.
BELGIUM: TVD
OVERVIEW. TVD provides cable television and communications services in selected
areas of Brussels and nearby Leuven in Belgium. We estimate that there are
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currently approximately 133,000 homes under license in TVD's franchise areas.
TVD, which currently has approximately 96.0% penetration, plans to grow through
the introduction of new services that currently are not subject to the price
regulations applicable to basic cable services.
In late 1996, TVD began upgrading its network through fiber optic overlay of its
trunk lines and replacement of all amplifiers. TVD's upgraded networks passed
approximately 91,735 homes, or 69.0% of its total network as of December 31,
1998. TVD expects to complete this upgrade by mid-1999.
TVD introduced expanded basic tier in October 1996 and an Internet access
service in September 1997. As of December 31, 1998, TVD had approximately 4,900
expanded basic subscribers and 1,869 residential and 284 business Internet
access subscribers. TVD plans to launch the Chello Broadband service in early
1999. As TVD upgrades additional portions of its network to full two-way
capability, it plans to introduce impulse pay-per-view in the second quarter of
1999. We are exploring the possibility of providing cable telephone services.
PROGRAMMING. TVD offers in Brussels a basic tier consisting of 32 channels, 17
expanded basic programs in six tiers, 20 FM radio channels and 20 premium
digital radio channels. Its system in Leuven offers a basic tier consisting of
37 channels, an expanded basic tier with six channels, 20 FM radio channels and
20 premium digital radio channels. TVD also distributes five premium channels,
three in Brussels and two in Leuven, which are provided by Canal+.
COMPETITION. TVD has approximately 96.0% penetration in its market. TVD faces
competition, however, from one other cable television provider, "Iverlek", which
was granted a license for the provision of cable television services in Leuven
and is constructing a cable network. As of December 31, 1998, TVD had
approximately 27,480 subscribers in Leuven. Also, we understand that in Leuven,
Telenet will offer a broadband access and content service using Iverlek's new
cable network. To date, TVD has experienced only limited competition from DTH
satellite service providers. In its Internet access business, TVD competes with
traditional dial-up Internet service providers.
THE NETHERLANDS: UTH
UPC'S Dutch operations are held through UTH of which UPC holds 51.0% as of
December 31, 1998. In February 1999, UPC acquired the remaining 49.0% of UTH and
began consolidating UTH's results. UTH holds three principal operating
companies: 100% of "CNBH", which holds the combined KTE and Combivisie systems,
100% of Telekabel Beheer, and 50.0% of A2000. UTH does not consolidate the
results of A2000. UTH owns and operates systems in the regions of Brabant,
Flevoland, Friesland and Gelderland. Because of the large number of current
subscribers located in four large clusters in The Netherlands, UTH is
constructing a fiber backbone to interconnect its region-wide networks. In
September 1998, UTH acquired 80.0% of Uniport, a carrier select telephone
service with approximately 20,500 subscribers at December 31, 1998.
OVERVIEW. Both KTE and Combivisie introduced an expanded basic tier in December
1996. KTE and Combivisie were combined into CNBH in 1998, which then launched
impulse pay-per-view services in June 1998. In 1997, Combivisie and Telekabel
Beheer began upgrading their networks. The upgrade is expected to be 89.0%
completed by year-end 1999. As of December 31, 1998, approximately 53.0% of
UTH's homes were passed by the upgraded network.
UTH intends to launch Chello Broadband's Internet/data services in the CNBH
systems in early 1999. In addition, UTH plans to introduce the initial phase of
cable telephone services in the NV Telekabel systems in mid-1999. Telekabel
Beheer introduced an Internet access service in November 1997 in parts of its
networks and also delivers a business telephone service, including leased line
management, on-site services and telephone equipment, to its former 100%
shareholder, "NUON", and several other companies. As part of the purchase
agreement with NUON for the remaining 49.0% of UTH, UTH and NUON have agreed to
enter into a preferred supplier arrangement through December 31, 2007, whereby
UTH will be the preferred supplier for NUON and its subsidiaries for
telecommunications and Internet services and NUON will be the preferred supplier
to UTH for energy and energy-related services.
In August, 1998, UTH acquired from Nutsbedrijf Regio Eindhoven a 16,700
subscriber cable television system in the Eindhoven region. This acquisition
enabled it to increase the cluster of operations in and around the Eindhoven
area.
In January 1999, UTH acquired the networks of Geldrop and St. Oedenrode and sold
the network of Schijndel to Palet Kabelcom. The main reason was a further
improvement of operations through clustering.
PROGRAMMING. UTH currently offers its subscribers an average of 28 channels of
basic programming along with a music channel and 33 FM radio channels. UTH also
distributes two premium channels provided by Canal+. In addition, UTH offers an
impulse pay-per-view service, consisting of four movie channels and one adult
channel. UTH's basic service includes Dutch broadcasting channels, as well as a
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variety of German, French and English channels. The eight channels in UTH's
expanded basic tier consist of sports, travel, news, science fiction, music and
general entertainment. UTH is discussing with some of its higher value
programming suppliers the migration of their channels from the basic tier to the
expanded basic tier. UTH is not certain when it will successfully conclude these
discussions.
COMPETITION. UTH is the only cable system in its franchise area. To date, UTH
has maintained approximately 94.0% penetration. Competition from television
signals received by antenna, DTH satellite services and local private cable
systems has been limited. In its Internet access business, UTH will compete with
dial-up Internet service providers such as KPN's World Access/Planet Internet,
NLNet and World Online. Upon launch of telephone services, UTH will compete
primarily with KPN.
THE NETHERLANDS: A2000
OVERVIEW. A2000 currently enjoys basic penetration rates of approximately 92.0%
in its two systems that serve Amsterdam and its surrounding communities of
Landsmeer, Purmerend, Zaanstad and Ouder-Amstel, and Hilversum.
A2000 launched a nine-channel expanded basic tier in October 1996, impulse
pay-per-view services in April 1997, cable telephone service on a trial basis in
July 1997 and an Internet/data access service in October 1997. A2000 launched
its Nedpoint-branded cable telephone service in August 1998. As of December 31,
1998, A2000 had approximately 14,250 subscribers to its expanded basic tier,
approximately 18,100 cable telephone subscribers and approximately 8,125
residential and 250 business subscribers to its Internet/data access service.
As of December 31, 1998, approximately 386,100 homes, or 67.0% of A2000's
systems, were passed by the upgraded network, with total rebuild expected to be
completed by the end of 1999.
PROGRAMMING. A2000 currently offers 26 channels of cable programming and 39 FM
radio channels to its basic tier subscribers in the A2000 systems. A2000 offers
programming in many languages, including Dutch, English, German, Italian, French
and Turkish.
A2000's expanded basic tier carries 13 channels. Programming includes both
ethnic content, such as Asian, Chinese and Arabic, and thematic content, such as
science fiction, travel, music, adult and art. A2000 has moved some popular
channels, including MBC and the National Geographic Channel, from the basic tier
service to the expanded basic tier. A2000 also distributes two premium channels
provided by Canal+. Canal+ has recently commenced litigation against A2000
demanding direct access to A2000's network in order to introduce its own digital
decoder. We do not believe A2000 will be obliged to provide the access demanded
by Canal+ and, even if it were, we do not believe providing such access would
have a material effect on A2000's business.
Increases in the price of the basic tier service are restricted by agreements
between A2000 and Amsterdam and the other municipalities in its franchise areas.
Because these prices are kept at a low level, A2000's basic tier revenues are
limited. A2000, therefore, charges programming suppliers carriage fees for the
transmission of their channels. Some of A2000's programming suppliers have been
unwilling to pay such carriage fees and Discovery, Eurosport, CNN and MTV have
withdrawn their channels from A2000's basic tier offering. A2000 has offered to
include these channels in its expanded basic tier or in separate mini-tiers.
While A2000 has experienced typical and anticipated customer dissatisfaction
with the change of programs in the basic tier, it has not experienced additional
churn that can be directly attributed to these changes.
A2000 plans to continue to introduce new channels on its tiered services when
such programming is available. A2000's impulse pay-per-view service offers
movies from all major studios on four movie channels. This service also includes
an adult channel and one "barker" channel that provides previews of upcoming
pay-per-view events.
COMPETITION. A2000 currently has a penetration rate of approximately 92.0% in
its service area. Its primary competition is from DTH satellite service
providers. To date, however, A2000's programming rights, low basic cable fees,
restrictive regulations on the installation of dishes and high installation
costs have limited DTH satellite services as a meaningful competitor. In its
Internet access service, A2000 currently is the only high speed access provider
in its operating area. A2000 expects to compete with KPN, which is testing a
high speed Internet access service, in the near future. A2000 also competes with
traditional dial-up providers, including KPN's World Access/Planet Internet,
NLNet and Euronet. In its telephone business, A2000 currently competes with KPN,
Telfort and Worldcom. A2000 is competing on the basis of price and the ability
to integrate a number of its services.
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NORWAY: JANCO
OVERVIEW. Janco is Norway's largest cable television operator with approximately
47.0% of the total Norwegian cable television market as of December 31, 1998.
Janco owns and operates 16 cable television systems in Norway located primarily
in the southeast and along the southwestern coast, as well as its main network
in Oslo. The well-established Norwegian cable television market has
approximately 70.0% penetration, as of December 31, 1998, primarily due to poor
over-the-air reception in much of Norway and a significant demand for television
entertainment.
Janco launched an Internet access service in March 1998 and plans to introduce
the Chello Broadband service early 1999. Janco has secured a telephony license
agreement from the Norwegian regulator, and an interconnection agreement with
"TeleNor", the incumbent telecom operator. We plan to introduce Priority
Telecom's cable telephone service in 1999 in the upgraded portions of Janco's
network.
Janco is currently upgrading its network to full high capacity 860 MHz two-way
capability, with the exception of 75,000 homes in western rural areas. Its
networks vary in capacity from 300 MHz to 550 MHz . This varying architecture
requires us to replace more of the network than in our other primary markets,
thereby increasing the costs of this upgrade. The upgrade, which began in April
1998, is scheduled to be completed over the next three to four years.
PROGRAMMING. Janco currently offers subscribers 31 channels of programming in
four tiers:
o basic, including "must carry", a limited number of broadcast channels
required by the government to be carried,
o an expanded basic tier,
o a "mini-tier" of certain selected channels, and
o premium services.
Because English is widely understood in Norway, Janco is able to use
English-language programming to supplement the limited, but increasing, supply
of available Scandinavian-language programming.
COMPETITION. Janco experiences limited competition from DTH satellite service
providers. In its Internet access business, Janco expects to compete with
TeleNor which is expected to launch a broadband Internet access service this
fall; and "Tele2", a subsidiary of NetCom Systems, which operates a dial-up
Internet access service and has recently launched a high speed wireless Internet
access service. With Priority Telecom telephone services, Janco will also
compete in this area with TeleNor.
ISRAEL: TEVEL
OVERVIEW. 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., or
"Gvanim", and has since integrated fully Gvanim's operations with its own.
Gvanim and its 90.0%-owned subsidiary Gvanim-Krayot operate cable television
systems in the Rishon-Leziyon, Ramla-Lod, Modiin, Haifa Bay, Karmiel, Maalot and
Lower Galilee areas of Israel. There are approximately 212,150 homes passed in
the Gvanim franchises and as of December 31, 1998, Gvanim and its subsidiary had
149,650 subscribers. The Gvanim acquisition increased Tevel's total subscribers
as of December 31, 1998 to more than 402,350 in franchise areas representing
over 595,000 homes, or approximately 40.0% of the total homes in Israel.
In addition to its cable operations, Tevel owns 50.0% of "Globcall", a
telecommunications company that designs, installs and maintains switching
systems for businesses. As of December 31, 1998, Globcall served approximately
35,000 outlets. Tevel also owns 33.0% of Netvision, one of Israel's leading
Internet service providers that had over 60,000 dial-up subscribers as of
December 31, 1998.
Tevel plans to upgrade all of its systems to 750 MHz hybrid fiber coaxial
technology capable of providing cable telephone and Internet/data services.
Currently, Gvanim's network is a one-way system with a substantial overlay of
fiber optic backbone, but it is being upgraded to full two-way capability with
the installation of 750 MHz hybrid fiber coaxial technology. Tevel expects that
the upgrade of all of its systems will be substantially complete by mid-1999.
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PROGRAMMING. Tevel offers basic subscribers 45 channels of programming,
including a wide range of entertainment, news, sports, performing arts and
educational channels, as well as five pay-per-view channels in all of Tevel's
areas. Currently, over 40.0% of Tevel's subscribers purchase at least one
pay-per-view buy per month. Tevel is negotiating with the Ministry of
Communications with respect to the terms of an extension for Tevel's
pay-per-view license beyond September 1999 and the grant of a license for
Gvanim.
Tevel and the other Israeli cable television operators own a programming
company, Israel Cable Programming Company Limited ("ICP"). ICP purchases
programming rights for subsequent sale to cable television operators in Israel
and produces two cable-exclusive channels: a general entertainment channel and a
movie channel. A children's channel, a sports channel and a channel showing
nature, science and art documentaries are produced by third parties. The
shareholders of ICP are considering various alternatives for divesting their
interests in ICP, due to regulatory pressure.
COMPETITION. Because Tevel has exclusive cable television licenses, to date, it
has experienced no competition from other multi-channel television providers.
The Israeli government recently passed legislation, however, to grant licenses
to DTH satellite service operators. In January 1999, a license has been granted
to a group led by "Bezeq", the Israeli incumbent telecommunications service
provider, and another license may be granted to a second group. These operators
are expected to begin providing DTH satellite services by the fourth quarter of
1999. ICP may be required to sell to DTH satellite service operators its
channels that are currently offered exclusively to cable television operators,
and Tevel may be required to divest its ownership in ICP.
FRANCE: MEDIARESEAUX
OVERVIEW. UPC has a 95.0% economic interest in Mediareseaux, which currently
holds cable television franchises for 150,000 homes in the Marne-la-Vallee area
east of Paris. Mediareseaux began construction of its network in September 1996,
and as of December 31, 1998, Mediareseaux's system passed approximately 74,620
homes and had approximately 29,100 basic subscribers, giving it a penetration
rate of 39.0%. 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.
UPC recently agreed to buy the French cable assets from Time Warner. These
French systems are located in suburban Paris and Lyon, and in Limoges. The
number of homes passed and subscribers is 210,000 and 64,000, respectively. We
expect to close this purchase in the third quarter of 1999.
In July 1998, Mediareseaux obtained a 15 year telephone license for an area that
includes 1.5 million homes in the eastern suburbs of Paris and in September
1998, Mediareseaux began installing a telephone switch. Mediareseaux has begun
offering telephone services in February 1999 within its cable television
franchise area and has obtained frequencies for a trial offering of fixed
wireless local loop services. Mediareseaux also plans to offer Chello
Broadband's Internet access services in 1999. To expand its operations,
Mediareseaux is pursuing potential acquisition opportunities and plans to
develop these franchises as one clustered system offering integrated video,
cable telephone and Internet/data services.
The hybrid fiber coaxial network was started with a 750 MHz UHF-VHF frequency
band network with a 5-65 MHz return path. The systems' post-1998 construction
incorporates 860 MHz hybrid fiber coaxial capacity with a 5-65 MHz return
providing full two-way capability. As of December 31, 1998, Mediareseaux's
network passed approximately 50.0% of the 150,000 homes then in its franchise
areas. We expect the network to pass all 150,000 homes in its current franchise
areas by the end of 2000.
PROGRAMMING. Mediareseaux's current programming offers:
o a basic eight-channel package containing off-air, local and
promotional programs,
o four extended basic tiers, called News & Current Events, Youth &
Discovery, International Channels and Sports & Leisure, with five to
nine channels each,
o three premium tiers containing three children's channels, three sports
channels and four movie channels, and
o ten impulse pay-per-view channels.
COMPETITION. Mediareseaux competes with other video service providers in its
license areas including satellite providers such as Canal Satellite and TPS.
Mediareseaux expects to face competition mainly from "France Telecom", the
French incumbent telecommunications operator and Cegetel with the launch of its
cable telephone services. Upon the launch of its Internet access service,
Mediareseaux expects to face competition from France Telecom's Wanadoo service,
"Cegetel", which now includes AOL, Compuserve and HOL, and Infonie, among
others.
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HUNGARY: TELEKABEL HUNGARY
In June 1998, we increased our interest in Kabelkom, Hungary's largest operator
of cable television systems, from 50.0% to 100%. Shortly thereafter, Kabelkom
combined operations with Kabeltel, Hungary's second largest operator of cable
television systems, creating Telekabel Hungary. As of December 31, 1998,
Telekabel Hungary had 442,560 subscribers. There are no current plans to launch
telephone or Internet/data services in Telekabel Hungary's systems.
We are upgrading Telekabel Hungary's networks. As of December 31, 1998,
approximately 86,000 customers were already served by the rebuilt network. The
upgraded network throughout Budapest will be 750 MHz hybrid fiber coaxial
technology with 65 MHz return path. As of December 31, 1998, Telekabel Hungary's
network passed approximately 105,100 homes with hybrid fiber coaxial cable.
PROGRAMMING. Telekabel Hungary offers subscribers four tiers of programming
comprising approximately 35 channels:
o basic tier, which includes a limited number of broadcast and satellite
channels required by the government to be carried,
o an expanded basic tier, and
o a premium service, HBO-Hungary.
Approximately 15 channels, including HBO-Hungary, are available in Hungarian. In
the Telekabel Hungary systems, 75.0% of all subscribers passed by the upgraded
network take the expanded basic tier package.
COMPETITION. Telekabel Hungary currently averages over 86.0% penetration in its
service area and faces limited competition. We understand, however, that
potential competitors may begin to offer DTH satellite services in Budapest.
OTHER UPC SYSTEMS
UPC also owns and operates multi-channel television systems in other European
countries:
o MALTA. 50.0% of 70,400-subscriber television network.
o CZECH REPUBLIC. 100% of a cable and MMDS service in Prague and Brno,
the Czech Republic's second largest city.
o SLOVAKIA. Majority interests in three cable television systems with a
total of 21,000 subscribers. UPC recently agreed to acquire 95.6% of
the 156,000 subscriber systems based in Bratislava and surrounding
cities.
o ROMANIA. Majority interests in three cable systems with a total of
62,000 subscribers.
o MONOR, HUNGARY. 44.75% economic interest in a traditional telephone
and cable television system in the Monor region of Hungary. Monor has
85,000 homes in its franchise area, with 84,000 traditional telephone
homes passed and 68,340 cable television homes passed. It served
69,240 traditional telephone access lines and 30,620 cable television
subscribers as of December 31, 1998.
ASIA/PACIFIC OPERATIONS
We are a leading provider of multi-channel television services in Australia, New
Zealand and the Philippines. We believe that we are well-positioned to
capitalize on the strong demand for multi-channel television, telephone and
Internet/data services in Australia and New Zealand. While we believe that a
substantial portion of our growth in the region will come from the continued
development of our Australian operation, Austar, we also anticipate growth in
our New Zealand multi-channel television and telephone business, and our
Australian programming business through our 50% owned programming subsidiary,
XYZ Entertainment. As of December 31, 1998, our Asia/Pacific systems passed an
aggregate of 2.5 million television homes and had 0.5 million subscribers.
AUSTRALIA: AUSTAR
Austar is the only provider of multi-channel television services to virtually
our entire market of approximately 2.1 million homes in regional Australia. We
primarily use a digital DTH satellite technology to deliver our service which
has allowed us to roll out our service quickly and achieve subscriber growth. We
believe that the ability to be the first provider of multi-channel television
services in our markets has allowed us to establish a significant market
presence and strong brand awareness, factors which management believes provide
us with a competitive advantage. Approximately 71% of our services are provided
through DTH, approximately 27.0% through local MMDS systems and approximately
2.0% through wireline cable.
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Another significant event was Austar's purchase of East Coast Television Pty
Limited, or "ECT", in July 1998 consisting of approximately 9,000 subscribers as
well as various transmission equipment and MMDS licenses. Furthermore, Austar
was able to access an additional 0.5 million households located in ECT's
operating area on the east coast of Australia and in the state of Tasmania.
Austar began sales and marketing initiatives in these regions in August 1998.
PROGRAMMING. Throughout 1998 and early 1999, Austar negotiated new program
contracts directly with the majority of our program suppliers, including Optus
and Foxtel. This gave us the ability to enhance our program line-up and created
several new tiers of program services. We relaunched an enhanced programming
service in October 1998 using our new program contracts with suppliers. We
believe that, as a result of our exclusive DTH and MMDS programming rights with
Foxtel and our access to Optus channels, we are the only major multi-channel
television operator in Australia with the ability to offer to its subscribers a
full suite of all premium programming available in Australia. Austar's DTH
service offers 20 basic channels and eight additional tiered channels. Austar's
MMDS service offers 15 basic channels and four additional tiered channels.
Austar also offers an eight-channel "Digital Radio" service to its DTH
customers.
COMPETITION. The substantial majority of Austar's metropolitan markets are
either small (i.e., approximately 20,000 homes), and/or have relatively low
household densities (generally 25 to 75 homes per square kilometer as compared
to 100 to 130 homes per square kilometer in Australia's largest cities). As a
result, Austar believes that its metropolitan markets generally do not have
sufficient density to justify the construction of competitive wireline cable
systems. While we believe household densities could potentially support wireline
cable construction in areas representing approximately 20.0% of Austar's total
franchise homes, the relatively small size of these markets reduces the
attractiveness of constructing a competitive cable network. In addition, Austar,
as a licensed subscription television provider, is authorized to build wireline
cable systems in its markets and, where appropriate, could construct wireline
cable systems.
With the exception of the Foxtel cable television system currently extending
into Austar's 116,000-home Gold Coast metropolitan market, Austar does not
currently have any operational subscription television competitors in its
markets. At December 31, 1998, Austar had 23,000 subscribers in the Gold Coast
and estimates that Foxtel has 13,000 subscribers in this market.
NEW ZEALAND: SATURN
Saturn launched local and long distance telephone service to both residential
and business customers as well as enhanced services such as Centrex and a cable
modem service. As of December 31, 1998, Saturn's activated networks passed
approximately 41,000 homes and provided service to approximately 13,000
subscribers, including cable and telephone. In addition, Saturn has secured
additional rights to use existing poles to attach its network cable in markets
representing 500,000 homes, subject to local planning approval, and is exploring
the possibility of expanding its networks and services to these markets. As of
December 31, 1998, our average penetration rate for our telephone services and
for our cable television services was approximately 20% and approximately 15%,
respectively.
We believe that New Zealand, a market of 1.2 million homes, is attractive for a
new local operator that can provide combined video, voice and data services over
a high bandwidth network. New Zealand has a demographic profile similar to
Australia including high per capita income and strong television, VCR, PC and
cellular telephone penetration rates. Wellington City has over 50.0% PC
penetration and over 20.0% of homes subscribing to the internet. In addition,
New Zealand imposes virtually no pricing regulation and only limited program
content regulation and permits operators to offer combined and bundled
multi-channel television, telephony service and internet access over one
network. There is currently only one significant multi-channel television
provider that offers a five-channel UHF-delivered subscription service and one
other local phone service provider.
COMPETITION. Saturn's major telephony competitor is "Telecom", New Zealand's
largest telecommunications service provider with nearly a 100% share of local
loop revenues, 75.0% of national and international toll revenues and 90.0% of
cellular revenues. During 1996 and 1997, Telecom constructed an HFC network to
70,000 homes in various parts of New Zealand and began offering a pay TV
service. In 1998, Telecom discountinued its pay television service and Telecom
now appears to be pursuing an asymmetrical digital subscriber line ("ADSL")
strategy for high speed internet access.
There are currently four broadcast networks in New Zealand as well as several
other free-to-air regional channels. The largest provider of subscription
television services in New Zealand is "Sky", which operates a five-channel
encrypted UHF subscription television service and has recently launched a
20-channel digital satellite service. Although Sky offers a popular sports
channel on an exclusive basis, we believe Sky does not currently offer value and
programming diversity or television/telephony bundling that Saturn offers.
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AUSTRALIAN PROGRAMMING: XYZ ENTERTAINMENT
Through our interest in XYZ Entertainment, we provide five channels (the "XYZ
Channels") to a subsidiary of Austar, which in turn supplies them to Austar and
Foxtel. The XYZ Channels are available to the majority of Australia's
approximately six million television households, including all households
marketed via MMDS and DTH by Austar and Foxtel. The XYZ Channels are also
distributed to Foxtel for cable distribution pursuant to a carriage agreement
between Foxtel and Austar that has been warranted to XYZ Entertainment as having
a term through 2020. XYZ Entertainment's agreement with Austar provides for
fixed per subscriber prices. We understand the cable carriage agreement between
Austar and Foxtel provides for substantial minimum subscriber guarantees. Austar
also has an agreement for the distribution of the XYZ channels to Optus Vision,
although distribution has yet to commence. As of December 31, 1998, the XYZ
Channels were distributed to approximately 700,000 multi-channel television
subscribers.
OTHER UAP OPERATIONS
Through UAP, we also provide multi-channel television services in the
Philippines and in Tahiti, and own a wireless data network in Australia. Our
operations in the Philippines are held through our approximately 20% economic
interest in Philipino Cable Corporation, which operates a wireline cable service
providing service to 151,500 subscribers and passing 401,800 homes as of
December 31, 1998. Our Tahitian operations are held through our up to 90.0%
economic interest in Telefenua, which operates a 16 channel MMDS service
providing service to 6,100 subscribers and passing approximately 20,000 homes as
of December 31, 1998. We also own a 100% economic interest in United Wireless
which operates a nationally linked public wireless data network in Australia.
United Wireless' target markets are the transportation industry for fleet
management requirements and the utility, fire and vending industries for fixed
telemetry applications, including remote monitoring. In December 1998, we agreed
to sell our 49.0% interest in a joint venture that owns a microwave relay
network in Hunan province, China, and provides transmission of video channels to
cable television throughout the province to AmTec. The selling price was
approximately $12 million in AmTec stock. The closing is conditioned on
shareholder approval.
LATIN AMERICA OPERATIONS
Through ULA, we own interests in and operate multi-channel television
distribution and telecommunications systems in Chile, Brazil, Mexico and Peru.
As of December 31, 1998 our Latin American systems passed an aggregate of
approximately 2.2 million homes and had approximately 491,700 subscribers.
CHILE: VTRH
VTRH
Our largest operation in Latin America is our Chilean operation, VTRH. Through
VTRH we are the largest provider of multi-channel television services including
each of wireline cable television, MMDS and DTH technologies and a growing
provider of telephone services in Chile. Wireline cable is our primary business
representing approximately 94.4% of our subscribers while MMDS and DTH represent
approximately 3.2% and approximately 2.4%, respectively. We have an estimated
56.0% market share of the cable television services throughout Chile and an
estimated 38.0% market share within Santiago, Chile's largest city. In 1998, we
began the wide-scale roll-out of residential cable telephone service in six
communities contained within Santiago and one major city outside Santiago and
are currently expanding our efforts to include additional areas throughout
Chile.
On April 29, 1999, an indirect wholly owned subsidiary of ours acquired a 60.0%
interest in VTRH (the "VTRH Acquisition"). This acquisition, combined with the
40.0% interest in VTRH that is owned by another indirect wholly owned subsidiary
of ours, gives us an indirect 100% interest in VTRH. The purchase price for the
60.0% interest in VTRH was approximately $258.0 million in cash, which included
repayment of advances from the other shareholders of VTRH and certain other
expenses. In addition, we provided capital for VTRH to prepay approximately
$126.0 million of existing bank indebtedness and a promissory note from us to
one of the other shareholders of VTRH.
To finance the prepayment of VTRH's indebtedness and a portion of the purchase
price for the VTRH Acquisition, we concurrently sold in a private transaction
$208.9 million of 10.875% Senior Discount Notes due 2009 (the "1999 Notes"). The
remaining portion of the VTRH Acquisition was funded with cash on hand and
approximately $145.0 million borrowed under a Senior Secured Credit Facility
between VTRH and a syndicate of banks (the "VTRH Bank Facility").
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The VTRH Bank Facility consists of two tranches - Tranche A, which is a single
term loan facility with an aggregate principal amount of $140.0 million,
substantially all of which was borrowed for the VTRH Acquisition, and Tranche B,
which is a three-year term loan facility, with an aggregate principal amount of
up to $80.0 million. Both tranches have been guaranteed by VTRH and its
subsidiaries. The banks are in the process of syndicating the final
approximately $50.0 million of the VTRH Bank Facility. We have agreed to
participate in the syndication as necessary.
The 1999 Notes have essentially the same terms as our outstanding 10.75% Senior
Secured Discount Notes due 2008, except for the maturity and coupon rate and
that the 1999 Notes are not secured.
As of December 31, 1998, our VTRH systems passed 1.6 million homes throughout
Chile and approximately 24.0%, or approximately 372,000 homes, subscribed to our
wireline cable television services. We also serve 12,600 customers via MMDS and
9,600 customers via DTH. As of December 31, 1998, approximately 218,000 of our
cable homes passed were capable of using our telephone services and
approximately 21,000 homes subscribed to these services. Approximately 28.0% of
our telephone subscribers also subscribe to our cable services.
PROGRAMMING. VTRH's channel line-up consists of 50 to 65 channels segregated
into two tiers of service -- a basic service with 45 to 60 channels and a
premium service with five channels. We offer basic tier programming similar to
the basic tier program line-up in the United States plus more premium-like
channels such as HBO, Cinemax and Cinecanal on the basic tier. As a result,
subscription to our existing premium service package is limited because our
basic cable package contains similar channels. In order to better differentiate
our premium service and increase the number of subscribers to premium service
and, therefore, average monthly revenues per subscriber, we anticipate gradually
moving some channels out of our basic tier and into premium tiers or
pay-per-view events. We are also considering offering additional movies and
believe it may be possible to offer adult programming on additional premium
tiers in the future. For the programming services necessary to compile our
channel lineups, we rely mainly on international sources including the United
States, Europe, Argentina and Mexico. Domestic cable television programming is
only just beginning to develop around local events such as soccer matches.
COMPETITION. There is only one other major cable television provider in Chile,
"Metropolis-Intercom". Metropolis overlaps approximately 60.0% of our homes
passed and we overlap approximately 90.0% of its homes passed. Our head-to-head
competition with Metropolis in many areas affects our pricing and programming
flexibility. We believe that our churn is the result, in part, of Metropolis'
marketing efforts. Due to the high capital expenditures required to build-out a
new wireline network, we believe significant barriers to entry exist. Metropolis
is the only other potential MMDS competitor, and controls the licenses for 4 of
the 16 MMDS analog frequencies available in Chile but does not currently
transmit any channels. Because MMDS is only capable of providing 16 analog
channels of service in comparison to the wireline cable offering of 50 to 65
channels, we do not believe analog MMDS is a viable competitor to cable as a
whole. There is only one other major DTH, provider in Chile, Sky, which launched
service last year. Because wireline cable is significantly penetrated and
offered at lower rates than DTH, we do not believe that DTH poses an immediate
significant threat.
VTRH TELEPHONE SERVICES
We began marketing cable telephone services to residential customers in several
communities within Santiago in 1997. We offer basic dial tone service as well as
several value added services including voice mail, caller I.D., 3-way calling,
speed dial, wake up service, call waiting, call forwarding, local bill detail,
unlisted number and directory assistance. We primarily provide service to
residential customers who require one or two telephone lines. We also provide
service to small businesses and home offices requiring up to twelve telephone
lines. In general, we have been able to achieve approximately 20.0% to 30.0%
penetration of our new telephone markets within the first year of marketing. By
the end of 1999, we plan to provide cable telephone service to three additional
cities outside Santiago and four additional communities in Santiago.
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As of December 31, 1998, approximately 14.0% of our network was capable of
providing cable telephone service. Since 74.0% of our network currently has 750
MHz of capacity, our costs to upgrade to two-way capable architecture are
relatively low. In areas where our network has less than 750 MHz of capacity, we
either have to retrofit existing network or rebuild the network to upgrade to
two-way capability. Our plan is to be technologically capable of providing
service to approximately 200,000 to 300,000 additional two-way homes during 1999
and to be able to provide telephone service to 1.3 million homes by 2002.
We have the necessary interconnect agreements with local carriers, cellular
operators and long distance carriers to allow us to provide our telephone
services. Interconnect agreements are mandatory for all local carriers.
COMPETITION. "CTC" is our only major competitor for local residential telephone
services in Chile. CTC provides telephone service to approximately 91.0% of the
total telephone lines throughout Chile. Other local residential telephone
service providers include Telefonica Manquehue S.A. and Complejo Manufacturero
de Equipos Telefonicos in Santiago. There are also two other telephone providers
in Chile who primarily serve business customers. Because of our geographically
extensive cable network, we believe we currently are the only company capable of
competing with CTC for residential telephone business. Metropolis currently
leases its cable network from CTC and currently does not provide cable telephone
service. We believe that we are in a strong position to compete with CTC as a
result of our extensive cable network, our quality cable telephone technology
and our good relationships with our customers. In addition, we do not believe
that wireless local loop telephone technology will be a competitive threat to
traditional or cable telephone because the mountainous topography of Chile makes
it difficult and expensive to implement.
OTHER ULA OPERATIONS
We also provide multi-channel television services in Brazil, Mexico and Peru.
During 1998, our Peruvian and Brazilian systems generated approximately 6.1% of
system-level consolidated revenue for our Latin America operations. We have
ownership interests in two systems in Brazil: (i) a 46.3% interest in Jundiai,
which holds nonexclusive cable television licenses for the city of Jundiai that
we are currently negotiating with our partner to sell and (ii) a 100% interest
in TVSB, an owner and operator of a 31 channel exclusive license MMDS system. We
have a 49.0% interest in Megapo in Mexico. We are also involved in the
development of two cable systems in Peru, in Arequipa and Tacna, through Cable
Star in which we hold a 60.0% interest. We also provide programming in Latin
America countries through our 50.0% ownership interest in MGM Networks LA. As of
December 31, 1998, MGM Networks LA had 3.4 million subscribers.
OTHER
Since 1997 we have provided management and technical services to ARA Group
International, Ltd. ("ARA") which has built a multi-channel MMDS Service that
will provide multi-channel television service throughout Saudi Arabia. We
recently exercised our option to acquire 49.0% of ARA. The acquisition is
subject to a number of conditions, including achievement of certain minimum
levels of activation and service. We estimate the purchase price for this 49.0%
interest will be between $55 million and $75 million. We are exploring various
sources to finance this potential acquisition.
EMPLOYEES
As of December 31, 1998, we, together with our consolidated subsidiaries, had
approximately 2,500 employees. Certain of our operating subsidiaries, including
our Austrian, Dutch, Norwegian and Australian systems are parties to collective
bargaining agreements with some of their respective employees. We believe that
our relations with our employees are good.
REGULATION
The provision of video, telephone and Internet/data services in the countries in
which we operate is regulated. The scope of regulation varies from country to
country. Below is a discussion of certain regulatory issues in the countries in
which our primary operations are located.
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AUSTRIA
Each of the five municipalities in which the Telekabel Group offers services
holds, directly or indirectly, 5.0% of the local operating company. Each member
of the Telekabel Group has entered into an agreement with its municipality.
Under the agreement between Telekabel Wien and the City of Vienna, decisions
regarding the subscriber rates and programming content of Telekabel Wien's basic
subscription package require the unanimous approval of Telekabel Wien's board of
management, of which the city appoints one member. While the board of management
in the past has always unanimously approved these decisions there can be no
assurance that the municipality's director will continue to approve these
decisions in the future and not hinder the implementation of our strategies for
our video, telephone or Internet/data services. If the managing directors cannot
reach agreement, the parties have agreed to call a shareholders meeting to
decide the matter. Under Austrian law, a majority shareholder, such as us, may
generally take a decision at a shareholders meeting rather than through the
board of management. However, UPC, as the majority shareholder, has never taken
this action and does not anticipate doing so in the future. The agreements
between the other Telekabel Group members and their municipalities require each
member to consult with its municipality prior to making similar business
decisions.
VIDEO SERVICES. The Cable and Satellite Broadcast Radio Law governs the
provision of video services in Austria. The Regional Radio and Cable Broadcast
Authorities regulate the operation of cable television networks. Under the Cable
and Satellite Broadcast Radio Law, Telekabel Group is required to carry two
"must carry" public Austrian channels in its basic tier service. In July 1997,
previous prohibitions on cable network operators transmitting programming
produced by them were lifted. Pursuant to the terms of the agreement with
Vienna, however, Telekabel Wien is prohibited from producing programming.
Pricing of the basic tier service is subject to price control by the Austrian
Wage and Price Commission. Approval from the Wage and Price Commission generally
must be sought where the desired increase is greater than 50.0% of the consumer
price index. Historically, all of Telekabel Group's price increase applications
have been approved. Pricing of services other than the basic tier is not
regulated.
TELEPHONE AND INTERNET/DATA SERVICES. The Telecommunications Act which came into
force August 1, 1997, liberalized the telecommunications sector in Austria as of
January 1, 1998, in compliance with "EU" directives. As a result, cable
television networks may be used to provide telecommunications services.
Telekabel Wien has received a license to provide public voice telephone services
in the entire Republic of Austria and a license for the public offer of leased
lines through its cable network. The licenses are granted for an unlimited
period of time provided that the offering of each respective service begins by
February 1999 at the latest.
Austria's Telecommunications Act generally implements the terms of the EU
Directive on Interconnection in Telecommunications. In November 1998, the
Telekabel Group entered into an interconnect agreement with PTA. Difficulty and
delay in negotiations and agreement led Telekabel Group to seek the intervention
of the Austrian telecommunications regulator, which determined the principal
terms of the agreement. PTA has brought an action in the Austrian courts to
revise the terms of the interconnection arrangement.
Although there are no voice-telephone pricing regulations, the Telekom Control
Commission must be notified of the tariff structure and any subsequent rate
increases.
Under Austria's Telecommunications Act, Telekabel Group does not require
licenses to provide Internet/data services. It need only notify the Telekom
Control Commission of the services it intends to provide.
BELGIUM
VIDEO SERVICES. In Belgium, a cable operator needs to obtain a governmental
authorization from the appropriate Community to operate a cable television
system. During 1996, 1997 and 1998, all of TVD's non-exclusive authorizations
were renewed for nine years. Special authorizations are also required for the
distribution of non-EU programs, both in Flanders and in Brussels and we have
requested a special authorization in Brussels.
In all of the regions of Belgium, cable television operators are required to
transmit particular local, national and other channels as part of their basic
tier service. There are usually between 11 and 13 of these "must-carry"
channels.
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Price increases require the approval of the Ministry of Economic Affairs and
must be justified by an increase in the cost of providing the service. Increases
are generally approved as long as the increase is below the level of inflation.
Historically, all of TVD's price increases have been approved.
Since 1995, cable regulations came into force, which granted cable operators a
right of way for the use of public and private property to install and exploit
cable networks. Prior to the 1995 regulations, TVD was a party to concession
agreements with the municipalities in its franchise areas, which obliged it to
pay certain franchise fees. TVD has not paid franchise fees since 1995 when the
cable regulations went into effect. In Etterbeek, however, TVD pays the
municipality an annual amount. Nonetheless, certain municipalities have
requested payment of the old franchise fees, which amount to 5.0% of the
operating system's annual gross revenues. TVD does not believe that it is
obliged to pay these fees because it believes that the 1995 regulations have
superseded the concession agreements.
TELEPHONE AND INTERNET/DATA SERVICES. The provision of cable telephone is
governed by the law of March 21, 1991, as amended by the law of 1997, together
with secondary regulations. These provisions allow telecommunications services
to be provided through cable television networks. TVD had a provisional license
to build and operate a public telecommunications network and has applied for a
permanent license to build and operate a telecommunications network. TVD has
submitted an application for a license to offer voice telephone services and
expects to receive a license during the first half of 1999.
INTERNET/DATA SERVICES. TVD must make certain notifications to the Institut
Belge des Postes et Telecommunications regarding the Internet/data services it
intends to provide. In addition, TVD is required to hold either a provisional or
a permanent license to build and operate a telecommunications network in order
to offer Internet/data services on its own infrastructure.
THE NETHERLANDS
VIDEO SERVICES. The liberalization of the Dutch telecommunications and cable
television sector has generally proceeded at a quicker pace than set by the EU
directives. The new Telecommunications Act took effect, with the exception of a
few provisions, on December 15, 1998 and further liberalizes these sectors. The
new Dutch Telecommunications Act does not require a license for the
installation, maintenance or operation of a cable network. Existing network
operators need only register with the Dutch Independent Post and
Telecommunications Authority within six months after December 15, 1998. The
registration of a network does not give an operator any exclusive right. Any
person may install, maintain and operate a new network alongside an existing
one. The new Dutch Telecommunications Act gives cable network operators and
providers of other public telecommunication networks rights of way to install
and maintain cable, which are identical to those currently enjoyed by KPN, our
principal competitor in The Netherlands.
PROGRAMMING. Pursuant to the Dutch Telecommunications Act and the Media laws,
cable television network providers must transmit to all of its subscribers at
least 15 programs for television and at least 25 programs for radio, including
approximately seven television and nine radio "must carry" channels. Our Dutch
operating companies originally purchased their cable television networks from
the local municipalities. Pursuant to the terms of the agreements with the
municipalities, the Dutch operating companies are obligated to continue to
provide basic tier services of between 20 and 30 television channels, including
the 15 required under the Media laws.
Under several of the agreements with the municipalities described above, for a
number of years the respective municipality's consent is required for increases
of the price of the basic tier service which exceed certain agreed levels. Such
consent is not typically required for price increases resulting from costs
beyond the control of the operating companies, such as copyright fees, consumer
price index increases and municipal duties and levies, which can be passed on to
subscribers. Because the base subscription rate for the basic tier service has
been kept at a low level, particularly in Amsterdam, the operating companies
make up their revenue by charging programming suppliers carriage fees for the
transmission of their channels. As A2000's basic tier price has been
particularly restricted, A2000's carriage fees have been higher than those of
the other Dutch systems held by UTH. Some of A2000's programming suppliers have
been unwilling to pay such carriage fees and have withdrawn their channels from
A2000's offering. Some of them have brought legal actions challenging the
carriage fees, arguing that A2000's carriage fees are an abuse of its market
strength. To date, none of A2000's programming suppliers have succeeded in their
actions against A2000.
The price of the basic tier service may also be regulated by the Dutch Ministry
of Culture, but it has not yet intervened to stop price increases.
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TELEPHONE AND INTERNET/DATA SERVICES. Until recently, the fixed
telecommunications infrastructure was a statutory monopoly of KPN. As described
above, the Dutch telecommunications sector has been liberalized in advance of
and in accordance with European Union telecommunications policy and cable
television networks may now be used for the provision of all telecommunications
services.
While A2000's telephone service is not currently subject to price regulation,
the prices of its competitor, KPN, are regulated. The Dutch Independent Post and
Telecommunications Authority has recently indicated that KPN should reduce its
end-user tariffs and substantially reduce its interconnection prices to reflect
costs.
INTERNET/DATA SERVICES. Under the Dutch Telecommunications Act, Internet/data
services are regulated as telecommunications services. As such, our Dutch
operating systems need only register with the Dutch Independent Post and
Telecommunications Authority as providers of public telecommunication services
and/or networks.
NORWAY
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. In Norway, the simultaneous and
unchanged transmission of television signals over a cable television network is
not subject to any licensing or registration requirements.
Cable television providers have "must-carry" obligations obliging them to
include three national channels and typically one local television channel in
their basic tier services. Distribution of any programming that is not a
simultaneous and unchanged retransmission requires a programming license issued
by the Ministry of Cultural Affairs. Because pay-per-view programming and some
other services are not strictly simultaneous retransmission, Janco has obtained
a three-year programming license.
The provision of the basic tier service is subject to price control. A cable
operator is only allowed to increase the basic package subscription fee in line
with the Official Consumer Price Index. There are no specific pricing
restrictions on expanded basic tier services.
TELEPHONE SERVICES. Since January 1, 1998, alternative networks in Norway have
been permitted to offer voice telephone services in accordance with the terms of
the applicable EU directives. For telephone operators and service providers
without significant market power, as is currently the case with Janco, no
license is required to offer voice telephone services. Such providers need only
register with the Norwegian Post and Telecommunications Authority.
Providers of public telephone without significant market power, including Janco,
are not subject to any specific pricing regulations.
INTERNET/DATA SERVICES. Cable television networks do not require a license or
notification to provide Internet/data services. They need only register the
service with the Norwegian Post and Telecommunications Authority.
FRANCE
Mediareseaux is authorized to operate cable networks for audio-visual services
in the territory of Syndicat Mixte de Videocommunication de l'Est parisien and
the territory of the city of Rosny-sous-Bois pursuant to two licenses, valid
until 2026 and 2022 respectively, granted by the Conseil Superieur de
l'Audiovisuel. In order to operate its cable television infrastructure, however,
Mediareseaux was required to enter into public service delegation agreements
with local authorities. The terms of Mediareseaux's agreements with these two
territories govern, among other things, Mediareseaux's channel line-up and cable
subscription rates. The agreements also give the respective territories the
option to purchase Mediareseaux's network at the expiration of the agreements
for a price equal to its usage value as estimated under the terms and conditions
of the agreements. Mediareseaux has also entered into public domain occupancy
agreements with each city in its region giving Mediareseaux the right to
establish its cable network in the public domain.
Mediareseaux holds licenses granted by the Minister of Telecommunications in
June 1998 for the establishment and operation of a public telecommunications
network and for the provision of voice telephone in three French departments of
the Paris region. The licenses were granted for a period of 15 years, are
non-transferable and can only be revoked for a material breach of
telecommunications regulations. Pursuant to the Post and Telecommunication Code,
France Telecom's interconnection rates must be cost-oriented and offered on
non-discriminatory terms. Mediareseaux has entered into an interconnect
agreement with France Telecom. Mediareseaux expects, however, that it will seek
to renegotiate some provisions of the interconnect agreement during 1999.
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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 in 1999. 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, franchise exclusivity will
be eliminated and other operators will be permitted to apply for cable
television licenses to compete in the cable television market.
The 1987 Bezeq law, which allowed the introduction of cable television, gave the
new cable companies exclusive rights to download and rebroadcast satellite
programming until 2003. The cable television operators therefore challenged the
legal basis of the Ministry of Communications policy of introducing direct to
home satellite service before that date. In November 1998, the Israeli High
Court of Justice decided that direct to home satellite service could be
introduced before 2003. The cable television operators are seeking compensation
for the loss of exclusivity prior to 2003. This could come in the form of some
additional right or rights with respect to the content or services they provide.
FRANCHISE AGREEMENTS. Tevel holds exclusive cable television franchise
agreements that were granted for a period of 12 years and expire in 2002. These
franchises include a four-year renewal option. Gvanim, which was recently
acquired by Tevel, holds exclusive franchises which expire in 2005 and 2002. As
with the Tevel franchises, the Communications Ministry is authorized to extend
both of these franchises for an additional four years. Tevel and Gvanim pay the
government royalties of 5.0% of their gross revenues. Upon the opening of the
telecommunications market to competition, exclusive cable television franchises
are expected to be replaced with long-term renewable, non-exclusive licenses
that will permit cable operators to continue providing cable television services
and to begin to offer additional telecommunications services such as voice
telephone and Internet/data services.
Pursuant to its franchise agreements, Tevel must provide within its basic
service five tape-delivered channels subtitled in Hebrew: a movie channel, a
general entertainment channel, a children's channel, a nature and science
channel, and a sports channel.
In addition, pursuant to the 1987 Bezeq Law, cable operators must obtain
authorization to add or remove channels from their service from the Ministry of
Communications. Further restrictions prohibit cable television operators from
carrying advertisements on their tape-delivered channels. Tevel currently is
required to provide three "must-carry" off-air channels. Its current arrangement
currently prohibits "tiering" of video services. In light of expected future
competition by the DTH satellite service providers, including the fact that the
DTH satellite service providers will be entitled to provide "tiering" of their
video services, Tevel and other cable television providers have applied to the
Ministry of Communications for approval of "tiering" of their respective
services upon opening the multi-channel television business to competition. The
Ministry of Communications has indicated its plans to delay introduction of
"tiering" by cable television operators by the earlier of 18-36 months or the
loss of 15% of cable subscribers. Tevel and other cable television operators
have filed an appeal to the High Court of Justice challenging the Ministry's
intention.
Cable television service subscription fees are subject to regulation through the
franchise agreements and through the arrangement approved by the Restrictive
Trade Practices tribunal. Currently, this arrangement is more restrictive than
the franchise agreements and permits basic service subscription fees to be
increased by a maximum of 1.9% per year above the cost of living index.
TELEPHONE AND INTERNET/DATA SERVICES. As part of the proposed liberalization of
the telecommunications market in 1999, Tevel and Gvanim expect to be permitted
to supply Internet/data and local telephone services in their franchise areas.
HUNGARY
Cable operators in Hungary are not granted franchises; however, all cable
operators must be properly registered with the appropriate government agency.
Moreover, although there is no rate regulation in Hungary, rates are subject to
consumer pricing and anti-competition reviews by the government. Further, a
single cable operator may not provide service to homes exceeding in the
aggregate one-sixth of the Hungarian population.
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AUSTRALIA
The provision of subscription television services in Australia is regulated by
the Australian federal government under various Commonwealth statutes. In
addition, State and Territory laws, including environmental and consumer
contract legislation, may impact the construction and maintenance of a
transmission system for subscription television services, the content of those
services, as well as on various aspects of the subscription television business
itself.
The Australia Broadcasting Services Act of 1992 ("BSA") regulates the ownership
and operation of all categories of television and radio services in Australia
including wireline cable, DTH, MMDS or any other means of transmission. The BSA
regulates subscription television broadcasting services by requiring each
service to have an individual license. Companies associated with Austar hold
approximately 100 non-satellite and 50 satellite subscription television
broadcasting licenses. These licenses, together with Austar's MMDS licenses,
enable Austar to provide subscription television broadcasting services by MMDS
in its operating areas. Austar's MMDS licenses are due to expire during 1999.
Although renewal is not automatic, Austar may apply to a government regulator
for renewal and if renewal is not granted the decision is reviewable by an
administrative appeals body.
Foreign ownership of "company interests" of subscription television broadcasting
licenses is limited to 20% by a single foreign person and an aggregate of 35% by
all foreign persons. "Company interests" under the BSA mean, in broad terms, a
beneficial entitlement to, or an interest in, shares of the company, being in a
position to exercise control of votes as a poll at a shareholders meeting,
having a beneficial entitlement to a dividend, a share of profits under the
company's memorandum and articles of association or shareholder distributions
upon liquidation or otherwise. Currently, our indirect interests in the
companies that hold the licenses are in the form of debentures and not company
interests under the BSA.
Our increase in our ownership of Austar and certain amendments to the articles
of association and securityholder agreements of Austar made in 1995 affected the
number of Austar directors designated by us and the manner in which those
directors are elected. While those matters did not require any advance
notification or approval under Australian law, they could be reviewed in the
future by the Treasurer of Australia under provisions of the Foreign Acquisition
and Takeover Act ("FATA"). We are currently considering restructing and
streamlining Austar's corporate structure. We plan to seek the Treasurer's
approval of this restructuring under FATA. We believe the Treasurer will approve
this restructuring.
CHILE
Cable and telephone applications for concessions and permits are submitted to
the Ministry of Transportation and Telecommunications which, through the
Subsecretary of Telecommunications, is the government body responsible for
regulating, granting concessions, and registering all telecommunications.
Wireline cable television licenses are non-exclusive and granted for indefinite
terms, based on a business plan for a particular geographic area. There is an
18.0% Value Added Tax levied on multi-channel television services but no royalty
or other charges associated with the re-transmitting of programming from off-air
broadcasting television networks. MMDS licenses have renewable terms of 10
years. VTRH has cable permits in most major and medium sized markets in Chile.
Cross ownership between cable television and telephone is also permitted.
The General Telecommunications Law of Chile allows telecommunications companies
to provide service and develop telecommunications infrastructure without
geographic restriction or exclusive rights to serve. Chile currently has a
competitive, multi-carrier system for international and local long distance
telecommunications services. Prices for local services are currently determined
by regulatory authorities until the market is determined to be competitive. The
maximum rate structure is determined every five years. Local service providers
with concessions are obligated to provide service to all concessionaires who are
willing to pay for an extension to get service. Local providers must also give
long distance service providers equal access to their network connections.
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(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
----------------------------------------------------------------------------
For information applicable to this item, see the notes to the consolidated
financial statements contained in Item 8 "Financial Statements and Supplementary
Data".
ITEM 2. PROPERTIES
- --------------------
We lease our executive offices in Denver, Colorado, as well as our regional
corporate offices. Our various operating companies lease or own their respective
administrative offices, headend facilities, tower sites and other property
necessary for their operations.
ITEM 3. LEGAL PROCEEDINGS
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Other than as described below, we are not a party to any other material legal
proceedings, nor are we currently aware of any other threatened material legal
proceedings. From time to time, we may become involved in litigation relating to
claims arising out of our operations in the normal course of our business.
In April 1997, following a trial in the United States District Court for the
District of Colorado, the Company obtained a jury verdict against The Wharf
(Holdings) Limited ("Wharf Holdings"), its wholly-owned subsidiary, Wharf
Communications Investments Limited and Wharf Holdings' deputy chairman, Stephen
Ng, on claims of securities fraud, fraud, breach of fiduciary duty, breach of
contract and negligent misrepresentation, and was awarded $67,000 in
compensatory damages and $58,500 in exemplary damages. In May 1997, the Court
awarded prejudgment interest of $28,200, and entered judgment on the verdicts.
In October 1997, the Court denied the defendants' motion for a reduction in the
amount of damages, for a new trial, and/or for a judgment as a matter of law. On
November 4, 1997, the defendants appealed the judgment to the United States
Court of Appeals for the Tenth Circuit. On December 31, 1997, Wharf Holdings
filed a separate appeal to the Tenth Circuit related to the contempt sanctions
that the District Court imposed as a result of Wharf Holdings' refusal to turn
over certain assets in satisfaction of the judgment. On January 29, 1998, Wharf
Holdings posted a $173,500 supersedeas bond to secure the judgment entered in
favor of the Company. Although the Company intends to vigorously defend the
appeals, there can be no assurance that the judgment will be affirmed or that
the damages will be collected.
The territorial government of Tahiti (in French Polynesia) had legally
challenged the decree and authority of the Conseil Superieur de l'Audiovisuel
("CSA") to award Telefenua the authorizations to operate an MMDS service in
French Polynesia. The French Polynesian's challenge to France's authority to
award Telefenua an MMDS license in Tahiti was upheld by the Conseil d'Etat, the
supreme administrative court of France. The territorial government of Tahiti
then brought an action in French court seeking cancellation of the MMDS licenses
awarded by the CSA to Telefenua. On November 25, 1998, the Conseil d' Etat
cancelled the MMDS licenses awarded to Telefenua. Telefenua is in the process of
seeking a new authorization. We have no reason to believe that a new
authorization will not be granted. If Telefenua does not obtain a new
authorization, there is no assurance that Telefenua will receive any
restitution. In addition, any available restitution could be limited and could
take years to obtain.
On July 14, 1998, UIH-SFCC Holdings, L.P. ("UIH-SFCC") filed a complaint in the
United States District Court for the District of Colorado, for damages for
breach of contract, breach of fiduciary duty and to enforce UIH-SFCC's rights as
General Partner in UIH-SFCC, a Colorado Limited Partnership which owns an
interest in SFCC, the 100% parent of Telefenua. The three defendants are Loic
Brigato, Winfred Anderson and Yoshiko Payne, limited partners of UIH-SFCC. On
September 27, 1998, UIH filed a parallel action in the District Court for the
State of Colorado. Specifically, the complaints allege that the defendants have
refused to abide by the terms of the Partnership Agreement and have taken
actions highly detrimental to Telefenua. UIH-SFCC seeks monetary damages, a
decree of specific performance requiring defendants to perform their obligations
and a constructive trust over defendants' partnership interest. Defendants have
filed in the federal court action a motion to dismiss the complaint for lack of
subject matter jurisdiction. There has been no decision issued as of this date.
We intend to vigorously defend our position.
29
<PAGE>
On April 20, 1999, a class action was filed in the District Court of Tel Aviv
against several cable operators in Israel, including Tevel. The complaint
alleges that the cable operators have taken advantage of their monopoly position
in the market by charging excessive prices for the services provided. The
plaintiffs are seeking damages in the amount of approximately NIS1,000
(approximately $240) per subscriber and a judicial order instructing Tevel to
reduce its subscriber fee to the alleged fair market price. The plaintiffs have
also applied for a judicial order against the Ministry of Communication to avoid
considering the extension of Tevel's cable franchise term for unfair
exploitation and monopoly status. Tevel's cable television service subscription
rates are subject to governmental regulation through franchise agreements and
through the arrangement approved by the Restrictive Trade Practices Tribunal.
Tevel intends to vigorously defend itself against these allegations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
On December 17, 1998, the Company held its 1998 annual meeting of stockholders.
At this meeting, the stockholders considered and approved the following:
1. The election of Lawrence F. DeGeorge, Bruce H. Spector and John P. Cole as
Class II Directors with the term of each to continue until the 2001 annual
meeting of stockholders;
2. The election of John F. Riordan as a Class III Director with his term to
continue until the 1999 annual meeting of stockholders;
3. The Company's Stock Option Plan for Non-Employee Directors; and
4. The appointment of Arthur Andersen LLP as the independent auditors for the
Company for the fiscal year covered by this Annual Report on Form 10-K.
30
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- -------------------------------------------------------------------------------
The Company's Class A Common Stock trades on the Nasdaq Stock Market sm under
the symbol "UIHIA". The following table sets forth the range of high and low
sale prices reported on the Nasdaq Stock Market sm for the periods indicated:
High Low
------- -------
Ten months ended December 31, 1998:
First Quarter.......................................... $19.2500 $14.0000
Second Quarter......................................... $19.4375 $10.1875
Third Quarter.......................................... $16.8750 $ 7.7500
December, 1998......................................... $20.5000 $15.8750
Year ended February 28, 1998:
First Quarter.......................................... $10.2500 $ 8.2500
Second Quarter......................................... $11.5000 $ 9.7500
Third Quarter.......................................... $13.7500 $10.3125
Fourth Quarter......................................... $14.5625 $10.3750
As of May 3, 1999, there were approximately 91 holders of record of Class A
Common Stock and 30 holders of record of Class B Common Stock.
The Company has never paid cash dividends on its common stock and is currently
restricted from paying cash dividends by the terms of the indentures governing
the Company's senior secured discount notes. See Item 7 "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Item 8
"Financial Statements and Supplementary Data".
ITEM 6. SELECTED FINANCIAL DATA
- ---------------------------------
The following selected annual consolidated financial data have been derived from
our audited consolidated financial statements. The Company's consolidated
financial statements do not consolidate the operating results of its
minority-owned affiliates, including UPC prior to December 11, 1997. The data
set forth below is qualified by reference to, and should be read in conjunction
with, our audited consolidated financial statements and notes thereto and also
with Item 7 "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
31
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
For the Years Ended
For the Ten -------------------------------------------------------
Months Ended February 28,
December 31, ----------------------- February 29, February 28,
1998 1998 1997 1996 1995
------------ ---------- ---------- ----------- ------------
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue.................................................. $ 254,068 $ 98,622 $ 31,555 $ 2,870 $ 1,613
System operating expense................................. (122,811) (65,631) (26,251) (4,224) (1,651)
System selling, general and administrative expense....... (105,226) (62,803) (33,655) (3,524) (2,103)
Corporate general and administrative expense............. (194,767) (28,553) (20,365) (18,959) (16,196)
Depreciation and amortization............................ (159,045) (91,656) (38,961) (2,331) (1,701)
---------- ---------- ---------- ---------- ----------
Net operating loss................................ (327,781) (150,021) (87,677) (26,168) (20,038)
Interest income.......................................... 10,464 7,806 13,329 8,417 6,479
Interest expense......................................... (163,227) (124,288) (79,659) (36,045) (9,266)
Provision for losses on marketable equity securities
and investment related costs............................ (9,686) (14,793) (5,859) (6,055) (2,865)
Gain on sale of investments in affiliated companies...... -- 90,020 65,249 16,013 --
Other (expense) income, net.............................. (2,546) (5,088) (991) 81 107
---------- ---------- ---------- ---------- ----------
Net loss before other items....................... (492,776) (196,364) (95,608) (43,757) (25,583)
Share in results of affiliated companies, net............ (54,166) (68,645) (47,575) (48,635) (6,106)
Minority interests in subsidiaries....................... 1,410 1,568 4,358 1,081 1,075
Extraordinary charge for early retirement of debt........ -- (79,091) -- -- --
---------- ---------- ---------- ---------- ----------
Net loss.......................................... $ (545,532) $ (342,532) $ (138,825) $ (91,311) $ (30,614)
========== ========== ========== ========== ==========
Net loss per common share (1):
Basic and diluted loss before extraordinary charge..... $ (13.71) $ (6.75) $ (3.59) $ (2.69) $ (1.10)
Extraordinary charge................................... -- (2.02) -- -- --
---------- ---------- ---------- ---------- ----------
Basic and diluted net loss............................. $ (13.71) $ (8.77) $ (3.59) $ (2.69) $ (1.10)
========== ========== ========== ========== ==========
Weighted-average number of common shares outstanding... 39,919,887 39,211,501 39,035,776 34,017,660 27,802,250
========== ========== ========== ========== ==========
As of
---------------------------------------------------------------------
February 28,
December 31, ----------------------- February 29, February 28,
1998 1998 1997 1996 1995
------------ ---------- ---------- ----------- ------------
(In thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term liquid
investments............................................. $ 94,321 $ 358,122 $140,743 $161,983 $215,955
Other current assets, net................................ 81,589 52,877 28,934 32,461 20,670
Investments in and advances to affiliated companies...... 429,490 341,252 253,108 272,205 85,280
Property, plant and equipment, net....................... 464,059 440,735 219,342 31,102 13,741
Goodwill and other intangible assets, net................ 424,934 409,190 132,636 45,629 --
Other non-current assets................................. 47,702 77,659 45,173 36,826 34,644
---------- ---------- -------- -------- --------
Total assets...................................... $1,542,095 $1,679,835 $819,936 $580,206 $370,290
========== ========== ======== ======== ========
Current liabilities...................................... $ 326,552 $ 291,390 $ 88,941 $ 13,255 $ 10,530
Senior discount notes and other long-term debt........... 1,939,289 1,702,771 675,183 371,227 202,416
Other non-current liabilities............................ 184,928 30,204 9,116 -- --
---------- ---------- -------- -------- --------
Total liabilities................................. 2,450,769 2,024,365 773,240 384,482 212,946
Minority interests in subsidiaries....................... 18,705 15,186 307 2,509 7,307
Preferred stock and other................................ 56,286 32,564 31,293 41,239 11,167
Stockholders' (deficit) equity........................... (983,665) (392,280) 15,096 151,976 138,870
---------- ---------- -------- -------- --------
Total liabilities and stockholders'
(deficit) equity................................. $1,542,095 $1,679,835 $819,936 $580,206 $370,290
========== ========== ======== ======== ========
</TABLE>
- -----------------
(1) Net loss per common share amounts include the accrual of dividends on
convertible preferred stock which are recorded directly to additional
paid-in capital.
32
<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, among other things, 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 known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements,
or industry results, to be materially different from what we say or imply with
such 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 subscribers'
acceptance of our newer telephone and Internet/data services, our ability to
manage and grow our newer telephone and Internet/data services, our ability to
secure adequate capital to fund other system growth and development, risks
inherent in investment and operations in foreign countries, changes in
government regulation, changes in the nature of key strategic relationships with
partners and joint venturers, and other factors discussed in our report on Form
8-K dated September 24, 1996. 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,
conditions or circumstances on which these statements are based. Our statements
in Management's Discussion and Analysis of Financial Condition and Results of
Operations in this report related to the Year 2000 issues are hereby denominated
as "Year 2000 Statements" within the meaning of the Year 2000 Information and
Readiness Disclosure Act. The following discussion and analysis of financial
condition and results of operations cover the ten months ended December 31, 1998
and the years ended February 28, 1998 and 1997, 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
UIH was formed in 1989 for the purpose of developing, acquiring and managing
foreign multi-channel television, programming and telephony operations outside
the United States. Through UPC, our systems in Europe together have the largest
number of subscribers of any group of broadband communications networks operated
across Europe. Through ULA and UAP, we hold interests in multi-channel
television operating systems and related business development projects in Chile,
Brazil, Mexico, Peru, Australia, New Zealand, Tahiti, the Philippines and China,
as well as interests in programming companies for the Australia and Latin
America markets.
For the ten months ended December 31, 1998, we consolidated the results from our
systems in Austria, Belgium, Norway, France, Hungary, the Czech Republic,
Romania, the Slovak Republic, Ireland, Australia, Peru and Brazil (Fortaleza).
Unconsolidated systems included our interests in certain Dutch, Israeli,
Maltese, New Zealand, Chile, Mexico, Tahiti, Philippines and China systems, and
programming interests in Hungary, the Czech Republic, Australia and Latin
America. We account for these unconsolidated systems using the equity method of
accounting. Under this method, the investment, originally recorded at cost, is
adjusted to recognize our proportionate share of net earnings or losses of the
affiliate, limited to the extent of our investment in and advances to the
affiliate, including any debt guarantees or other contractual funding
commitments. Our proportionate share of net earnings or losses of each affiliate
includes the amortization of the excess of our cost over our proportionate
interest in each affiliate's net tangible assets. During the ten months ended
December 31, 1998, we consolidated certain of our Dutch systems for the period
ended July 31, 1998. Thereafter, all of our Dutch systems were accounted for
using the equity method. On February 17, 1999, UPC acquired the remaining 49.0%
interest in UTH, our Dutch holding company, and will begin consolidating the
results of UTH's systems other than A2000. On December 11, 1997, we purchased
the remaining 50.0% of UPC we did not already own, and as a result began
consolidating UPC's operating results. We had historically accounted for UPC
under the equity method.
Prior to the ten months ended December 31, 1998, our fiscal year end was
February 28, and we accounted for our share of the income or loss of our
operating companies based on the calendar year results of each operating
company. This created a two-month delay in reporting the operating company
results in our consolidated results for our fiscal year-end.
33
<PAGE>
On February 24, 1999, we changed our fiscal year end from the last day in
February to the last day in December, effective December 31, 1998. To effect the
transition to the new fiscal year end, the combined results of operations of the
operating companies for January and February 1998, a loss of $50,369, has been
reported as a one-time charge to our retained deficit as of March 1, 1998 in our
consolidated statement of stockholders' (deficit) equity. Consequently, the
consolidated statement of operations presents the consolidated results of the
Company and its subsidiaries for the ten months ended December 31, 1998.
SERVICES
To date, our primary source of revenue has been video entertainment services.
Our operating systems generally offer a range of video service subscription
packages including a basic tier and an expanded basic tier. In some systems, we
also offer mini-tiers and other premium programming. 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.
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.
PRICING
We usually charge a one-time installation fee when we connect subscribers, a
monthly subscription fee that depends on whether basic or expanded basic tier
service is offered, and incremental amounts for those subscribers purchasing
pay-per-view and premium programming, which are generally offered only to
expanded basic tier subscribers.
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. 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.
34
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES
We have financed our acquisitions and funding of our video, voice and data
systems in the three main regions of the world in which we operate primarily
through public and private debt and equity as well as cash received from the
sale of non-strategic assets by certain subsidiaries. These resources have also
been used to refinance certain debt instruments and facilities as well as to
cover corporate overhead. The following table outlines the sources and uses of
cash, cash equivalents, restricted cash and short-term liquid investments (for
purposes of this table only, "cash") for UIH (parent only) from inception to
date:
<TABLE>
<CAPTION>
For the Ten
Inception to Months Ended
February 28, 1998 December 31, 1998 Total
UIH (Parent Only) ----------------- ----------------- --------
----------------- (In millions)
<S> <C> <C> <C>
Financing Sources:
Gross bond proceeds..................... $ 1,138.1 $ -- $1,138.1
Gross equity proceeds (1)............... 367.1 41.8 408.9
Asset sales, dividends and note payments 216.1 8.3 224.4
Interest income and other............... 26.3 6.4 32.7
--------- ------- --------
Total sources...................... 1,747.6 56.5 1,804.1
--------- ------- --------
Application of Funds:
Investment in:
UPC................................... (363.1) (91.6) (454.7)
UAP (1)............................... (160.0) (96.4) (256.4)
ULA................................... (224.2) (68.1) (292.3)
Other................................. (25.8) -- (25.8)
--------- ------- --------
Total.............................. (773.1) (256.1) (1,029.2)
Repayment of bonds (2).................. (531.8) -- (531.8)
Offering costs.......................... (63.7) (0.8) (64.5)
Corporate equipment and development..... (25.6) (0.1) (25.7)
Corporate overhead and other............ (94.6) (11.9) (106.5)
--------- ------- --------
Total uses......................... (1,488.8) (268.9) (1,757.7)
--------- ------- --------
Period change in cash................... 258.8 (212.4) 46.4
Cash, beginning of period............... -- 258.8 --
--------- ------- --------
Cash, end of period..................... $ 258.8 $ 46.4 46.4
========= =======
UIH's Subsidiaries
------------------
Cash, end of period:
UPC..................................... 31.7
UAP..................................... 3.5
ULA..................................... 9.2
Other................................... 3.5
--------
Total consolidated cash, cash equivalents,
restricted cash and short-term liquid
investments.............................. $ 94.3
========
</TABLE>
----------------
(1) Includes issuance/use of $29.8 million and $29.5 million in convertible
preferred stock in 1995 and 1998, respectively, to acquire interests in
Australia as well as $50.0 million in common stock in 1995 to acquire the
initial interest in UPC.
(2) Includes tender premium of $65.6 million.
UIH PARENT
We had $46.4 million of cash, cash equivalents, restricted cash and short-term
liquid investments on hand as of December 31, 1998. Subsequent to December 31,
1998 we received $13.9 million from the exercise of existing warrants to
purchase our common stock, as well as $89.2 million from the repayment of
inter-company loans to UPC. Additional sources of cash in 1999 may include the
raising of additional private or public debt and/or equity and/or the receipt of
35
<PAGE>
sales proceeds from the disposition of non-strategic assets by certain
subsidiaries. Uses of cash in the next year will include continued funding to
the Asia/Pacific and Latin America regions to meet the existing growth plans of
our systems in those regions and corporate overhead. We do not expect to
contribute additional capital to UPC for its on-going operating or development
requirements, as UPC will finance its operating systems and development
opportunities with its operating cash flow and proceeds from its initial public
offering in February 1999. We estimate approximately $42.3 million of UIH Parent
funding will be required by systems in the Asia/Pacific region during 1999, and
approximately $26.3 million of UIH Parent funding will be required by systems in
the Latin America region during 1999. We believe that our existing capital
resources, combined with potential debt or equity financings will enable us to
assist in satisfying the operating and development requirements of our
subsidiaries and to cover corporate overhead for the next year. To the extent we
pursue new acquisitions or development opportunities, we would need to raise
additional capital or seek strategic partners.
UPC
UPC has financed its operations and acquisitions primarily from cash contributed
by UIH upon the formation of UPC, debt financed at the UPC corporate level,
project debt financed at the operating company level and operating cash flow.
UPC has used these capital resources to fund acquisitions, developing systems
and corporate overhead. UPC has financed its well-established systems and, when
possible, its developing systems with project debt and operating cash flow.
Also, well-established systems generally have stable positive cash flows that,
to the extent permitted by applicable credit facilities, may be used to fund
other operations. Developing systems, which are at various stages of
construction and development, will generally depend on UPC for some of the
funding for their cash needs until project financing can be secured.
During February 1999, UPC successfully completed an initial public offering
selling 44.6 million shares on the Amsterdam Stock Exchange and Nasdaq National
Market System and raising gross and net proceeds from the offering of
approximately Dutch guilder ("NLG") 2,850.3 million ($1,508.1 million) and
NLG2,705.8 million ($1,431.6 million), respectively (the "UPC IPO"). Concurrent
with the offering, a subsidiary of Discount Investment Corportion ("DIC")
exercised one of its two option agreements acquiring approximately 1.6 million
shares for NLG89.6 million ($47.4 million). Proceeds from the sale of the shares
to DIC were used to repay $45.0 million of the DIC Loan and related interest.
Also concurrent with the offering, proceeds were used to reduce UPC's Senior
Revolving Credit Facility totaling NLG635.8 million ($336.4 million), including
accrued interest of NLG15.8 million ($8.4 million), repay in its entirety UPC's
Bridge Bank Facility totaling NLG110.0 million ($58.2 million), net of the
interest reserve account, acquire NUON's 49% interest in UTH for NLG518.1
million ($265.7 million), including accrued interest of NLG15.8 million ($8.1
million), and assume from NUON a subordinated loan, including accrued interest
of NLG33.3 million ($17.0 million). UPC also repaid approximately $89.2 million
of intercompany loans to UIH Parent. The remaining proceeds from the initial
public offering are expected to be used primarily for capital expenditures and
to fund other costs associated with UPC's network upgrade, the build and launch
of UPC's telephone and Internet/data services businesses as well as UPC's video
distribution and programming businesses. Some of the proceeds are expected to be
used for acquisitions of new systems and other related businesses. UPC may need
to raise additional capital in the future to the extent it pursues new
acquisition or development opportunities or if cash flow from operations is
insufficient to satisfy its liquidity requirements.
UAP
UAP has financed its operations and acquisitions primarily from cash and
preferred stock contributed by UIH, public bonds at the UIH A/P level and
project debt financed at the operating company level. UAP has used these capital
resources to fund acquisitions, developing systems and corporate overhead.
Developing systems, which are at various stages of construction and development,
will generally depend on both funding from UIH and project financing to meet
their growth needs.
We expect the need for additional funding for Austar in the future. The amount
of capital needed is dependent primarily upon three factors: (i) the number of
new subscribers added; (ii) the level of churn, that is, the level of existing
subscribers who disconnect from Austar's service; and (iii) the mix of DTH
satellite compared to MMDS installations. Substantially all fixed costs required
to operate Austar's service have already been incurred. The average cost to
install a subscriber includes variables such as equipment, marketing and sales
costs, and installation fees. The average cost of a subscriber who disconnects
is reduced by the recovery of certain equipment (principally converters), and is
further reduced if a new subscriber is installed in a previously disconnected
home. Austar plans to continue to expand and add subscribers; however, the
timing of such expansion and the funds required for such expansion are largely
36
<PAGE>
variable. Based upon current plans and budgeted churn, Austar will require
approximately $112.4 million to continue on its current expansion path from
January 1, 1999 through December 31, 1999, which will be funded substantially by
the New Austar Bank Facility. The remaining sources of funds for such expansion
may include the raising of private or public debt and/or equity by UAP or its
subsidiaries and/or continued investment by us. We believe that committed
financial support from us combined with these potential debt or equity
financings and, if necessary, reductions in planned capital expenditures, are
sufficient to sustain Austar's operations through at least mid-2000.
We expect the need for additional funding for Saturn in the future. Saturn's
capital needs include approximately $37.2 million for the completion of the
network required by Saturn to offer cable television and telephony services and
approximately $4.8 million until Saturn has sufficient cash flows to cover its
operations and the capital required to install customers, although there can be
no assurance that further additional capital will not be required. The sources
of funds for such expansion may include the Saturn Bank Facility, the raising of
private or public debt and/or equity by UAP or its subsidiaries and/or continued
investment by us and our partner in Saturn. We believe that committed financial
support from us combined with these potential debt or equity financings and, if
necessary, reductions in planned capital expenditures, are sufficient to sustain
Saturn's operations through at least mid-2000.
ULA
ULA has financed its operations and acquisitions primarily from cash contributed
by us, asset sales, ULA corporate-level debt and project debt financed at the
operating company level. In January 1996, ULA sold its 25.0% interest in a
company developing a cable television system in Rio de Janeiro, Brazil for
approximately $13.5 million, recognizing a gain of approximately $11.9 million.
In August 1996, ULA sold its 34.0% interest in a company developing a cable
television system in Sao Paulo, Brazil for $78.1 million in cash and a note
receivable and recognized a gain of $65.2 million. In October 1997, ULA sold all
of its Argentina multi-channel television system assets (Bahia Blanca) for
approximately $211.1 million, resulting in a gain of approximately $90.0
million. ULA's systems, which are at various stages of construction and
development, will generally depend on funding from us and project financing to
meet their growth needs. ULA anticipates additional funding for various projects
totaling approximately $26.3 million through 1999. In addition to continued
investment by us, other sources of funds for growth for ULA systems may include
the raising of private or public debt and/or equity or the sale of non-strategic
assets. ULA may or may not be successful in completing all or any of such
financings. We believe, however, that financial support from us combined with,
if necessary, reductions in planned capital expenditures, are sufficient to
sustain ULA's operations through at least the end of 1999.
On April 29, 1999, an indirect wholly owned subsidiary of ours acquired a 60.0%
interest in VTRH (the "VTRH Acquisition"). This acquisition, combined with the
40.0% interest in VTRH that is owned by another indirect wholly owned subsidiary
of ours, gives us an indirect 100% interest in VTRH. The purchase price for the
60.0% interest in VTRH was approximately $258.0 million in cash, which included
repayment of advances from the other shareholders of VTRH and certain other
expenses. In addition, we provided capital for VTRH to prepay approximately
$126.0 million of existing bank indebtedness and a promissory note from us to
one of the other shareholders of VTRH.
To finance the prepayment of VTRH's indebtedness and a portion of the purchase
price for the VTRH Acquisition, we concurrently sold in a private transaction
$208.9 million of 10.875% Senior Discount Notes due 2009 (the "1999 Notes"). The
remaining portion of the VTRH Acquisition was funded with cash on hand and
approximately $145.0 million borrowed under a Senior Secured Credit Facility
between VTRH and a syndicate of banks (the "VTRH Bank Facility").
The VTRH Bank Facility consists of two tranches - Tranche A, which is a single
term loan facility with an aggregate principal amount of $140.0 million,
substantially all of which was borrowed for the VTRH Acquisition, and Tranche B,
which is a three-year term loan facility, with an aggregate principal amount of
up to $80.0 million. Both tranches have been guaranteed by VTRH and its
subsidiaries. The banks are in the process of syndicating the final
approximately $50.0 million of the VTRH Bank Facility. We have agreed to
participate in the syndication as necessary.
The 1999 Notes have essentially the same terms as our outstanding 10.75% Senior
Secured Discount Notes due 2008, except for the maturity and coupon rate and
that the 1999 Notes are not secured.
OBLIGATIONS
Our consolidated subsidiaries and UIH Parent had the following long-term and
short-term debt outstanding as of December 31, 1998. Debt denominated in
currencies other than United States dollars has been translated to United States
dollars for the last column using December 31, 1998 exchange rates.
37
<PAGE>
<TABLE>
<CAPTION>
Outstanding
Final At December 31,
Description (Borrower) Use of Funds Maturity Interest Rate Facility Size 1998
- ----------------------------- -------------------- -------- -------------------- ------------- ---------------
(in millions) (in millions)
<S> <C> <C> <C> <C> <C>
Parent:
UIH Senior Discount Notes Refinancing 2008 10.75% $1,375.0 $ 893.0
UIH Old Notes -- -- -- -- $ 0.4
UPC:
Senior Revolving Credit Facility UIH/Philips transaction; 2006 LIBOR + 0.5% to NLG1,100.0 $ 512.2
Refinancing; 2.0% per annum
Acquisitions;
Capital expenditures;
Working capital
Mediareseaux Facility Capital expenditures; 2007 FRF LIBOR + 0.75% FRF 680.0 $ 21.3
Acquisitions; Working to 2.0%
capital
DIC Loan To increase interests in 2000 8.0% per annum $90.0 $ 84.2
Israeli and Maltese + 6.0% of principal
operating systems amount at maturity
Other Various Various Various Various $ 3.8
Time Warner Note Acquisition of Hungary June 1999 Non-interest bearing $18.0 $ 18.0
distribution assets
Bridge Bank Facility UPC Acquisition June 1999 LIBOR + 4.5% $125.0 $ 60.1
to 6.0%
Telekabel Hungary Facility Capital expenditures, April 1999 BUBOR + 2.5% DM 65.6 $ 15.5
Acquisitions; Working
capital
UAP:
UIH A/P Notes Refinancing; 2006 14.0% $492.9 $ 356.6
Capital Expenditures
Austar Bank Facility Capital expenditures; 2000-2004 Australian Base Rate A$110.0 $ 67.4
(Working Capital and Working capital + 1.75%
Cash Advance Portion)
Austar Bank Facility Capital expenditures April 1999 Australian Base Rate A$90.0 $ 36.7
(Term Loan Portion) + 2.25%
Other Various Various Various Various $ 2.9
ULA:
VTRH Note Funding of VTRH April 1999 12.95% $9.3 $ 9.3
ULA Revolving Credit Facility Capital expenditures February LIBOR +4.0% $8.0 $ 8.0
1999
TVSB Seller Note Acquisition of TVSB September 10.0% $5.9 $ 5.9
1999
--------
Total UIH Consolidated $2,095.3
========
</TABLE>
38
<PAGE>
SENIOR DISCOUNT NOTES. In February 1998, we raised total gross proceeds of
$812.2 million from a private offering of senior secured discount notes (the
"1998 Notes"). We used $531.8 million of the proceeds (which included
approximately $65.6 million for tender premiums and associated costs) to
repurchase the Old Notes. The 1998 Notes were issued at a significant discount
from their aggregate principal amount at maturity and will accrete at a rate of
10.75% per annum, compounded semi-annually to an aggregate principal amount on
February 15, 2003 of $1.375 billion. Cash interest will commence to accrue on
the 1998 Notes on February 15, 2003. Commencing August 15, 2003, cash interest
on the 1998 Notes will be payable on February 15 and August 15 of each year
until maturity at a rate of 10.75% per annum. The 1998 Notes will mature on
February 15, 2008, and will be redeemable at various premiums to par at our
option, on or after February 15, 2003. The 1998 Notes are secured by a first
priority lien on the capital stock and intercompany notes to UIH of UIPI and
UIHE. We will hold our future investments in, and conduct our future operations
through, UIPI and UIHE.
PREFERRED STOCK. In December 1995, in connection with our acquisition of an
additional 40.0% economic interest in Austar, we issued 170,513 shares of our
Series A Preferred Stock, having a liquidation value at issuance of
approximately $29.8 million ($175.00 per preferred share) as partial
consideration for the 40.0% interest we acquired in Austar (increasing our
interest at that time to 90.0%). In June 2000, we are required to redeem the
Series A Preferred Stock not previously converted at the then liquidation value.
The Series A Preferred Stock is convertible into Class A common shares of UIH
based upon the accreted liquidation value divided by $17.50. During the ten
months ended December 31, 1998, 38,369 shares of Series A Preferred Stock were
converted into Class A common shares. Subsequent to December 31, 1998, an
additional 100,144 shares were converted into Class A common shares. The June
2000 redemption value for the remaining 32,000 shares of Series A Preferred
Stock is approximately $6.7 million.
In July 1998, in connection with our acquisition of certain Australian pay
television assets of ECT, we issued 28,965 shares of our Series B Preferred
Stock having a liquidation value at issuance of approximately $6.2 million
($212.50 per preferred share). In September 1998, in connection with our
acquisition of an additional 25.0% interest in XYZ Entertainment, we issued
110,066 shares of our Series B Preferred Stock having a liquidation value at
issuance of approximately $23.4 million ($212.50 per preferred share). In June
of 2008, we are required to redeem the Series B Preferred Stock not previously
converted at the then liquidation value. Assuming that none of the Series B
Preferred Stock is converted prior to redemption, the total cost of redeeming
the Series B Preferred Stock would be approximately $55.7 million. The Series B
Preferred Stock is convertible into Class A common shares of UIH based upon the
accreted liquidation value divided by $21.25.
WARRANTS. In conjunction with the issuance of the Old Notes, we issued 394,000
warrants to purchase a total of 1,786,699 shares of Class A Common Stock at a
price of $15.00 per share. Holders of the warrants required us to purchase a
total of 76,070 warrants during a put option period in February 1996. Subsequent
to December 31, 1998, a total of 204,840 warrants were exercised, resulting in
proceeds of $13.9 million. A total of 928,942 shares of Class A Common Stock
were issued. The remaining 113,090 outstanding warrants (representing 512,863
shares of Class A Common Stock) are exercisable at any time before November 15,
1999, and would result in proceeds of approximately $7.7 million, if exercised.
SENIOR REVOLVING CREDIT FACILITY. In October 1997, UPC and Norkabel as borrowers
entered into a NLG1.1 billion ($582.0 million) multi-currency revolving credit
facility with a syndicate of banks led by The Toronto-Dominion Bank. Norkabel
was succeeded as a borrower by Janco after the merger of Janco and Norkabel. In
December 1997, Telekabel Wien and the other members of the Telekabel Group also
became borrowers under this facility. Although currently not a borrower, TVD is
a guarantor under this facility. As of December 31, 1998, the amount outstanding
under this facility owed by UPC, Telekabel Wien and Janco was NLG620.0 million
($328.0 million), NLG213.5 million ($113.0 million) and NLG134.5 million ($71.2
million), respectively. This facility is secured by a pledge of the stock and
assets of TVD, Janco and Telekabel Wien.
UPC's borrowings and those of its subsidiaries in Austria, Belgium and Norway
are limited by financial covenants under this facility. The principal amount of
all borrowings may not exceed certain multiples of total annualized net
operating cash flow for UPC and its subsidiaries. In addition, the principal
amount of all borrowings may not exceed certain multiples of UPC's cable
television net operating cash flow. This facility generally prohibits dividends
and other distributions to UPC's shareholders unless, among other things, UPC
achieves certain financial ratios for at least two consecutive quarters. This
facility also includes financial covenants relating to interest and debt service
coverage and application of proceeds from asset sales and debt or equity
offerings.
39
<PAGE>
UPC agreed with its lenders to reduce this facility amount from NLG1.1 billion
($582.0 million) to NLG1.0 billion (%529.1 million) in February 1999. This
amount will be further reduced by 5% each quarter beginning December 31, 2001
until final maturity. Subsequent to December 31, 1998, UPC repaid NLG620.0
million ($328.0 million), excluding interest, of the amount outstanding under
this facility with proceeds from their initial public offering.
MEDIARESEAUX FACILITY. In July 1998, Mediareseaux entered into an FRF680.0
million ($121.4 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 UPC's stock of Mediareseaux. The
availability of this facility depends on revenue generated and its debt to
equity ratios. Drawings under this facility may be made until December 31, 2002.
The repayment period runs from January 1, 2003 to final maturity in 2007.
Mediareseaux may not draw more than FRF120 million ($21.4 million) of this
facility for acquisitions. During the repayment period, Mediareseaux must apply
50.0% of its excess cash flow in prepaying the facility. This facility generally
restricts the payment of dividends and distributions. This facility also
restricts Mediareseaux from incurring additional indebtedness, subject to
certain exceptions. In July 1998, Mediareseaux also secured a 9.5 year FRF20
million ($3.6 million) overdraft facility, subject to the same terms and
conditions as this facility except for the availability tests which are not
applicable. Until certain financial covenants are met, UPC must own more than
51.0% 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 UPC.
DIC LOAN. In November 1998, a subsidiary of DIC loaned UPC $90.0 million. The
loan from DIC was subsequently assigned to an Israeli bank. UPC 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 8.0% per
annum. This interest is payable, together with an additional 6.0% of the
principal amount, on maturity. The loan from DIC may be repaid on quarterly
prepayment dates with three months' prior notice by UPC. In connection with the
loan from DIC, UPC granted the Discount Group, its partner in the Israeli
system, an option to acquire $90.0 million, plus accrued interest, of UPC
ordinary shares at a price equal to 90.0% of the initial public offering price.
Subsequent to December 31, 1998, UPC negotiated an amendment to this option,
resulting in an option to acquire $45.0 million, plus accrued interest, of UPC's
ordinary shares at a price equal to 90.0% of the initial public offering price,
and, if this option is exercised, another option to acquire $45.0 million, plus
accrued interest, of UPC's ordinary shares at a price equal to the 30 day
average closing price of UPC's shares on the Amsterdam Stock Exchange
immediately prior to the second option exercise, or the initial public offering
price, whichever is higher. At the UPC IPO date, DIC exercised the first option
and acquired 1,558,654 ordinary shares of UPC. The other option is exercisable
until September 30, 2000.
TIME WARNER NOTE. The Time Warner note matures on the earlier of June 30, 1999
or 90 days after written notice from Time Warner. UPC may, however, prepay the
Time Warner note in certain instances. Subsequent to December 31, 1998, the Time
Warner note was cancelled as Time Warner exercised its option to acquire UPC's
50.0% interest in Telekabel Hungary Programming and 100% interest in TV Max.
BRIDGE BANK FACILITY. In November 1997, UPC entered into the $125.0 million
Bridge Bank Facility with a syndicate of banks led by The Toronto-Dominion Bank.
In March 1998, UPC repaid $63.0 million of the Bridge Bank Facility with
proceeds borrowed from UIH. In August 1998, UPC made an additional repayment of
$1.9 million from proceeds of the sale of its interest in Portugal. Subsequent
to December 31, 1998, UPC repaid the remaining outstanding balance of the Bridge
Bank Facility with proceeds from the offering.
TELEKABEL HUNGARY FACILITY. In October 1998, Telekabel Hungary entered into a
DM65.6 million ($39.3 million) six-month secured bridge facility. Availability
under this facility depends on certain financial covenants. The DM49.2 million
($29.5 million) international tranche of the facility and half of the DM16.4
million ($9.8 million) local tranche bear interest at BUBOR plus 2.5% per annum
plus an additional cost of funding calculation. The remaining half of the local
tranche must be drawn in Hungarian forints and bears interest at Budapest
interbank offered rates for Hungarian forints, plus 2.5% per annum plus an
additional cost of funding calculation. Telekabel Hungary is using the facility,
among other things, to finance capital expenditures and to acquire minority
shares in UPC's Kabelkom systems. UPC has pledged its indirect 79.25% interest
in Telekabel Hungary to secure the facility. The facility also is secured by a
pledge over certain assets of the Telekabel Hungary group and a negative pledge.
Telekabel Hungary is currently negotiating a long-term facility with the lenders
to replace this bridge facility. The Telekabel Hungary Facility was repaid in
April, 1999.
40
<PAGE>
UIH A/P NOTES. The 14.0% senior notes, which UIH A/P issued in May 1996 and
September 1997 at a discount from their principal amount of $488.0 million had
an accreted value of $356.6 million as of December 31, 1998. On and after May
15, 2001, cash interest will accrue and will be payable semi-annually on each
May 15 and November 15, commencing November 15, 2001. The UIH A/P Notes are due
May 15, 2006. Effective May 16, 1997, the interest rate on these notes increased
by an additional 0.75% per annum to 14.75%. On October 14, 1998, UIH A/P
consummated an equity sale resulting in gross proceeds to UIH A/P of $70.0
million, reducing the interest rate from 14.75% to 14.0% per annum. Due to the
increase in the interest rate effective May 16, 1997, until consummation of the
equity sale, the UIH A/P Notes will accrete to a principal amount of $492.9
million on May 15, 2001, the date cash interest begins to accrue.
On November 17, 1997, pursuant to the terms of the indentures governing the UIH
A/P Notes, UIH A/P issued warrants to purchase a total of 488,000 shares of its
common stock, which represented 3.4% of its common stock. The warrants are
exercisable at a price of $10.45 per share which would result in gross proceeds
of approximately $5.1 million, if exercised. The warrants are exercisable
through May 15, 2006.
AUSTAR BANK FACILITY. In July 1997, Austar secured the Austar Bank Facility in
the amount of A$200.0 million ($122.5 million as of December 31, 1998) to fund
Austar's subscriber acquisition and working capital needs. As of December 31,
1998, Austar had drawn a total of A$110.0 million ($67.4 million converted using
the December 31, 1998 exchange rate).
In September 1998, Austar received an amendment to the Austar Bank Facility
which allowed Austar to temporarily draw under the remaining A$90.0 million term
loan facility at an increased interest rate of 2.25% above the professional
market rate in Australia. As of December 31, 1998, Austar had drawn A$60.0
million ($36.7 million) for a total outstanding balance of A$170.0 million.
Subsequent to year-end an additional A$30.0 million was borrowed which, along
with the A$60.0 million draw, was payable April 30, 1999. On April 23, 1999
(subsequently executed and A$222.0 million funded on April 28, 1999), Austar
secured a new A$400.0 million Syndicated Senior Secured Debt Facility (the "New
Austar Bank Facility") to refinance the A$200.0 million Austar Bank Facility and
to fund Austar's subscriber acquisition and working capital needs. The New
Austar Bank Facility consists of two sub-facilities: (i) A$200.0 million
amortizing term facility ("Tranche 1") and (ii) A$200.0 million cash advance
facility ("Tranche 2"). Tranche 1 was used to refinance the Austar Bank
Facility, and Tranche 2 is available upon the contribution of additional equity
on a 2:1 debt-to-equity basis. All of Austar's assets are pledged as collateral
for this facility. In addition, pursuant to this facility, Austar cannot pay any
dividends, interest or fees under its technical assistance agreements without
the consent of the majority banks. The New Austar Bank Facility bears interest
at the professional market rate in Australia plus a margin ranging from 1.75% to
2.25% based upon certain debt to cash flow ratios. The New Austar Bank Facility
is fully repayable pursuant to an amortization schedule beginning December 31,
2002 and ending March 31, 2006.
VTRH NOTE. UIH Chile, Inc. a wholly-owned subsidiary of ULA executed a
promissory note in the amount of $7.8 million payable to VTR S.A., the majority
shareholder of VTRH, in exchange for 51,993 shares of VTRH (the "VTRH Note").
The VTRH Note bears interest at 12.95% per annum and is due April 30, 1999. On
April 29, 1999 the VTRH Note was repaid in conjunction with the VTRH
Acquisition.
ULA REVOLVING CREDIT FACILITY. In November 1997, ULA entered into an amended and
restated credit agreement with a bank for a revolving credit facility of up to
$40.0 million. Borrowings under this facility were due within 12 months at an
interest rate of LIBOR plus 3.5%. The facility was extendable up to 18 months
under certain conditions. In November 1998, ULA exercised its option to extend
the maturity date until February 1999, increasing the interest rate to LIBOR
plus 4.0%. The agreement was also amended to reduce the facility from $40.0
million to $8.0 million effective November 20, 1998. As of December 31, 1998,
ULA had an outstanding balance of $8.0 million under this facility which was
repaid in February 1999.
TVSB SELLER NOTE. On October 2, 1998, ULA increased its ownership interest in
TVSB from 45.0% to 100.0% for $11.4 million, half of which was paid in cash,
with the remaining $5.7 million financed by the seller. This note bears interest
at 10.0% and is due September 14, 1999.
41
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
We had cash and cash equivalents of $35.6 million as of December 31, 1998, a
decrease of $267.8 million from $303.4 million as of February 28, 1998. Cash and
cash equivalents as of February 28, 1998 represented an increase of $234.6
million from $68.8 million as of February 28, 1997, and cash and cash
equivalents as of February 28, 1997 represented a decrease of $43.4 million from
$112.2 million as of February 29, 1996.
<TABLE>
<CAPTION>
For the Ten For the Years Ended
Months Ended February 28,
December 31, ------------------------
1998 1998 1997
------------ -------- --------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities.................. $ 1,988 $(60,652) $(35,494)
Cash flows from investing activities.................. (433,460) (73,096) (209,778)
Cash flows from financing activities.................. 158,815 369,089 200,782
Effect of exchange rates on cash...................... 4,824 (684) 1,056
--------- -------- --------
Net (decrease) increase in cash and cash equivalents.. (267,833) 234,657 (43,434)
Cash and cash equivalents at beginning of period...... 303,441 68,784 112,218
--------- -------- --------
Cash and cash equivalents at end of period............ $ 35,608 $303,441 $ 68,784
========= ======== ========
</TABLE>
TEN MONTHS ENDED DECEMBER 31, 1998
Principal sources of cash during the ten months ended December 31, 1998 included
$321.2 million from long-term and short-term borrowings, primarily on the UPC
Senior Revolving Credit Facility, CNBH's major facility, the DIC Loan and the
Austar bank facility, $27.9 million from the net release of restricted funds,
primarily the Janco deposit, $20.0 million from the sale of Portugal and other
systems, $12.2 million from the issuance of our equity securities and $11.1
million from operating activities and other investing and financing sources.
Principal uses of cash during the ten months ended December 31, 1998 included
capital expenditures totaling $217.1 million for system upgrades and new-build
activities, $168.4 million of debt repayments, primarily on the UPC Bridge Bank
Facility and KTE bank facility, $139.0 million of funding to our operating
systems including the acquisition of additional interests in Tevel, Melita,
Janco and TVSB, $109.9 million primarily for the new acquisitions of Combivisie
and Kabelkom and $25.8 million for other investing and financing uses.
YEAR ENDED FEBRUARY 28, 1998
Principal sources of cash during the year ended February 28, 1998 included gross
proceeds of $812.2 million from the sale of the 1998 Notes, $211.1 million net
cash proceeds from the sale of our Argentine cable systems, $110.0 million of
borrowings by ULA to finance acquisitions in Argentina, $85.2 million of
borrowings on the Austar Bank Facility, $38.0 million from the ULA Revolving
Credit Facility, net proceeds from the net change in short-term investments of
$36.6 million, $29.9 million gross proceeds from the issuance of the UIH A/P
Notes in September 1997, $22.0 million from cash contributions from minority
interest partners and $20.1 million of repayments on notes receivable and other
sources.
Principal uses of cash during the year ended February 28, 1998 included
redemption of the Old Notes of $531.8 million, investments in our affiliated
companies totaling $177.6 million, repayment of debt under the Argentina
acquisition financing of $110.0 million, purchases of property, plant and
equipment totaling $115.0 million to continue the build-out of existing
projects, primarily Austar, payments on our seller notes for Comodoro, Trelew,
Santa Fe and Bahia Blanca, Argentina totaling $46.4 million, debt financing
costs of $30.9 million, payment of construction payables that existed as of
February 28, 1997 totaling $29.6 million, $8.4 million deposited in restricted
cash, $20.0 million for repayment of other debt and other investing and
financing uses, and the funding of operating activities of $60.7 million during
the period.
YEAR ENDED FEBRUARY 28, 1997
Principal sources of cash during this period included $225.1 million gross
proceeds from the issuance of the UIH A/P Notes in May 1996, $78.1 million from
the sale of the Sao Paulo cable systems, which was satisfied with $43.1 million
in cash at closing and $35.0 million in payments on a note receivable, $38.3
million of an increase in construction payables and $27.3 million of repayments
on other notes receivable and other sources.
42
<PAGE>
Principal uses of cash during the year ended February 28, 1997 included the
purchase of property, plant and equipment totaling $204.4 million to construct
Austar's and Telefenua's systems, investments in our affiliated companies and
new acquisitions totaling $100.3 million, the purchase of net short-term
investments of $34.7 million, $11.9 million of repayments on sellers notes,
$25.4 million of financing costs and other uses, and the funding of operating
activities of $35.5 million during the period.
RESULTS OF OPERATIONS
The following table sets forth information from, or derived from, our
Consolidated Statements of Operations for the ten months ended December 31, 1998
and the years ended February 28, 1998 and 1997.
<TABLE>
<CAPTION>
For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------------
1998 1998 1997
------------ ------------- ------------
(In thousands)
<S> <C> <C> <C>
Revenue........................................................... $ 254,068 $ 98,622 $ 31,555
System operating expense.......................................... (122,811) (65,631) (26,251)
System selling, general and administrative expense................ (105,226) (62,803) (33,655)
Corporate general and administrative expense...................... (194,767) (28,553) (20,365)
Depreciation and amortization..................................... (159,045) (91,656) (38,961)
---------- ---------- ----------
Net operating loss........................................ (327,781) (150,021) (87,677)
Interest income .................................................. 10,464 7,806 13,329
Interest expense.................................................. (163,227) (124,288) (79,659)
Provision for losses on marketable equity securities and
investment related costs........................................ (9,686) (14,793) (5,859)
Gain on sale of investments in affiliated companies............... -- 90,020 65,249
Other expense, net................................................ (2,546) (5,088) (991)
---------- ---------- ----------
Net loss before other items............................... (492,776) (196,364) (95,608)
Share in results of affiliated companies, net..................... (54,166) (68,645) (47,575)
Minority interests in subsidiaries................................ 1,410 1,568 4,358
---------- ---------- ----------
Net loss before extraordinary charge...................... (545,532) (263,441) (138,825)
Extraordinary charge for early retirement of debt................. -- (79,091) --
---------- ---------- ----------
Net loss.................................................. $ (545,532) $ (342,532) $ (138,825)
========== ========== ==========
Other information:
Adjusted EBITDA(1)
Net operating loss....................................... $ (327,781) $ (150,021) $ (87,677)
Depreciation and amortization............................ 159,045 91,656 38,961
Stock-based compensation expense......................... 164,793 -- --
---------- ---------- ----------
Consolidated Adjusted EBITDA............................. $ (3,943) $ (58,365) $ (48,716)
========== ========== ==========
</TABLE>
- ---------------
(1) "Adjusted EBITDA" represents earnings before net interest expense, income
tax expense, depreciation and 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 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. 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
Adjusted EBITDA in the same manner.
43
<PAGE>
SELECTED SYSTEM OPERATING DATA. The following table displays selected system
operating data for our significant consolidated systems in the currency reported
to UIH:
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
UPC (NLG):
Revenue.............................. 408,970 337,255 245,179
Net operating (loss) income.......... (398,838) (33,208) 1,732
Net loss............................. (562,884) (175,854) (80,189)
Adjusted EBITDA...................... 111,435 104,498 81,564
Capital expenditures................. 281,678 145,630 106,647
Austar (A$):
Revenue.............................. 136,072 86,470 26,852
Net operating income (loss).......... (187,294) (129,062) (29,770)
Net loss............................. (211,632) (134,048) (66,015)
Adjusted EBITDA...................... (37,981) (26,027) (29,770)
Capital expenditures................. 96,162 100,149 157,315
</TABLE>
The following rates were used to translate the selected system operating data
above into U.S. dollars for consolidation purposes per one U.S. dollar:
Australian
Dutch Guilder Dollar
------------- ----------
Spot rate December 31, 1998............ 1.8900 1.6332
Average rate 1998...................... 1.9900 1.6102
Spot rate December 31, 1997............ 2.0200 1.5378
Average rate 1997...................... 1.9500 1.3584
Spot rate December 31, 1996............ 1.7400 1.2583
Average rate 1996...................... 1.6900 1.2675
REVENUE. Our revenue increased $155.5 million during the ten months ended
December 31, 1998 and $67.0 million during the year ended February 28, 1998, the
detail of which is as follows:
<TABLE>
<CAPTION>
For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------------
1998 1998 1997
------------ ------------- ------------
(In thousands)
<S> <C> <C> <C>
Europe................................. $172,287 $ 9,996 $ --
Asia/Pacific........................... 77,269 68,961 25,012
Latin America.......................... 4,512 19,244 5,794
Corporate and other.................... -- 421 749
-------- ------- -------
Total revenue..................... $254,068 $98,622 $31,555
======== ======= =======
</TABLE>
44
<PAGE>
EUROPE:
We began consolidating the results of UPC effective December 11, 1997.
Accordingly, we recorded $9.9 million of revenue from UPC during the three weeks
ended December 31, 1997.
Revenue for UPC in U.S. dollar terms increased $32.5 million, or 18.8% from
$173.0 million for the year ended December 31, 1997 to $205.5 million for the
year ended December 31, 1998. On a functional currency basis, UPC's revenue
increased NLG71.7 million to NLG409.0 million from NLG337.3 million for the year
ended December 31, 1997, a 21.3 % increase. Of this increase, approximately
NLG57.5 million resulted from increased cable television revenue, NLG8.7 million
from increased internet revenue and the remainder NLG5.5 million from
programming and other services. The increase in cable television revenue
resulted primarily from the acquisition of Combivisie (The Netherlands) in
January 1998, which was consolidated through July 31, 1998, and the
consolidation of Telekabel Hungary effective July 1, 1998. Of the NLG57.5
million approximately 21.6% was attributable to Combivisie and 48.2% was
attributable to Telekabel Hungary. The balance of the increase in cable
television revenue came from Austria subscriber growth and revenue per
subscriber growth, as well as increased revenue from subscriber growth in the
systems we are developing in France and Eastern Europe.
During the year ended December 31, 1997, UPC's revenue increased NLG92.1 million
to NLG337.3 million from NLG245.2 million for the year ended December 31, 1996,
a 37.6% increase. A substantial portion of this increase was attributable to the
acquisition of Norkabel in October 1996 and the acquisition of Janco in January
1997, which together amounted to NLG77.0 million. The remaining increase in
revenue was attributable to subscriber growth in the Austrian systems, increases
in subscription fees in some systems and revenues from developing systems in
France, Romania and the Slovak Republic, which were not included in the 1996
operating results.
ASIA/PACIFIC:
Revenue at Austar in U.S. dollar terms increased $21.4 million, or 33.5%, from
$63.8 million for the year ended December 31, 1997 to $85.2 million for the year
ended December 31, 1998. On a functional currency basis, Austar's revenue
increased A$49.6 million, from A$86.5 million for the year ended December 31,
1997 to A$136.1 million for the year ended December 31, 1998, a 57.3% increase.
These increases were primarily due to subscriber growth (288,721 at December 31,
1998, compared to 196,205 at December 31, 1997) as Austar continued to roll-out
its services. The U.S. dollar increases occurred despite the negative impact of
approximately $15.0 million due to fluctuation in exchange rates between the
years ended December 31, 1998 and 1997.
Revenue at Austar in U.S. dollar terms increased $42.6 million, or 200.9%, from
$21.2 million for the year ended December 31, 1996 to $63.8 million for the year
ended December 31, 1997. This increase was primarily due to subscriber growth
from an average of approximately 54,000 subscribers during 1996 to an average of
approximately 150,000 subscribers during 1997.
We deconsolidated the results of operations of Saturn effective January 1, 1998.
Saturn had $0.5 million of revenue for the year ended December 31, 1997.
LATIN AMERICA:
Revenue for Cable Star in U.S. dollar terms increased $1.4 million, or 93.3%
from $1.5 million for the year ended December 31, 1997 to $2.9 million for the
year ended December 31, 1998. The remainder of Latin America's revenue for the
year ended December 31, 1998 was attributable to our system in Brazil.
We consolidated the results of Bahia Blanca effective November 1, 1996 through
August 31, 1997. Bahia Blanca's revenue, consisting primarily of service fees,
was $17.6 million for the period ended August 31, 1997. The remainder of Latin
America's revenue for the year ended December 31, 1997 was attributable to our
systems in Peru.
SYSTEM OPERATING EXPENSE. System operating expense increased $57.2 million and
$39.3 million during the ten months ended December 31, 1998 and the year ended
February 28, 1998, respectively, the detail of which is as follows:
45
<PAGE>
<TABLE>
<CAPTION>
For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------------
1998 1998 1997
------------ ------------- ------------
(In thousands)
<S> <C> <C> <C>
Europe................................. $ 57,123 $ 6,135 $ 1,074
Asia/Pacific........................... 61,982 50,296 22,358
Latin America.......................... 3,706 9,200 2,819
-------- ------- -------
Total system operating expense.... $122,811 $65,631 $26,251
======== ======= =======
</TABLE>
EUROPE:
We began consolidating the results of UPC effective December 11, 1997.
Accordingly, we recorded $2.8 million of system operating expense from UPC
during the year ended February 28, 1998.
Operating expense for UPC in U.S. dollar terms increased $8.9 million, or 14.7%
from $60.7 million for the year ended December 31, 1997 to $69.6 million for the
year ended December 31, 1998. On a functional currency basis, UPC's operating
expense increased NLG20.0 million to NLG138.5 million from NLG118.5 million for
the year ended December 31, 1997, a 16.9% increase. Approximately NLG9.9 million
of this increase was attributable to the results of Telekabel Hungary, which
were consolidated effective July 1, 1998. In addition, approximately NLG2.0
million was attributable to the acquisition of Combivisie (The Netherlands). The
remaining increase comprised of direct costs related to subscriber growth and
increased operating costs related to the introduction of UPC's Internet/data
services. As a percentage of revenues, operating expense declined from 35.1% for
the comparable period in 1997 to 33.9%, due primarily to the lower operating
costs in the Combivisie system. We expect operating expense as a percentage of
revenue to increase as new video, telephone and Internet/data services are
introduced.
During the year ended December 31, 1997, UPC's operating expense increased
NLG36.1 million to NLG118.5 million from NLG82.4 million the previous year, a
43.8% increase. Most of this increase was attributable to the acquisition of
Norkabel in October 1996 and of Janco in January 1997, which together amounted
to NLG27.5 million, as well as the inclusion of operating expenses related to
developing systems in France, Romania and the Slovak Republic that were not
included in the 1996 operating results. In addition, operating expenses during
1997 included expenses related to the introduction of expanded basic tier
programming in Austria, Belgium and The Netherlands and Internet/data services
in Austria and Belgium.
ASIA/PACIFIC:
Operating expense for Austar in U.S. dollar terms increased $22.5 million, or
52.6%, from $42.8 million for the year ended December 31, 1997 to $65.3 million
for the year ended December 31, 1998. On a functional currency basis, Austar's
operating expense increased A$47.1 million, from A$58.1 million for the year
ended December 31, 1997 to A$105.2 million for the year ended December 31, 1998,
an 81.1% increase. These increases were primarily due to an increase in
satellite programming costs resulting from the May 1998 agreements with Foxtel
and Optus Vision to obtain additional programming rights in connection with the
receivership of Australis as well as additional satellite platform costs
associated with the May 1998 joint venture with Optus Vision. The Company
expects that the restructuring of programming costs for certain channels will
result in somewhat higher costs in the near term for these channels which will
be offset by lower costs in the long-term when compared to Austar's previous
agreements with Australis. The remainder of the increase between periods was due
to an increase in salaries and benefits related to the additional personnel
necessary to support Austar's establishment of local and state offices in its
markets and an increase in customer subscriber management expense related to
volume increases in telephone, billing and collection costs. The U.S. dollar
increases were positively impacted by approximately $12.1 million due to
fluctuation in exchange rates between the years ended December 31, 1998 and
1997.
Operating expense for Austar in U.S. dollar terms increased $24.8 million, or
137.8%, from $18.0 million for the year ended December 31, 1996 to $42.8 million
for the year ended December 31, 1997. This increase was primarily due to an
increase in satellite programming fees and copyright costs, which corresponds to
the increase in subscribers and additional basic programming services, an
increase in salaries and benefits related to the additional personnel necessary
to support Austar's launch of local and state offices in its markets, and an
increase in customer subscriber management expenses related to the volume
increases in telephone, billing and collection costs. The remainder of the
increase related to increases in system travel, maintenance, vehicle costs and
management fees.
46
<PAGE>
Austar expects operating expense as a percentage of service revenue to decline
in future periods because a significant portion of Austar's distribution
facilities and network costs, such as local and state office staffing levels,
operating costs and wireless license costs, have already been incurred and are
fixed in relation to changes in subscriber volumes. Other system operating
expense, such as certain costs related to programming and subscriber management
expense, will vary in direct proportion to the number of subscribers.
We deconsolidated the results of operations of Saturn effective January 1, 1998.
Saturn had $4.0 million of operating expense for the year ended December 31,
1997.
LATIN AMERICA:
Operating expense for Cable Star in U.S. dollar terms increased $1.5 million, or
136.4% from $1.1 million for the year ended December 31, 1997 to $2.6 million
for the year ended December 31, 1998. The remainder of Latin America's operating
expense for the year ended December 31, 1998 was attributable to our system in
Brazil.
We consolidated the results of Bahia Blanca effective November 1, 1996 through
August 31, 1997. Bahia Blanca's system operating expense for the period ended
August 31, 1997 was $8.1 million, consisting primarily of programming expenses
and salaries.
SYSTEM SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. System selling, general and
administrative expense increased $42.4 million during the ten months ended
December 31, 1998 and $29.1 million during the year ended February 28, 1998, the
detail of which is as follows:
<TABLE>
<CAPTION> For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------------
1998 1998 1997
------------ ------------- ------------
(In thousands)
<S> <C> <C> <C>
Europe................................... $ 56,401 $ 5,748 $ 720
Asia/Pacific............................. 45,578 50,006 31,140
Latin America............................ 3,247 7,049 1,795
-------- ------- -------
Total system selling, general and
administrative expense............ $105,226 $62,803 $33,655
======== ======= =======
</TABLE>
EUROPE:
We began consolidating the results of UPC effective December 11, 1997.
Accordingly, we recorded $3.4 million of system selling, general and
administrative expense from UPC during the year ended February 28, 1998.
Selling, general and administrative expense for UPC in U.S. dollar terms
increased $21.1 million, or 45.4% from $46.5 million for the year ended December
31, 1997 to $67.6 million for the year ended December 31, 1998. On a functional
currency basis, UPC's selling, general and administrative expense increased
NLG43.8 million to NLG134.5 million from NLG90.7 million for the year ended
December 31, 1997, a 48.3% increase. UPC incurred NLG15.9 million in general and
administrative expenses attributable to the formation and start up of chello. A
portion of this increase was also attributable to the acquisition of Combivisie
and the acquisition of Telekabel Hungary, with the remaining increase comprised
of additional selling, general and administrative expenses related to the
development of new businesses, including further development of Internet/data
services and preparation for the launch of telephone services in The
Netherlands, Norway and France. We expect selling, general and administrative
expense as a percentage of revenue to continue to increase as new video,
telephone and Internet/data services are introduced.
During the year ended December 31, 1997, UPC's selling, general and
administrative expense increased NLG26.5 million to NLG90.7 million from NLG64.2
million during the prior year, a 41.3% increase. A substantial portion of this
increase was attributable to the acquisition of Norkabel in October 1996 and of
Janco in January 1997, as well as the inclusion of expenses related to
developing systems in France, Romania and the Slovak Republic that were not
included in 1996. Selling, general and administrative expense during the year
ended December 31, 1997 also included expenses related to the introduction of
expanded basic tier programming in Austria, Belgium and The Netherlands and
Internet/data services in Austria and Belgium.
UPC's allowance for doubtful accounts as a percentage of trade receivables for
the years ended December 31, 1998, 1997 and 1996 was 41.6%, 40.6% and 37.9%
47
<PAGE>
respectively. This high allowance as a percentage of trade receivables results
primarily from UPC's billing process, whereby subscribers receive and generally
pay their invoice before the service period begins. Therefore, most of our
outstanding receivables generally represent overdue accounts requiring
consideration for an allowance. As a percentage of revenue, our receivable
balance is less than one half of one month of revenue.
ASIA/PACIFIC:
System selling, general and administrative expense for Austar in U.S. dollar
terms increased $4.2 million, or 9.8%, from $42.8 million for the year ended
December 31, 1997 to $47.0 million for the year ended December 31, 1998. On a
functional currency basis, Austar's selling, general and administrative expense
increased A$17.3 million, from A$57.9 million for the year ended December 31,
1997 to A$75.2 million for the year ended December 31, 1998, a 29.9% increase.
This increase was primarily due to an increase in salaries as a result of
additional personnel necessary to support the increase in subscribers and an
increase in marketing costs. The U.S. dollar increases were positively impacted
by approximately $8.4 million due to fluctuation in exchange rates between the
years ended December 31, 1998 and 1997.
System selling, general and administrative expense for Austar in U.S. dollar
terms increased $15.9 million, or 59.1%, from $26.9 million for the year ended
December 31, 1996 to $42.8 million for the year ended December 31, 1997. This
increase was primarily due to an increase in salaries associated with Austar's
national customer service center and Austar's corporate headquarters as a result
of additional personnel necessary to support the increase in subscribers, an
increase in marketing costs related to print, radio and television
advertisements associated with subscriber acquisition and retention and an
increase in direct sales commissions due to subscriber growth. In addition,
Austar experienced certain one-time charges for the restructuring and
consolidation of various regional offices.
Austar expects system selling, general and administrative expense as a
percentage of service revenue to decline in future periods because a significant
portion of Austar's infrastructure costs, such as the national customer service
center, its corporate management staff and media-related marketing costs, have
already been incurred and are fixed in relation to changes in subscriber
volumes. Other system selling, general and administrative expense relating to
commissions and acquisition costs is expected to vary in relation to the number
of customer sales and installations.
We deconsolidated the results of operations of Saturn effective January 1, 1998.
Saturn had $3.6 million of selling, general and administrative expense for the
year ended December 31, 1997.
LATIN AMERICA:
Selling, general and administrative expense for Cable Star in U.S. dollar terms
increased $0.6 million, or 46.2% from $1.3 million for the year ended December
31, 1997 to $1.9 million for the year ended December 31, 1998. The remainder of
Latin America's selling, general and administrative expense for the year ended
December 31, 1998 was attributable to our system in Brazil.
We consolidated the results of Bahia Blanca effective November 1, 1996 through
August 31, 1997. Bahia Blanca's system general and administrative expense for
the period ended August 31, 1997 was $5.6 million, consisting primarily of
marketing-related costs and salaries with the remainder consisting of billing,
office and utility costs.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE. Corporate general and
administrative expense increased $166.2 million from $28.6 million for the year
ended February 28, 1998 to $194.8 million for the ten months ended December 31,
1998, and increased $8.2 million from $20.4 million for the year ended February
28, 1997 to $28.6 million for the year ended February 28, 1998. The increase in
the ten months ended December 31, 1998 was primarily due to stock-based
compensation expense totaling $164.8 million, $162.1 million of which was
attributable to UPC's stock option plans. Prior to UPC's public offering, these
plans required variable plan accounting. Increases in the fair market value of
UPC's shares resulted in non-cash compensation charges to the statement of
operations for vested options. Following the initial public offering of UPC, UPC
has the right to settle the options in shares upon exercise; therefore options
issued pursuant to the stock option plan will no longer require variable plan
accounting. Only our subsidiaries' phantom stock option plans will continue to
require variable plan accounting. Corporate general and administrative expense
also increased due to the consolidation of UPC effective December 11, 1997.
These increases were offset by reporting ten months of results in the transition
period compared to twelve in the prior year, as well as the non-recurrence of
certain prior year charges. The increase in the year ended February 28, 1998 was
primarily attributable to professional services incurred in connection with the
lawsuit against the Wharf Group and professional consulting services incurred in
connection with assisting company management in evaluating various strategic
issues including capital formation and strategic asset deployment alternatives.
48
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
$67.3 million during the ten months ended December 31, 1998 and $52.7 million
for the year ended February 28, 1998, the detail of which is as follows:
<TABLE>
<CAPTION>
For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------------
1998 1998 1997
------------ ------------- ------------
(In thousands)
<S> <C> <C> <C>
Europe.................................... $ 76,550 $ 6,343 $ 80
Asia/Pacific.............................. 79,746 80,802 36,269
Latin America............................. 1,637 3,503 1,789
Corporate and other....................... 1,112 1,008 823
-------- ------- -------
Total depreciation and amortization
expense............................ $159,045 $91,656 $38,961
======== ======= =======
</TABLE>
EUROPE:
We began consolidating the results of UPC effective December 11, 1997.
Accordingly, we recorded $6.1 million of depreciation and amortization expense
from UPC during the year ended February 28, 1998.
Depreciation expense for UPC in U.S. dollar terms increased $26.1 million, or
38.3% from $68.2 million for the year ended December 31, 1997 to $94.3 million
for the year ended December 31, 1998. On a functional currency basis, UPC's
depreciation and amortization expense increased NLG54.8 million to NLG187.7
million from NLG132.9 million for the year ended December 31, 1997, a 41.2%
increase. NLG26.3 million of this increase and much of the increase as a
percentage of UPC's revenue was attributable to the application of push-down
accounting, including goodwill created in connection with the acquisition of UPC
on December 11, 1998. The remaining increase comprised of additional
depreciation related to the acquisition of Combivisie and acquisition of
Telekabel Hungary, additional capital expenditures to upgrade the network in our
Western European systems and new-build for developing systems.
During the year ended December 31, 1997, UPC's depreciation and amortization
expense increased NLG53.1 million to NLG132.9 million from NLG79.8 million in
1996, a 66.5% increase. The majority of the increase was directly attributable
to the acquisition of Norkabel in October 1996 and of Janco in January 1997,
which together amounted to NLG45.4 million. The remaining increase comprised of
additional depreciation from capital expenditures to upgrade the network in
UPC's primary systems and new-build for developing systems.
On January 25, 1999, UPC and Microsoft Corporation entered into a letter of
intent providing for the establishment of a technical services relationship. In
connection with this letter of intent, UPC agreed to grant Microsoft warrants to
purchase up to 3,800,000 ADSs or ordinary shares, at Microsoft's option, at an
exercise price of $28.00 per ordinary share or ADS. Half of these warrants will
be issued at the earlier of April 25, 1999 or the signing of the first
definitive agreement. These warrants will be 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 expects to record as contract acquisition rights
approximately NLG64.4 million associated with the first half of the warrants.
Such costs are expected to be amortized on a straight-line basis over the
expected contract life, which is yet to be determined. The accounting for the
cost associated with the second half of the warrants will depend upon the
ultimate nature of the performance criteria giving rise to the earn-out of these
warrants. These warrants will be recorded as such at fair value when it is
probable the performance criteria will be met, in accordance with EITF Issue No.
96-18.
ASIA/PACIFIC:
Depreciation and amortization expense for Austar in U.S. dollar terms increased
$18.5 million, or 24.1%, from $76.9 million for the year ended December 31, 1997
to $95.4 million for the year ended December 31, 1998. On a functional currency
basis, Austar's depreciation and amortization expense increased A$43.4 million,
from A$99.6 million for the year ended December 31, 1997 to A$143.0 million for
the year ended December 31, 1998, a 43.6% increase. These increases were
primarily due to the larger fixed asset base due to the significant deployment
of operating assets to meet subscriber growth as well as an increase in
depreciation expense related to subscriber disconnects. The U.S. dollar
49
<PAGE>
increases were positively impacted by approximately $14.9 million due to
fluctuation in exchange rates between the years ended December 31, 1998 and
1997.
Depreciation and amortization expense from Austar in U.S. dollar terms increased
$43.5 million, or 130.2% from $33.4 million for the year ended December 31, 1996
to $76.9 million for the year ended December 31, 1997. This increase was
primarily due to the larger fixed asset base due to the significant deployment
of operating assets to meet subscriber growth as well as an increase in expense
related to subscriber disconnects.
We deconsolidated the results of operations of Saturn effective January 1, 1998.
Saturn had $1.7 million of depreciation expense for the year ended December 31,
1997.
LATIN AMERICA:
Depreciation expense for Cable Star increased $0.1 million, or 14.3% from $0.7
million for the year ended December 31, 1997 to $0.8 million for the year ended
December 31, 1998. The remainder of Latin America's depreciation expense for the
year ended December 31, 1998 was attributable to our system in Brazil.
We consolidated the results of Bahia Blanca effective November 1, 1996 through
August 31, 1997. Bahia Blanca's depreciation expense consolidated by us was $3.3
million for the period ended August 31, 1997.
INTEREST INCOME. Interest income increased $2.7 million and decreased $5.5
million during the ten months ended December 31, 1998 and the year ended
February 28, 1998, respectively, compared to the amounts for the corresponding
periods in the prior year. The increase in the ten months ended December 31,
1998 was due to higher cash balances related to the issuance of the 1998 Notes
in February 1998, and the decrease during the year ended February 28, 1998 was
due to reduced cash and short-term investment balances related to the funding of
our investments in affiliated operating systems.
INTEREST EXPENSE. Interest expense increased $38.9 million, or 31.3%, from
$124.3 million during the year ended February 28, 1998 to $163.2 million during
the ten months ended December 31, 1998. This increase was primarily due to the
continued accretion of interest on our $1,375.0 million aggregate principal
amount 1998 Notes and continued accretion on the $492.9 million aggregate
principal amount UIH A/P Notes. During the ten months ended December 31, 1998,
interest expense also included amortization of deferred financing costs of $8.6
million compared to $10.7 million for the year ended February 28, 1998.
Interest expense increased $44.6 million, or 56.0%, from $79.7 million during
the year ended February 28, 1997 to $124.3 million during the year ended
February 28, 1998. This increase was primarily due to the continued accretion of
interest on the Company's $599.4 million aggregate principal amount Old Notes,
new accretion on the $45.5 million aggregate principal amount UIH A/P September
1997 Notes and accretion of interest for an entire year on the $447.4 million
aggregate principal amount UIH A/P May 1996 Notes. Interest expense for the year
ended February 28, 1998 also included amortization of deferred financing costs
of $10.7 million compared to $3.3 million for the year ended February 28, 1997.
PROVISION FOR LOSSES ON MARKETABLE EQUITY SECURITIES AND INVESTMENT RELATED
COSTS. The provision for losses on marketable equity securities and investment
related costs totaled $9.7 million, $14.8 million and $5.9 million for the ten
months ended December 31, 1998, the year ended February 28, 1998 and the year
ended February 28, 1997, respectively. In October 1998, as a result of an
other-than-temporary loss of control of Telefenua, we recorded a reserve for the
remaining balance of our investment of $4.4 million. In addition, Tara wrote off
its deferred development costs in December 1998 totaling $3.1 million. In
December 1997, based on the financial difficulties and potential insolvency of
Australis, we determined that the loss relating to our investment in Australis
was other-than-temporary. As a result, we recorded a provision for this loss of
$4.8 million for the year ended February 28, 1998. Cumulative unrealized losses
on our investment in International Broadcasting Corporation, Ltd. ("IBC"), a
publicly-traded Thailand corporation, totaled $2.7 million as of February 28,
1997. During the year ended February 28, 1998, we determined these losses to be
other than temporary, and recorded a provision of $3.6 million, reducing the
carrying value of our investment in IBC to $0.8 million. The remainder of the
balance for the ten months ended December 31, 1998 and the years ended February
28, 1998 and 1997, consisted of our write-off of various non-strategic
investments.
GAIN ON SALE OF INVESTMENTS IN AFFILIATED COMPANIES. In October 1997, we sold
all of our Argentine multi-channel television system assets for approximately
$211.1 million cash, resulting in a gain of approximately $90.0. In August 1996,
we sold our 34.0% interest in the Sao Paulo cable systems for $78.1 million,
resulting in a gain of $65.2 million.
50
<PAGE>
EXTRAORDINARY CHARGE FOR EARLY RETIREMENT OF DEBT. In connection with the
issuance of the 1998 Notes, we paid $531.8 million to repurchase the existing
Old Notes which had an accreted value of $466.2 million as of February 5, 1998.
This tender premium of $65.6 million, combined with the write off of unamortized
deferred financing costs and other transaction related costs totaling $13.5
million, resulted in an extraordinary charge during the year ended February 28,
1998 of $79.1 million.
SHARE IN RESULTS OF AFFILIATED COMPANIES. Our share in the results of affiliated
companies totaled $54.2 million, $68.6 million and $47.6 million for the ten
months ended December 31, 1998 and the years ended February 28, 1998 and 1997,
respectively, as follows:
<TABLE>
<CAPTION>
For the Ten Months Ended For the Year Ended For the Year Ended
December 31, 1998 February 28, 1998 February 28, 1997
-------------------------------- -------------------------------- --------------------------------
Company Company Company
Ownership Share in Results of Ownership Share in Results of Ownership Share in Results of
Interest Affiliated Companies Interest Affiliated Companies Interest Affiliated Companies
--------- -------------------- --------- -------------------- --------- --------------------
(In thousands) (In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Europe:
UPC (1)................ -- -- 100.0% $(42,236) 50.0% $(24,665)
A2000.................. 50.0% (11,515) -- -- -- --
UTH (2)................ 51.0% (9,850) -- -- -- --
Hungary (3)............ 79.3% (3,446) -- -- -- --
Melita, Princes
Holdings and Tevel.... various (288) -- -- -- --
Other UPC affiliates... various (457) various (195) -- --
Monor.................. 44.8% (1,848) 48.6% (4,590) 48.6% (2,648)
IPS.................... 33.5% (77) 33.5% (2,348) 33.5% (4,321)
-------- -------- --------
(27,481) (49,369) (31,634)
-------- -------- --------
Asia/Pacific:
Saturn (4)............. 65.0% (8,628) 65.0% -- 100.0 (930)
XYZ Entertainment...... 50.0% 506 25.0% (2,408) 25.0% (4,484)
Sun Cable.............. 19.6% (1,383) 40.0% (656) 40.0% (218)
HITV................... 49.0% (2,092) 49.0% (220) 49.0% (6)
-------- -------- --------
(11,597) (3,284) (5,638)
-------- -------- --------
Latin America:
VTRH................... 34.0% (5,427) 34.0% (7,805) 34.0% (2,130)
Megapo................. 49.0% 253 49.0% (386) 49.0% (678)
TVSB (5)............... 100.0% (891) 40.0% (616) 40.0% (1,277)
MGM Networks LA........ 50.0% (9,221) 50.0% (7,477) 50.0% (10)
Jundiai................ 46.3% 198 46.3% 426 46.3% (458)
-------- -------- --------
(15,088) (15,858) (4,553)
-------- -------- --------
Other.................... -- various (134) various (5,750)
-------- -------- --------
Total share in results of
affiliated companies... $(54,166) $(68,645) $(47,575)
======== ======== ========
</TABLE>
(1) We consolidated UPC's balance sheet and statement of operations
effective December 11, 1997.
(2) We accounted for our investment in UTH using the equity method of
accounting because the UTH shareholder agreement provides for joint
governance by NUON and UPC on almost all significant participating and
protective type rights.
(3) Effective July 1, 1998 we began consolidating the results of
operations of Telekabel Hungary.
(4) Effective July 1, 1996 we began consolidating the results of
operations of Saturn. In July 1997, a strategic partner purchased a
35.0% equity interest in Saturn, reducing our ownership interest to
65.0%. Effective January 1, 1998, we discontinued consolidating the
results of operations of Saturn and returned to the equity method of
accounting due to certain minority partner participating and
protective type rights.
(5) Effective October 2, 1998 we increased our ownership interest in TVSB
to 100% and began consolidating their results of operations.
51
<PAGE>
NEW ACCOUNTING PRINCIPLES
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information", which requires that a public business enterprise report
certain financial and descriptive information about its reportable segments. We
have adopted this statement for the year ended December 31, 1998.
The American Institute of Certified Public Accountants recently issued Statement
of Position 98-5, "Reporting on the Costs of Start-Up Activities", which is
required to be adopted by affected companies for fiscal years beginning after
December 15, 1998. This statement defines start-up and organization costs, which
must be expensed as incurred. In addition, all deferred start-up and
organization costs existing as of January 1, 1999 must be written-off and
accounted for as a cumulative effect of an accounting change. As of December 31,
1998, our deferred start-up and organization costs were insignificant. We intend
to adopt this statement during the year ended December 31, 1999.
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which requires that companies recognize all derivatives as either
assets or liabilities in the balance sheet at fair value. Under this statement,
accounting for changes in fair value of a derivative depends on its intended use
and designation. This statement is effective for fiscal years beginning after
June 15, 1999. We currently are assessing the effect of this new standard.
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. We believe that the adoption of SOP 98-1
will not have a material effect on the financial statements.
YEAR 2000 READINESS DISCLOSURE
Our multi-channel television, programming and telephony operations are heavily
dependent upon computer systems and other technological devices with imbedded
chips. Such computer systems and other technological devices may not be capable
of accurately recognizing dates beginning on January 1, 2000. This problem could
cause miscalculations, resulting in our multi-channel television and telephony
systems or programming services malfunctioning or failing to operate.
YEAR 2000 PROGRAM. In response to possible Year 2000 problems, our Board of
Directors established a Task Force to assess the impact that potential Year 2000
problems may have on company-wide operations and to implement necessary changes
to address such problems. The Task Force reports directly to the UIH Board. In
creating a program to minimize Year 2000 problems, the Task Force identified
certain critical operations of our business. These critical operations are
service delivery systems, field and headend devices, customer service and
billing systems, and corporate management and administrative operations (e.g.,
cash flow, accounts payable and accounts receivable, payroll and building
operations).
The Task Force has 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.
52
<PAGE>
At March 31, 1999, 91.0% of our operating systems had completed the
Identification Phase and the Task Force is working on the Implementation Phase
for these systems. The Task Force has researched approximately 83.0% of the
items identified during the Identification Phase as to Year 2000 compliance. Of
the items researched, 69.0% are compliant and 9.0% are not compliant but can be
easily remediated without significant cost to us. The remaining items require
further research or additional testing. Because of several acquisitions in the
later part of 1998, such as UTH, our research of items has expanded
significantly. As a result, the research on 75.0% of the identified items has
been completed and research on the remaining items is ongoing.
The Task Force commenced the Testing Phase in first quarter 1999. The Task Force
is supervising the Testing Phase of the computer systems for our headend
controllers and our customer service billing systems and routers. Based on
current data to date, we expect to complete this testing by mid-1999. At this
time, we anticipate that all material aspects of the program will be completed
before January 1, 2000, and we do not anticipate any material remediations or
replacements.
Certain of our operating systems have not completed the Identification Phase,
including Tahiti, the Philippines and certain Australian programming interests.
Despite our attempts to include these systems in our Year 2000 Program, these
systems have not responded. Therefore, we have no information on which to
determine if these systems will be Year 2000 compliant by December 31, 1999. If
none of these systems are Year 2000 compliant, we do not believe that their
operation failure, if any, will have a material adverse effect on our business
as a whole. The basis for determining the above percentages includes these
systems.
Subsequent to December 31, 1998, we acquired or will acquire four additional
systems, which will be included in our Year 2000 Program. At this time we have
not determined whether any of these systems have their own programs in place for
Year 2000 compliance. We are undertaking such review during the second quarter
1999 and will determine at what level their systems are at within our Year 2000
Program.
In general, we manage the program with our internal Task Force. In addition, we
have retained several independent consultants to assist with the Year 2000
Program for our operations in Europe, Eastern Europe and New Zealand. The Task
Force will continue to evaluate the need for external resources to complete the
Implementation Phase and implement the Testing Phase. In the event the Task
Force elects to use additional external resources, such resources may not,
however, be available.
In addition to our program, we are a member of a Year 2000 working group, which
has 12 cable television companies and meets under the auspices of Cable Labs.
The dialogue with the other cable operators has assisted us in developing our
Year 2000 program. Part of the agenda of the working group is to develop test
procedures and contingency plans for critical components of operating systems
for the benefit of all its members. The test procedures are expected to be
available to members, including us, during second quarter 1999.
THIRD PARTY DEPENDENCIES. We believe our largest Year 2000 risk is our
dependency upon third-party products. Two significant areas on which our systems
depend upon third-party products are programming and telephony interconnects. We
do not have the ability to control such parties in their assessment and
remediation procedures for potential Year 2000 problems. Should these parties
not be prepared for Year 2000, their systems may fail and we would not be able
to provide our services to our customers. Notwithstanding these limitations, the
Task Force monitors the websites for all vendors used by us, to the extent
available, for information on such vendors' Year 2000 programs. To the extent
applicable, the Task Force uses such information to verify Year 2000 compliance
and to implement remediation procedures. We also have requested information from
various third parties on the status of their Year 2000 compliance programs in an
effort to prevent any possible interruptions or failures. To date, responses by
programming vendors to such communications have been limited. The responses
received state only that the party is working on Year 2000 issues and does not
have a definitive position at this time. As a result, we are unable to assess
the risk posed by our dependence upon such third parties' systems. Vendors for
critical equipment components, such as the headend controllers mentioned below,
have been more responsive and we believe substantially all of our equipment will
be Year 2000 compliant. We cannot, however, give any assurances concerning
compliance of equipment because such belief is based on information provided by
vendors, which cannot be independently verified, and because of the
uncertainties inherent in Year 2000 remediation.
We are considering certain limited contingency plans, including preparing
back-up programming and stand-by power generators. Such contingency plans may
not, however, resolve the problem in a satisfactory manner. With respect to
other third-party systems, each UIH operating system is responsible for
inquiring of their vendors and other entities with which they do business (e.g.,
utility companies, financial institutions and facility owners) as to such
entities' Year 2000 compliance programs. In addition, we have distributed a
contingency plan to all of our operating systems, which sets forth preparation
procedures and recovery solutions.
53
<PAGE>
The Task Force is working closely with the manufacturers of our headend devices
to remedy any Year 2000 problems assessed in the headend equipment. Recent
information from the two primary manufacturers of such equipment indicate that
most of the equipment used in the UIH operating systems are not date sensitive.
Where such equipment needs to be upgraded for Year 2000 issues, such vendors are
upgrading without charge. These upgrades are expected to be completed before
year-end 1999, but such process is not wholly within the control of us or our
systems. Approximately 91.0% of the headend controllers, which are considered
the most critical component of the headend devices, have been upgraded. With
respect to billing and customer care systems, we use standard billing and
customer care programs from several vendors. The Task Force is working with such
vendors to achieve Year 2000 compliance for all systems in UIH.
MINORITY-HELD SYSTEMS. We have several minority investments in international
multi-channel television and telephony operations. With respect to these
minority investments, the Task Force is including their systems in the program.
Of these investments, 95.0% have completed their Identification Phase of the
program and the Task Force is in the process of making recommendations to these
entities as to Year 2000 compliance matters. No assurance can be given, however,
that these entities will implement the recommendations or otherwise be Year 2000
compliant. On an overall basis, the Task Force continues to analyze the Year
2000 program and will revise the program as necessary throughout 1999, including
procedures it undertakes with respect to third parties to ensure their Year 2000
compliance.
COSTS OF COMPLIANCE. The Task Force is not able to determine the full cost of
its Year 2000 program and its related impact on the financial condition of the
Company. 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. The Task Force has,
however, revised its estimates of the cost for the Year 2000 program to $3.9
million. The cost includes certain identified replacement and remediation
procedures and external consultants, and has been increased because of system
acquisitions and additional date sensitive items that require research as to
Year 2000 compliance. Such estimate does not, however, include internal costs
because we do not separately track the internal costs incurred for the Year 2000
program. Although no assurance can be made, we believe that the known Year 2000
compliance issues can be remedied without a material financial impact on us. No
assurance can be made, however, as to the total cost (excluding internal costs)
for the Year 2000 program until all of the data has been gathered. In addition,
we can not predict the financial impact on us if Year 2000 problems are caused
by third parties upon which our systems are dependent or experienced by entities
in which we hold investments. The failure of any one of these parties to
implement Year 2000 procedures could have a material adverse impact on our
operations and financial condition.
EUROPEAN ECONOMIC AND MONETARY UNION
On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and the euro. The participating countries adopted the euro as their common legal
currency on that day. The euro trades on currency exchanges and is available for
non-cash transactions during the transition period between January 1, 1999 and
January 1, 2002. During this transition period, the existing currencies are
scheduled to remain legal tender in the participating countries as denominations
of the euro and public and private parties may pay for goods and services using
either the euro or the participating countries' existing currencies.
During the transition period, all UPC operating companies' billing systems will
include amounts in euro as well as the respective country's existing currency.
All of UPC's accounting and management reporting systems currently are
multi-currency.
UPC intends to use the euro as its reporting currency by the end of 2000. We do
not expect the introduction of the euro to affect materially UPC's cable
television and other operations. We have not yet taken steps to confirm that the
financial institutions and other third parties with whom we have financial
relationships are prepared for the use of the euro. Thus far, we have not
experienced any material problem with third parties as a result of the
introduction of the euro. We believe the introduction of the euro will not
require us to amend any of our financial instruments or loan facilities, other
than amendments that will be made automatically by operation of law. These will
include automatic replacement of the currencies of participating countries with
the euro. They will also include automatic replacement of interest rates of
participating countries with European interest rates. We believe the
introduction of the euro will reduce our exposure to risk from foreign currency
and interest rate fluctuations.
54
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ---------------------------------------------------------------------
INVESTMENT PORTFOLIO
We do not use derivative financial instruments in our non-trading investment
portfolio. We place our cash and cash equivalent investments in highly liquid
instruments that meet high credit quality standards with original maturities at
the date of purchase of less than three months. We also place our short-term
investments in liquid instruments that meet high credit quality standards with
original maturities at the date of purchase of between three and twelve months.
We also limit the amount of credit exposure to any one issue, issuer or type of
instrument. These investments are subject to interest rate risk and will fall in
value if market interest rates increase. We do not expect, however, any material
loss with respect to our investment portfolio. Subsequent to December 31, 1998,
UPC completed its initial public offering raising net proceeds of NLG2,705.8
million ($1,431.6 million). The proceeds from the offering will be invested in
short-term investments that meet high credit quality standards with original
maturities at the date of purchase between one and twelve months. We must comply
with the restrictions placed on us by the 1998 Notes indenture, which limits
such investments to a risk profile of A2/P2 commercial paper.
IMPACT OF FOREIGN CURRENCY RATE CHANGES
We are exposed to foreign exchange rate fluctuations related to our operating
subsidiaries' monetary assets and liabilities and the financial results of
foreign subsidiaries when their respective financial statements are translated
into U.S. dollars during consolidation. Our exposure to foreign exchange rate
fluctuations also arises from intercompany charges such as the cost of
equipment, management fees and certain other charges. These intercompany
accounts are predominantly denominated in the functional currency of the foreign
subsidiary.
The operating companies' monetary assets and liabilities are subject to foreign
currency exchange risk as certain equipment purchases and payments for certain
operating expenses, such as programming expenses, are denominated in currencies
other than their own functional currency. In addition, certain of the operating
companies have notes payable and notes receivable which are denominated in a
currency other than their own functional currency. Foreign currency rate changes
also affect our share in results of our minority-owned affiliates.
The functional currency for our foreign operations is the applicable local
currency for each affiliate company. Assets and liabilities of foreign
subsidiaries are translated at the exchange rates in effect at year-end, and the
statements of operations are translated at the average exchange rates during the
period. Exchange rate fluctuations on translating foreign currency financial
statements into U.S. dollars result in unrealized gains or losses referred to as
translation adjustments. Cumulative translation adjustments are recorded as a
separate component of other cumulative comprehensive loss in the statement of
stockholders' (deficit) equity.
Transactions denominated in currencies other than the local currency are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in exchange rates result in transaction gains and losses which are
reflected in income as unrealized (based on period-end translations) or realized
upon settlement of the transactions.
Cash flows from our operations in foreign countries are translated based on
their reporting currencies. As a result, amounts related to assets and
liabilities reported on the consolidated statements of cash flows will not agree
to changes in the corresponding balances on the consolidated balance sheets. The
effects of exchange rate changes on cash balances held in foreign currencies are
reported as a separate line below cash flows from financing activities.
The spot rates and average rates for the primary currencies that impact our
financial statements are shown below per one U.S. dollar:
55
<PAGE>
<TABLE>
<CAPTION>
Dutch Australian New Zealand Chilean Mexican
Guilder Dollar Dollar Peso Peso
------- ---------- ----------- -------- -------
<S>
Spot Rates: <C> <C> <C> <C> <C>
December 31, 1998.......... 1.8900 1.6332 1.8939 472.5000 9.9080
December 31, 1997.......... 2.0200 1.5378 1.7161 439.8500 8.0700
December 31, 1996.......... 1.7400 1.2583 1.4156 424.7500 7.8900
Average Rates:
1998....................... 1.9900 1.6102 1.9133 459.7378 9.1431
1997....................... 1.9500 1.5378 1.5126 419.0443 7.9205
1996....................... 1.6900 1.2675 1.4400 412.1028 7.5604
</TABLE>
In general, we do not execute hedge transactions to reduce our exposure to
foreign currency exchange rate risk. 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. During the
ten months ended December 31, 1998, we recorded a negative change in cumulative
translation adjustments of $24.7 million, primarily due to the strengthening of
the U.S. dollar compared to the currencies listed above.
INTEREST RATE SENSITIVITY
The table below provides information about our primary debt obligations. The
variable-rate financial instruments are sensitive to changes in interest rates.
The information is presented in U.S. dollar equivalents, which is our reporting
currency.
<TABLE>
<CAPTION>
As of December 31, 1998
------------------------------------------
Book Value Fair Value
---------- ----------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C>
Long-term and short-term debt:
Fixed rate U.S. dollar denominated 1998 Notes................................ $893,003 $783,750
Average interest rate..................................................... 10.75% 12.46%
Fixed rate U.S. dollar denominated UIH A/P Notes............................. $356,640 $246,433
Average interest rate..................................................... 14.00% 20.71%
Fixed rate U.S. dollar denominated DIC Loan.................................. $ 84,214 $ 84,214
Average interest rate..................................................... 8.00% 8.00%
Fixed rate U.S. dollar denominated VTRH Note................................. $ 9,284 $ 9,284
Average interest rate..................................................... 12.95% 12.95%
Fixed rate U.S. dollar denominated TVSB Seller Note.......................... $ 5,853 $ 5,853
Average interest rate..................................................... 10.00% 10.00%
Variable rate Dutch guilder denominated Senior Revolving Credit Facility..... $512,179 $512,179
Average interest rate..................................................... 5.70% 5.70%
Variable rate U.S. dollar denominated Bridge Bank Facility................... $ 60,063 $ 60,063
Average interest rate..................................................... 10.80% 10.80%
Variable rate French Franc denominated Mediareseaux Facility................. $ 21,346 $ 21,346
Average interest rate..................................................... 5.20% 5.20%
Variable rate German Mark denominated Telekabel Hungary Facility............. $ 15,504 $ 15,504
Average interest rate..................................................... 5.70% 5.70%
Variable rate Australian dollar denominated Austar Bank Facility............. $104,090 $104,090
Average interest rate..................................................... 6.75% 6.75%
Variable rate U.S. dollar denominated ULA Revolving Credit Facility.......... $ 8,000 $ 8,000
Average interest rate..................................................... 8.83% 8.83%
</TABLE>
The table below presents principal cash flows by expected maturity dates for our
debt obligations. The information is presented in U.S. dollar equivalents, which
is our reporting currency.
56
<PAGE>
<TABLE>
<CAPTION>
As of December 31, 1998
----------------------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
-------- -------- -------- -------- -------- ---------- --------
(U.S. dollars, in thousands except interest rates)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term and short-term debt:
Fixed rate U.S. dollar denominated
1998 Notes.............................. -- -- -- -- -- $893,003 $893,003
Fixed rate U.S. dollar denominated
UIH A/P Notes............................ -- -- -- -- -- $356,640 $356,640
Fixed rate U.S. dollar denominated
DIC Loan................................ $ 42,107 $ 42,107 -- -- -- -- $ 84,214
Fixed rate U.S. dollar denominated
VTRH Note................................ $ 9,284 -- -- -- -- -- $ 9,284
Fixed rate U.S. dollar denominated
TVSB Seller Note......................... $ 5,853 -- -- -- -- -- $ 5,853
Variable rate Dutch guilder denominated
Senior Revolving Credit Facility......... $328,042 $184,137 -- -- -- -- $512,179
Variable rate U.S. dollar denominated
Bridge Bank Facility..................... $ 60,063 -- -- -- -- -- $ 60,063
Variable rate French Franc denominated
Mediareseaux Facility.................... -- -- -- $21,346 -- -- $ 21,346
Variable rate German Mark denominated
Telekabel Hungary Facility............... $ 15,504 -- -- -- -- -- $ 15,504
Variable rate Australian dollar denominated
Austar Bank Facility..................... $ 36,738 -- -- -- -- $ 67,352 $104,090
Variable rate U.S. dollar denominated
ULA Revolving Credit Facility............ $ 8,000 -- -- -- -- -- $ 8,000
</TABLE>
We use interest rate swap agreements from time to time, to manage interest rate
risk on our floating rate debt facilities. Interest rate swaps are entered into
depending on our assessment of the market, and generally are used to convert
floating rate debt to fixed rate debt. Interest differentials paid or received
under these swap agreements are recognized over the life of the contracts as
adjustments to the effective yield of the underlying debt, and related amounts
payable to, or receivable from, the counterparties are included in the
consolidated balance sheet. Currently, we have two interest rate swaps to manage
interest rate exposure on the Austar Bank Facility. These swap agreements expire
in 2002 and effectively convert an aggregate principal amount of A$50.0 million
($30.6 million as of December 31, 1998) of variable rate, long-term debt into
fixed rate borrowings. As of December 31, 1998, the weighted-average fixed rate
under these agreements was 7.94% compared to a weighted-average variable rate on
the Austar Bank Facility of 6.75%. As a result of these swap agreements,
interest expense was increased by approximately A$0.6 million ($0.4 million)
during 1998.
Fair values of the interest rate swap agreements are based on the estimated
amounts that we would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
creditworthiness of the counterparties. As of December 31, 1998, we estimate we
would have paid approximately A$1.3 million ($0.8 million) to terminate the
agreements.
57
<PAGE>
The table below provides information about our interest rate swaps. The table
presents notional amounts and weighted-average interest rates by expected
(contractual) maturity dates. Notional amounts are used to calculate the
contractual payments to be exchanged under the contract. The information is
presented in U.S. dollar equivalents (in thousands), which is our reporting
currency.
<TABLE>
<CAPTION>
As of December 31, 1998
------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps:
Variable to fixed............. -- -- -- $30,615 -- -- $30,615
Average pay rate %............ 8.00% 8.00% 8.00% 8.00% -- -- 8.00%
Average receive rate %........ 6.75% 6.75% 6.75% 6.75% -- -- 6.75%
</TABLE>
INFLATION AND FOREIGN INVESTMENT RISK
Certain of our operating companies operate in countries where the rate of
inflation is extremely high relative to that in the United States. While our
affiliated companies attempt to increase their subscription rates to offset
increases in operating costs, there is no assurance that they will be able to do
so. Therefore, operating costs may rise faster than associated revenue,
resulting in a material negative impact on reported earnings. We are also
impacted by inflationary increases in salaries, wages, benefits and other
administrative costs, the effects of which to date have not been material.
Our foreign operating companies are all directly affected by their respective
countries' government, economic, fiscal and monetary policies and other
political factors. We believe that our operating companies' financial conditions
and results of operations have not been materially adversely affected by these
factors.
58
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The consolidated financial statements of the Company are filed under this Item
as follows:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
UNITED INTERNATIONAL HOLDINGS, INC.
Report of Independent Public Accountants................................................................... 60
Consolidated Balance Sheets as of December 31, 1998 and February 28, 1998.................................. 61
Consolidated Statements of Operations for the Ten Months Ended December 31, 1998, and
the Years Ended February 28, 1998 and February 28, 1997.................................................. 62
Consolidated Statements of Stockholders' (Deficit) Equity for the Ten Months Ended December 31, 1998, and
the Years Ended February 28, 1998 and February 28, 1997.................................................. 63
Consolidated Statements of Cash Flows for the Ten Months Ended December 31, 1998, and
the Years Ended February 28, 1998 and February 28, 1997.................................................. 67
Notes to Consolidated Financial Statements................................................................. 70
</TABLE>
The financial statement schedules and separate financial statements of
collateral subsidiaries and significant equity investees required by Regulation
S-X are filed under Item 14 "Exhibits, Financial Statement Schedules and Reports
on Form 8-K."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------
None.
59
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To United International Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of United
International Holdings, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1998 and February 28, 1998, and the related consolidated statements
of operations, stockholders' deficit and cash flows for the ten months ended
December 31, 1998 (see Note 2) and the years ended February 28, 1998 and
February 28, 1997. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform these audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United International Holdings,
Inc. and subsidiaries as of December 31, 1998 and February 28, 1998, and the
results of their operations and their cash flows for the ten months ended
December 31, 1998 and the years ended February 28, 1998 and February 28, 1997 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
April 30, 1999
60
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C>
ASSETS
Current assets
Cash and cash equivalents............................................................................... $ 35,608 $ 303,441
Restricted cash......................................................................................... 17,215 20,950
Short-term liquid investments........................................................................... 41,498 33,731
Subscriber receivables, net of allowance for doubtful accounts of $5,482 and $3,191, respectively....... 13,788 7,311
Costs to be reimbursed by affiliated companies.......................................................... 21,232 15,157
Other related party receivables......................................................................... 2,064 4,167
Other receivables....................................................................................... 15,380 5,474
Inventory............................................................................................... 12,762 6,455
Other current assets, net............................................................................... 16,363 14,313
---------- ----------
Total current assets.............................................................................. 175,910 410,999
Investments in and advances to affiliated companies, accounted for under the equity method, net........... 429,490 341,252
Property, plant and equipment, net of accumulated depreciation of $201,183 and $84,633, respectively...... 464,059 440,735
Goodwill and other intangible assets, net of accumulated amortization of $39,683 and $14,532,
respectively............................................................................................. 424,934 409,190
Deferred financing costs, net of accumulated amortization of $9,923 and $1,634, respectively.............. 41,270 44,943
Non-current restricted cash and other assets, net......................................................... 6,432 32,716
---------- ----------
Total assets...................................................................................... $1,542,095 $1,679,835
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable, including related party payables of $247 and $86, respectively........................ $ 76,696 $ 55,741
Accrued liabilities..................................................................................... 66,079 46,419
Subscriber prepayments and deposits..................................................................... 24,210 12,145
Short-term debt......................................................................................... 93,379 --
Current portion of senior discount notes................................................................ 412 --
Current portion of other long-term debt................................................................. 62,252 163,325
Other current liabilities............................................................................... 3,524 13,760
---------- ----------
Total current liabilities......................................................................... 326,552 291,390
Senior discount notes..................................................................................... 1,249,643 1,127,763
Other long-term debt...................................................................................... 689,646 575,008
Deferred compensation..................................................................................... 173,251 2,385
Deferred taxes............................................................................................ 4,580 22,032
Other long-term liabilities............................................................................... 7,097 5,787
---------- ----------
Total liabilities......................................................................................... 2,450,769 2,024,365
---------- ----------
Minority interests in subsidiaries........................................................................ 18,705 15,186
---------- ----------
Preferred stock, $0.01 par value, 3,000,000 shares authorized, stated at liquidation value:
Series A Convertible Preferred Stock, 132,144 and 170,513 shares issued and outstanding, respectively... 26,086 32,564
---------- ----------
Series B Convertible Preferred Stock, 139,031 and 0 shares issued and outstanding, respectively......... 30,200 --
---------- ----------
Stockholders' deficit:
Class A Common Stock, $0.01 par value, 60,000,000 shares authorized, 30,674,995 and 26,381,093 shares
issued and outstanding, respectively................................................................... 307 264
Class B Common Stock, $0.01 par value, 30,000,000 shares authorized, 9,915,880 and 12,863,323 shares
issued and outstanding, respectively................................................................... 99 128
Additional paid-in capital.............................................................................. 378,597 352,253
Deferred compensation................................................................................... (679) (42)
Treasury stock, at cost, 2,784,620 and 3,169,151 shares of Class A Common Stock, respectively........... (29,061) (33,074)
Accumulated deficit..................................................................................... (1,241,986) (646,085)
Other cumulative comprehensive loss..................................................................... (90,942) (65,724)
---------- ----------
Total stockholders' deficit....................................................................... (983,665) (392,280)
---------- ----------
Commitments and contingencies (Notes 13 and 14)
Total liabilities and stockholders' deficit....................................................... $1,542,095 $1,679,835
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands, except share and per share amounts)
For the Ten For the Years Ended
Months Ended February 28,
December 31, -------------------------
1998 1998 1997
------------ ---------- -----------
<S> <C> <C> <C>
Revenue............................................................................. $ 254,068 $ 98,622 $ 31,555
System operating expense............................................................ (122,811) (65,631) (26,251)
System selling, general and administrative expense.................................. (105,226) (62,803) (33,655)
Corporate general and administrative expense........................................ (194,767) (28,553) (20,365)
Depreciation and amortization....................................................... (159,045) (91,656) (38,961)
---------- ---------- ----------
Net operating loss.......................................................... (327,781) (150,021) (87,677)
Interest income, including related party income of $497, $302 and $197,
respectively....................................................................... 10,464 7,806 13,329
Interest expense.................................................................... (163,227) (124,288) (79,659)
Provision for losses on marketable equity securities and investment related costs... (9,686) (14,793) (5,859)
Gain on sale of investments in affiliated companies................................. -- 90,020 65,249
Other expense, net.................................................................. (2,546) (5,088) (991)
---------- ---------- ----------
Net loss before other items................................................. (492,776) (196,364) (95,608)
Share in results of affiliated companies, net....................................... (54,166) (68,645) (47,575)
Minority interests in subsidiaries.................................................. 1,410 1,568 4,358
---------- ---------- ----------
Net loss before extraordinary charge........................................ (545,532) (263,441) (138,825)
Extraordinary charge for early retirement of debt................................... -- (79,091) --
---------- ---------- ----------
Net loss.................................................................... $ (545,532) $ (342,532) $ (138,825)
========== ========== ==========
Net loss per common share:
Basic and diluted loss before extraordinary charge.......................... $ (13.71) $ (6.75) $ (3.59)
Extraordinary charge........................................................ -- (2.02) --
---------- ---------- ----------
Basic and diluted net loss.................................................. $ (13.71) $ (8.77) $ (3.59)
========== ========== ==========
Weighted-average number of common shares outstanding................................ 39,919,887 39,211,501 39,035,776
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
(Stated in thousands, except share amounts)
Class A Class B Addi- Other
Common Stock Common Stock tional Deferred Treasury Stock Cumulative Total
---------------- ---------------- Paid-In Compen- ---------------- Accumulated Comprehen- Comprehen-
Shares Amount Shares Amount Capital sation Shares Amount Deficit sive Loss(1) sive Loss Total
--------- ------ --------- ------ -------- -------- --------- ------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
February
29, 1996.....25,732,154 $257 13,274,685 $133 $325,716 $(842) -- $ -- $(164,728) $ (8,560) $ -- $151,976
Issuance of
Class A
Common Stock
in connect-
ion with
Company's
stock option
plan......... 39,750 -- -- -- 349 -- -- -- -- -- -- 349
Issuance of
Class A
Common Stock
in connec-
tion with
Company's
401(k) plan... 22,449 -- -- -- 309 -- -- -- -- -- -- 309
Exchange of
Class B
Common Stock
for Class A
Common Stock.. 302,910 4 (302,910) (4) -- -- -- -- -- -- -- --
Accrual of
dividends on
convertible
preferred
stock......... -- -- -- -- (1,221) -- -- -- -- -- -- (1,221)
Expiration
of put option
of warrants
not tendered
to the
Company....... -- -- -- -- 9,011 -- -- -- -- -- -- 9,011
Gain on sale
of stock by
subsidiary.... -- -- -- -- 5,898 -- -- -- -- -- -- 5,898
Repricing of
stock
options....... -- -- -- -- 691 (691) -- -- -- -- -- --
Amortization
of deferred
compensation.. -- -- -- -- -- 909 -- -- -- -- -- 909
Net loss....... -- -- -- -- -- -- -- -- (138,825) -- (138,825) (138,825)
Unrealized
loss on
investments... -- -- -- -- -- -- -- -- -- (4,880) (4,880) (4,880)
Change in
cumulative
translation
adjustments... -- -- -- -- -- -- -- -- -- (8,430) (8,430) (8,430)
---------- ---- ---------- ---- -------- ----- --------- ---- --------- -------- --------- --------
Balances,
February
28, 1997..... 26,097,263 $261 12,971,775 $129 $340,753 $(624) -- $ -- $(303,553) $(21,870) $(152,135) $ 15,096
========== ==== ========== ==== ======== ===== ========= ==== ========= ======== ========= ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Continued)
(Stated in thousands, except share amounts)
Class A Class B Addi- Other
Common Stock Common Stock tional Deferred Treasury Stock Cumulative Total
---------------- ---------------- Paid-In Compen- ---------------- Accumulated Comprehen- Comprehen-
Shares Amount Shares Amount Capital sation Shares Amount Deficit sive Loss(1) sive Loss Total
--------- ------ --------- ------ -------- -------- --------- ------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
February
28, 1997......26,097,263 $261 12,971,775 $129 $340,753 $(624) -- $ -- $(303,553) $(21,870) $ -- $ 15,096
Issuance of
Class A
Common Stock
in connection
with Company's
stock option
plan.......... 151,894 2 -- -- 794 -- -- -- -- -- -- 796
Issuance of
Class A
Common Stock
in connection
with Company's
401(k) plan... 23,484 -- -- -- 334 -- -- -- -- -- -- 334
Exchange of
Class B
Common Stock
for Class A
Common Stock.. 108,452 1 (108,452) (1) -- -- -- -- -- -- -- --
Accrual of
dividends on
convertible
preferred
stock......... -- -- -- -- (1,271) -- -- -- -- -- -- (1,271)
Compensation
expense related
to stock
options....... -- -- -- -- 351 -- -- -- -- -- -- 351
Issuance of
warrants to
purchase
common
stock of
subsidiary.... -- -- -- -- 3,678 -- -- -- -- -- -- 3,678
Gain on sale
of stock by
subsidiaries.. -- -- -- -- 7,614 -- -- -- -- -- -- 7,614
Amortization
of deferred
compensation.. -- -- -- -- -- 582 -- -- -- -- -- 582
Purchase of
Class A
Common Stock
by subsidiary. -- -- -- -- -- -- 3,169,151 (33,074) -- -- -- (33,074)
Net loss...... -- -- -- -- -- -- -- -- (342,532) -- (342,532) (342,532)
Change in
unrealized gain
(loss) on
investments,
net........... -- -- -- -- -- -- -- -- -- (1,593) (1,593) (1,593)
Provision for
loss on
marketable
equity
securities.... -- -- -- -- -- -- -- -- -- 8,013 8,013 8,013
Change in
cumulative
translation
adjustments... -- -- -- -- -- -- -- -- -- (50,274) (50,274) (50,274)
---------- ---- ---------- ---- -------- ----- --------- -------- --------- -------- --------- ----------
Balances,
February 28,
1998..........26,381,093 $264 12,863,323 $128 $352,253 $ (42) 3,169,151 $(33,074) $(646,085) $(65,724) $(386,386) $(392,280)
========== ==== ========== ==== ======== ===== ========= ======== ========= ======== ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Continued)
(Stated in thousands, except share amounts)
Class A Class B Addi- Other
Common Stock Common Stock tional Deferred Treasury Stock Cumulative Total
---------------- ---------------- Paid-In Compen- ---------------- Accumulated Comprehen- Comprehen-
Shares Amount Shares Amount Capital sation Shares Amount Deficit sive Loss(1) sive Loss Total
--------- ------ --------- ------ -------- -------- --------- ------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
February 28,
1998..........26,381,093 $264 12,863,323 $128 $352,253 $ (42) 3,169,151 $(33,074) $ (646,085) $(65,724) $ -- $(392,280)
Issuance of
Class A
Common Stock
in connection
with public
offering,
net of
offering
expense....... 450,000 5 -- -- 7,399 -- -- -- -- -- -- 7,404
Issuance of
Class A
Common Stock
in connection
with Company's
stock option
plan.......... 453,144 5 -- -- 4,783 -- -- -- -- -- -- 4,788
Issuance of
Class A
Common Stock
in connection
with Company's
401(k) plan... 17,858 -- -- -- 260 -- -- -- -- -- -- 260
Exchange of
Class B
Common Stock
for Class A
Common Stock.. 2,947,443 29 (2,947,443) (29) -- -- -- -- -- -- -- --
Exchange of
Series A
Convertible
Preferred
Stock for
Class A
Common Stock.. 425,457 4 -- -- 7,441 -- -- -- -- -- -- 7,445
Accrual of
dividends on
convertible
preferred
stock......... -- -- -- -- (1,623) -- -- -- -- -- -- (1,623)
Repricing of
stock options. -- -- -- -- 1,380 (1,380) -- -- -- -- -- --
Amortization
of deferred
compensation.. -- -- -- -- -- 743 -- -- -- -- -- 743
Gain on deemed
issuance of
stock by
subsidiary.... -- -- -- -- 5,786 -- -- -- -- -- -- 5,786
Class A
Common Stock
issued by
subsidiary for
additional
interest
in Ireland
systems....... -- -- -- -- 918 -- (384,531) 4,013 -- -- -- 4,931
Elimination
of historical
two month
reporting
difference
due to change
in fiscal
year end...... -- -- -- -- -- -- -- -- (50,369) -- -- (50,369)
Net loss....... -- -- -- -- -- -- -- -- (545,532) -- (545,532) (545,532)
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Continued)
(Stated in thousands, except share amounts)
Class A Class B Addi- Other
Common Stock Common Stock tional Deferred Treasury Stock Cumulative Total
---------------- ---------------- Paid-In Compen- ---------------- Accumulated Comprehen- Comprehen-
Shares Amount Shares Amount Capital sation Shares Amount Deficit sive Loss(1) sive Loss Total
--------- ------ --------- ------ -------- -------- --------- ------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Change in
cumulative
translation
adjustments... -- $ -- -- $ -- $ -- $ -- -- $ -- $ -- $(24,713) $ (24,713) $ (24,713)
Change in
unrealized
gain on
investment.... -- -- -- -- -- -- -- -- -- (505) (505) (505)
---------- ---- ----------- ---- -------- ----- --------- -------- ----------- -------- --------- ---------
Balances,
December 31,
1998..........30,674,995 $307 9,915,880 $ 99 $378,597 $(679) 2,784,620 $(29,061) $(1,241,986) $(90,942) $(570,750) $(983,665)
========== ==== =========== ==== ======== ===== ========= ======== =========== ======== ========= =========
</TABLE>
(1) Other Cumulative Comprehensive Loss at the end of each reporting period
consists of the following:
<TABLE>
<CAPTION>
As of As of February 28, As of
February 29, ----------------------- December 31,
1996 1997 1998 1998
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Foreign currency translation adjustments $(7,371) $(15,801) $(66,075) $(90,788)
Unrealized (loss) gain on investments...... (1,189) (6,069) 351 (154)
------- -------- -------- --------
Total................................... $(8,560) $(21,870) $(65,724) $(90,942)
======= ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)
For the Ten For the Years Ended
Months Ended February 28,
December 31, -------------------------
1998 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................................................. $(545,532) $(342,532) $(138,825)
Elimination of historical two month reporting difference due to change in
fiscal year end..................................................................... (50,369) -- --
Adjustments to reconcile net loss to net cash flows from operating activities:
Extraordinary charge for early retirement of debt................................... -- 79,091 --
Share in results of affiliated companies, net....................................... 66,326 70,291 47,575
Gain on sale of investments in affiliated companies................................. -- (90,020) (65,249)
Minority interests share of losses.................................................. (1,186) (1,568) (4,358)
Depreciation and amortization....................................................... 192,968 91,656 38,961
Accretion of interest on senior notes and amortization of deferred financing costs.. 130,803 110,633 73,695
Compensation expense related to stock options....................................... 164,793 351 --
Provision for losses on marketable equity securities and investment related costs... 9,473 14,793 5,859
Increase in receivables, net........................................................ (12,755) (3,222) (2,801)
(Decrease) increase in other assets................................................. (8,528) 6,993 (13,409)
Increase in accounts payable, accrued liabilities and other......................... 55,995 2,882 23,058
---------- --------- ---------
Net cash flows from operating activities...................................... 1,988 (60,652) (35,494)
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments............................................. (149,601) (94,656) (359,534)
Proceeds from sale of short-term liquid investments................................... 141,834 131,284 324,867
Restricted cash released (deposited).................................................. 27,904 (8,350) 12,473
Investments in and advances to affiliated companies................................... (139,011) (177,632) (73,865)
Proceeds from sale of investments in affiliated companies............................. 19,968 211,125 43,098
New acquisitions, net of cash acquired................................................ (109,881) -- (26,382)
Capital expenditures.................................................................. (217,057) (115,033) (204,407)
Deconsolidation of New Zealand subsidiary............................................. (9,881) -- --
Proceeds from sale of property, plant and equipment................................... -- 5,332 --
Distribution received from affiliated company......................................... 223 1,248 --
(Decrease) increase in construction payables.......................................... (2,007) (29,621) 38,331
Payments on notes receivable.......................................................... 3,370 12,238 45,264
Acquisition, transaction and development costs and other.............................. 679 (9,031) (9,623)
---------- --------- ---------
Net cash flows from investing activities...................................... (433,460) (73,096) (209,778)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from offering of senior discount notes....................................... -- 842,125 225,115
Retirement of existing senior notes................................................... -- (531,800) --
Proceeds from short-term and long-term borrowings..................................... 321,167 233,715 --
Deferred financing costs.............................................................. (5,932) (30,868) (10,670)
Repayments of long and short-term borrowings.......................................... (168,358) (120,570) --
Payment of sellers notes.............................................................. -- (46,351) (11,856)
Issuance of common stock in connection with public offerings, net of financing costs.. 7,402 -- --
Issuance of common stock in connection with Company's stock option plan............... 4,789 796 349
Cash (paid to) contributed from minority interest partners............................ (253) 22,042 --
Payment of warrants tendered to the Company........................................... -- -- (2,156)
---------- --------- ---------
Net cash flows from financing activities...................................... 158,815 369,089 200,782
---------- --------- ---------
EFFECT OF EXCHANGE RATES ON CASH...................................................... 4,824 (684) 1,056
---------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...................................... (267,833) 234,657 (43,434)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................ 303,441 68,784 112,218
---------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................................. $ 35,608 $ 303,441 $ 68,784
========== ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Stated in thousands)
For the Ten For the Years Ended
Months Ended February 28,
December 31, -------------------------
1998 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
NON-CASH INVESTING AND FINANCING ACTIVITIES:
CONTRIBUTION OF DUTCH CABLE SYSTEMS TO NEW JOINT VENTURE:
Working capital................................................................... $ (1,871) $ -- $ --
Investments in affiliated companies............................................... 96,866 -- --
Property, plant and equipment..................................................... 85,037 -- --
Goodwill and other intangible assets.............................................. 78,515 -- --
Senior secured notes and other debt............................................... (111,553) -- --
Other liabilities................................................................. (17,417) -- --
-------- --------- --------
Total net assets contributed................................................ $129,577 $ -- $ --
======== ========= ========
Issuance of preferred stock utilized in purchase of Australian investments.......... $ 29,544 $ -- $ --
======== ========= ========
Seller note for purchase of system in Hungary....................................... $ 18,000 $ -- $ --
======== ========= ========
Note issued upon purchase of remaining interest in Brazilian investment............. $ 5,683 $ -- $ --
======== ========= ========
Seller notes for purchase of Argentine systems...................................... $ -- $ 52,061 $ 33,401
======== ========= ========
Note issued upon sale of investment in Venezuela.................................... $ -- $ 6,500 $ --
======== ========= ========
Note receivable upon sale of investment in Brazil system............................ $ -- $ -- $ 35,000
======== ========= ========
Non-cash stock issuance for purchase of 50.0% interest in New Zealand affiliate..... $ -- $ -- $ 7,800
======== ========= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest............................................................ $ 40,929 $ 7,513 $ 870
======== ========= ========
Cash received for interest........................................................ $ 9,074 $ 7,694 $ 11,900
======== ========= ========
ACQUISITION OF DUTCH CABLE ASSETS:
Property, plant and equipment and other long-term assets.......................... $(51,632) $ -- $ --
Goodwill and other intangible assets.............................................. (36,416) -- --
-------- --------- --------
Total cash paid............................................................. $(88,048) $ -- $ --
======== ========= ========
DECONSOLIDATION OF NEW ZEALAND SUBSIDIARY:
Working capital................................................................... $ 4,159 $ -- $ --
Property, plant and equipment..................................................... (26,484) -- --
Goodwill and other intangible assets.............................................. (2,805) -- --
Notes payable and other debt...................................................... 3,833 -- --
Minority interest................................................................. 11,416 -- --
-------- --------- --------
Total cash relinquished..................................................... $ (9,881) $ -- $ --
======== ========= ========
SALE OF ARGENTINE CABLE SYSTEMS:
Working capital, net of cash relinquished of $2,133............................... $ -- $ (3,319) $ --
Investments in affiliated companies............................................... -- 83,535 --
Property, plant and equipment and other long-term assets.......................... -- 4,560 --
Goodwill and other intangible assets.............................................. -- 60,727 --
Sellers notes (assumed by the buyers)............................................. -- (24,398) --
Gain on sale...................................................................... -- 90,020 --
-------- --------- --------
Cash received from sale..................................................... $ -- $ 211,125 $ --
======== ========= ========
ACQUISITION OF ADDITIONAL 50.0 % INTEREST IN EUROPEAN SUBSIDIARY:
Working capital, including cash acquired of $50,872............................... $ -- $ (7,158) $ --
Investment in UIH Class A Common Stock............................................ -- (33,074) --
Investments in affiliated companies............................................... -- (167,945) --
Property, plant and equipment and other long-term assets.......................... -- (273,988) --
Goodwill and other intangible assets.............................................. -- (383,503) --
Elimination of UIH equity investment.............................................. -- 46,319 --
Long-term debt.................................................................... -- 624,633 --
Other liabilities................................................................. -- 32,216 --
-------- --------- --------
Total cash paid............................................................. $ -- $(162,500) $ --
======== ========= ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Stated in thousands)
For the Ten For the Years Ended
Months Ended February 28,
December 31, -------------------------
1998 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
ACQUISITION OF BAHIA BLANCA SYSTEM:
Working capital, including cash acquired of $97................................... $ -- $ -- $ 14,752
Property, plant and equipment and other long-term assets.......................... -- -- (4,051)
Goodwill and other intangible assets.............................................. -- -- (63,464)
Purchase money notes and other debt............................................... -- -- 26,381
-------- --------- --------
Total cash paid............................................................. $ -- $ -- $(26,382)
======== ========= ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
69
<PAGE> UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in thousands, except share and per share amounts)
1. ORGANIZATION AND NATURE OF OPERATIONS
United International Holdings, Inc. (together with its majority-owned
subsidiaries, the "Company" or "UIH") was formed as a Delaware corporation in
May 1989, for the purpose of developing, acquiring and managing foreign
multi-channel television, programming and telephony operations outside the
United States.
The following chart presents a summary of the Company's significant investments
in multi-channel television and telephony operations as of December 31, 1998.
<TABLE>
<CAPTION>
<S> <C>
************************************************************************************************************************************
* UIH *
* *
************************************************************************************************************************************
100% * 100% *
*************************************** *******************************************************************************************
* UIH Europe, Inc. * * United International Properties, Inc. *
* ("UIHE") * * ("UIPI") *
*************************************** *******************************************************************************************
* *
* **********************************************
100%(1) * 98% * * 100%
*************************************** ********************************************* *********************************************
*United Pan-Europe Communications N.V.* * UIH Asia/Pacific Communications, Inc. * * UIH Latin America, Inc. *
* ("UPC") * * ("UAP") * * ("ULA") *
*************************************** ********************************************* *********************************************
* * *
* * *
*************************************** ********************************************* *********************************************
*Austria: * *Australia: * *Brazil: *
* Telekabel Group 95.0% * * CTV Pty Limited and STV Pty * * TV Show Brazil, S.A. ("TVSB") 100.0% *
*Belgium: * * Limited (collectively, * * TV Cabo e Comunicacoes de *
* Radio Public N.V./S.A. * * "Austar") 100.0% * * Jundiai, S.A. ("Jundiai") 46.3% *
* ("TVD") 100.0% * * United Wireless Pty Limited * *Chile: *
*Czech Republic: * * ("United Wireless") 100.0% * * VTR Hipercable S.A. ("VTRH") 40.0% (7)*
* Kabel Net Group * * XYZ Entertainment Pty Limited * *Mexico: *
* ("KabelNet") 100.0% * * ("XYZ Entertainment") 50.0% * * Tele Cable de Morelos, S.A. *
* Ceska Programova * *China: * * de C.V. ("Megapo") 49.0% *
* Spolecnost SRO * * Hunan International TV * *Peru: *
* ("TV Max") 100.0% * * Communications Company Limited * * Cable Star S.A. ("Cable Star") 60.0% *
*France: * * ("HITV") 49.0% (5)* *Latin American Programming: *
* Mediareseaux Marne S.A. * *New Zealand: * * MGM Networks Latin America *
* ("Mediareseaux") 99.6% * * Saturn Communications Limited * * LLC ("MGM Networks LA") 50.0% *
*Hungary: * * ("Saturn") 65.0% * *********************************************
* Telekabel Hungary BV * *Philippines: *
* ("Telekabel Hungary") 79.3% * * Pilipino Cable Corporation *
* Kabelkom Kabeltelevizio * * ("PCC") 19.6% (6)*
* KFT ("Telekabel Hungary * *Tahiti: *
* Programming") 50.0% (2)* * Telefenua S.A. ("Telefenua") 90.0% *
* Monor Telefon Tarsasag, * *********************************************
* Rt ("Monor") 44.8% *
*Ireland: *
* Tara Television Limited *
* ("Tara") 80.0% *
*Israel: *
* Tevel Israel International *
* Communications Ltd. *
* ("Tevel") 46.6% *
*Malta: *
* Melita Cable TV PLC *
* ("Melita") 50.0% *
*The Netherlands: *
* United Telekabel Holding *
* N.V. ("UTH") 51.0% (3)*
*Norway: *
* Janco Multicom AS *
* ("Janco") 100.0% *
*Romania: *
* Control Cable Ventures SRL *
* ("Control Cable") 100.0% *
* Multicanal Holdings SRL *
* ("Multicanal") 100.0% *
* Eurosat CA-TV SRL *
* ("Eurosat") 51.0% *
*Slovak Republic: *
* Kabeltel SRO ("Kabeltel") 100.0% *
* Trnavatel SRO *
* ("Trnavatel") 75.0% *
*Spain/Portugal: *
* Ibercom, Inc. ("IPS") 33.5% (4)*
***************************************
</TABLE> 70
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
(1) As of December 31, 1998, UIHE held all of the voting control of UPC and
owned all of its issued and outstanding shares, including approximately
7.2% of such shares, which had been registered in the name of a foundation
controlled by UIH to support UPC's employee stock option plan. In February
1999, UPC successfully completed an initial public offering selling 44.6
million of its shares on the Amsterdam Stock Exchange and Nasdaq National
Market System and completed a sale of approximately 1.6 million shares to a
strategic investor, resulting in an ownership interest by UIHE of
approximately 64.3% subsequent to the offering.
(2) In March 1999, Time Warner Entertainment Company ("TWE") exercised its
option to acquire UPC's interest in Telekabel Hungary Programming (see Note
3).
(3) On February 17, 1999, UPC acquired the remaining 49.0% of UTH for
euro250,187 (approximately $282,738) (see Note 3).
(4) UIPI transferred its interest in IPS to UPC in February 1999.
(5) Pursuant to a memorandum of understanding with AmTec, Inc. ("AmTec") UAP
and AmTec agreed to exchange UAP's interest in HITV for AmTec stock.
Closing on the transaction is expected to occur by the end of 1999, subject
to certain conditions.
(6) UAP currently holds a convertible loan, which upon full conversion would
provide UAP with a 40.0% equity ownership interest in Sun Cable Systems
("Sun Cable"). UIH will hold an effective 19.6% interest in PCC when the
merger between Sun Cable (49.0%) and Sky Cable (51.0%) is completed in
1999.
(7) On April 29, 1999, ULA acquired the remaining ownership interest in VTRH
from its current partners, increasing its ownership interest to 100% (see
Note 18).
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had a net working capital deficit of
$150,642. However, subsequent to December 31, 1998 approximately $36,738 of
short-term debt was refinanced on a long-term basis, and UPC completed an
initial public offering resulting in approximately $1,431,600 in net proceeds.
Additional sources of cash in the next year may include the exercise of existing
warrants to purchase UIH common stock, the raising of additional private or
public debt or equity and/or the sale of non-strategic assets by certain
subsidiaries. Management believes that these capital resources will enable UIH
to fund the operating and development requirements of its subsidiaries and to
cover corporate overhead for the next year. If UIH pursues new acquisitions or
development opportunities, UIH would need to raise additional capital or seek
strategic partners.
71
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and all subsidiaries where it exercises a controlling financial interest
through the ownership of a majority voting interest, except for UTH, where
because of certain minority shareholders rights the Company accounts for its
investment in UTH using the equity method of accounting. The Company began
consolidating UPC upon acquisition on December 11, 1997. Prior to December 11,
1997, the Company accounted for its investment in UPC under the equity method.
The Company has consolidated the operations of Saturn since July 1, 1996. Prior
to that time, the Company accounted for its investment in Saturn under the
equity method. Effective January 1, 1998, the Company discontinued consolidating
the results of operations of Saturn and returned to the equity method of
accounting. The change was made to comply with the consensus guidance of the
Emerging Issues Task Force regarding Issue 96-16 "EITF 96-16", and related rules
of the SEC, because the minority shareholders of Saturn have participating
approval or veto rights with respect to certain significant decisions of Saturn
in the ordinary course of business. The Company is currently discussing
alternatives which would allow for the consolidation of Saturn. Effective
October 1, 1998, the Company discontinued consolidating the results of
operations of Telefenua due to an other-than-temporary loss of control and began
using the equity method of accounting. In September 1996, ULA contributed its
wholly-owned subsidiaries in Chile in exchange for a 34.0% interest in VTRH.
Prior to the formation of the joint venture, the Company accounted for these
Chilean investments under the equity method. For the first nine months of the
year ended February 28, 1998, the Company accounted for its investments in
Comodoro, Trelew and Santa Fe, Argentina under the equity method, due to an
expected joint venture in Argentina. This joint venture was abandoned due to the
sale of these interests in October 1997. All significant intercompany accounts
and transactions have been eliminated in consolidation.
CHANGE IN FISCAL YEAR END
Prior to the ten months ended December 31, 1998, the Company's fiscal year end
was February 28, and it accounted for its share of the income or loss of its
operating companies based on the calendar year results of each operating
company. This created a two month delay in reporting the operating company
results in the Company's consolidated results for its fiscal year-end. On
February 24, 1999, the Company changed its fiscal year-end from the last day in
February to the last day in December, effective December 31, 1998. To effect the
transition to the new fiscal year end, the combined results of operations of the
operating companies for January and February 1998, a loss of $50,369, has been
reported as a one-time charge to retained deficit as of March 1, 1998 in the
consolidated statement of stockholders' (deficit) equity. Consequently, the
consolidated statement of operations presents the consolidated results of the
Company and its subsidiaries for the ten months ended December 31, 1998. For
comparative purposes, the Company's consolidated revenue, net operating loss and
net loss were $84,297, $125,445 and $206,374, respectively, for the ten months
ended December 31, 1997.
CASH AND CASH EQUIVALENTS AND SHORT-TERM LIQUID INVESTMENTS
Cash and cash equivalents include cash and investments with original maturities
of less than three months. Short-term liquid investments include certificates of
deposit, commercial paper, corporate bonds and government securities which have
original maturities greater than three months but less than twelve months.
Short-term liquid investments are classified as available-for-sale and are
reported at fair market value.
RESTRICTED CASH
Cash held as collateral for letters of credit and other loans is classified
based on the expected expiration of such facilities. Cash held in escrow and
restricted to a specific use is classified based on the expected timing of such
disbursement.
72
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
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.
INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
EQUITY METHOD
For those investments in unconsolidated subsidiaries and companies in which the
Company's voting interest is 20.0% to 50.0%, 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, 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 affiliate, limited to the extent of the Company's investment in
and advances to the affiliate, 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.
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 incorporate overhead expense and interest
charges incurred during the period of construction; investment subsidies are
deducted. Upon disconnection of a subscriber, the remaining book value of the
subscriber equipment, excluding converters which are recovered upon
disconnection, and the capitalized labor are written off and accounted for as an
operating cost. Depreciation is calculated using the straight-line method over
the economic life of the asset.
The economic lives of property, plant and equipment at acquisition are as
follows:
Cable distribution networks.................... 5-20 years
Subscriber premises equipment and converters... 3-10 years
MMDS/DTH distribution facilities............... 5-20 years
Office equipment, furniture and fixtures....... 3-10 years
Buildings and leasehold improvements........... 3-33 years
Other.......................................... 3-10 years
GOODWILL AND OTHER INTANGIBLE ASSETS
The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized on a straight-line basis over 15 years.
Licenses in newly-acquired companies are recognized at the fair market value of
those licenses at the date of acquisition. Licenses in new franchise areas
include the capitalization of direct costs incurred in obtaining the license.
The license value is amortized on a straight-line basis over the initial license
period, up to a maximum of 20 years.
RECOVERABILITY OF TANGIBLE AND INTANGIBLE ASSETS
The Company evaluates the carrying value of all tangible and intangible assets
whenever events or circumstances indicate the carrying value of assets may
exceed their recoverable amounts. An impairment 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.
73
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
DEFERRED FINANCING COSTS
Costs to obtain debt financing are capitalized and amortized over the life of
the debt facility using the effective interest method.
SUBSCRIBER PREPAYMENTS AND DEPOSITS
Payments received in advance for multi-channel television service are deferred
and recognized as revenue when the associated services are provided. Deposits
are recorded as a liability upon receipt and refunded to the subscriber upon
disconnection.
OTHER COMPREHENSIVE LOSS
The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which requires that an enterprise
(i) classify items of other comprehensive income (loss) by their nature in a
financial statement and (ii) display the accumulated balance of other
comprehensive income (loss) separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position.
REVENUE RECOGNITION
Revenue is primarily derived from the sale of multi-channel 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
worldwide.
STOCK-BASED COMPENSATION
Stock-based compensation is recognized using the intrinsic value method for the
Company's stock option plans, which results in compensation expense for the
difference between the grant price and the fair market value at each measurement
date. In addition to the Company's stock option plans, UPC, UAP and ULA have
also adopted stock-based compensation plans for their employees. With respect to
these plans, the rights conveyed to employees are the substantive equivalents to
stock appreciation rights. Accordingly, compensation expense and deferred
compensation expense are recognized at each financial statement date based on
the difference between the grant price and the estimated fair value of the
respective subsidiary's common stock.
INCOME TAXES
The Company accounts for income taxes under the asset and liability method which
requires recognition of deferred tax assets and liabilities for the expected
future income tax consequences of transactions which have been included in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and income tax basis of assets, liabilities and loss carryforwards
using enacted tax rates in effect for the year in which the differences are
expected to reverse. Net deferred tax assets are then reduced by a valuation
allowance if management believes it 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.
74
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
STAFF ACCOUNTING BULLETIN NO. 51 ("SAB 51") ACCOUNTING POLICY
Gains realized as a result of stock issuances by the Company's subsidiaries are
recorded in the statement of operations, except for any transactions which must
be credited directly to equity in accordance with the provisions of SAB 51.
BASIC AND DILUTED NET LOSS PER SHARE
"Basic loss per share" is determined by dividing net loss available to common
stockholders by the weighted-average number of common shares outstanding during
each period. Net loss available to common stockholders includes the accrual of
dividends on convertible preferred stock which is charged directly to additional
paid-in capital. "Diluted net loss per share" includes the effects of
potentially issuable common stock, but only if dilutive. 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, except for countries which have
experienced hyper-inflationary economies. For countries which have
hyper-inflationary economies, the financial statements are prepared in U.S.
dollars. 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 U.S. dollars that result in
unrealized gains or losses are referred to as translation adjustments.
Cumulative translation adjustments are recorded as a separate component of
stockholders' (deficit) equity and are included in Other Cumulative
Comprehensive 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 in the consolidated statements of cash flows will not agree
to changes in the corresponding balances in 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.
Certain of the Company's foreign 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 11, 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 (including 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, Hungary, Ireland, Israel and Malta.
NEW ACCOUNTING PRINCIPLES
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"), which requires that a public business
enterprise report certain financial and descriptive information about its
reportable segments. The Company adopted SFAS 131 for the ten months ended
December 31, 1998.
75
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), which requires that companies recognize all
derivatives as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133, accounting for changes in fair value of a derivative depends on
its intended use and designation. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. The Company is currently assessing the effect of
this new standard.
The American Institute of Certified Public Accountants recently 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 its financial position or results of operations.
The American Institute of Certified Public Accountants recently issued Statement
of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"),
which is required to be adopted by affected companies for fiscal years beginning
after December 15, 1998. SOP 98-5 defines start-up and organization costs, which
must be expensed as incurred. In addition, all deferred start-up and
organization costs existing as of January 1, 1999 must be written off and
accounted for as a cumulative effect of an accounting change. The Company does
not expect the adoption of SOP 98-5 to have a material effect on its financial
position or results of operations.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
3. ACQUISITIONS AND DISPOSITIONS
COMBIVISIE AND CNBH
Effective January 1, 1998, UPC acquired certain assets, including the Dutch
cable systems of Combivisie for $88,048. The purchase was funded with a Dutch
guilder ("NLG") 60,000 ($29,226) draw on UPC's Senior Revolving Credit Facility
(as defined in Note 10) and NLG120,762 ($58,822) from a UPC credit facility with
a bank which was subsequently refinanced. Subsequent to the transaction, the
assets and liabilities of UPC's other Dutch systems and Combivisie were merged,
forming Cable Network Brabant Holding B.V. ("CNBH"), a wholly-owned subsidiary
of UPC.
TELEKABEL HUNGARY AND TELEKABEL HUNGARY PROGRAMMING
On June 29, 1998, UPC acquired TWE's interest in its Hungarian multi-channel
television system assets for $9,500 in cash and a non-interest bearing
promissory note in the amount of $18,000 (the "Time Warner Note"). UPC and TWE
retained their respective percentage interests in Telekabel Hungary Programming.
UPC granted TWE an option to acquire UPC's interest in Telekabel Hungary
Programming along with certain other assets 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"), along with
the assets acquired from TWE, 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, TWE exercised its option to
acquire UPC's interest in Telekabel Hungary Programming and the Time Warner Note
was cancelled.
MGM NETWORKS LA
In 1997, ULA and International Family Entertainment ("IFE") created United
Family Communications, LLC ("UFC") which was 50.0% owned by ULA and IFE. In July
1997, UFC launched two channels of Spanish and Portuguese language
family-oriented programming distributed via satellite throughout Latin America.
In May 1998, ULA acquired IFE's 50.0% ownership interest in UFC and then entered
into a joint venture with a division of Metro-Goldwyn-Mayer, Inc. ("MGM") to
form MGM Networks LA. Under the terms of the joint venture, ULA contributed its
100% interest in UFC for a 50.0% interest in MGM Networks LA, and MGM acquired a
50.0% interest in MGM Networks LA by contributing its Brazil channel (MGM Gold
Brazil) and committing to fund the first $9,900 ($6,700 of which was funded at
closing) required by MGM Networks LA. MGM Networks LA has also entered into a
trademark license agreement with MGM for the use of the MGM brand name and also
into a program license agreement to acquire programming from MGM.
76
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
AUSTAR
In July 1998, Austar acquired certain Australian pay television assets of East
Coast Television Pty Limited ("ECT"), an affiliate of Century Communications
Corporation ("Century"), for $6,155 of the Company's newly-created Series B
Convertible Preferred Stock. ECT's subscription television business includes
subscribers and certain MMDS licenses and transmission equipment serving the
areas in and around Newcastle, Gossford, Wollongong and Tasmania, Australia.
UTH
In August 1998, UPC merged its Dutch cable television and telecommunications
assets, consisting of its 50.0% interest in A2000 Holding NV ("A2000") and its
wholly-owned subsidiary CNBH, with those of the Dutch energy company N.V. NUON
Energie-Onderneming voor Gelderland, Friesland en Flevoland ("NUON"), forming a
new company, UTH (the "UTH Transaction"). The transaction was accounted for as a
formation of a joint venture with NUON's and UPC's net assets recorded at their
historical carrying values. Although UPC retained a 51.0% economic and voting
interest in UTH, because of joint governance on most significant operating
decisions, UPC accounted for its investment in UTH using the equity method of
accounting.
On February 17, 1999, UPC acquired the remaining 49.0% of UTH from NUON (the
"NUON Transaction") for euro235,086 ($265,672). In addition, UPC repaid NUON and
assumed from NUON a euro15,101 ($17,066) subordinated loan, including accrued
interest, dated December 31, 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.
The following unaudited pro forma condensed consolidated operating results for
the ten months ended December 31, 1998 and the year ended February 28, 1998
gives effect to the UTH Transaction and the NUON Transaction as if they had
occurred at the beginning of the periods presented. This unaudited 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 dates. The pro forma adjustments are
based upon currently available information and upon certain assumptions that
management believes are reasonable.
<TABLE>
<CAPTION>
For the Ten Months Ended For the Year Ended
December 31, 1998 February 28, 1998
------------------------- -------------------------
Historical Pro Forma Historical Pro Forma
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue................................................. $ 254,068 $ 335,076 $ 98,622 $ 98,622
========== ========== ========== ==========
Net loss before extraordinary charge.................... $ (545,532) $ (581,388) $ (263,441) $ (277,797)
========== ========== ========== ==========
Net loss................................................ $ (545,532) $ (581,388) $ (342,532) $ (356,888)
========== ========== ========== ==========
Net loss per common share:
Basic and diluted loss before extraordinary charge.... $ (13.71) $ (14.60) $ (6.75) $ (7.11)
Extraordinary charge.................................. -- -- (2.02) (2.02)
---------- ---------- ---------- ----------
Basic and diluted net loss............................ $ (13.71) $ (14.60) $ (8.77) $ (9.13)
========== ========== ========== ==========
Weighted-average number of common shares
outstanding........................................... 39,919,887 39,919,887 39,211,501 39,211,501
========== ========== ========== ==========
</TABLE>
XYZ ENTERTAINMENT
In September 1998, UAP acquired the Australian programming assets held by
Century, consisting of Century's 25.0% interest in XYZ Entertainment, a
programming company that owns and/or distributes five channels to the Australian
multi-channel marketplace. Following the acquisition, UAP owns a total of 50.0%
of XYZ Entertainment. The purchase price consisted of $1,231 in cash and $23,389
of the Company's Series B Preferred Stock.
77
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
TVSB
On October 2, 1998, ULA increased its ownership interest in TVSB from 45.0% to
100% for $11,400, half of which was paid in cash, with the remainder financed by
the seller. This "TVSB Seller Note" bears interest at 10.0% and is due September
14, 1999.
CABLE STAR
In October 1998, ULA and Arequipa Cable Vision ("ACV") each contributed their
Peruvian multi-channel television assets to Cable Star, with ULA receiving 60.0%
of the outstanding shares of Cable Star and the former shareholders of ACV
receiving the other 40.0%.
TEVEL AND MELITA
In November 1998, UPC (i) acquired from Tele-Communications International, Inc.
("TINTA") its indirect 23.3% and 25.0% interests in the Tevel and Melita
systems, respectively for $91,500, doubling UPC's respective ownership in these
systems to 46.6% and 50.0%, respectively, (ii) purchased an additional 5.0%
interest in Princes Holdings and 5.0% of Tara in consideration for 384,531
shares of UIH Class A Common Stock held by UPC, and (iii) sold the 5.0% interest
in Princes Holdings, together with its existing 20.0% interest, to TINTA for
$20,500. The net payment of $71,000 to TINTA ($68,000 after closing adjustments)
was funded with the proceeds of a $90,000 promissory note made by a subsidiary
of UPC to its primary partners in the Tevel system (the "DIC Loan").
UPC
In July 1995, the Company 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 95.0% interest in
cable television systems in Austria, its 100% interest in cable television
systems in Belgium, its minority interests in multi-channel television systems
in Germany, the Netherlands (Eindhoven) and France. The Company contributed its
interests in multi-channel television systems in Israel, Ireland, the Czech
Republic, Malta, Norway, Hungary, Sweden and Spain. The Company also contributed
$78,200 in cash to UPC and issued to Philips 3,169,151 shares of its Class A
Common Stock having a value of $50,000 (at date of closing). In addition, UPC
issued to Philips $133,600 of convertible subordinated pay-in-kind notes (the
"PIK Notes"). As a result of this transaction, the Company and Philips each
owned a 50.0% economic and voting interest in UPC.
On December 11, 1997, the Company acquired Philips' entire interest in UPC (the
"UPC Transaction"). As part of the UPC Transaction, (i) UPC purchased the
3,169,151 shares of Class A Common Stock of the Company held by Philips, (ii)
UIH purchased NLG169,899 ($84,336) of the accreted amount of UPC's PIK Notes and
redeemed them for 15,180,261 shares of UPC, (iii) UPC repaid to Philips the
remaining NLG170,371($84,570) accreted amount of the PIK Notes, (iv) UIH
purchased 13,121,604 shares of UPC directly from Philips, and (v) UPC
repurchased Philips' remaining equity interest in UPC (24,378,396 shares). The
Company effectively owned 100% of UPC as a result of the UPC Transaction,
including shares held by a foundation controlled by UIH which administers the
UPC stock plan for the benefit of UPC employees and management, pursuant to
UPC's equity incentive plans. The final purchase price (excluding
transaction-related costs) was $425,200, comprised of $168,700 for the purchase
by the Company and repayment by UPC of UPC's PIK Notes, $33,200 allocated to the
purchase by UPC of 3,169,151 shares of the Company's Class A Common Stock and
$223,300 allocated to the purchase of Philips' interest in UPC. The UPC
Transaction was funded by a long-term revolving credit facility through UPC with
a syndicate of banks ($151,500), a bridge bank facility through a subsidiary of
UPC ($111,200) and a cash investment by the Company of $162,500.
Details of the net assets acquired, based on a preliminary allocation of the
purchase price, which were denominated in Dutch guilders and translated to U.S.
dollars using the exchange rate on the date of acquisition, were as follows:
78
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
Working capital, including cash acquired of $50,872........ $ (7,158)
Investment in UIH Class A Common Stock..................... (33,074)
Investment in affiliated companies......................... (167,945)
Property, plant and equipment and other long-term assets... (273,988)
Goodwill and other intangible assets....................... (383,503)
Elimination of UIH equity investment....................... 46,319
Long-term debt............................................. 624,633
Other liabilities.......................................... 32,216
---------
Total cash paid....................................... $(162,500)
=========
JANCO
In January 1997 UPC deposited NLG47,000 ($24,867) with a bank as collateral for
an obligation to seller to purchase the remaining 29.8% in Janco that UPC did
not already own. In November 1998, UPC exercised its call option and acquired
the remaining minority shareholder interest in Janco for NLG37,200 ($19,683).
The residual restricted funds held as collateral were released.
ARGENTINA
In October 1996, the Company acquired 100% of two cable systems and 80.0% of a
third system, serving the cities of Bahia Blanca and Punta Alta, for
approximately $52,520. Under terms of the agreements, the Company had the option
to acquire, or could have been required to purchase, the remaining 20.0% of the
third system between April 24, 1998 and October 31, 1998. The Company had
accrued $4,406 related to this option. The Company paid $26,382 in cash at the
date of acquisition, with the remaining $26,138 to be paid over the following 18
months. Details of the net assets acquired, which were denominated in Argentine
pesos and translated to U.S. dollars using the exchange rate on the date of
acquisition, were as follows:
Tangible assets............................................ $ (4,051)
Goodwill .................................................. (63,464)
Cash....................................................... (97)
Other...................................................... (5,958)
Accounts payable and accrued liabilities................... 20,807
Notes payable.............................................. 243
--------
(52,520)
Less purchase money notes.................................. 26,138
--------
Total cash paid $(26,382)
========
In April 1997, ULA acquired 100% of multi-channel television systems in Comodoro
and Trelew, Argentina for a total purchase price of $27,900, of which $13,900
was paid at closing and the remaining $14,000 was due in 18 monthly installments
beginning May 1997. Also in April 1997, ULA agreed to acquire up to an 80.0%
equity interest in the multi-channel television systems located in Santa Fe,
Parana and Galvez, Argentina for a total purchase price of $59,000. In April
1997, ULA closed the acquisition of the first 31.0% equity interest for a total
purchase price of $23,000 and paid a $2,000 deposit to acquire the additional
38.0% equity interest by July 15, 1997 and the additional 11.0% equity interest
by the end of July 1997. The total purchase price was paid 50.0% at closing and
the balance was to be paid in monthly installments through June 2000.
In October 1997, the Company completed the sale of all of its cable television
assets in Argentina, including the regions of Bahia Blanca, Comodoro, Trelew and
Santa Fe (the "Argentina Transaction"). The sale price for Bahia Blanca,
Comodoro, Trelew and Santa Fe collectively was $268,200, of which $25,300
consisted of remaining notes payable to sellers from the original acquisitions.
From this net sales price of $242,900, $29,600 was paid directly by the buyers
to other minority interest stockholders, resulting in net proceeds to the
Company of approximately $211,125. The payment was received in full in cash,
except for an amount placed in escrow, subject to finalization of post-closing
adjustments. The Company recognized a gain on the transaction of $90,020. Under
the terms of its lending arrangements with a group of banks, the Company repaid
from the proceeds of the sale all of its outstanding indebtedness under its
bridge loan facility totaling $110,000 plus accrued interest.
79
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
TARA
In October 1997, Tara issued shares to third parties in exchange for
consideration totaling $2,476, thereby diluting the Company's interest in Tara
from 100% to 75.0%. A gain of $1,629 recognized on the transaction was credited
to additional paid-in capital in accordance with SAB 51.
NET SAO PAULO
In August 1996, the Company sold its 34.0% interest in Net Sao Paulo for $43,098
in cash and a $35,000 note receivable which was collected during the year ended
February 28, 1997. The Company recognized a gain of $65,249 on the transaction.
STX, CABLEVISION AND VTRH
In June 1995, ULA completed an acquisition of 65.0% of Red de Television y
Servicios por Cable S.A. ("STX"), a Chilean company which owned and operated
eight cable television systems in Northern Chile. The purchase price was
$25,918. In June 1996, ULA acquired the remaining 35.0% of STX for $24,000. The
Company acquired an initial 50.0% interest in Cablevision S.A. ("Cablevision")
in January 1994 for $3,900. In January 1996, ULA increased its ownership in
Cablevision to 100% for approximately $22,100. ULA contributed its interests in
STX and Cablevision in exchange for a 40.0% interest in VTRH in September 1996.
Prior to the formation of VTRH, the Company accounted for its investments in
Cablevision and STX under the equity method, in contemplation of the formation
of VTRH.
SATURN
In July 1994, the Company acquired a 50.0% interest in Kiwi Communications
Limited, which subsequently changed its name to Saturn. In July 1996, the
Company acquired the remaining 50.0% interest in Saturn in exchange for a 2.6%
interest in a wholly-owned subsidiary of UAP, UIH Australia/Pacific, Inc.("UIH
A/P") which was valued at approximately $7,800. The holder of this 2.6% interest
in UIH A/P subsequently exchanged it for a 2.0% interest in UAP. Details of the
net assets acquired, which were determined in New Zealand dollars and translated
to U.S. dollars using the exchange rate on the day of the acquisition, were as
follows:
Tangible assets.................................... $8,509
Receivables, prepaids and other.................... 373
Cash............................................... 708
Accounts payable and accrued liabilities........... (1,430)
Net investment prior to acquisition of 50.0% (9,133)
------
Net assets.................................... (973)
Goodwill........................................... 8,773
------
Total consideration........................... $7,800
======
In July 1997, SaskTel Holdings (New Zealand), Inc. ("SaskTel") purchased a 35.0%
equity interest in Saturn by investing approximately New Zealand $29,900
($19,566) directly into Saturn for its newly-issued shares, thereby reducing the
Company's equity interest in Saturn to 65.0%. A gain of $5,985 recognized on the
transaction was credited to additional paid-in capital in accordance with SAB
51.
PRO FORMA FINANCIAL INFORMATION FOR THE YEARS ENDED FEBRUARY 28, 1998 AND 1997
The following pro forma condensed consolidated operating results for the years
ended February 28, 1998 and 1997 give effect to the UPC Transaction and the
Argentina Transaction as if each had occurred at the beginning of the periods
presented. This pro forma condensed consolidated financial information and notes
thereto do not purport to represent what the Company's results of operations
would actually have been if such transactions had in fact occurred on such
dates. The pro forma adjustments are based upon currently available information
and upon certain assumptions that management believes are reasonable.
80
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
February 28, 1998 February 28, 1997
------------------------- --------------------------
Historical Pro Forma(1) Historical Pro Forma (2)
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Revenue............................................... $ 98,622 $ 244,394 $ 31,555 $ 172,246
========== ========== ========== ==========
Net loss before extraordinary charge.................. $ (263,441) $ (395,723) $ (138,825) $ (182,569)
========== ========== ========== ==========
Net loss.............................................. $ (342,532) $ (474,814) $ (138,825) $ (182,569)
========== ========== ========== ==========
Net loss per common share:
Basic and diluted loss before extraordinary charge.. $ (6.75) $ (11.02) $ (3.59) $ (5.12)
Extraordinary charge................................ (2.02) (2.19) -- --
---------- ---------- ---------- ----------
Basic and diluted net loss.......................... $ (8.77) $ (13.21) $ (3.59) $ (5.12)
========== ========== ========== ==========
Weighted-average number of shares outstanding......... 39,211,501 36,042,350 39,035,776 35,866,625
========== ========== ========== ==========
</TABLE>
(1) Represents elimination of historical statement of operations balances
for the Argentina systems and elimination of the gain recorded on the
Argentina Transaction, as well as inclusion of the historical amounts
included in UPC's consolidated statement of operations for the period
from January 1, 1997 to December 10, 1997, additional depreciation and
amortization related to the step-up in basis in tangible assets and
additional goodwill, the net decrease in equity in losses of affiliated
companies, and the net increase in interest expense as a result of the
UPC Transaction.
(2) Represents elimination of historical statement of operations balances
for Bahia Blanca for the year ended December 31, 1996, and inclusion of
the historical amounts included in UPC's consolidated statement of
operations for the year ended December 31, 1996, additional
depreciation and amortization related to the step-up in basis in
tangible assets and additional goodwill, the net decrease in share in
results of affiliated companies, and the net increase in interest
expense as a result of the UPC Transaction.
The following unaudited pro forma condensed consolidated operating results for
the year ended February 28, 1997 gives effect to the disposition of the 34.0%
interest in Net Sao Paulo as if it had occurred at the beginning of the period.
This pro forma condensed consolidated financial information and note thereto do
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
February 28, 1997
---------------------------
Historical Pro Forma (1)
---------- -------------
<S> <C> <C>
Revenue.......................................... $ 31,555 $ 31,555
========== ==========
Net loss......................................... $ (138,825) $ (202,285)
========== ==========
Basic and diluted net loss per common share...... $ (3.59) $ (5.21)
========== ==========
Weighted-average number of shares outstanding.... 39,035,776 39,035,776
========== ==========
</TABLE>
(1) Represents elimination of historical statement of operations balances
related to Net Sao Paulo and elimination of the gain recorded on sale.
81
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
4. CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM LIQUID INVESTMENTS
<TABLE>
<CAPTION>
As of December 31, 1998
----------------------------------------------------
Short-term
Cash and Cash Restricted Liquid
Equivalents Cash Investments Total
------------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Cash........................................ $18,766 $17,215 $ -- $35,981
Certificates of deposit..................... -- -- 4,000 4,000
Commercial paper............................ 16,580 -- 10,541 27,121
Corporate bonds............................. -- -- 15,935 15,935
Government securities....................... 262 -- 11,022 11,284
------- ------- ------- -------
Total.................................... $35,608 $17,215 $41,498 $94,321
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
As of February 28, 1998
----------------------------------------------------
Short-term
Cash and Cash Restricted Liquid
Equivalents Cash Investments Total
------------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Cash........................................ $ 72,054 $16,524 $ -- $ 88,578
Certificates of deposit..................... -- -- 8,399 8,399
Commercial paper............................ 214,609 -- 3,926 218,535
Corporate bonds............................. 16,778 -- 16,506 33,284
Government securities....................... -- 4,426 4,900 9,326
-------- ------- ------- --------
Total.................................... $303,441 $20,950 $33,731 $358,122
======== ======= ======= ========
</TABLE>
82
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
5. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
EQUITY METHOD
<TABLE>
<CAPTION>
As of December 31, 1998
---------------------------------------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation Valuation
Affiliated Companies Received Affiliated Companies Adjustments Allowance Total
-------------------- --------- -------------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Europe:
UTH........................... $135,290 $ -- $ (11,447) $ 8,288 $ -- $132,131
Tevel......................... 96,340 (6,090) (390) (306) -- 89,554
Melita........................ 14,078 -- 997 724 -- 15,799
Telekabel Hungary
Programming................. 12,263 -- (3,881) 28 -- 8,410
Monor......................... 11,301 -- (2,601) (7,849) -- 851
IPS........................... 14,082 -- (7,418) (25) -- 6,639
Other......................... 7,595 -- (531) 400 -- 7,464
Asia/Pacific:
Saturn........................ 49,808 -- (23,138) (2,881) -- 23,789
XYZ Entertainment............. 44,306 -- (18,537) 111 -- 25,880
PCC........................... 11,673 -- (2,812) (2,824) -- 6,037
HITV.......................... 6,073 -- (2,435) 16 -- 3,654
Telefenua..................... 18,599 -- (14,215) -- (4,384) --
Other......................... 350 -- -- -- -- 350
Latin America:
VTRH.......................... 112,052 -- (17,203) (9,874) -- 84,975
Megapo........................ 32,496 (1,471) (1,122) (11,067) -- 18,836
MGM Networks LA (1)........... 19,272 -- (19,272) -- -- --
Jundiai....................... 6,797 -- (587) (1,089) -- 5,121
-------- ------- --------- -------- ------- --------
Total.................. $592,375 $(7,561) $(124,592) $(26,348) $(4,384) $429,490
======== ======= ========= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
As of February 28, 1998
--------------------------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation
Affiliated Companies Received Affiliated Companies Adjustments Total
-------------------- --------- -------------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Europe:
A2000......................... $109,373 $ -- $ (287) $ 4 $109,090
Melita, Princes Holdings
and Tevel.................... 51,005 -- (32) -- 50,973
Monor......................... 27,682 -- (13,161) (6,256) 8,265
IPS........................... 13,920 -- (7,261) (95) 6,564
Kabelkom...................... 28,605 -- 124 (1) 28,728
Other......................... 1,774 -- -- -- 1,774
Asia/Pacific:
XYZ Entertainment (2)......... 18,610 -- (18,720) 110 --
Sun Cable..................... 12,336 -- (1,023) (2,783) 8,530
HITV.......................... 6,073 -- (236) 7 5,844
Other......................... 182 -- -- -- 182
Latin America:
VTRH.......................... 92,754 -- (10,327) (4,262) 78,165
Megapo........................ 32,496 (1,248) (1,313) (1,604) 28,331
TVSB.......................... 8,100 -- (3,770) -- 4,330
UFC........................... 12,099 -- (7,487) -- 4,612
Jundiai....................... 6,652 -- (788) -- 5,864
-------- ------- -------- -------- --------
Total.................. $421,661 $(1,248) $(64,281) $(14,880) $341,252
======== ======= ======== ======== ========
</TABLE>
(1) Includes an accrued funding obligation of $3,012 at December 31, 1998.
The Company would face significant and punitive dilution if it did not
make the requested fundings.
(2) Includes an accrued funding obligation of $406 at December 31, 1997.
The Company does not have a contractual funding obligation to XYZ
Entertainment; however, the Company would face significant and
punitive dilution if it did not make the requested fundings.
83
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
As of December 31, 1998 and February 28, 1998, the Company had the following
differences related to the excess of its cost over its proportionate interest in
each affiliate's net tangible assets included in the above table. Such
differences are being amortized over 15 years.
<TABLE>
<CAPTION>
As of December 31, 1998 As of February 28, 1998
-------------------------- --------------------------
Basis Accumulated Basis Accumulated
Difference Amortization Difference Amortization
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Europe:
UTH.................................... $ 1,471 $ (33) $ -- $ --
Tevel ................................. 80,644 (3,351) -- --
Melita................................. 12,898 (451) -- --
Telekabel Hungary Programming ......... 7,629 (302) -- --
A2000.................................. -- -- 90,898 --
Melita, Princes Holdings and Tevel..... -- -- 31,054 --
Kabelkom............................... -- -- 20,509 --
Monor.................................. 885 (69) 3,838 (1,125)
IPS.................................... 2,216 (85) 651 (53)
Other.................................. 3,585 (73) -- --
Asia/Pacific:
XYZ Entertainment...................... 23,595 -- -- --
Saturn................................. 12,733 (1,005) -- --
Latin America:
VTRH................................... 19,994 (1,941) 11,368 (1,211)
Megapo................................. 19,583 (5,767) 21,528 (4,307)
TVSB................................... -- -- 2,361 (895)
Jundiai................................ -- -- 540 (172)
UFC.................................... -- -- 439 (63)
-------- -------- -------- -------
Total............................. $185,233 $(13,077) $183,186 $(7,826)
======== ======== ======== =======
</TABLE>
Condensed financial information for UPC, stated in U.S. dollars, is presented
below:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1997 (1) December 31, 1996
--------------------- -------------------
<S> <C> <C>
Revenue.................................................... $172,951 $145,076
Operating, selling, general and administrative expense (121,833) (96,814)
Depreciation and amortization.............................. (68,148) (47,238)
-------- --------
Net operating (loss) income........................... (17,030) 1,024
Interest, net.............................................. (32,936) (21,135)
Share in results of affiliated companies, net.............. (10,395) (13,187)
Other...................................................... (29,820) (14,152)
-------- --------
Net loss.............................................. $(90,181) $(47,450)
======== ========
</TABLE>
(1) The Company consolidated the results of UPC effective December 11, 1997.
84
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
6. PROPERTY, PLANT AND EQUIPMENT As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Cable distribution networks................................................... $255,702 $203,015
Subscriber premises equipment and converters.................................. 264,867 200,990
MMDS/DTH distribution facilities.............................................. 62,872 61,509
Office equipment, furniture and fixtures...................................... 30,415 19,622
Buildings and leasehold improvements.......................................... 11,236 9,070
Other......................................................................... 40,150 31,162
-------- ---------
665,242 525,368
Accumulated depreciation................................................. (201,183) (84,633)
-------- --------
Net property, plant and equipment........................................ $464,059 $440,735
======== ========
</TABLE>
<TABLE>
<CAPTION>
7. GOODWILL AND OTHER INTANGIBLE ASSETS As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Europe:
Telekabel Group............................................................. $206,092 $192,828
Janco....................................................................... 87,563 94,200
CNBH (1).................................................................... -- 39,847
Telekabel Hungary........................................................... 51,550 --
TVD......................................................................... 22,322 20,903
Other....................................................................... 12,971 14,174
Asia/Pacific:
Austar...................................................................... 55,804 51,552
Saturn (2).................................................................. -- 6,100
Other....................................................................... 4,267 2,873
Latin America:
TVSB........................................................................ 16,161 --
Cable Star.................................................................. 7,887 1,245
-------- --------
464,617 423,722
Accumulated amortization................................................. (39,683) (14,532)
-------- --------
Net goodwill and other intangible assets................................. $424,934 $409,190
======== ========
</TABLE>
(1) Effective August 6, 1998, CNBH was contributed to UTH as part of the
UTH Transaction.
(2) Saturn was de-consolidated effective January 1, 1998.
<TABLE>
<CAPTION>
8. SHORT-TERM DEBT As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Austar Bank Facility (see Note 10)............................................ $36,738 $ --
Time Warner Note.............................................................. 18,000 --
Telekabel Hungary Facility.................................................... 15,504 --
VTRH Note..................................................................... 9,284 --
ULA Revolving Credit Facility................................................. 8,000 --
TVSB Seller Note (see Note 3)................................................. 5,853 --
------- -------
Total short-term debt.................................................... $93,379 $ --
======= =======
</TABLE>
Carrying value approximates fair value for these short-term facilities.
85
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
TIME WARNER NOTE
In December 1998, TWE extended the maturity date of its non-interest bearing
note for a period of 90 days to the earlier of June 30, 1999 or 90 days after
written notice from TWE. Subsequent to December 31, 1998, the Time Warner Note
was cancelled as TWE exercised its option to acquire UPC's 50.0% interest in
Telekabel Hungary Programming.
TELEKABEL HUNGARY FACILITY
In October 1998, Telekabel Hungary entered into a German mark ("DM") 65,600
($39,317) six-month secured bridge facility. Availability under this facility
depends on certain financial covenants. The DM49,200 ($29,488) international
tranche of the facility and half of the DM16,400 ($9,829) local tranche bear
interest at LIBOR plus 2.5% per annum plus an additional cost of funding
calculation. The remaining half of the local tranche must be drawn in Hungarian
forints and bears interest at Budapest interbank offered rates for Hungarian
forints, plus 2.5% per annum plus an additional cost of funding calculation.
Telekabel Hungary is using the facility, among other things, to finance capital
expenditures and to acquire minority shares in UPC's Hungarian systems. UPC has
pledged its indirect 79.25% interest in Telekabel Hungary to secure the
facility. The facility also is secured by a pledge over certain assets of the
Telekabel Hungary group and a negative pledge. Telekabel Hungary is currently
negotiating a long-term facility with the lenders to replace this bridge
facility. As of December 31, 1998, the amount outstanding under this facility
totaled DM25,861 ($15,504).
VTRH NOTE
UIH Chile, Inc., a wholly-owned subsidiary of ULA, executed a promissory note in
the amount of $7,770 payable to VTR S.A., the majority shareholder of VTRH, in
exchange for 51,993 shares of VTRH (the "VTRH Note"). The VTRH Note bears
interest at 12.95% per annum and is due April 30, 1999. On April 29, 1999 the
VTRH Note was repaid in conjunction with the VTRH acquisition (see Note 18).
ULA REVOLVING CREDIT FACILITY
In November 1997, ULA entered into an amended and restated credit agreement with
a bank for a revolving credit facility of up to $40,000 (the "ULA Revolving
Credit Facility"). Borrowings under this facility were due within 12 months at
an interest rate of LIBOR plus 3.5%. The facility was extendable up to 18 months
under certain conditions. In November 1998, ULA exercised its option to extend
the maturity date until February 1999, increasing the interest rate to LIBOR
plus 4.0%. The agreement was also amended to reduce the facility from $40,000 to
$8,000 effective November 20, 1998. As of December 31, 1998, ULA had an
outstanding balance of $8,000 under this facility which was repaid in February
1999.
9. SENIOR DISCOUNT NOTES
As of As of
December 31, February 28,
1998 1998
------------ ------------
1998 Notes (as defined below)............. $ 893,003 $ 818,272
Old Notes (as defined below).............. 412 368
1996 UIH A/P Notes (as defined below)..... 321,687 278,662
1997 UIH A/P Notes (as defined below)..... 34,953 30,461
---------- ----------
$1,250,055 1,127,763
Less current portion................... (412) --
---------- ----------
Total senior discount notes............ $1,249,643 $1,127,763
========== ==========
86
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
1998 NOTES AND OLD NOTES
On February 5, 1998, the Company sold $1,375,000 principal amount at maturity of
10.75% senior secured discount notes due 2008 (the "1998 Notes"). The 1998 Notes
were issued at a discount from their principal amount at maturity, resulting in
gross proceeds to the Company of approximately $812,200.
The Company used approximately $531,800 of the proceeds from the 1998 Notes to
complete a tender offer for the Company's existing 14.0% senior secured discount
notes due 1999 (collectively, the "Old Notes") and the consent solicitation that
the Company conducted concurrently therewith. The Company commenced the tender
offer on January 7, 1998, and the tender offer expired on February 4, 1998, with
over 99.8% of the Old Notes being validly tendered. The Company subsequently
purchased $500 principal amount at maturity of the Old Notes on the open market,
leaving approximately $465 principal amount at maturity outstanding as of
February 28, 1998. The Old Notes redeemed had an aggregate accreted value of
approximately $466,200 as of February 5, 1998. The tender premium of
approximately $65,600, combined with the write-off of unamortized deferred
financing costs and other transaction-related costs totaling approximately
$13,500, resulted in an extraordinary charge of $79,091.
The 1998 Notes will accrete at 10.75% per annum, compounded semi-annually to an
aggregate principal amount of $1,375,000 on February 15, 2003, at which time
cash interest will commence to accrue. Commencing August 15, 2003, cash interest
on the 1998 Notes will be payable on February 15 and August 15 of each year
until maturity at a rate of 10.75% per annum. The 1998 Notes will mature on
February 15, 2008, and will be redeemable at the option of the Company on or
after February 15, 2003.
The remaining Old Notes will mature on November 15, 1999. Holders of the 1998
Notes and the remaining outstanding Old Notes share a first-priority security
interest in the stock and intercompany notes to the Company of UIPI; however,
only holders of the 1998 Notes have a first-priority security interest in the
stock and intercompany notes to the Company of UIHE.
The 1998 Notes are senior secured obligations of the Company that rank senior in
right of payment to all future subordinated indebtedness of the Company and rank
pari passu in right of payment with the Old Notes. The 1998 Notes are
effectively subordinated to all future indebtedness and other liabilities and
commitments of the Company's subsidiaries. Under the terms of the indenture
governing the 1998 Notes (the "Indenture"), the Company's subsidiaries are
generally prohibited and/or restricted from incurring any lien against their
assets other than liens incurred in the ordinary course of business, from paying
dividends, and from making investments in entities that are not "restricted" by
the terms of the Indenture. The Company has the option to invest in
"unrestricted entities" in an aggregate amount equal to the sum of $100,000 plus
the aggregate amount of net cash proceeds from sales of equity, net of payments
made on its preferred stock plus net proceeds from certain litigation
settlements. The Indenture generally prohibits the Company from incurring
additional indebtedness with the exception of a general allowance of $75,000 for
debt maturing on or after February 15, 2008, certain guarantees totaling
$15,000, refinancing indebtedness, normal indebtedness to restricted affiliates
and other letters of credit in the ordinary course of business. The Indenture
also limits the amount of additional debt that 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 Indenture at
the time of the borrowing. The Indenture also restricts its subsidiaries'
ability to make certain asset sales and certain payments.
In conjunction with the Old Notes, the Company issued 394,000 warrants,
including related put rights (the "Warrants") to purchase a total of 1,786,699
shares of Class A Common Stock at a price of $15.00 per share. At any time
between January 31, 1996 and March 1, 1996, the Warrant holders had the right to
require the Company to repurchase all or a part of the Warrants for $28.34 per
Warrant. Holders of the Warrants required the Company to purchase 76,070
Warrants to purchase 344,932 shares of Class A Common Stock for a cost of $2,156
on March 1, 1996. The remaining value assigned to the Warrants of $9,011 was
reclassified to additional paid-in capital on March 1, 1996. The remaining
317,930 outstanding Warrants (representing 1,441,739 shares of Class A Common
Stock) are exercisable at any time before November 15, 1999. Subsequent to
December 31, 1998, a total of 204,840 warrants were exercised, resulting in
87
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
proceeds to the Company of $13,900. A total of 928,942 shares of Class A Common
Stock were issued. The remaining 113,090 outstanding warrants (representing
512,863 shares of Class A Common Stock) are exercisable at any time before
November 15, 1999, and would result in proceeds of approximately $7,700, if
exercised.
1996 UIH A/P NOTES
The 14.0% senior notes, which UIH A/P issued in May 1996 at a discount from
their principal amount of $443,000 (the "1996 UIH A/P Notes"), had an accreted
value of $321,687 as of December 31, 1998. On and after May 15, 2001, cash
interest will accrue and will be payable semi-annually on each May 15 and
November 15, commencing November 15, 2001. The 1996 UIH A/P Notes are due May
15, 2006. Effective May 16, 1997, the interest rate on these notes increased by
an additional 0.75% per annum to 14.75%. On October 14, 1998, UIH A/P
consummated an equity sale resulting in gross proceeds of $70,000 which reduced
the interest rate from 14.75% to 14.0% per annum. Due to the increase in the
interest rate effective May 16, 1997 until consummation of the equity sale, the
1996 UIH A/P Notes will accrete to a principal amount of $447,418 on May 15,
2001, the date cash interest begins to accrue.
1997 UIH A/P NOTES
The 14.0% senior notes, which UIH A/P issued in September 1997 at a discount
from their principal amount of $45,000 (the "1997 UIH A/P Notes"), had an
accreted value of $34,953 as of December 31, 1998. On and after May 15, 2001,
cash interest will accrue and will be payable semi-annually on each May 15 and
November 15, commencing November 15, 2001. The September 1997 Notes are due May
15, 2006. Effective September 23, 1997, the interest rate on these notes
increased by an additional 0.75% per annum to 14.75%. On October 14, 1998, UIH
A/P consummated an equity sale, reducing the interest rate from 14.75% to 14.0%
per annum. Due to the increase in the interest rate effective September 23, 1997
until consummation of the equity sale, the 1997 UIH A/P Notes will accrete to a
principal amount of $45,448 on May 15, 2001, the date cash interest begins to
accrue.
On November 17, 1997, pursuant to the terms of the indentures governing the 1996
and 1997 UIH A/P Notes (collectively, the "UIH A/P Notes"), UIH A/P issued
warrants to purchase 488,000 shares of its common stock, which represented 3.4%
of its common stock. The warrants are exercisable at a price of $10.45 per share
which would result in gross proceeds of approximately $5,100 upon exercise. The
warrants are exercisable through May 15, 2006. The warrants were valued at
$3,678 and have been reflected as an additional discount to the UIH A/P Notes on
a pro-rata basis and as an increase in additional paid-in capital.
10. OTHER LONG-TERM DEBT
As of As of
December 31, February 28,
1998 1998
------------ ------------
UPC Senior Revolving Credit Facility..... $512,179 $437,598
UPC Bridge Bank Facility................. 60,063 125,000
UPC Mediareseaux Facility................ 21,346 --
UPC DIC Loan............................. 84,214 --
Other UPC................................ 3,821 61,084
Austar Bank Facility..................... 67,352 71,531
ULA Revolving Credit Facility............ -- 33,000
Other Asia/Pacific....................... 2,923 10,120
-------- --------
751,898 738,333
Less current portion.................. (62,252) (163,325)
-------- --------
Total other long-term debt............ $689,646 $575,008
======== ========
88
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
UPC SENIOR REVOLVING CREDIT FACILITY
In October 1997, UPC and certain of its subsidiaries entered into a NLG1,100,000
($582,000) multi-currency Senior Revolving Credit Facility with a syndicate of
banks. As of December 31, 1998, a total of NLG968,000 ($512,179) was outstanding
under this facility. The amount outstanding for UPC, Telekabel Group and Janco
was NLG620,000 ($328,042), NLG213,500 ($112,963) and NLG134,500 ($71,174),
respectively. Amounts advanced under the Senior Revolving Credit Facility bear
interest at the London interbank offered rate ("LIBOR") plus a margin ranging
from 0.5% to 2.0% per annum. The aggregate amount available for borrowing under
the facility is reduced automatically by 5.0% per quarter beginning December 31,
2001. The borrowings of UPC and its subsidiaries in Austria, Belgium and Norway
are limited by financial covenants under the Senior Revolving Credit Facility.
The principal amount of all borrowings by UPC and such subsidiaries may not
exceed certain multiples of total annualized net operating cash flow for UPC and
such subsidiaries. In addition, the principal amount of all borrowings of UPC
and such subsidiaries may not exceed certain multiples of their cable television
net operating cash flow. The Senior Revolving Credit Facility generally
prohibits dividends and other distributions to shareholders of UPC unless, among
other things, UPC achieves for at least two consecutive quarters certain
financial ratios. The Senior Revolving Credit Facility also includes financial
covenants relating to interest and debt service coverage and application of
proceeds from asset sales and securities offerings. Borrowings by UPC and
certain of its subsidiaries in Austria, Belgium and Norway under the Senior
Revolving Credit Facility together with borrowings under the Bridge Bank
Facility may not exceed NLG1,300,000 ($687,831) before September 30, 2001. The
Senior Revolving Credit Facility also generally limits to NLG80,000 ($42,328)
UPC's investments in, loans to and guarantees for, certain of UPC's subsidiaries
and downstream affiliates that are not borrowers or guarantors under the Senior
Revolving Credit Facility. UPC repaid a portion of this facility in February
1999 with proceeds from their initial public offering (see Note 18).
UPC BRIDGE BANK FACILITY
In connection with the UPC Transaction, UPC entered into the $125,000 Bridge
Bank Facility with a syndicate of banks. The Bridge Bank Facility is a one year
bridge originally due December 5, 1998 and bears interest at LIBOR plus a margin
ranging from 4.5% to 6.0% per annum. In November 1998, the lenders granted an
extension of the maturity date to June 5, 1999. The Bridge Bank Facility
generally prohibits dividends and distributions and is secured by various
upstream guarantees from, negative pledges over and, in some cases, share
pledges of, certain share holdings or partnership interests of UPC in operating
systems in The Netherlands, France, Israel and Malta, as well as a first lien
over approximately 2,784,620 shares of UIH's Class A Common Stock which UPC
acquired from Philips as part of the UPC Transaction. The Bridge Bank Facility
prohibits all of the companies whose interests are pledged from incurring
additional indebtedness, subject to certain exceptions. UPC must apply proceeds
from disposals, if any, of certain share holdings and partnership interests to
prepayment of the facility, which restricts the manner and terms on which UPC
may dispose of these assets. UPC must maintain on deposit with the bank a
compensating balance, restricted for payment of interest, until the facility
matures. The balance in this interest reserve account, including proceeds from
the sale of Princes Holdings, was NLG30,263 ($16,012) as of December 31, 1998.
UPC repaid $64,937 of the Bridge Bank Facility during the year ended December
31, 1998, resulting in an outstanding amount of $60,063 as of December 31, 1998.
UPC repaid the remaining balance of this facility in February 1999 with proceeds
from their initial public offering (see Note 18).
UPC MEDIARESEAUX FACILITY
In July 1998, Mediareseaux entered into a 9.5 year term facility with a bank for
an amount of French francs ("FRF")680,000 ($121,400) ("Mediareseaux Facility").
The purpose of the facility is to finance on-going capital expenditures, working
capital and acquisitions with a limit of FRF120,000 ($21,400). The Mediareseaux
Facility bears interest at LIBOR plus a margin ranging from 0.75% to 2.0%. The
availability of the facility depends on revenue generated and debt to equity
ratios. The availability period ends at December 31, 2002. The repayment period
starts from January 1, 2003 to final maturity in 2007. During the repayment
period, Mediareseaux must apply 50.0% of its excess cash flow in prepaying the
facility. The Mediareseaux Facility generally restricts the payment of dividends
and distributions. This facility also restricts Mediareseaux from incurring
additional indebtedness, subject to certain exceptions. In July 1998,
Mediareseaux secured a 9.5 year FRF20,000 ($3,600) overdraft facility, subject
to the same terms and conditions as the Mediareseaux Facility except that the
availability tests are not applicable. As of December 31, 1998 an amount of
FRF120,000 ($21,346) was outstanding under the Mediareseaux Facility.
89
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
UPC DIC LOAN
In November 1998, a subsidiary of Discount Investment Corporation ("DIC") loaned
UPC a total of $90,000 to acquire the additional interests in Tevel and Melita.
The DIC Loan matures in November 2000 and is secured by UPC's pledge of its
ownership interest in Tevel. The DIC Loan bears interest at 8.0% and is payable,
together with 106.0% of the principal amount, on maturity. The DIC Loan may be
repaid on quarterly prepayment dates with three months' prior notice by UPC. In
connection with the DIC Loan, UPC granted to an affiliate of DIC an option to
acquire a total of $90,000, plus accrued interest, of ordinary shares of UPC at
a price equal to 90.0% of the initial public offering price. The exercise price
of this option, which expires upon the initial public offering, is payable in
cash or delivery of the DIC Loan promissory notes. UPC allocated the $90,000 in
loan proceeds between the debt instrument ($84,214) and the equity option
element ($5,786) on the basis of relative fair values. Accordingly, the
effective interest rate on the debt instrument exceeds the stated rate as set
forth above. At the date of UPC's initial public offering, DIC exercised the
option and acquired 1,558,654 ordinary shares of UPC.
AUSTAR BANK FACILITY
In July 1997, Austar secured a senior syndicated term debt facility in the
amount of A$200,000 ($122,459 as of December 31, 1998) to fund Austar's
subscriber acquisition and working capital needs (the "Austar Bank Facility").
The Austar Bank Facility consisted of three sub-facilities: (i) A$50,000
revolving working capital facility, (ii) A$60,000 cash advance facility and
(iii) A$90,000 term loan facility. All of Austar's assets were pledged as
collateral for the Austar Bank Facility. As of December 31, 1998, Austar had
drawn the entire amount of the working capital facility and the cash advance
facility totaling A$110,000 ($67,352). The working capital facility was fully
repayable on June 30, 2000. The cash advance facility was fully repayable
pursuant to an amortization schedule beginning December 31, 2000 and ending June
30, 2004.
In September 1998, Austar received an amendment to the Austar Bank Facility
which allowed Austar to temporarily draw under the remaining A$90,000 term loan
facility at an increased interest rate of 2.25% above the professional market
rate in Australia. As of December 31, 1998, Austar had drawn A$60,000 ($36,738)
on the term loan facility for a total outstanding balance of A$170,000.
Subsequent to year-end an additional A$30,000 was borrowed against the term loan
facility which, along with the A$60,000 draw, was payable April 30, 1999. On
April 23, 1999 (subsequently executed and A$222,000 funded on April 28, 1999),
Austar secured a new A$400,000 Syndicated Senior Secured Debt Facility (the "New
Austar Bank Facility") to refinance the A$200,000 Austar Bank Facility and to
fund Austar's subscriber acquisition and working capital needs. The New Austar
Bank Facility consists of two sub-facilities: (i) A$200,000 amortizing term
facility ("Tranche 1") and (ii) A$200,000 cash advance facility ("Tranche 2").
Tranche 1 was used to refinance the Austar Bank Facility, and Tranche 2 is
available upon the contribution of additional equity on a 2:1 debt-to-equity
basis. All of Austar's assets are pledged as collateral for this facility. In
addition, pursuant to this facility, Austar cannot pay any dividends, interest
or fees under its technical assistance agreements without the consent of the
majority banks. The New Austar Bank Facility bears interest at the professional
market rate in Australia plus a margin ranging from 1.75% to 2.25% based upon
certain debt to cash flow ratios. The New Austar Bank Facility is fully
repayable pursuant to an amortization schedule beginning December 31, 2002 and
ending March 31, 2006.
90
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
FAIR VALUE OF SENIOR DISCOUNT NOTES AND OTHER LONG-TERM DEBT
Fair value is based on market prices for the same or similar issues. Carrying
value is used when a market price is unavailable.
Carrying Value Fair Value
-------------- ----------
As of December 31, 1998:
1998 Notes............................... $ 893,003 $ 783,750
Old Notes................................ 412 412
UPC Senior Revolving Credit Facility..... 512,179 512,179
UPC Bridge Bank Facility................. 60,063 60,063
UPC Mediareseaux Facility................ 21,346 21,346
UPC DIC Loan............................. 84,214 84,214
Other UPC................................ 3,821 3,821
1996 UIH A/P Notes....................... 321,687 223,700
1997 UIH A/P Notes....................... 34,953 22,700
Austar Bank Facility..................... 67,352 67,352
Other.................................... 2,923 2,923
---------- ----------
Total............................... $2,001,953 $1,782,460
========== ==========
As of February 28, 1998:
1998 Notes............................... $ 818,272 $ 831,875
Old Notes................................ 368 368
UPC Senior Revolving Credit Facility..... 437,598 437,598
UPC Bridge Bank Facility................. 125,000 125,000
Other UPC................................ 61,084 61,084
1996 UIH A/P Notes....................... 278,662 292,380
1997 UIH A/P Notes....................... 30,461 29,700
Austar Bank Facility..................... 71,531 71,531
ULA Revolving Credit Facility............ 33,000 33,000
Other.................................... 10,316 10,316
---------- ----------
Total............................... $1,866,292 $1,892,852
========== ==========
DEBT MATURITIES
The maturities of the Company's senior discount notes and other long-term debt
are as follows:
Year Ended December 31, 1999........................ $ 62,664
Year Ended December 31, 2000........................ 85,471
Year Ended December 31, 2001........................ --
Year Ended December 31, 2002........................ 46,570
Year Ended December 31, 2003........................ 118,537
Thereafter.......................................... 1,688,711
----------
Total.......................................... $2,001,953
==========
91
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
OTHER FINANCIAL INSTRUMENTS
Interest rate swap agreements are used by the Company from time to time, to
manage interest rate risk on its floating rate debt facilities. Interest rate
swaps are entered into depending on the Company's assessment of the market, and
generally are used to convert the floating rate debt to fixed rate debt.
Interest differentials paid or received under these swap agreements are
recognized over the life of the contracts as adjustments to the effective yield
of the underlying debt, and related amounts payable to, or receivable from, the
counterparties are included in the consolidated balance sheet. Currently, the
Company has two interest rate swaps to manage interest rate exposure on the
Austar Bank Facility. These swap agreements expire in 2002 and effectively
convert an aggregate principal amount of A$50,000 ($30,600) of variable rate,
long-term debt into fixed rate borrowings. As of December 31, 1998, the
weighted-average fixed rate under these agreements was 7.94% compared to a
weighted-average variable rate on the Austar Bank Facility of 6.75%. As a result
of these swap agreements, interest expense was increased by approximately A$600
($400) during 1998.
Fair values of the interest rate swap agreements are based on the estimated
amounts that the Company would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
creditworthiness of the counterparties. As of December 31, 1998, the Company
estimates it would have paid approximately A$1,300 ($800) to terminate the
agreements.
11. CONVERTIBLE PREFERRED STOCK
SERIES A
In connection with the Company's acquisition of an additional 40.0% economic
interest in Austar in 1995, the Company issued 170,513 shares of par value $0.01
per share Series A Preferred Stock. The Series A Preferred Stock had an initial
liquidation value of $175.00 per share (approximately $29,840) and accrues
dividends at a rate of 4.0% per annum, compounded quarterly. Each share of
Series A Preferred Stock is convertible into the number of shares of the
Company's Class A Common Stock equal to the liquidation value at the time of
conversion divided by $17.50. The Company is required to redeem the Series A
Preferred Stock on June 19, 2000 at a redemption price equal to its then
liquidation value plus accrued dividends. Assuming none of the Series A
Preferred Stock is converted prior to redemption, the total cost to the Company
upon redemption would be approximately $35,700. The Company has granted certain
rights to holders of the Series A Preferred Stock to register under the
Securities Act of 1933 the sale of shares of Class A Common Stock into which the
Series A Preferred Stock may be converted. During the ten months ended December
31, 1998, 38,369 shares of Series A Preferred Stock were converted into 425,457
shares of Class A Common Stock. Subsequent to December 31, 1998, an additional
100,144 shares of Series A Preferred Stock were converted into Class A Common
Stock.
SERIES B
In connection with the Company's acquisition of certain assets of ECT in July
1998, and the acquisition of an additional interest in XYZ Entertainment in
September 1998, the Company issued a total of 139,031 shares of par value $0.01
per share Series B Preferred Stock. The Series B Preferred Stock had an initial
liquidation value of $212.50 per share (approximately $29,544) and accrues
dividends at a rate of 6.5% per annum, compounded quarterly. Each share of
Series B Preferred Stock is convertible into the number of shares of the
Company's Class A Common Stock equal to the liquidation value at the time of
conversion divided by $21.25. The Company is required to redeem the Series B
Preferred Stock on June 30, 2008 at a redemption price equal to its then
liquidation value plus accrued dividends. Assuming none of the Series B
Preferred Stock is converted prior to redemption, the total cost to the Company
upon redemption would be approximately $55,723. The Company has granted certain
rights to holders of the Series B Preferred Stock to register under the
Securities Act of 1933 the sale of shares of Class A Common Stock into which the
Series B Preferred Stock may be converted.
92
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
12. STOCKHOLDERS' DEFICIT
COMMON STOCK
In April 1993, the Company adopted a Restated Certificate of Incorporation
pursuant to which the Company authorized the issuance of two classes of common
stock, Class A Common Stock and Class B Common Stock. Each share of Class A
Common Stock is entitled to one vote per share while each share of Class B
Common Stock is entitled to ten votes per share. Each share of Class B Common
Stock is convertible at any time at the option of the holder into one share of
Class A Common Stock. The two classes of common stock are identical in all other
respects.
CUMULATIVE TRANSLATION ADJUSTMENTS
During the ten months ended December 31, 1998, the Company recorded a negative
change in cumulative translation adjustments of $24,713, primarily due to (i)
the strengthening of the U.S. dollar compared to the Mexican peso of
approximately 23.0%, (ii) the strengthening of the U.S. dollar compared to the
Hungarian forint of approximately 6.0% and (iii) the strengthening of the U.S.
dollar compared to the Chilean peso of approximately 7.0%.
TREASURY STOCK
As a result of the UPC Transaction, UPC acquired 3,169,151 shares of the
Company's Class A Common Stock, valued at cost on December 11, 1997 at $33,074.
In November 1998, UPC used 384,531 shares to acquire an additional 5.0% interest
in Tara and Princes Holdings, resulting in 2,784,620 UIH shares remaining in the
treasury.
EMPLOYEE STOCK OPTION PLAN
In May 1993, the Company adopted a stock option plan for certain of its
employees (the "Employee Plan"). The Employee Plan is construed, interpreted and
administered by the compensation committee (the "Committee"), consisting of all
members of the Board of Directors who are not employees of the Company. Members
of the Company's Board of Directors who are not employees are not eligible to
receive option grants under the Employee Plan. The Committee has the discretion
to determine the employees and consultants to whom options are granted, the
number of shares subject to the options, the exercise price of the options, the
period over which the options become exercisable, the term of the options
(including the period after termination of employment during which an option may
be exercised) and certain other provisions relating to the option. The maximum
number of shares subject to options that may be granted to any one participant
under the Employee Plan during any calendar year is 500,000 shares. The maximum
term of options granted under the Employee Plan is ten years. Options granted
may be either incentive stock options under the Internal Revenue Code of 1986,
as amended, or non-qualified stock options. The options vest in equal monthly
increments over the four-year period following the date of grant. Vesting would
be accelerated upon a change of control in the Company as defined in the
Employee Plan. Under the Employee Plan, options to purchase a total of 3,800,000
shares of Class A Common Stock have been authorized, of which 496,149 were
available for grant as of December 31, 1998.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Company adopted a stock option plan for non-employee directors (the
"Director Plan") effective June 1, 1993. The Director Plan provides for the
grant of an option to acquire 20,000 shares of the Company's Class A Common
Stock to each member of the Board of Directors who was not also an employee of
the Company (a "non-employee director") on June 1, 1993, and to each person who
is newly elected to the Board of Directors as a non-employee director after June
1, 1993, on the date of their election. The maximum term of options granted
under the Director Plan is ten years. The options vest in equal monthly
increments over the four-year period following the date of grant. Vesting would
be accelerated upon a change in control of the Company as defined in the
Director Plan. Under the Director Plan, options to purchase a total of 480,000
shares of Class A Common Stock have been authorized, of which 32,500 were
available for grant as of December 31, 1998.
93
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
FAIR VALUE OF STOCK OPTIONS
For purposes of the pro forma disclosures presented below, the Company has
computed the fair values of all options granted during the ten months ended
December 31, 1998 and the year ended February 28, 1998 using the Black-Scholes
single-option pricing model and the following weighted-average assumptions:
<TABLE>
<CAPTION>
For the Ten
Months Ended For the Year Ended For the Year Ended
December 31, February 28, February 28,
1998 1998 1997
------------ ------------------ ------------------
<S> <C> <C> <C>
Risk-free interest rate........ 4.60% 5.91% 6.38%
Expected lives................. 7 years 7 years 7 years
Expected volatility............ 55.34% 53.46% 54.72%
Expected dividend yield........ 0% 0% 0%
</TABLE>
The total fair value of options granted was approximately $3,746, $2,929 and
$5,376 for the ten months ended December 31, 1998 and the years ended February
28, 1998 and 1997, respectively. These 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 forfeited prior to vesting, is adjusted as a reduction of pro forma
compensation expense in the period of forfeiture. For the ten months ended
December 31, 1998 and the years ended February 28, 1998 and 1997, pro forma
stock-based compensation, net of the effect of the forfeitures, was $2,694,
$2,773 and $2,002, respectively, as follows:
<TABLE>
<CAPTION>
For the Ten Months For the Year Ended For the Year Ended
Ended December 31, 1998 February 28, 1998 February 28, 1997
------------------------ ---------------------- ----------------------
Net Net Loss Net Net Loss Net Net Loss
Loss Per Share Loss Per Share Loss Per Share
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
As reported.................... $(545,532) $(13.71) $(342,532) $(8.77) $(138,825) $(3.59)
Pro forma...................... $(548,226) $(13.77) $(345,305) $(8.84) $(140,827) $(3.64)
</TABLE>
The fair value method of accounting for stock-based compensation plans
recognizes the value of options granted as compensation expense over the
option's vesting period and has not been applied to options granted prior to
March 1, 1995.
94
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
A summary of stock option activity for the Employee Plan is as follows:
<TABLE>
<CAPTION>
For the Ten Months For the Year Ended For the Year Ended
Ended December 31, 1998 February 28, 1998 February 28, 1997
----------------------- ----------------------- -------------------------
Number Weighted- Number Weighted- Number Weighted-
of Average of Average of Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
---------- -------------- ---------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year......... 2,947,476 $11.8348 2,793,851 $11.7458 2,315,122 $11.5673
Granted during the year.................. 369,500 $ 9.8808 435,625 $10.9943 655,000 $13.0011
Cancelled during the year................ (249,069) $18.6709 (130,106) $14.8130 (136,521) $15.6011
Exercised during the year................ (413,144) $10.8813 (151,894) $ 5.2366 (39,750) $ 8.7925
--------- -------- --------- -------- --------- --------
Outstanding at end of year............... 2,654,763 $11.0699 2,947,476 $11.8348 2,793,851 $11.7458
========= ======== ========= ======== ========= ========
Exercisable at end of year............... 1,681,162 $11.0977 2,014,070 $11.5499 1,661,936 $10.7192
========= ======== ========= ======== ========= ========
</TABLE>
A summary of stock option activity for the Director Plan is as follows:
<TABLE>
<CAPTION>
For the Ten Months For the Year Ended For the Year Ended
Ended December 31, 1998 February 28, 1998 February 28, 1997
----------------------- ----------------------- -------------------------
Number Weighted- Number Weighted- Number Weighted-
of Average of Average of Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
---------- -------------- ---------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year......... 260,000 $12.1636 280,000 $12.5358 280,000 $12.5358
Granted during the year.................. 165,000 $ 9.8768 20,000 $11.1250 -- $ --
Cancelled during the year................ -- $ -- (40,000) $14.2500 -- $ --
Exercised during the year................ (40,000) $ 9.5000 -- $ -- -- $ --
------- -------- ------- -------- ------- --------
Outstanding at end of year............... 385,000 $11.4603 260,000 $12.1636 280,000 $12.5358
======= ======== ======= ======== ======= ========
Exercisable at end of year............... 231,978 $12.5712 243,333 $12.2346 219,445 $12.1753
======= ======== ======= ======== ======= ========
</TABLE>
The combined weighted-average fair values and weighted-average exercise prices
of options granted are as follows:
<TABLE>
<CAPTION>
For the Ten Months Ended For the Year Ended For the Year Ended
December 31, 1998 February 28, 1998 February 28, 1997
------------------------------ ------------------------------ ------------------------------
Number Fair Exercise Number Fair Exercise Number Fair Exercise
Exercise Price of Options Value Price of Options Value Price of Options Value Price
- -------------- ---------- -------- -------- ---------- ------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Less than market price...... 75,000 $13.2225 $10.3750 3,125 $4.2937 $ 9.5000 5,000 $10.2382 $ 5.0000
Equal to market price....... 459,500 $ 5.9935 $ 9.7987 432,500 $6.6316 $10.7912 550,000 $ 8.2285 $13.0968
Greater than market price... -- $ -- $ -- 20,000 $2.3484 $15.7500 100,000 $ 7.9957 $12.8750
------- -------- -------- ------- ------- -------- ------- -------- --------
Total.................. 534,500 $ 7.0078 $ 9.8796 455,625 $6.4276 $11.0000 655,000 $ 8.2083 $13.0011
======= ======== ======== ======= ======= ======== ======= ======== ========
</TABLE>
95
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
The following table summarizes information about employee and director stock
options outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- -----------------------
Weighted-Average Weighted- Weighted-
Number of Remaining Average Number of Average
Options Contractual Life Exercise Options Exercise
Exercise Price Range Outstanding (Years) Price Exercisable Price
-------------------- ----------- ---------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 4.5000 - $ 8.3125............................ 361,000 8.57 $ 7.4639 92,666 $ 5.0069
$ 9.5000 - $ 9.5000............................ 930,050 4.51 $ 9.5000 930,050 $ 9.5000
$10.2500 - $10.8750............................ 786,418 8.88 $10.6874 238,164 $10.8212
$11.1875 - $18.2500............................ 967,095 6.74 $14.4314 657,060 $14.8536
--------- ---- -------- --------- --------
Total....................................... 3,044,563 6.83 $11.1317 1,917,940 $11.2810
========= ==== ======== ========= ========
</TABLE>
SUBSIDIARY STOCK OPTION PLANS
UPC PLAN
In June 1996, UPC adopted a stock option plan (the "UPC Plan") for certain of
its employees and those of its subsidiaries. There are 6,000,000 total shares
available for the granting of options under the UPC Plan, which are held by the
Stichting Administratiekantoor UPC (the "Foundation"), which administers the UPC
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. UIH appoints
the board members of the Foundation and thus controls the voting of the
Foundation's common stock. The options are granted at fair market value
determined by UPC'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 UPC 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 UPC 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. UPC 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 UPC until
expiration of the underlying options. The UPC 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.
96
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
A summary of stock option activity for the UPC Plan is as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------------------------------
1998 1997 1996
------------------------- -------------------------- ---------------------------
Number Weighted- Number Weighted- Number Weighted-
of Average of Average of Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
--------- -------------- --------- -------------- ---------- --------------
(Dutch guilders) (Dutch guilders) (Dutch guilders)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period...... 2,241,552 10.49 2,300,417 10.49 -- --
Granted during the period............... 2,343,000 12.10 -- -- 3,990,000 10.49
Cancelled during the period............. (14,052) 10.49 (58,865) 10.49 (9,583) 10.49
Exercised during the period............. (375,000) 10.49 -- -- (1,680,000) --
--------- ----- --------- ----- ---------- -----
Outstanding at end of period............ 4,195,500 11.39 2,241,552 10.49 2,300,417 10.49
========= ===== ========= ===== ========== =====
Exercisable at end of period (1)........ 4,195,500 11.39 2,241,552 10.49 2,300,417 10.49
========= ===== ========= ===== ========== =====
</TABLE>
(1) Includes certificate rights as well as options.
UPC granted no stock options during the year ended December 31, 1997. The
combined weighted-average fair values and weighted-average exercise prices of
options granted during the year ended December 31, 1998 and the year ended
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1998 December 31, 1996
-------------------------------- -------------------------------
Number Fair Exercise Number Fair Exercise
of Options Value Price of Options Value Price
---------- ----- -------- ---------- ----- --------
(Dutch guilders) (Dutch guilders)
<S> <C> <C> <C> <C> <C> <C>
Exercise price equal to market price...... 2,343,000 12.10 12.10 3,990,000 10.49 10.49
</TABLE>
The following table summarizes information about stock options outstanding and
exercisable as of December 31, 1998:
<TABLE>
<CAPTION>
Weighted-Average
Number of Remaining Number of
Options Contractual Life Options
Exercise Price (Dutch guilders) Outstanding (Years) Exercisable
------------------------------- ----------- ----------------- -----------
<S> <C> <C> <C>
10.49................................ 1,852,500 2.47 1,852,500
12.00................................ 2,195,250 4.63 2,195,250
13.57................................ 147,750 4.71 147,750
--------- ---- ---------
Total........................... 4,195,500 3.68 4,195,500
========= ==== =========
</TABLE>
The UPC Plan is accounted for as a variable plan because, based on the plan's
provisions, the rights conveyed to employees are the substantive equivalents to
stock appreciation rights. Accordingly, compensation expense is recognized at
each financial statement date based on the difference between the grant price
and the estimated fair value of UPC's common stock. Compensation expense of
NLG268,109 ($134,728), NLG4,818 ($2,477) and NLG0 was recognized for the ten
months ended December 31, 1998 and the years ended December 31, 1997 and
December 31, 1996, respectively. UPC's estimate of the fair value of its common
stock as of December 31, 1998 utilized in recording compensation expense under
the UPC Plan was NLG63.91, which is the initial public offering price. Because
UPC will account for the UPC Plan as a variable plan up until the consummation
date of its initial public offering, and thereafter as a fixed plan due to
97
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
modifications to the UPC Plan which will occur on that date, the total
compensation expense and deferred compensation expense recognized related to
options granted as of December 31, 1998 will not increase.
UPC PHANTOM STOCK OPTION PLAN
In March 1998, UPC adopted a phantom stock option plan (the "UPC Phantom Plan")
which permits the grant of phantom stock rights in up to 2,400,000 shares of
UPC's common stock. The rights are granted at fair market value determined by
UPC'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 UPC Phantom Plan gives the employee the right to receive payment equal to
the difference between the fair market value of a share of UPC common stock and
the option base price for the portion of the rights vested. UPC, at its sole
discretion, may make payment in (i) cash, (ii) freely tradable shares of UIH
Class A Common Stock or (iii) if UPC's stock is publicly traded, freely tradable
shares of its stock. If UPC chooses to make a cash payment, even though its
stock is publicly traded, employees have the option to receive an equivalent
number of freely tradable shares of stock instead. Concurrent with the approval
of the UPC Phantom Plan, the Supervisory Board ratified the grant of 1,232,250
and 825,000 phantom stock rights at base prices of NLG12.00 and NLG13.57,
respectively, and specified retroactive vesting for several of the grants. The
UPC Phantom Plan contains anti-dilution protection and provides that, in certain
cases of a change of control, all phantom options outstanding become fully
exercisable.
A summary of stock option activity for the UPC Phantom Plan is as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1998
-------------------------------
Number Weighted-
of Average
Shares Exercise Price
--------- ----------------
(Dutch guilders)
<S> <C> <C>
Outstanding at beginning of period.......... -- --
Granted during the period................... 2,057,250 12.63
Cancelled during the period................. -- --
Exercised during the period................. -- --
--------- -----
Outstanding at end of period................ 2,057,250 12.63
========= =====
Vested and exercisable at end of period..... 470,469 12.15
========= =====
</TABLE>
The combined weighted-average fair values and weighted-average exercise prices
of options granted during the year ended December 31, 1998 are as follows:
Number Fair Exercise
of Options Value Price
---------- ------ ---------
(Dutch guilders)
Exercise price equal to market price...... 2,057,250 12.63 12.63
98
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
The following table summarizes information about stock options outstanding,
vested and exercisable as of December 31, 1998:
<TABLE>
<CAPTION>
Weighted-Average Number of
Number of Remaining Options
Options Contractual Life Vested and
Exercise Price (Dutch guilders) Outstanding (Years) Exercisable
------------------------------- ----------- ----------------- -----------
<S> <C> <C> <C>
12.00.................................. 1,232,250 8.54 425,469
13.57.................................. 825,000 9.70 45,000
--------- ---- -------
Total............................. 2,057,250 9.00 470,469
========= ==== =======
</TABLE>
The UPC 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 NLG52,374 ($26,319) was recognized for the ten months ended December
31, 1998. UPC's estimate of the fair value of its common stock as of December
31, 1998 utilized in recording compensation expense under the UPC Phantom Plan
was NLG63.91, which is the initial public offering price.
CHELLO STOCK OPTION PLAN
In June 1998, UPC adopted a phantom stock option plan (the "chello Plan"), which
permits the grant of phantom stock rights in up to 1,500,000 shares of chello, a
wholly-owned subsidiary of UPC. The rights are granted at fair market value
determined by chello's Supervisory Board at the time of grant, and generally
vest in equal monthly increments over the four-year period following the
effective date of grant and may be exercised for ten years following the
effective date of grant. The chello Plan gives the employee the right to receive
payment equal to the difference between the fair market value of a share of
chello and the option base price for the portion of the rights vested. UPC, at
its sole discretion, may make payment in (i) cash, (ii) freely tradable shares
of UIH Class A Common Stock or (iii) if UPC's stock is publicly traded, freely
tradable shares of its stock. If UPC chooses to make a cash payment, even though
its stock is publicly traded, employees have the option to receive an equivalent
number of freely tradable shares of stock instead. Concurrent with the approval
of the chello Plan, the Supervisory Board ratified the grant of 570,000 options
at a base price of NLG10.00, and specified retroactive vesting for several of
the grants. For the ten months ended December 31, 1998, UPC recorded
compensation expense of NLG2,144 ($1,077) for options granted under the chello
Plan.
A summary of stock option activity for the chello Plan is as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1998
------------------------------
Number Weighted-
of Average
Shares Exercise Price
-------- ---------------
(Dutch guilders)
<S> <C> <C>
Outstanding at beginning of period......... -- --
Granted during the period.................. 570,000 10.00
Cancelled during the period................ -- --
Exercised during the period................ -- --
------- -----
Outstanding at end of period............... 570,000 10.00
======= =====
Vested and exercisable at end of period.... 70,625 10.00
======= =====
</TABLE>
The weighted-average remaining contractual life for these options is 9.47 years
as of December 31, 1998.
99
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
UAP Plan
In March 1998, UAP's Board of Directors approved a stock option plan (the "UAP
Plan") which permits the grant of phantom stock options or the grant of stock
options to purchase up to 1,600,000 shares of UAP's Class A Common Stock. The
options vest in equal monthly increments over the four-year period following the
date of grant. Concurrent with approval of the UAP Plan, UAP's Board granted a
total of 918,500 phantom stock options to certain employees which gives the
employee the right with respect to vested options to receive a cash payment
equal to the difference between the fair market value of a share of UAP stock
and the option base price of $10 per share. Vesting of these phantom stock
options was retroactive to June 6, 1997. No compensation expense has been
recognized under the UAP Plan through December 31, 1998.
A summary of phantom stock option activity for the UAP Plan is as follows:
For the Ten Months
Ended December 31, 1998
-----------------------------
Number Weighted-
of Average
Shares Exercise Price
--------- --------------
Outstanding at beginning of period..... -- $ --
Granted during the period.............. 1,779,500 $10.00
Cancelled during the period............ -- $ --
Exercised during the period............ -- $ --
--------- ------
Outstanding at end of period........... 1,779,500 $10.00
========= ======
Exercisable at end of period........... 584,063 $10.00
========= ======
The combined weighted-average fair values and weighted-average exercise prices
of options granted during the ten months ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
For the Ten Months Ended
December 31, 1998
----------------------------------------------------
Number Fair Exercise
of Options Value Price
---------- ------- --------
<S> <C> <C> <C>
Exercise price equal to market price.... 1,779,500 $10.00 $10.00
</TABLE>
The following table summarizes information about the UAP Plan phantom options
outstanding and exercisable at December 31, 1998:
Weighted-Average
Number of Remaining Number of
Options Contractual Life Options
Exercise Price Outstanding (Years) Exercisable
-------------- ----------- ------------------ -----------
$10.00................. 1,779,500 9.08 584,063
100
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
ULA Plan
In April 1998, ULA's Board of Directors approved a stock option plan (the "ULA
Plan") which permits the grant of phantom stock options or the grant of stock
options to purchase up to 1,631,000 shares of ULA's Class A Common Stock. The
options vest in equal monthly increments over the four-year period following the
date of grant. Concurrent with approval of the ULA Plan, ULA's Board granted a
total of 1,475,500 phantom stock options to certain employees which gives the
employee the right with respect to vested options to receive a cash payment
equal to the difference between the fair market value of a share of ULA stock
and the option base prices in the range of $4.26-$6.76 per share. Vesting of
these phantom stock options was retroactive to June 6, 1997. For the ten months
ended December 31, 1998 ULA recognized $2,669 and $1,060 in non-cash and cash
compensation expense related to these phantom options, respectively.
A summary of phantom stock option activity for the ULA Plan is as follows:
<TABLE>
<CAPTION>
For the Ten Months
Ended December 31, 1998
----------------------------
Number Weighted-
of Average
Shares Exercise Price
---------- --------------
<S> <C> <C>
Outstanding at beginning of period.......... -- --
Granted during the period................... 1,785,500 $5.6295
Cancelled during the period................. (317,296) $5.4723
Exercised during the period................. (279,787) $5.1935
--------- -------
Outstanding at end of period................ 1,188,417 $5.7741
========= =======
Exercisable at end of period................ 268,730 $4.8646
========= =======
</TABLE>
The combined weighted-average fair values and weighted-average exercise prices
of options granted during the ten months ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
For the Ten Months Ended
December 31, 1998
-----------------------------------
Number Fair Exercise
of Options Value Price
---------- ------- --------
<S> <C> <C> <C>
Exercise price equal to market price........ 945,500 $5.8075 $5.8075
Exercise price greater than market price 840,000 $4.2600 $5.4300
--------- ------- -------
Total.................................... 1,785,500 $5.0795 $5.6295
========= ======= =======
</TABLE>
The following table summarizes information about the ULA Plan phantom options
outstanding and exercisable at December 31, 1998:
Weighted-Average
Number of Remaining Number of
Options Contractual Life Options
Exercise Price Outstanding (Years) Exercisable
-------------- ----------- ---------------- -----------
$ 4.26................ 531,750 8.43 140,813
$ 4.59................ 150,000 8.43 56,250
$ 4.96................ 100,000 8.43 37,500
$ 5.93................ 30,000 8.43 11,250
$ 6.76................ 66,667 8.43 4,167
$ 8.98................ 310,000 9.72 18,750
--------- ---- -------
Total............ 1,188,417 8.77 268,730
========= ==== =======
101
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
13. COMMITMENTS
The Company has entered into various operating lease agreements for office
space, office furniture and equipment, and vehicles. Rental expense under these
lease agreements totaled $5,824, $4,125 and $3,481 for the ten months ended
December 31, 1998 and for the years ended February 28, 1998 and February 28,
1997, respectively.
<TABLE>
<CAPTION>
The Company has operating lease obligations and other non-cancelable
commitments as follows:
<S> <C>
Year ended December 31, 1999.............................................................. $ 9,374
Year ended December 31, 2000.............................................................. 6,035
Year ended December 31, 2001.............................................................. 4,860
Year ended December 31, 2002.............................................................. 3,331
Year ended December 31, 2003 and thereafter............................................... 2,732
--------
Total.................................................................................. $ 26,332
========
The Company has MMDS license fees and programming license fees payable
annually as follows:
Year ended December 31, 1999.............................................................. $ 38,310
Year ended December 31, 2000.............................................................. 45,658
Year ended December 31, 2001.............................................................. 51,541
Year ended December 31, 2002.............................................................. 54,583
Year ended December 31, 2003 and thereafter............................................... 57,152
--------
Total.................................................................................. $247,244
========
A subsidiary of Austar has a five-year agreement to lease a 54 MHz satellite
transponder. Pursuant to the agreement, which commenced September 1, 1997,
Austar will pay approximately $4,440 in satellite service fees annually as
follows:
Year ended December 31, 1999.............................................................. $ 4,440
Year ended December 31, 2000.............................................................. 4,440
Year ended December 31, 2001.............................................................. 4,440
Year ended December 31, 2002.............................................................. 2,960
Year ended December 31, 2003.............................................................. --
--------
Total.................................................................................. $ 16,280
========
</TABLE>
UIH and certain of its employees serving as senior management in the Company's
operating companies are parties to employment agreements, typically with terms
of three to five years. The agreements generally provide for a specified base
salary as well as a bonus set at a specified percentage of the base salary. The
bonus is based on the performance of the respective company and the employee.
The agreements often provide for the grant of an incentive interest equal to a
percentage of the residual equity value of the respective company, which is
typically defined as the fair market value of the business less net liabilities
and a reasonable return on shareholders' investment. The Company has recorded a
liability for the estimated amount of the bonus earned during the ten months
ended December 31, 1998 and the years ended February 28, 1998 and 1997. The
employment agreements generally also provide for cost of living differentials,
relocation and moving expenses, automobile allowances and income tax
equalization payments, if necessary, to keep the employee's tax liability the
same as it would be in the United States.
In September 1998, UTH entered into a subordinated loan agreement to provide
funding up to $30,000 for A2000. UTH's share of the funding is $15,000. UPC is
obligated to fund drawdowns on the loan in proportion to its 51.0% ownership in
UTH (representing a total funding obligation of $7,650). As of December 31,
1998, UPC had funded $3,750 of its commitment. 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.
102
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
14. CONTINGENCIES
The Company is not a party to any material legal proceedings other than as
described below, nor is it currently aware of any other threatened material
legal proceedings. From time to time, the Company may become involved in
litigation relating to claims arising out of its operations in the normal course
of its business.
In April 1997, following a trial in the United States District Court for the
District of Colorado, the Company obtained a jury verdict against The Wharf
(Holdings) Limited ("Wharf Holdings"), its wholly-owned subsidiary, Wharf
Communications Investments Limited and Wharf Holdings' deputy chairman, Stephen
Ng, on claims of securities fraud, fraud, breach of fiduciary duty, breach of
contract and negligent misrepresentation, and was awarded $67,000 in
compensatory damages and $58,500 in exemplary damages. In May 1997, the Court
awarded prejudgment interest of $28,200, and entered judgment on the verdicts.
In October 1997, the Court denied the defendants' motion for a reduction in the
amount of damages, for a new trial, and/or for a judgment as a matter of law. On
November 4, 1997, the defendants appealed the judgment to the United States
Court of Appeals for the Tenth Circuit. On December 31, 1997, Wharf Holdings
filed a separate appeal to the Tenth Circuit related to the contempt sanctions
that the District Court imposed as a result of Wharf Holdings' refusal to turn
over certain assets in satisfaction of the judgment. On January 29, 1998, Wharf
Holdings posted a $173,500 supersedeas bond to secure the judgment entered in
favor of the Company. Although the Company intends to vigorously defend the
appeals, there can be no assurance that the judgment will be affirmed or that
the damages will be collected.
The territorial government of Tahiti (in French Polynesia) had legally
challenged the decree and authority of the Conseil Superieur de l'Audiovisuel
("CSA") to award Telefenua the authorizations to operate an MMDS service in
French Polynesia. The French Polynesian's challenge to France's authority to
award Telefenua an MMDS license in Tahiti was upheld by the Conseil d'Etat, the
supreme administrative court of France. The territorial government of Tahiti
then brought an action in French court seeking cancellation of the MMDS licenses
awarded by the CSA to Telefenua. On November 25, 1998, the Conseil d' Etat
cancelled the MMDS licenses awarded to Telefenua. Telefenua is in the process of
seeking a new authorization. The Company has no reason to believe that a new
authorization will not be granted. If Telefenua does not obtain a new
authorization, there is no assurance that Telefenua will receive any
restitution. In addition, any available restitution could be limited and could
take years to obtain.
On July 14, 1998, UIH SFCC, a wholly-owned subsidiary of UIPI, filed a complaint
in the United States District Court for the District of Colorado, for damages
for breach of contract, breach of fiduciary duty and to enforce UIH SFCC's
rights as General Partner in UIH-SFCC LP, a Colorado Limited Partnership which
owns an interest in SFCC, the 100% parent of Telefenua. The three defendants are
Loic Brigato, Winfred Anderson and Yoshiko Payne, limited partners of UIH-SFCC
LP. On September 27, 1998, UIH filed a parallel action in the District Court for
the State of Colorado. Specifically, the complaints allege that the defendants
have refused to abide by the terms of the Partnership Agreement and have taken
actions highly detrimental to Telefenua. UIH SFCC seeks monetary damages, a
decree of specific performance requiring defendants to perform their obligations
and a constructive trust over defendants' partnership interest. Defendants have
filed in the federal court a motion to dismiss the complaint for lack of subject
matter jurisdiction. There has been no decision issued as of this date. The
Company intends to vigorously defend its position.
On April 20, 1999, a class action was filed in the District Court of Tel Aviv
against several cable operators in Israel, including Tevel. The complaint
alleges that the cable operators have taken advantage of their monopoly position
in the market by charging excessive prices for the services provided. The
plaintiffs are seeking damages in the amount of approximately NIS1,000.00
(approximately $240.00) per subscriber and a judicial order instructing Tevel to
reduce its subscriber fee to the alleged fair market price. The plaintiffs have
also applied for a judicial order against the Ministry of Communication to avoid
considering the extension of Tevel's cable franchise term for unfair
exploitation and monopoly status. Tevel's cable television service subscription
rates are subject to governmental regulation through franchise agreements and
through the arrangement approved by the Restrictive Trade Practices Tribunal.
Tevel intends to vigorously defend itself against these allegations.
103
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
15. INCOME TAXES
In general, a United States corporation may claim a foreign tax credit against
its federal income tax expense for foreign income taxes paid or accrued. Because
the Company must calculate its foreign tax credit separately for dividends
received from each foreign corporation in which the Company owns 10.0% to 50.0%
of the voting stock, and because of certain other limitations, the Company's
ability to claim a foreign tax credit may be limited, particularly with respect
to dividends paid out of earnings subject to a high rate of foreign income tax.
Generally, the Company's ability to claim a foreign tax credit is limited to the
amount of U.S. taxes the Company pays with respect to its foreign source income.
In calculating its foreign source income, the Company is required to allocate
interest expense and overhead incurred in the United States between its United
States and foreign activities. Accordingly, to the extent United States
borrowings are used to finance equity contributions to its foreign subsidiaries,
the Company's ability to claim a foreign tax credit may be significantly
reduced. These limitations and the inability of the Company to offset losses in
one foreign jurisdiction against income earned in another foreign jurisdiction
could result in a high effective tax rate on the Company's earnings. The Company
has an ownership interest in Telefenua and Cable Star which are located in
Tahiti and Peru, with which the United States does not have income tax treaties.
As a result, the Company may be subject to increased withholding taxes on
dividend distributions and other payments from those entities and also may be
subject to double taxation with respect to income generated by those entities.
The primary differences between taxable loss and net loss for financial
reporting purposes relate to accounting for the share in results of foreign
affiliated companies, the non-consolidation of its consolidated foreign
subsidiaries for United States tax purposes and the current non-deductibility of
interest expense on UIH A/P's senior notes. Since the Company holds the majority
of its foreign investments through affiliates which hold investments accounted
for under the equity method in foreign corporations, taxable income (loss)
generated by these affiliated companies does not flow through to the Company for
United States federal and state tax purposes, even though the Company records
its allocable share of affiliate income (losses) for financial reporting
purposes. Accordingly, due to the indefinite reversal of such amounts in future
periods, no deferred tax asset has been established for tax basis in excess of
the Company's book basis (approximately $163,000 and $141,000 at December 31,
1998 and February 28, 1998, respectively) in investments in affiliated
companies, which in turn have investments in foreign corporations.
The Company's United States tax net operating losses, totaling approximately
$255,000 at December 31, 1998, expire beginning in 2004 through 2014. The
Company's tax net operating loss carryforwards of its consolidated foreign
subsidiaries totaled $191,000, $286,000 and $6,000 for UAP and ULA,
respectively. The significant components of the net deferred tax asset are as
follows:
<TABLE>
<CAPTION>
As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Deferred Tax Assets:
--------------------
Tax net operating loss carryforward of consolidated foreign subsidiaries... $183,656 $144,356
Company's U.S. tax net operating loss carryforward......................... 97,044 67,141
Accrued interest expense on the UIH A/P Notes.............................. 32,885 18,856
Stock-based compensation................................................... 7,215 --
Investment valuation allowance and other................................... 2,605 3,302
Basis difference in marketable equity securities........................... 3,070 3,192
Deferred compensation and severence........................................ 1,175 1,260
Other...................................................................... 70 149
-------- --------
Total deferred tax assets............................................. 327,720 238,256
Valuation allowance........................................................ (319,292) (231,710)
-------- --------
Deferred tax assets, net of valuation allowance....................... 8,428 6,546
Deferred Tax Liabilities:
-------------------------
Intangible assets........................................................ (5,852) (23,800)
Property, plant and equipment, net....................................... (7,156) (5,046)
Other.................................................................... -- 268
-------- --------
Total deferred tax liabilities........................................ (13,008) (28,578)
-------- --------
Deferred tax liabilities, net......................................... $ (4,580) $(22,032)
======== ========
</TABLE>
104
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
Of the Company's 1998 consolidated net loss, $361,637 is derived from the
Company's foreign operations. 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 Ten For the Years Ended
Months Ended --------------------------
December 31, February 28, February 28,
1998 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Expected income tax benefit at the U.S. statutory rate of 35%...... $(172,472) $(68,727) $(33,463)
Tax effect of permanent and other differences:
Change in valuation allowance.................................... 127,810 66,519 30,787
Non-deductible expenses.......................................... 49,497 566 --
Book/tax basis differences associated with foreign investments... 1,176 3,901 3,428
State tax, net of federal benefit................................ (14,783) (5,891) (2,868)
International rate differences................................... 619 (515) (181)
Non-deductible interest accretion on the UIH A/P Notes........... 2,148 2,145 973
Amortization of licenses......................................... 1,516 1,312 625
Other............................................................ 4,489 690 699
--------- --------- ---------
Total income tax benefit..................................... $ -- $ -- $ --
========= ========= =========
</TABLE>
During 1996, the Austrian tax authorities passed legislation which had the
effect of eliminating approximately NLG256,000 ($135,450) of tax basis
associated with certain amounts of goodwill recorded at Telekabel Group
effective January 1, 1997. This change in tax law is expected to be challenged
on constitutional grounds. However, there can be no assurance of a successful
repeal of such legislation. Accordingly, this change caused Telekabel Group's
effective tax rate to increase from the historical effective tax rate through
December 31, 1996, due to the non-deductibility of such goodwill amortization
subsequent to January 1, 1997.
16. SEGMENT AND GEOGRAPHIC INFORMATION
The Company adopted SFAS 131 for the ten months ended December 31, 1998. The new
rules establish revised standards for public companies relating to the reporting
of financial information about operating segments. The adoption of SFAS 131 did
not have a material effect on the Company's consolidated financial statements
but did affect the Company's segment information disclosure. The Company's
business has historically been derived from its video entertainment segment.
This service has been provided in various countries where the Company owns and
operates it systems. During 1998, the Company introduced telephony and
internet/data services and during 1999 the Company will continue to introduce
these services to several systems. To date, revenues and net operating results
from these services have not been significant and therefore segment information
for these services is not required. Accordingly, the Company's current
reportable segments are the various countries in which it operates multi-channel
television, programming and/or telephony operations. These reportable segments
are evaluated separately because each geographic region presents different
marketing strategies and technology issues as well as distinct economic climates
and regulatory constraints. The key operating performance criteria used in this
evaluation includes revenue growth, operating income before depreciation,
amortization and stock-based compensation expense ("Adjusted EBITDA"), and
capital expenditures. Senior management of the Company does not view segment
results below Adjusted EBITDA, therefore, interest income, interest expense,
provision for losses on investment related costs, gain on sale of investments,
share in results of affiliated companies, minority interests in subsidiaries and
other expenses are not broken out by segment below.
105
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
The Company's segment information is as follows:
<TABLE>
<CAPTION>
For the Ten Months Ended December 31, 1998 As of December 31, 1998
------------------------------------------ --------------------------------------------------------
Depreciation Investments Property,
& Adjusted in Plant and Total Capital
Revenue Amortization EBITDA(1) Affiliates Equipment Assets Expenditures
------- ------------ -------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Europe:
The Netherlands............ $ 21,500 $ (9,503) $(3,658) $132,131 $ 5,176 $ 297,068 $ (12,874)
Austria.................... 74,629 (31,527) 30,975 -- 140,550 341,159 (41,458)
Belgium.................... 15,854 (8,357) 5,071 -- 27,558 57,847 (9,930)
Czech Republic............. 3,753 (3,142) (722) -- 8,737 11,497 (523)
France..................... 3,395 (1,684) (1,941) -- 40,328 51,092 (26,329)
Hungary.................... 11,672 (2,743) 3,819 8,410 26,788 86,921 (6,727)
Norway..................... 39,040 (18,487) 12,636 -- 63,335 219,068 (25,725)
Other...................... 2,444 (1,107) (3,572) 120,307 6,574 22,744 (17,981)
-------- --------- -------- -------- -------- ---------- ---------
Total Europe............. 172,287 (76,550) 42,608 260,848 319,046 1,087,396 (141,547)
-------- --------- -------- -------- -------- ---------- ---------
Asia/Pacific:
Australia.................. 74,209 (79,538) (25,725) 25,880 122,968 181,169 (71,197)
Other...................... 3,060 (208) (7,655) 33,830 61 72,781 (337)
-------- --------- -------- -------- -------- ---------- ---------
Total Asia/Pacific....... 77,269 (79,746) (33,380) 59,710 123,029 253,950 (71,534)
-------- --------- -------- -------- -------- ---------- ---------
Latin America:
Chile...................... -- -- -- 84,975 -- 84,975 --
Other...................... 4,512 (1,637) (10,264) 23,957 11,715 73,048 (3,238)
-------- --------- -------- -------- -------- ---------- ---------
Total Latin America...... 4,512 (1,637) (10,264) 108,932 11,715 158,023 (3,238)
-------- --------- -------- -------- -------- ---------- ---------
Corporate & Other............ -- (1,112) (2,907) -- 10,269 42,726 (738)
-------- --------- -------- -------- -------- ---------- ---------
Total Company............ $254,068 $(159,045) $ (3,943) $429,490 $464,059 $1,542,095 $(217,057)
======== ========= ======== ======== ======== ========== =========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended February 28, 1998 As of February 28, 1998
------------------------------------------ --------------------------------------------------------
Depreciation Investments Property,
& Adjusted in Plant and Total Capital
Revenue Amortization EBITDA(1) Affiliates Equipment Assets Expenditures
------- ------------ -------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Europe:
The Netherlands............ $ -- $ -- $ -- $109,090 $ 20,773 $ 308,907 $ --
Austria.................... -- -- -- -- 115,786 323,298 --
Belgium.................... -- -- -- -- 24,526 49,204 --
Norway..................... -- -- -- -- 51,369 215,517 --
Other...................... 9,996 (6,343) (9,204) 96,304 27,636 54,572 (6,423)
------- -------- -------- -------- -------- ---------- ---------
Total Europe............. 9,996 (6,343) (9,204) 205,394 240,090 951,498 (6,423)
------- -------- -------- -------- -------- ---------- ---------
Asia/Pacific:
Australia.................. 64,370 (77,557) (24,082) -- 147,871 202,325 (84,375)
New Zealand................ 473 (2,033) (6,688) -- 26,484 43,349 (16,258)
Other...................... 4,118 (1,212) (7,192) 14,556 8,746 48,871 (502)
------- -------- -------- -------- -------- ---------- ---------
Total Asia/Pacific....... 68,961 (80,802) (37,962) 14,556 183,101 294,545 (101,135)
------- -------- -------- -------- -------- ---------- ---------
Latin America:
Argentina.................. 17,627 (3,296) 2,836 -- -- -- (1,329)
Chile...................... -- -- -- 78,165 -- 78,165 --
Other...................... 1,617 (207) (11,114) 43,137 6,541 69,102 (3,112)
------- -------- -------- -------- -------- ---------- ---------
Total Latin America...... 19,244 (3,503) (8,278) 121,302 6,541 147,267 (4,441)
------- -------- -------- -------- -------- ---------- ---------
Corporate & Other............ 421 (1,008) (2,921) -- 11,003 286,525 (3,034)
------- -------- -------- -------- -------- ---------- ---------
Total Company............ $98,622 $(91,656) $(58,365) $341,252 $440,735 $1,679,835 $(115,033)
======= ======== ======== ======== ======== ========== =========
</TABLE>
106
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
For the Year Ended February 28, 1997
---------------------------------------
Depreciation
& Adjusted
Revenue Amortization EBITDA(1)
------- ------------ ----------
Europe - Other............... $ -- $ (80) $ (7,893)
------- -------- --------
Asia/Pacific:
Australia.................. 21,354 (34,087) (25,471)
Tahiti..................... 3,513 (1,382) (816)
Other...................... 145 (800) (7,935)
------- -------- --------
Total Asia/Pacific....... 25,012 (36,269) (34,222)
------- -------- --------
Latin America:
Argentina.................. 4,385 (1,597) (185)
Other...................... 1,409 (192) (3,132)
------- -------- --------
Total Latin America 5,794 (1,789) (3,317)
------- -------- --------
Corporate & Other............ 749 (823) (3,284)
------- -------- --------
Total Company............ $31,555 $(38,961) $(48,716)
======= ======== ========
(1) "Adjusted EBITDA" represents earnings before net interest expense, income
tax expense, depreciation and 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. Management believes Adjusted EBITDA helps
investors to assess the cash flow from operations from period to period and
thus to value the Company's 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 Adjusted
EBITDA. 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 presentation 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.
Adjusted EBITDA reconciles to the consolidated statement of operations as
follows:
<TABLE>
<CAPTION>
For the Ten For the Years Ended
Months Ended February 28,
December 31, -------------------------
1998 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
Net operating loss..................... $(327,781) $(150,021) $(87,677)
Depreciation and amortization.......... 159,045 91,656 38,961
Stock-based compensation expense....... 164,793 -- --
--------- --------- --------
Consolidated Adjusted EBIDTA...... $ (3,943) $ (58,365) $(48,716)
========= ========= ========
</TABLE>
107
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
17. RELATED PARTY TRANSACTIONS
LOANS TO EMPLOYEES
In 1996, UPC loaned certain employees of UPC 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 UPC is
presented in the consolidated financial statements net of UPC's obligation to
the employees under the plan. As of December 31, 1998 and 1997, the receivable
from employees, including accrued interest totaled NLG19,177 ($10,147) and
NLG18,561 ($9,189), respectively.
ACQUISITIONS OF INTEREST IN PRINCES HOLDINGS 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 of UPC, a 5.0% interest in Tara and a 5.0% interest in
Princes Holdings. The price for these interests was 384,531 shares of UIH Class
A Common Stock that UPC acquired as part of the UPC Transaction.
18. SUBSEQUENT EVENTS
UPC INITIAL PUBLIC OFFERING
During February 1999, UPC successfully completed an initial public offering
selling 44,600,000 shares on the Amsterdam Stock Exchange and Nasdaq National
Market System and raising gross and net proceeds at NLG 63.91 per share of
approximately NLG2,850,300 ($1,508,100) and NLG2,705,800 ($1,431,600),
respectively. Concurrent with the offering, DIC exercised one of its two option
agreements acquiring 1,558,654 shares for $45,000. Proceeds from the sale of the
shares to DIC were used to repay $45,000 of the DIC Loan and related interest.
Also concurrent with the offering, proceeds were used to reduce the Senior
Revolving Credit Facility totaling NLG635,800 ($336,400), including accrued
interest of NLG15,800 ($8,400), repay in its entirety the Bridge Bank Facility
totaling NLG110,000 ($58,200), net of the interest reserve account, and acquire
NUON's 49.0% interest in UTH. Based on the carrying value of the Company's
investment in UPC as of December 31, 1998, UIH would have recognized a gain of
approximately $825,000 from the resulting step-up in the carrying amount of
UIH's investment in UPC, in accordance with SAB 51. The final gain will be based
on the Company's investment in UPC as of the date of the initial public
offering. No deferred taxes will be recorded related to this gain due to the
Company's intent on holding its investment in UPC indefinitely. UPC's offering
reduced the Company's ownership interest from 100% to approximately 64.3%.
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, UPC agreed to grant Microsoft warrants to
purchase up to 3,800,000 of its shares or ADSs at Microsoft's option, at an
exercise price of $28.00. Half of these warrants will be issued at the earlier
of April 25, 1999 or the signing of the first definitive agreement. These
warrants will be 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
expects to record as contract acquisition rights approximately NLG64,400
($34,100) associated with the first half of the warrants. Such costs are
expected to be amortized on a straight-line basis over the expected contract
life, which is yet to be 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. These
warrants will be recorded as such at fair value when it is probable the
performance criteria will be met in accordance with EITF Issue No. 96-18.
DIC LOAN
In connection with the loan from DIC, UPC granted DIC, its partner in the
Israeli system, an option to acquire $90,000, plus accrued interest, of ordinary
shares of UPC at a price equal to 90.0% of the initial public offering price.
108
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
Subsequent to December 31, 1998, UPC negotiated an amendment to this option,
resulting in an option to acquire $45,000, plus accrued interest, of ordinary
shares at a price equal to 90.0% of the initial public offering price, and, if
this option is exercised, another option to acquire $45,000, plus accrued
interest, of ordinary shares at a price equal to the 30 day average closing
price of UPC's shares on the Amsterdam Stock Exchange immediately prior to the
second option exercise, or the initial public offering price, whichever is
higher. At the IPO, DIC exercised the first option and thus acquired 1,558,654
ordinary shares of UPC. The other option is exercisable until September 30,
2000.
ACQUISITION OF BRATISLAVA CABLE TV SYSTEM
In March 1999, UPC reached final agreement with Siemens Austria ("Siemens") to
purchase Siemens' 95.63% interest in SKT s.r.o., the company that owns and
operates the cable TV system in Bratislava, Slovak Republic. The completion of
the purchase is subject to obtaining the approval of regulatory authorities. The
purchase price for the 95.63% interest is approximately NLG77,500 ($41,000).
AGREEMENT FOR THE PURCHASE OF TIME WARNER CABLE FRANCE
In March 1999, UPC and TWE reached a definitive agreement for the purchase by
UPC of 100% of Time Warner Cable France, a company which controls and operates
three cable TV systems in the suburbs of Paris and Lyon and the city of Limoges.
Completion of the purchase, which is subject to regulatory approval, is expected
to take place in the third quarter of 1999.
VTRH ACQUISITION
On April 29, 1999, an indirect wholly owned subsidiary of the Company acquired a
60.0% interest in VTRH (the "VTRH Acquisition"). This acquisition, combined with
the 40.0% interest in VTRH that is owned by another indirect wholly owned
subsidiary of the Company, gives the Company an indirect 100% interest in VTRH.
The purchase price for the 60.0% interest in VTRH was approximately $258,000 in
cash, which included repayment of advances from the other shareholders of VTRH
and certain other expenses. In addition, the Company provided capital for VTRH
to prepay approximately $126,000 of existing bank indebtedness and a promissory
note from the Company to one of the other shareholders of VTRH.
To finance the prepayment of VTRH's indebtedness and a portion of the purchase
price for the VTRH Acquisition, The Company concurrently sold in a private
transaction $208,900 of 10.875% Senior Discount Notes due 2009 (the "1999
Notes"). The remaining portion of the VTRH Acquisition was funded with cash on
hand and approximately $145,000 borrowed under a Senior Secured Credit Facility
between VTRH and a syndicate of banks (the "VTRH Bank Facility").
The VTRH Bank Facility consists of two tranches - Tranche A, which is a single
term loan facility with an aggregate principal amount of $140,000, substantially
all of which was borrowed for the VTRH Acquisition, and Tranche B, which is a
three-year term loan facility, with an aggregate principal amount of up to
$80,000. Both tranches have been guaranteed by VTRH and its subsidiaries. The
banks are in the process of syndicating the final approximately $50,000 of the
VTRH Bank Facility. The Company has agreed to participate in the syndication as
necessary.
The 1999 Notes have essentially the same terms as the 1998 Notes, except for the
maturity and coupon rate and that the 1999 Notes are not secured.
109
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The information required by this item appears in the Company's Proxy Statement
for the 1999 Annual Meeting to be filed within 30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
- ---------------------------------
The information required by this item appears in the Company's Proxy Statement
for the 1999 Annual Meeting to be filed within 30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------
The information required by this item appears in the Company's Proxy Statement
for the 1999 Annual Meeting to be filed within 30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ---------------------------------------------------------
The information required by this item appears in the Company's Proxy Statement
for the 1999 Annual Meeting to be filed within 30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.
110
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a) INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
UNITED INTERNATIONAL HOLDINGS, INC.
Report of Independent Public Accountants................................................................... 60
Consolidated Balance Sheets as of December 31, 1998 and February 28, 1998.................................. 61
Consolidated Statements of Operations for the Ten Months Ended December 31, 1998,
the Years Ended February 28, 1998 and February 28, 1997.................................................. 62
Consolidated Statements of Stockholders' (Deficit) Equity for the Ten Months Ended December 31, 1998,
the Years Ended February 28, 1998 and February 28, 1997.................................................. 63
Consolidated Statements of Cash Flows for the Ten Months Ended December 31, 1998,
the Years Ended February 28, 1998 and February 28, 1997.................................................. 67
Notes to Consolidated Financial Statements................................................................. 70
UNITED INTERNATIONAL HOLDINGS, INC. (Parent only)
Report of Independent Public Accountants on Schedule....................................................... 116
Schedule I Condensed Financial Information of Registrant (Parent only)..................................... 117
Schedule I Condensed Information as to the Operations of the Registrant (Parent only)...................... 118
Schedule I Condensed Information as to the Cash Flows of the Registrant (Parent only)...................... 119
UNITED INTERNATIONAL PROPERTIES, INC.
Report of Independent Public Accountants................................................................... 120
Consolidated Balance Sheets as of December 31, 1998 and February 28, 1998.................................. 122
Consolidated Statements of Operations for the Ten Months Ended December 31, 1998,
the Years Ended February 28, 1998 and February 28, 1997.................................................. 123
Consolidated Statements of Stockholder's (Deficit) Equity for the Ten Months Ended December 31, 1998,
the Years Ended February 28, 1998 and February 28, 1997.................................................. 124
Consolidated Statements of Cash Flows for the Ten Months Ended December 31, 1998,
the Years Ended February 28, 1998 and February 28, 1997.................................................. 125
Notes to Consolidated Financial Statements................................................................. 127
UIH EUROPE, INC.
Report of Independent Public Accountants................................................................... 150
Consolidated Balance Sheets as of December 31, 1998 and February 28, 1998.................................. 151
Consolidated Statements of Operations for the Ten Months Ended December 31, 1998,
the Years Ended February 28, 1998 and February 28, 1997.................................................. 152
Consolidated Statements of Stockholder's (Deficit) Equity for the Ten Months Ended December 31, 1998,
the Years Ended February 28, 1998 and February 28, 1997.................................................. 153
Consolidated Statements of Cash Flows for the Ten Months Ended December 31, 1998,
the Years Ended February 28, 1998 and February 28, 1997.................................................. 154
Notes to Consolidated Financial Statements................................................................. 156
UNITED TELEKABEL HOLDING N.V.
Independent Auditors' Report .............................................................................. 178
Consolidated Balance Sheet as of December 31, 1998 ........................................................ 179
Consolidated Statement of Operations from August 6, 1998 (commencement of operations)
until December 31, 1998.................................................................................. 180
Consolidated Statement of Cash Flows from August 6, 1998 (commencement of operations)
until December 31, 1998.................................................................................. 181
Notes to Consolidated Financial Statements................................................................. 182
</TABLE>
111
<PAGE>
(b) REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Date of Report Item Reported Financial Statements Filed
- -------------- ------------- --------------------------
<S> <C> <C>
December 11, 1998 Item 2 - Purchase of Philips Item 7 - Financial statements of United and Philips
Electronics NV's interest in UPC Communications B.V. and pro forma financial
information
</TABLE>
(c) EXHIBITS
3.1 Second Restated Certificate of Incorporation of United
International Holdings, Inc. (the "Company") filed June 4,
1993.(1)
3.2 Certificate of Amendment to the Certificate of Incorporation
dated February 7, 1994.(2)
3.3 Certificate of Designations with respect to Convertible Preferred
Stock, Series A of the Company.(3)
3.4 Certificate of Designation with respect to Convertible Preferred
Stock, Series B of the Company.(4)
3.5 Restated Bylaws of the Company amended and restated as of May 25,
1993.(1)
4.1 Specimen of Class A Common Stock certificate of the Company.(1)
4.2 The Second Restated Certificate of Incorporation, as amended, and
Restated Bylaws of the Company are included as Exhibits 3.1-3.5.
4.3 Indenture dated as of November 23, 1994, between the Company and
Firstar Bank of Minnesota, N.A., as successor in interest to
American Bank National Association ("Trustee") as Trustee (the
"1994 Indenture").(5)
4.4 Indenture dated as of November 22, 1995, between the Company and
Trustee (the "1995 Indenture").(6)
4.5 Supplemental Indenture dated as of November 15, 1995, between the
Company and Trustee as implementing certain amendments to the
1994 Indenture to permit additional incurrence of
indebtedness.(6)
4.6 Supplemental Indenture dated as of November 15, 1995, between the
Company and Trustee as regarding the definition of "accreted
value" in the 1994 Indenture.(6)
4.7 Supplemental Indenture dated as of February 5, 1998, between the
Company and Trustee with respect to the 1994 Indenture.(7)
4.8 Supplemental Indenture dated as of February 5, 1998, between the
Company and Trustee with respect to the 1995 Indenture.(7)
4.9 Warrant Agreement dated as of November 23, 1994, between the
Company and Trustee, as Warrant Agent.(5)
4.10 Amendment No. 1 to Warrant Agreement dated as of November 14,
1995, between the Company and Trustee, as Warrant Agent.(6)
4.11 Indenture dated as of February 27, 1996, between the Company and
Trustee.(8)
4.12 Indenture dated as of February 5, 1998, between the Company and
Trustee.(9)
4.13 Indenture dated as of April 29, 1999 between the Company and
Trustee.(10)
10.1 Stockholders' Agreement dated as of April 13, 1993, among the
Company, United International Holdings (the "Partnership"),
certain partners of the Partnership and Apollo Cable Partners
L.P. ("Apollo").(11)
10.2 Standstill Agreement dated as of April 13, 1993, between the
Company and Apollo.(11)
112
<PAGE>
10.3 Letter Agreement dated April 15, 1993, between the Company and
Apollo.(11)
10.4 Registration Rights Agreement dated as of April 13, 1993, between
the Company and Apollo.(11)
10.5 UIH Registration Rights Agreement dated as of April 13, 1993,
between the Company and the Partnership.(1)
10.6 *1993 Stock Option Plan of the Company.(1)
10.7 *Stock Option Plan for Non-Employee Directors.(12)
10.8 Form of Indemnification Agreement between the Company and its
directors.(1)
10.9 Amended and Restated Pledge Agreement dated as of November 22,
1995, by the Company in favor of Morgan Stanley & Co. (the
"Collateral Agent"), as Collateral Agent (the "1995 Pledge
Agreement").(13)
10.10 First Amendment to 1995 Pledge Agreement dated as of February 5,
1998, between the Company and the Collateral Agent.(7)
10.11 Pledge Agreement dated as of February 5, 1998, between the
Company and the Collateral Agent.(7)
10.12 Indenture dated as of May 14, 1996, between UIH
Australia/Pacific, Inc. ("UIH A/P") and Trustee.(14)
10.13 Indenture dated as of September 23, 1997, between UIH A/P and
Trustee.(15)
10.14 Loan Agreement for NLG1,100,000,000 multi-currency Revolving
Credit Facility dated as of October 8, 1997, between UPC and
certain of its subsidiaries and The Toronto-Dominion Bank as
Agent for the financial institutions identified therein, as
amended by a Supplement Agreement dated December 8, 1997.(16)
10.15 Supplemental Agreement dated January 25, 1999, relating to Loan
Agreement for a NLG1,100,000,000 Multi-currency Revolving Credit
Facility between UPC and certain of its subsidiaries and The
Toronto-Dominion Bank.(17)
10.16 Loan Agreement for Facilities up to euro340,000,000 dated as of
March 10, 1999, among N.V. Telekabel as borrower, and the
guarantors and banks named therein.
10.17 A$400,000,000 Syndicated Senior Secured Debt Facility Agreement
dated April 23, 1999, among Austar Entertainment Pty Limited,
Chase Securities Australia Limited, the Guarantors named herein
and the financial institutions named herein.
10.18 Credit Agreement dated as of April 28, 1999, among UIH Chile
Holding S.A., the subsidiary guarantors named therein, Toronto
Dominion (Texas), Inc., TD Securities (USA), Inc. and Citibank,
N.A.(10)
10.19 Amended and Restated Securities Purchase and Conversion Agreement
dated as of December 1, 1997, by and among Philip Media B.V.,
Philips Media Network B.V., the Company, Joint Venture, Inc. and
United and Philips Communications B.V.(13)
10.20 Stock Purchase Agreement, dated as of October 17, 1997, by and
among Multicanal S.A., as Buyer, and United International
Holdings Argentina, S.A. and UIH Argentina, Inc., as Sellers,
relating to the sale of the companies operating in Bahia
Blanca.(17)
10.21 Stock Purchase Agreement, dated as of October 20, 1997, by and
among Supercanal Holding S.A., as Buyer, and United International
Holdings Argentina, S.A. and UIH Argentina, Inc., as Sellers,
relating to the sale of the companies operating in Comodoro
Rivadavia and Trelew.(17)
10.22 Stock Purchase Agreement, dated as of October 20, 1997, by and
among Supercanal Holding S.A., as Buyer, and UIH Argentina, Inc.
and CV American Holdings L.L.C., as Sellers, relating to the sale
of the companies operating in Santa Fe and Entre Rios.(17)
113
<PAGE>
10.23 Assignment and Amendment Agreement, dated as of October 29, 1997,
by and among Supercanal Holding S.A., as Assignor, Multicanal
S.A. and Cablevision S.A., as Assignees, and UIH Argentina, Inc.
and CV American Holdings L.L.C., as Sellers. This agreement was
signed, and the transactions contemplated thereby were closed, on
October 29, 1997.(17)
10.24 Promise Agreement entered into as of October 15, 1998, among UIH
Latin America, Inc., VTR S.A. and Compania Nacional de Telefonos,
Telefonica del Sur S.A.(10)
10.25 Share Purchase Agreement dated as of January 19, 1999, among UPC,
Belmarken Holding, B.V., UPC Intermediates B.V., N.V. Nuon
Energie-Onderneming voor Gelderland, Friesland en Flevoland,
N.V. Kraton, and UTH, as amended by letter agreements dated
January 19 and 25, 1999.(19)
10.26 Final Amendment to the Share Purchase Agreement dated as of
February 17, 1999.(20)
12.1 Statement re: Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries and Restricted Affiliates of the Company.
21.2 Unrestricted Subsidiaries of the Company.
23.1 Consent of Independent Public Accountants--Arthur Andersen LLP
(United International Holdings, Inc.).
23.2 Consent of Independent Public Accountants--Arthur Andersen LLP
(United International Properties, Inc.).
23.3 Consent of Independent Public Accountants--Arthur Andersen LLP
(UIH Europe, Inc.).
23.4 Consent of Independent Public Accountants--Arthur Andersen & Co.
(United Telekabel Holding N.V.).
23.5 Consent of Independent Auditors--Galaz, Gomez Morfin, Chavero,
Yamazaki, S.C. (Megapo Comunicaciones de Mexico, S.A. de C.V.).
24.1 Power of Attorney.
27.1 Financial Data Schedule.
* Management compensation plan.
(1) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-1 (File No. 33-61376) filed with the
Commission on June 23, 1993.
(2) Incorporated by reference from Form 10-K for the year ended February
28, 1994 (File No. 0-21974).
(3) Incorporated by reference from Form 8-K dated December 21, 1995 (File
No. 0-21974).
(4) Incorporated by reference from Form 8-K dated July 9, 1998 (File No.
0-21974).
(5) Incorporated by reference from Form 10-K for the year ended February
28, 1995 (File No. 0-21974).
(6) Incorporated by reference from the November 30, 1995, Form 10-Q/A
dated January 26, 1996 (File No. 0-21974).
(7) Incorporated by reference from Form 8-K dated February 5, 1998 (File
No. 0-21974).
(8) Incorporated by reference from the Company's Registration Statement on
Form S-3 (File No. 333-00208) filed with the Commission on January 9,
1996.
(9) Incorporated by reference from the Company's Registration Statement on
Form S-4 (File No. 333-47245) filed with the Commission on March 3,
1998.
(10) Incorporated by reference from Form 8-K dated April 29, 1999 (File No.
0-21974).
(11) Incorporated by reference from the Company's Registration Statement on
Form S-1 (File No. 33-61376) filed with the Commission on April 21,
1993.
(12) Incorporated by reference from Amendment No. 2 to the Company's
Registration Statement on Form S-1 (File No. 33-61376) filed with the
Commission on July 19, 1993.
(13) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-3 (File No. 33-97974) filed with the
Commission on October 25, 1995.
(14) Incorporated by reference from Form 10-K for the year ended February
29, 1996 (File No. 0-21974).
114
<PAGE>
(15) Incorporated by reference from UIH A/P's Registration Statement on
Form S-4 filed on November 6, 1997 (File No. 333-39707).
(16) Incorporated by reference from Form 8-K dated December 11, 1997 (File
No. 0-21974).
(17) Incorporated by reference from Amendment No. 8 to UPC's Registration
Statement on Form S-1 filed on February 10, 1999 (File No. 333-67895).
(18) Incorporated by reference from Form 8-K dated October 17, 1997 (File
No. 0-21974).
(19) Incorporated by reference from Amendment No. 6 to UPC's Registration
Statement on Form S-1 dated February 4, 1999 (Registration No.
333-67895).
(20) Incorporated by reference from Form 8-K dated February 17, 1999 (File
No. 0-21974).
(d) SEE INDEX TO FINANCIAL STATEMENTS IN (a) ABOVE.
115
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To United International Holdings, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of United International Holdings, Inc.
included in this Form 10-K and have issued our report thereon dated April 30,
1999. Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The following schedule is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has 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,
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 LLP
Denver, Colorado
April 30, 1999
116
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
PARENT ONLY
SCHEDULE I
Condensed Financial Information of Registrant
(Stated in thousands)
As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................................................... $ 7,553 $ 236,511
Restricted cash......................................................................................... 450 835
Short-term liquid investments........................................................................... 38,367 21,406
Management fee receivables from related parties......................................................... -- 1,242
Notes receivable........................................................................................ -- 381
Costs to be reimbursed by affiliated companies, net..................................................... 17,430 13,223
Other receivables...................................................................................... 772 --
Other current assets, net............................................................................... 1,849 286
---------- ---------
Total current assets.............................................................................. 66,421 273,884
Notes receivable, including accrued interest from wholly-owned subsidiaries............................... 200,005 38,993
Investments in and advances to affiliated companies, accounted for under the equity method, net........... -- 123,193
Property, plant and equipment, net of accumulated depreciation of $917 and $917, respectively............. 2,325 2,599
Deferred financing costs, net of accumulated amortization of $1,772 and $139, respectively................ 18,133 19,356
Non-current restricted cash and other assets, net......................................................... 74 2,610
---------- ---------
Total assets...................................................................................... $ 286,958 $ 460,635
========== =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable, including related party payables of $0 and $86, respectively.......................... $ 264 $ 663
Accrued liabilities..................................................................................... 1,817 1,416
Losses recognized in excess of investment in unconsolidated subsidiaries................................ 319,253 --
---------- ---------
Total current liabilities......................................................................... 321,334 2,079
Senior discount notes..................................................................................... 893,003 818,272
---------- ---------
Total liabilities................................................................................. 1,214,337 820,351
---------- ---------
Preferred stock, $0.01 par value, 3,000,000 shares authorized, stated at liquidation value:
Series A Convertible Preferred Stock, 132,144 and 170,513 shares issued and outstanding, respectively... 26,086 32,564
---------- ---------
Series B Convertible Preferred Stock, 139,031 and 0 shares issued and outstanding, respectively......... 30,200 --
---------- ---------
Stockholders' deficit:
Class A Common Stock, $0.01 par value, 60,000,000 shares authorized, 30,674,995
and 26,381,093 shares issued and outstanding, respectively............................................ 307 264
Class B Common Stock, $0.01 par value, 30,000,000 shares authorized 9,915,880 and 12,863,323 shares
issued and outstanding, respectively.................................................................. 99 128
Additional paid-in capital.............................................................................. 378,597 352,253
Deferred compensation................................................................................... (679) (42)
Treasury stock, at cost, 2,784,620 and 3,169,151 shares of Class A Common Stock, respectively........... (29,061) (33,074)
Accumulated deficit..................................................................................... (1,241,986) (646,085)
Other cumulative comprehensive loss..................................................................... (90,942) (65,724)
---------- ---------
Total stockholders' deficit....................................................................... (983,665) (392,280)
---------- ---------
Total liabilities and stockholders' deficit....................................................... $ 286,958 $ 460,635
========== =========
</TABLE>
117
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
PARENT ONLY
SCHEDULE I
Condensed Information as to the Operations of Registrant
(Stated in thousands)
For the Ten For the Years Ended
Months Ended February 28,
December 31, ----------------------------
1998 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Management fee income from related parties.............. $ -- $ 452 $ 801
Corporate general and administrative expense............ (1,698) (983) (1,069)
Depreciation and amortization........................... (278) (366) (395)
--------- --------- ---------
Net operating loss.............................. (1,976) (897) (663)
Interest income......................................... 5,051 5,006 6,652
Interest expense........................................ (76,364) (6,228) (27)
Interest income, related parties, net................... 13,558 7,443 5,227
Provision for losses on investment related costs........ 255 (451) (35)
Other income (expense), net............................. 13 (202) 894
--------- --------- ---------
Net (loss) income before other items............ (59,463) 4,671 12,048
Share in results of affiliated companies, net........... (486,069) (347,203) (150,873)
--------- --------- ---------
Net loss........................................ $(545,532) $(342,532) $(138,825)
========= ========= =========
</TABLE>
118
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
PARENT ONLY
SCHEDULE I
Condensed Information as to Cash Flows of Registrant
(Stated in thousands)
For the Ten For the Years Ended
Months Ended February 28,
December 31, ----------------------------
1998 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................................................. $(545,532) $(342,532) $(138,825)
Adjustments to reconcile net loss to net cash flows from operating activities:
Share in results of affiliated companies, net....................................... 486,069 347,203 150,873
Depreciation and amortization....................................................... 279 366 395
Accretion of interest on senior notes and amortization of deferred financing costs.. 76,365 6,212 --
Provision for losses on marketable equity securities and investment related costs... -- 451 35
(Increase) decrease in other assets................................................. (8,813) (157) 2,238
(Decrease) increase in accounts payable, accrued liabilities and other.............. (11,524) (2,582) 1,506
--------- --------- ---------
Net cash flows from operating activities.............................................. (3,156) 8,961 16,222
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments............................................. (145,678) (77,668) (160,290)
Proceeds from sale of short-term liquid investments................................... 128,717 107,982 144,262
Restricted cash and short-term investments released................................... 385 765 2,653
Payoff of debt recorded as subsidiary level by parent - recorded as deemed
capital contribution to subsidiary................................................... -- (531,800) --
Investments in and advances to affiliated companies and other investments............. (69,412) (192,565) (18,041)
Increase in notes receivable from affiliates.......................................... (147,333) -- (37,500)
Payments on note receivable from affiliates........................................... -- 37,500 --
Capital expenditures.................................................................. (56) (1,841) (479)
Distribution received from affiliated company......................................... -- 123,230 --
Acquisition, transaction and development costs and other.............................. (4,207) (2,676) 5,560
--------- --------- ---------
Net cash flows from investing activities.......................................... (237,584) (537,073) (63,835)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from offering of senior discount notes....................................... -- 812,200 --
Deferred financing costs.............................................................. (409) (19,495) --
Issuance of common stock in connection with public offerings, net of financing costs.. 7,402 -- --
Issuance of common stock in connection with Company's stock option plan............... 4,789 796 349
Cash paid for warrants................................................................ -- -- (2,156)
Payments made on payable to affiliate, net............................................ -- (76,782) 7,729
--------- --------- ---------
Net cash flows from financing activities.......................................... 11,782 716,719 5,922
--------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...................................... (228,958) 188,607 (41,691)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................ 236,511 47,904 89,595
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................................. $ 7,553 $ 236,511 $ 47,904
========= ========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of preferred stock utilized in purchase of Australian investments.......... $ 29,544 $ -- $ --
========= ========= =========
Non-cash issuance of warrants by subsidiary to purchase subsidiary stock............ $ -- $ 3,678 $ --
========= ========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash received for interest.......................................................... $ 5,003 $ 5,318 $ 6,964
========= ========= =========
</TABLE>
119
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To United International Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of United
International Properties, Inc. (a Colorado corporation) and subsidiaries as of
December 31, 1998 and February 28, 1998, and the related consolidated statements
of operations, parent's deficit and cash flows for the ten months ended December
31, 1998 (see Note 2) and for the years ended February 28, 1998 and February 28,
1997. 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 audits. With respect to the year ended February 28,
1998, we did not audit the financial statements of Tele Cable de Morelos S.A. de
C.V. and related companies ("Megapo") as of and for the year ended December 31,
1997, an investment which is reflected in the accompanying financial statements
using the equity method of accounting. Those financial statements were audited
by other auditors whose report has been furnished to us and our opinion, insofar
as it relates to the amounts included for Megapo in the accompanying
consolidated financial statements and related footnotes is based solely on the
report of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits, and the report of other auditors, provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of United International Properties, Inc. and subsidiaries
as of December 31, 1998 and February 28, 1998 and the results of their
operations and their cash flows for the ten months ended December 31, 1998 and
the years ended February 28, 1998 and February 28, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
April 30, 1999
120
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of:
Tele Cable de Morelos, S.A. de C.V.
Tele Cable Mexicano, S.A. de C.V.
Vision por Cable de Oaxaca, S.A. de C.V.
Telecable de Chilpancingo, S.A. de C.V.
Mega Com-M Servicios, S.A. de C.V.
Grupo Telecable Mexicano, S.A. de C.V.
Cuernamu, S.A. de C.V.
We have audited the accompanying balance sheets of Tele Cable de Morelos, S.A.
de C.V. and related companies, (all of which are subsidiaries of Megapo
Comunicaciones de Mexico, S.A. de C.V.) as of December 31, 1996 and 1997, and
the related statements of operations, changes in stockholders' equity and
changes in financial position for the years then ended, all expressed in Mexican
pesos. The combined financial statements include the accounts of Tele Cable de
Morelos, S.A. de C.V., Tele Cable Mexicano, S.A. de C.V., Vision por Cable de
Oaxaca, S.A. de C.V., Tele Cable de Chilpancingo, S.A. de C.V., Mega Com-M
Servicios, S.A. de C.V., Grupo Telecable Mexicano, S.A. de C.V. and Cuernamu,
S.A. de C.V. The financial statements of these companies are under the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Mexico, which are substantially the same as those followed 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 and that they are prepared in accordance with accounting
principles generally accepted in Mexico. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As mentioned in note 2 to the financial statements, as of January 1, 1997, the
Company applied provisions of the Fifth Document of Amendments to Bulletin B-10
(Modified) issued by the Mexican Institute of Public Accountants. As a result,
the Company changed the method from specific cost applied up to December 31,
1996, to restate the value of property and equipment and its depreciation to
that of adjustments due to changes in general price levels. The effect of this
change was not measured.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Tele Cable de Morelos, S.A. de C.V. and
related companies as of December 31, 1996 and 1997, and the results of their
operations, changes in their stockholders' equity and changes in their financial
position for the years then ended in conformity with accounting principles
generally accepted in Mexico.
Galaz, Gomez Morfin, Chavero, Yamazaki, S.C.
Raymundo Diaz Gonzalez
Acapulco, Mexico
March 6, 1998
121
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................................................. $ 12,409 $ 22,764
Restricted cash....................................................................................... 753 9,115
Short-term liquid investments......................................................................... 3,131 12,325
Subscriber receivables, net of allowance for doubtful accounts of $634 and $0, respectively........... 6,970 2,648
Costs to be reimbursed by affiliated companies, net................................................... 280 211
Other related party receivables....................................................................... 2,064 3,608
Other receivables..................................................................................... 933 2,194
Other current assets, net............................................................................. 6,231 4,899
-------- --------
Total current assets............................................................................ 32,771 57,764
Investments in and advances to affiliated companies, accounted for under the equity method, net......... 175,281 149,218
Property, plant and equipment, net of accumulated depreciation of $153,860 and $80,103, respectively.... 142,688 198,684
Goodwill and other intangible assets, net of accumulated amortization of $18,989 and $12,121,
respectively.......................................................................................... 65,130 50,029
Deferred financing costs, net of accumulated amortization of $3,237 and $1,386, respectively............ 11,675 13,734
Non-current restricted cash and other assets, net....................................................... 4,610 5,000
-------- --------
Total assets.................................................................................... $432,155 $474,429
======== ========
LIABILITIES AND PARENT'S DEFICIT
Current liabilities
Accounts payable, including related party payables of $2,291 and $1,810, respectively................. $ 11,679 $ 14,761
Accrued liabilities................................................................................... 34,165 27,812
Short-term debt....................................................................................... 59,875 --
Current portion of senior discount notes.............................................................. 412 --
Current portion of other long-term debt............................................................... 2,189 36,682
Other current liabilities............................................................................. 3,524 743
-------- --------
Total current liabilities....................................................................... 111,844 79,998
Notes payable to parent................................................................................. 107,396 38,993
Senior discount notes................................................................................... 356,640 309,491
Other long-term debt.................................................................................... 68,086 77,969
Other long-term liabilities, including due to parent of $575 and $3,238, respectively................... 3,016 4,665
-------- --------
Total liabilities............................................................................... 646,982 511,116
-------- --------
Minority interests in subsidiaries...................................................................... 4,983 11,830
-------- --------
Parent's deficit:
Common Stock, $0.01 par value, 1,000 shares authorized, 100 and 100 shares issued and
outstanding, respectively, (pledged as collateral under parent's senior discount notes)............. -- --
Additional paid-in capital............................................................................ 615,712 509,959
Accumulated deficit................................................................................... (770,620) (514,990)
Other cumulative comprehensive loss................................................................... (64,902) (43,486)
-------- --------
Total parent's deficit.......................................................................... (219,810) (48,517)
-------- --------
Commitments and Contingencies (Notes 13 and 14)
Total liabilities and parent's deficit.......................................................... $432,155 $474,429
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
122
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands)
For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------
1998 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Revenue............................................................................. $ 81,781 $ 88,644 $ 30,771
System operating expense............................................................ (65,688) (62,886) (26,799)
System selling, general and administrative expense.................................. (48,825) (59,385) (33,655)
Corporate general and administrative expense........................................ (14,790) (20,250) (16,258)
Depreciation and amortization....................................................... (82,217) (85,204) (38,566)
--------- --------- ---------
Net operating loss.......................................................... (129,739) (139,081) (84,507)
Interest income..................................................................... 1,973 2,568 6,480
Interest expense.................................................................... (48,339) (116,015) (79,632)
Interest expense, related party..................................................... (7,536) (7,063) (5,029)
Provision for losses on marketable equity securities and investment related costs... (6,810) (14,342) (5,824)
Gain on sale of investments in affiliated companies................................. -- 90,020 65,249
Other expense, net.................................................................. (3,896) (4,961) (833)
--------- --------- ---------
Net loss before other items................................................. (194,347) (188,874) (104,096)
Share in results of affiliated companies, net....................................... (28,487) (26,771) (23,273)
Minority interests in subsidiaries.................................................. 617 1,685 4,358
--------- --------- ---------
Net loss before extraordinary charge........................................ (222,217) (213,960) (123,011)
Extraordinary charge for early retirement of debt................................... -- (79,091) --
--------- --------- ---------
Net loss ................................................................... $(222,217) $(293,051) $(123,011)
========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
123
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF PARENT'S DEFICIT
(Stated in thousands, except share amounts)
Other
Common Stock Additional Cumulative Total
-------------------- Paid-In Accumulated Comprehensive Comprehensive
Shares Amount Capital Deficit Loss(1) Loss Total
---------- -------- ---------- ----------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, February 29, 1996............. 100 $ -- $ 61,669 $ (98,928) $ (5,484) $ -- $ (42,743)
Gain on sale of stock by subsidiary..... -- -- 5,898 -- -- -- 5,898
Capital distribution to parent.......... -- -- (2,079) -- -- -- (2,079)
Net loss................................ -- -- -- (123,011) -- (123,011) (123,011)
Unrealized loss on investment........... -- -- -- -- (4,880) (4,880) (4,880)
Change in cumulative translation
adjustments............................ -- -- -- -- (1,141) (1,141) (1,141)
--- ---- -------- --------- -------- --------- ---------
Balances, February 28, 1997............. 100 -- 65,488 (221,939) (11,505) $(129,032) (167,956)
=========
Issuance of warrants to purchase
common stock of subsidiary............. -- -- 3,678 -- -- $ -- 3,678
Gain on sale of stock by subsidiary..... -- -- 7,614 -- -- -- 7,614
Payoff of debt recorded at subsidiary
level by parent - recorded as
deemed capital contribution............ -- -- 531,800 -- -- -- 531,800
Capital distribution to parent, net -- -- (98,621) -- -- -- (98,621)
Net loss................................ -- -- -- (293,051) -- (293,051) (293,051)
Change in unrealized gain (loss)
on investments, net.................... -- -- -- -- (1,593) (1,593) (1,593)
Provision for loss on marketable
equity securities...................... -- -- -- -- 8,013 8,013 8,013
Change in cumulative translation
adjustments............................ -- -- -- -- (38,401) (38,401) (38,401)
--- ---- -------- --------- -------- --------- ---------
Balances, February 28, 1998............. 100 -- 509,959 (514,990) (43,486) $(325,032) (48,517)
=========
Cash contributions from parent.......... -- -- 65,982 -- -- $ -- 65,982
Non-cash contributions from parent...... -- -- 39,767 -- -- -- 39,767
Distribution of net investment in
subsidiaries to parent, at cost........ -- -- 4 -- -- -- 4
Elimination of historical two month
reporting difference due to change
in fiscal year end..................... -- -- -- (33,413) -- -- (33,413)
Net loss................................ -- -- -- (222,217) -- (222,217) (222,217)
Change in unrealized gain (loss)
on investment, net..................... -- -- -- -- (505) (505) (505)
Change in cumulative translation
adjustments............................ -- -- -- -- (20,911) (20,911) (20,911)
--- ---- -------- --------- -------- --------- ---------
Balances, December 31, 1998............. 100 $ -- $615,712 $(770,620) $(64,902) $(243,633) $(219,810)
=== ==== ======== ========= ======== ========= =========
(1) Other Cumulative Comprehensive Loss at the end of each reporting period consists of the following:
As of As of February 28, As of
February 29, ---------------------- December 31,
1996 1997 1998 1998
------------ --------- --------- ------------
Foreign currency translation adjustments... $(4,295) $ (5,436) $(43,837) $(64,748)
Unrealized gain (loss) on investments...... (1,189) (6,069) 351 (154)
------- -------- -------- --------
Total.............................. $(5,484) $(11,505) $(43,486) $(64,902)
======= ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
124
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)
For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------
1998 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................. $(222,217) $(293,051) $(123,011)
Elimination of historical two month reporting difference due to change in fiscal year
end..................................................................................... (33,413) -- --
Adjustments to reconcile net loss to net cash flows from operating activities:
Extraordinary charge for early retirement of debt...................................... -- 79,091 --
Share in results of affiliated companies, net.......................................... 34,423 27,860 23,273
Allocation of general, administrative and other expenses accounted for as a net
contribution of capital by parent.................................................... 7,899 15,910 9,091
Gain on sale of investments in affiliated companies, net............................... -- (90,020) (65,249)
Minority interests share of losses..................................................... (617) (1,685) (4,358)
Depreciation and amortization.......................................................... 99,703 85,204 38,566
Accretion of interest on senior notes and amortization of deferred financing costs..... 49,798 104,311 73,695
Compensation expense related to stock options.......................................... 2,669 -- --
Provision for losses on marketable equity securities and investment related costs...... 6,342 14,342 5,824
Increase in receivables, net........................................................... (3,395) (4,128) (991)
(Increase) decrease in other assets................................................... (8,723) 7,471 (8,263)
Increase in accounts payable, accrued liabilities and other............................ 26,969 9,905 25,595
---------- ---------- ---------
Net cash flows from operating activities......................................... (40,562) (44,790) (25,828)
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments................................................ (3,923) (16,988) (199,242)
Proceeds from sale of short-term liquid investments...................................... 13,117 23,303 180,602
Restricted cash released (deposited)..................................................... 7,943 (9,115) 9,820
Investments in and advances to affiliated companies...................................... (38,346) (64,540) (100,247)
Proceeds from sale of investments in affiliated company.................................. -- 211,125 43,098
Capital expenditures..................................................................... (75,454) (106,776) (204,187)
Deconsolidation of New Zealand subsidiary................................................ (9,881) -- --
Proceeds from sale of property, plant and equipment...................................... -- 5,332 --
Distribution received from affiliated company............................................ 223 1,248 --
(Decrease) increase in construction payables............................................. (2,007) (29,621) 38,331
Payments on notes receivable............................................................. 3,370 11,827 45,264
Acquisition, transaction and development costs and other................................. (633) (3,322) (13,057)
---------- ---------- ---------
Net cash flows from investing activities......................................... (105,591) 22,473 (199,618)
---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from offering of senior discount notes.......................................... -- 29,925 225,115
Proceeds from short-term and long-term borrowings........................................ 39,519 233,210 7,263
Deferred financing costs................................................................. (486) (11,373) (10,670)
Repayments of long and short-term borrowings............................................. (30,183) (119,114) (15,463)
Capital contribution from (distribution to) parent....................................... 65,982 (123,230) (11,170)
Payments received on receivable from parent, net......................................... -- 76,782 --
Proceeds from (payment on) note payable to parent........................................ 60,865 (37,500) 39,428
Payment of sellers notes................................................................. -- (46,351) (11,856)
Cash contributed from minority interest partners......................................... -- 22,042 --
---------- ---------- ---------
Net cash flows from financing activities......................................... 135,697 24,391 222,647
---------- ---------- ---------
EFFECT OF EXCHANGE RATES ON CASH......................................................... 101 (190) 1,056
---------- ---------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS......................................... (10,355) 1,884 (1,743)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................... 22,764 20,880 22,623
---------- ---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................................. $ 12,409 $ 22,764 $ 20,880
========== ========== =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
125
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Stated in thousands)
For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------
1998 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Payoff of debt recorded at subsidiary level by parent - recorded as deemed capital
contribution to subsidiary............................................................ $ -- $ 531,800 $ --
========== ========== =========
Issuance of parent company preferred stock utilized in purchase of Australian
investment............................................................................ $ 29,544 $ -- $ --
========== ========== =========
Note issued upon purchase of remaining interest in Brazilian investment................ $ 5,683
========== ========== =========
Seller notes for purchase of Argentine systems......................................... $ -- $ 52,061 $ 33,401
========== ========== =========
Note issued upon sale of investments in Venezuela...................................... $ -- $ 6,500 $ --
========== ========== =========
Note received upon sale of investment in Brazil system................................. $ -- $ -- $ 35,000
========== ========== =========
Non-cash stock issuance for purchase of 50.0% interest in New Zealand affiliate......... $ -- $ -- $ 7,800
========== ========== =========
Conversion of notes receivable to equity investment.................................... $ -- $ 6,908 $ --
========== ========== =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest............................................................... $ 6,223 $ 7,497 $ 870
========== ========== =========
Cash received for interest........................................................... $ 558 $ 2,376 $ 4,936
========== ========== =========
DECONSOLIDATION OF NEW ZEALAND SUBSIDIARY:
Working capital...................................................................... $ 4,159 $ -- $ --
Property, plant and equipment........................................................ (26,484) -- --
Goodwill and other intangible assets................................................. (2,805) -- --
Notes payable and other debt......................................................... 3,833 -- --
Minority interest.................................................................... 11,416 -- --
---------- --------- --------
Total cash relinquished........................................................ $ (9,881) $ -- $ --
========== ========= ========
SALE OF ARGENTINE CABLE SYSTEMS:
Working capital, net of cash relinquished of $2,133.................................. $ -- $ (3,319) $ --
Investments in affiliated companies.................................................. -- 83,535 --
Property, plant and equipment and other long-term assets............................. -- 4,560 --
Goodwill and other intangible assets................................................. -- 60,727 --
Sellers notes (assumed by the buyers)................................................ -- (24,398) --
Gain on sale......................................................................... -- 90,020 --
========== ========== =========
Cash received from sale........................................................ $ -- $ 211,125 $ --
========== ========== =========
ACQUISITION OF BAHIA BLANCA SYSTEM:
Working capital, including cash acquired of $97...................................... $ -- $ -- $ 14,752
Property, plant and equipment and other long-term assets............................. -- -- (4,051)
Goodwill and other intangible assets................................................. -- -- (63,464)
Purchase money notes and other debt.................................................. -- -- 26,381
---------- ---------- ---------
Total cash paid................................................................ $ -- $ -- $ (26,382)
========== ========== =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
126
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in thousands, except share and per share amounts)
1. ORGANIZATION AND NATURE OF OPERATIONS
United International Properties, Inc. ("UIPI" or the "Company"), a wholly-owned
subsidiary of United International Holdings, Inc. ("UIH") was formed on
September 21, 1994 in connection with the transaction contemplated by UIH's
offering of 14% senior discount notes (the "Old Notes").
Under UIH's offering of the Old Notes, UIH contributed to UIPI, UIH's interests
in certain operating properties and early stage projects in Latin America and
Asia/Pacific. UIPI will hold all of UIH's future investments and development
projects in Latin America and Asia/Pacific. The accompanying financial
statements have been prepared on a basis of reorganization accounting as though
UIPI had performed all foreign development activities and made all acquisitions
of the foreign multi-channel television interests in Latin America and
Asia/Pacific since inception. UIPI reflected all of the transfers from UIH as a
capital contribution from parent in the accompanying consolidated financial
statements.
The following chart presents a summary of the Company's significant investments
in multi-channel television and telephony operations as of December 31, 1998.
********************************************************************************
* *
* UIH *
* *
********************************************************************************
*
100% *
********************************************************************************
* *
* UIPI *
* *
********************************************************************************
*
****************************************
98% * * 100%
*************************************** ****************************************
*UIH Asia/Pacific Communications, Inc.* * UIH Latin America, Inc. *
* ("UAP")* * * ("UIH LA") *
*************************************** ****************************************
* *
* *
*************************************** ****************************************
* * * *
*Australia: * *Brazil: *
* CTV Pty Limited and STV Pty * * TV Show Brasil, S.A. *
* Limited (collectively, * * ("TVSB") 100.0% *
* "Austar") 100.0% * * TV Cabo e Comunicacoes *
* United Wireless Pty * * de Jundiai, S.A. *
* Limited ("United * * ("Jundiai") 46.3% *
* Wireless") 100.0% * *Chili: *
* XYZ Entertainment Pty * * VTR Hipercable S.A. *
* Limited ("XYZ * * ("VTRH") 40.0% (3)*
* Entertainment") 50.0% * *Mexico: *
*China: * * Tele Cable de Morelos, S.A. *
* Hunan International TV * * de C.V. ("Megapo") 49.0% *
* Communications Company * *Peru: *
* Limited ("HITV") 49.0% (1)* * Cable Star S.A. ("Cable *
*New Zealand: * * Star") 60.0% *
* Saturn Communications * *Latin American Programming: *
* Limited ("Saturn") 65.0% * * MGM Networks Latin *
*Philippines: * * America LLC ("MGM *
* Philipino Cable * * Networks LA") 50.0% *
* Corporation ("PCC") 19.6% (2)* * *
*Tahiti: * ****************************************
* Telefenua S.A. *
* ("Telefenua") 90.0% *
* *
***************************************
(1) Pursuant to a memorandum of understanding with AmTec, Inc. ("AmTec") UAP
and AmTec agreed to exchange UAP's interest in HITV for AmTec stock.
Closing on the transaction is expected to occur by the end of 1999, subject
to certain conditions.
127
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
(2) UAP currently holds a convertible loan, which upon full conversion would
provide UAP with a 40.0% equity ownership interest in Sun Cable Systems
("Sun Cable"). UIPI will hold an effective 19.6% interest in PCC when the
merger between Sun Cable (49.0%) and Sky Cable (51.0%) is completed in
1999.
(3) On April 29, 1999, ULA acquired the remaining ownership interest in VTRH
from its current partners, increasing its ownership interest to 100% (see
Note 17).
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had a net working capital deficit of
$79,073. Subsequent to December 31, 1998, $36,738 of short-term debt was
refinanced on a long-term basis. Sources of cash in the next year may include
funding from UIH, raising of additional private or public debt or equity and/or
the sale of non-strategic assets by certain subsidiaries. Management believes
that these capital resources will enable UIPI to fund the operating and
development requirements of its subsidiaries and to cover corporate overhead for
the next year. If UIPI pursues new acquisitions or development opportunities,
UIPI would need to raise additional capital or seek strategic partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and all subsidiaries where it exercises a controlling financial interest
through the ownership of a majority voting interest. The Company has
consolidated the operations of Saturn since July 1, 1996. Prior to that time,
the Company accounted for its investment in Saturn under the equity method.
Effective January 1, 1998, the Company discontinued consolidating the results of
operations of Saturn and returned to the equity method of accounting. The change
was made to comply with the consensus guidance of the Emerging Issues Task Force
regarding Issue 96-16 "EITF 96-16", and related rules of the SEC, because the
minority shareholders of Saturn have participating approval or veto rights with
respect to certain significant decisions of Saturn in the ordinary course of
business. The Company is currently discussing alternatives which would allow for
the consolidation of Saturn. Effective October 1, 1998, the Company discontinued
consolidating the results of operations of Telefenua due to an
other-than-temporary loss of control and began using the equity method of
accounting. In September 1996, ULA contributed its wholly-owned subsidiaries in
Chile in exchange for a 34% interest in VTRH. Prior to the formation of the
joint venture, the Company accounted for these Chilean investments under the
equity method. For the first nine months of the year ended February 28, 1998,
the Company accounted for its investments in Comodoro, Trelew and Santa Fe,
Argentina under the equity method, due to an expected joint venture in
Argentina. This joint venture was abandoned due to the sale of these interests
in October 1997. All significant intercompany accounts and transactions have
been eliminated in consolidation.
CHANGE IN FISCAL YEAR END
Prior to the ten months ended December 31, 1998, the Company's fiscal year end
was February 28, and it accounted for its share of the income or loss of its
operating companies based on the calendar year results of each operating
company. This created a two month delay in reporting the operating company
results in the Company's consolidated results for its fiscal year-end. On
February 24, 1999, the Company changed its fiscal year-end from the last day in
February to the last day in December, effective December 31, 1998. To effect the
transition to the new fiscal year end, the combined results of operations of the
operating companies for January and February 1998, a loss of $33,413, has been
reported as a one-time charge to retained deficit as of March 1, 1998 in the
consolidated statement of parent's deficit. Consequently, the consolidated
statement of operations presents the consolidated results of the Company and its
subsidiaries for the ten months ended December 31, 1998. For comparative
purposes, the Company's consolidated revenue, net operating loss and net loss
were $74,381, $115,275 and $173,174, respectively, for the ten months ended
December 31, 1997.
CASH AND CASH EQUIVALENTS AND SHORT-TERM LIQUID INVESTMENTS
Cash and cash equivalents include cash and investments with original maturities
of less than three months. Short-term investments include certificates of
128
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
deposit, commercial paper, corporate bonds and government securities which have
original maturities greater than three months, but less than twelve months.
Short-term investments are classified as available-for-sale, and are reported at
fair market value.
RESTRICTED CASH
Cash held as collateral for letters of credit and other loans is classified
based on the expected expiration of such facilities. Cash held in escrow and
restricted to a specific use is classified based on the expected timing of such
disbursement.
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.
INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
EQUITY METHOD
For those investments in unconsolidated subsidiaries and companies in which the
Company's voting interest is 20.0% to 50.0%, 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, 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 affiliate, 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.
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 incorporate overhead expense and interest
charges incurred during the period of construction; investment subsidies are
deducted. Upon disconnection of a subscriber, the remaining book value of the
subscriber equipment, excluding converters which are recovered upon
disconnection, and the capitalized labor are written off and accounted for as an
operating cost. Depreciation is calculated using the straight-line method over
the economic life of the asset.
The economic lives of property, plant and equipment at acquisition are as
follows:
Cable distribution networks.................... 5-20 years
Subscriber premises equipment and converters... 3-10 years
MMDS/DTH distribution facilities............... 5-20 years
Office equipment, furniture and fixtures....... 3-10 years
Buildings and leasehold improvements........... 3-33 years
Other.......................................... 3-10 years
GOODWILL AND OTHER INTANGIBLE ASSETS
The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized on a straight-line basis over 15 years.
Licenses in newly-acquired companies are recognized at the fair market value of
those licenses at the date of acquisition. Licenses in new franchise areas
include the capitalization of direct costs incurred in obtaining the license.
The license value is amortized on a straight-line basis over the initial license
period, up to a maximum of 20 years.
RECOVERABILITY OF TANGIBLE AND INTANGIBLE ASSETS
The Company evaluates the carrying value of all tangible and intangible assets
whenever events or circumstances indicate the carrying value of assets may
exceed their recoverable amounts. An impairment 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.
129
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
DEFERRED FINANCING COSTS
Costs to obtain debt financing are capitalized and amortized over the life of
the debt facility using the effective interest method.
OTHER COMPREHENSIVE LOSS
The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which requires that an enterprise
(i) classify items of other comprehensive income (loss) by their nature in a
financial statement and (ii) display the accumulated balance of other
comprehensive income (loss) separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position.
REVENUE RECOGNITION
Revenue is primarily derived from the sale of cable television services to
subscribers and is recognized in the period the related services are provided.
Initial installation fees are recognized as revenue in the period in which the
installation occurs, to the extent installation fees are equal to or less than
direct selling costs, which are expensed. To the extent installation fees exceed
direct selling costs, the excess would be 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
worldwide.
STOCK-BASED COMPENSATION
Stock-based compensation is recognized using the intrinsic value method, which
results in compensation expense for the difference between the grant price and
the fair market value at each new measurement date. UAP and ULA have incentive
stock option plans for their employees. With respect to these plans, the rights
conveyed to employees are the substantive equivalents to stock appreciation
rights. Accordingly, compensation expense and deferred compensation expense are
recognized at each financial statement date based on the difference between the
grant price and the estimated fair value of the respective subsidiary's common
stock.
INCOME TAXES
The Company accounts for income taxes under the asset and liability method,
which requires recognition of deferred tax assets and liabilities for the
expected future income tax consequences of transactions which have been included
in the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement and income tax basis of assets, liabilities and loss
carryforwards using enacted tax rates in effect for the year in which the
differences are expected to reverse. Net deferred tax assets are then reduced by
a valuation allowance if management believes it 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.
STAFF ACCOUNTING BULLETIN NO. 51 ("SAB 51") ACCOUNTING POLICY
Gains realized as a result of stock sales by the Company's subsidiaries are
recorded in the statement of operations, except for any transactions which must
be credited directly to equity in accordance with the provisions of SAB 51.
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, except for countries which have
experienced hyper-inflationary economies. For countries which have
hyper-inflationary economies, the financial statements are prepared in U.S.
dollars. 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 U.S. dollars that result in
unrealized gains or losses are referred to as translation adjustments.
130
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
Cumulative translation adjustments are recorded as a separate component of
parent's (deficit) equity, included in Other Comprehensives 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.
Certain of the Company's foreign operating companies have notes payable and
notes receivable that are denominated in a currency other than their own
functional currency. In general, the Company and the operating companies do not
execute hedge transactions to reduce the Company's exposure to foreign currency
exchange rate risks. Accordingly, the Company may experience economic loss and a
negative impact on earnings and equity with respect to its holdings solely as a
result of foreign currency exchange rate fluctuations.
NEW ACCOUNTING PRINCIPLES
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"), which requires that a public business
enterprise report certain financial and descriptive information about its
reportable segments. The Company adopted SFAS 131 for the ten months ended
December 31, 1998.
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), which requires that companies recognize all
derivatives as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133, accounting for changes in fair value of a derivative depends on
its intended use and designation. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. The Company is currently assessing the effect of
this new standard.
The American Institute of Certified Public Accountants recently 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 its financial position or results of operations.
The American Institute of Certified Public Accountants recently issued Statement
of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"),
which is required to be adopted by affected companies for fiscal years beginning
after December 15, 1998. SOP 98-5 defines start-up and organization costs, which
must be expensed as incurred. In addition, all deferred start-up and
organization costs existing as of January 1, 1999 must be written off and
accounted for as a cumulative effect of an accounting change. The company does
not expect the adoption of SOP 98-5 to have a material effect on its financial
position or results of operations.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the current
year's presentation.
3. ACQUISITIONS AND DISPOSITIONS
MGM NETWORKS LA
In 1997, ULA and International Family Entertainment ("IFE") created United
Family Communications, LLC ("UFC") which was 50.0% owned by ULA and IFE. In July
1997, UFC launched two channels of Spanish and Portuguese language
family-oriented programming distributed via satellite throughout Latin America.
In May 1998, ULA acquired IFE's 50.0% ownership interest in UFC and then entered
into a joint venture with a division of Metro-Goldwyn-Mayer, Inc. ("MGM") to
form MGM Networks LA. Under the terms of the joint venture, ULA contributed its
100.0% interest in UFC for a 50.0% interest in MGM Networks LA, and MGM acquired
131
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
a 50.0% interest in MGM Networks LA by contributing its Brazil channel (MGM Gold
Brazil) and committing to fund the first $9,900 ($6,700 of which was funded at
closing) required by MGM Networks LA. MGM Networks LA has also entered into a
trademark license agreement with MGM for the use of the MGM brand name and also
into a program license agreement to acquire programming from MGM.
AUSTAR
In July 1998, Austar acquired certain Australian pay television assets of East
Coast Television Pty Limited ("ECT"), an affiliate of Century Communications
Corporation ("Century"), for $6,155 of the Company's newly-created Series B
Convertible Preferred Stock. ECT's subscription television business includes
subscribers and certain MMDS licenses and transmission equipment serving the
areas in and around Newcastle, Gossford, Wollongong and Tasmania, Australia.
XYZ ENTERTAINMENT
In September 1998, UAP acquired the Australian programming assets held by
Century, consisting of Century's 25.0% interest in XYZ Entertainment, a
programming company that owns and/or distributes five channels to the Australian
multi-channel marketplace. Following the acquisition, UAP owns a total of 50.0%
of XYZ Entertainment. The purchase price consisted of $1,231 in cash and $23,389
of the Company's Series B Preferred Stock.
TVSB
On October 2, 1998, ULA increased its ownership interest in TVSB from 45.0% to
100% for $11,400, half of which was paid in cash, with the remainder financed by
the seller. This "TVSB Seller Note" bears interest at 10.0% and is due September
14, 1999.
CABLE STAR
In October 1998, ULA and Arequipa Cable Vision ("ACV") each contributed their
Peruvian multi-channel television assets to Cable Star, with ULA receiving 60.0%
of the outstanding shares of Cable Star and the former shareholders of ACV
receiving the other 40.0%.
ARGENTINA
In October 1996, the Company acquired 100% of two cable systems and 80.0% of a
third system, serving the cities of Bahia Blanca and Punta Alta, for
approximately $52,520. Under terms of the agreements, the Company had the option
to acquire, or could have been required to purchase, the remaining 20.0% of the
third system between April 24, 1998 and October 31, 1998. The Company had
accrued $4,406 related to this option. The Company paid $26,382 in cash at the
date of acquisition, with the remaining $26,138 to be paid over the following 18
months. Details of the net assets acquired, which were denominated in Argentine
pesos and translated to U.S. dollars using the exchange rate on the date of
acquisition, were as follows:
Tangible assets................................... $ (4,051)
Goodwill ......................................... (63,464)
Cash.............................................. (97)
Other............................................. (5,958)
Accounts payable and accrued liabilities.......... 20,807
Notes payable..................................... 243
--------
(52,520)
Less purchase money notes......................... 26,138
--------
Total cash paid.............................. $(26,382)
========
In April 1997, ULA acquired 100% of multi-channel television systems in Comodoro
and Trelew, Argentina for a total purchase price of $27,900, of which $13,900
was paid at closing and the remaining $14,000 was due in 18 monthly installments
beginning May 1997. Also in April 1997, ULA agreed to acquire up to an 80.0%
equity interest in the multi-channel television systems located in Santa Fe,
Parana and Galvez, Argentina for a total purchase price of $59,000. In April
1997, ULA closed the acquisition of the first 31.0% equity interest for a total
purchase price of $23,000 and paid a $2,000 deposit to acquire the additional
38.0% equity interest by July 15, 1997 and the additional 11.0% equity interest
by the end of July 1997. The total purchase price was paid 50.0% at closing and
the balance was to be paid in monthly installments through June 2000.
In October 1997, the Company completed the sale of all of its cable television
assets in Argentina, including the regions of Bahia Blanca, Comodoro, Trelew and
132
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
Santa Fe (the "Argentina Transaction"). The sale price for Bahia Blanca,
Comodoro, Trelew and Santa Fe collectively was $268,200, of which $25,300
consisted of remaining notes payable to sellers from the original acquisitions.
From this net sales price of $242,900, $29,600 was paid directly by the buyers
to other minority interest stockholders, resulting in net proceeds to the
Company of approximately $211,125. The payment was received in full in cash,
except for an amount placed in escrow, subject to finalization of post-closing
adjustments. The Company recognized a gain on the transaction of $90,020. Under
the terms of its lending arrangements with a group of banks, the Company repaid
from the proceeds of the sale all of its outstanding indebtedness under its
bridge loan facility totaling $110,000 plus accrued interest.
TARA
In October 1997, Tara issued shares to third parties in exchange for
consideration totaling $2,476, thereby diluting the Company's interest in Tara
from 100% to 75.0%. A gain of $1,629 recognized on the transaction was credited
to additional paid-in capital in accordance with SAB 51.
NET SAO PAULO
In August 1996, the Company sold its 34.0% interest in Net Sao Paulo for $43,098
in cash and a $35,000 note receivable which was collected during the year ended
February 28, 1997. The Company recognized a gain of $65,249 on the transaction.
STX, CABLEVISION AND VTRH
In June 1995, ULA completed an acquisition of 65.0% of Red de Television y
Servicios por Cable S.A. ("STX"), a Chilean company which owned and operated
eight cable television systems in Northern Chile. The purchase price was
$25,918. In June 1996, ULA acquired the remaining 35.0% of STX for $24,000. The
Company acquired an initial 50.0% interest in Cablevision S.A. ("Cablevision")
in January 1994 for $3,900. In January 1996, ULA increased its ownership in
Cablevision to 100% for approximately $22,100. ULA contributed its interests in
STX and Cablevision in exchange for a 40.0% interest in VTRH in September 1996.
Prior to the formation of VTRH, the Company accounted for its investments in
Cablevision and STX under the equity method, in contemplation of the formation
of VTRH.
SATURN
In July 1994, the Company acquired a 50.0% interest in Kiwi Communications
Limited, which subsequently changed its name to Saturn. In July 1996, the
Company acquired the remaining 50.0% interest in Saturn in exchange for a 2.6%
interest in a wholly-owned subsidiary of UAP, UIH Australia/Pacific Inc. ("UIH
A/P") which was valued at approximately $7,800. The holder of this 2.6% interest
in UIH A/P subsequently exchanged it for a 2.0% interest in UAP. Details of the
net assets acquired, which were determined in New Zealand dollars and translated
to U.S. dollars using the exchange rate on the day of the acquisition, were as
follows:
Tangible assets................................... $8,509
Receivables, prepaids and other................... 373
Cash.............................................. 708
Accounts payable and accrued liabilities.......... (1,430)
Net investment prior to acquisition of 50.0%...... (9,133)
------
Net assets.................................... (973)
Goodwill.......................................... 8,773
------
Total consideration........................... $7,800
======
In July 1997, SaskTel Holdings (New Zealand), Inc. ("SaskTel") purchased a 35.0%
equity interest in Saturn by investing approximately New Zealand $29,900
($19,566) directly into Saturn for its newly-issued shares, thereby reducing the
Company's equity interest in Saturn to 65.0%. A gain of $5,985 recognized on the
transaction was credited to additional paid-in capital in accordance with SAB
51.
PRO FORMA FINANCIAL INFORMATION FOR THE YEARS ENDED FEBRUARY 28, 1998 AND 1997
The following pro forma condensed consolidated operating results for the years
ended February 28, 1998 and 1997 give effect to the Argentina Transaction as if
it had occurred at the beginning of the periods presented. This pro forma
condensed consolidated financial information and notes thereto do not purport to
represent what the Company's results of operations would actually have been if
such transaction had in fact occurred on such dates. The pro forma adjustments
are based upon currently available information and upon certain assumptions that
management believes are reasonable.
133
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
February 28, 1998 February 28, 1997
------------------------- --------------------------
Historical Pro Forma(1) Historical Pro Forma (2)
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Revenue............................... $ 88,644 $ 71,017 $ 30,771 $ 26,386
========= ========= ========= =========
Net operating loss.................... $(139,081) $(138,908) $ (84,507) $ (83,086)
========= ========= ========= =========
Net loss before extraordinary charge.. $(213,960) $(295,469) $(123,011) $(120,534)
========= ========= ========= =========
Net loss.............................. $(293,051) $(374,560) $(123,011) $(120,534)
========= ========= ========= =========
</TABLE>
(1) Represents elimination of historical statement of operations balances
for the Argentina systems and elimination of the gain recorded on the
Argentina Transaction.
(2) Represents elimination of historical statement of operations balances
for Bahia Blanca.
The following unaudited pro forma condensed consolidated operating results for
the year ended February 28, 1997 gives effect to the disposition of the 34.0%
interest in Net Sao Paulo as if it had occurred at the beginning of the period.
This pro forma condensed consolidated financial information and note thereto do
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.
For the Year Ended
February 28, 1997
---------------------------
Historical Pro Forma (1)
---------- -------------
Revenue.............................. $ 30,771 $ 30,771
========= =========
Net loss............................. $(123,011) $(186,471)
========= =========
(1) Represents elimination of historical statement of operations balances
related to Net Sao Paulo and elimination of the gain recorded on the
sale.
4. CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
As of December 31, 1998
-------------------------------------------------------
Restricted
Cash and
Cash and Cash Short-term Short-term
Equivalents Investments Investments Total
------------- ----------- ----------- -------
<S> <C> <C> <C> <C>
Cash................................. $ 1,499 $753 $ -- $ 2,252
Certificates of deposit.............. -- -- 250 250
Commercial paper..................... 10,648 -- 1,187 11,835
Corporate bonds...................... -- -- 187 187
Government securities................ 262 -- 1,507 1,769
------- ---- ------ -------
Total............................. $12,409 $753 $3,131 $16,293
======= ==== ====== =======
</TABLE>
<TABLE>
<CAPTION>
As of February 28, 1998
-------------------------------------------------------
Restricted
Cash and
Cash and Cash Short-term Short-term
Equivalents Investments Investments Total
------------- ----------- ----------- -------
<S> <C> <C> <C> <C>
Cash................................. $22,764 $5,524 $ -- $28,288
Certificates of deposit.............. -- -- 8,399 8,399
Commercial paper..................... -- -- 3,926 3,926
Government securities................ -- 3,591 -- 3,591
------- ------ ------- -------
Total............................. $22,764 $9,115 $12,325 $44,204
======= ====== ======= =======
</TABLE>
134
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
5. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
EQUITY METHOD
<TABLE>
<CAPTION>
As of December 31, 1998
---------------------------------------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation Valuation
Affiliated Companies Received Affiliated Companies Adjustments Allowance Total
-------------------- --------- -------------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Europe:
IPS........................ $ 14,082 $ -- $ (7,418) $ (25) $ -- $ 6,639
Asia/Pacific:
Saturn..................... 49,808 -- (23,138) (2,881) -- 23,789
XYZ Entertainment.......... 44,306 -- (18,537) 111 -- 25,880
PCC........................ 11,673 -- (2,812) (2,824) -- 6,037
HITV....................... 6,073 -- (2,435) 16 -- 3,654
Telefenua.................. 18,599 -- (14,215) -- (4,384) --
Other...................... 350 -- -- -- -- 350
Latin America:
VTRH....................... 112,052 -- (17,203) (9,874) -- 84,975
Megapo..................... 32,496 (1,471) (1,122) (11,067) -- 18,836
MGM Networks LA (1)........ 19,272 -- (19,272) -- -- --
Jundiai.................... 6,797 -- (587) (1,089) -- 5,121
-------- ------- --------- -------- ------- --------
Total............... $315,508 $(1,471) $(106,739) $(27,633) $(4,384) $175,281
======== ======= ========= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
As of February 28, 1998
---------------------------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation
Affiliated Companies Received Affiliated Companies Adjustments Total
-------------------- --------- -------------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Europe:
Monor...................... $ 27,182 $ -- $(13,161) $ (6,256) $ 7,765
IPS........................ 13,920 -- (7,261) (95) 6,564
Asia/Pacific:
XYZ Entertainment (2)...... 18,610 -- (18,720) 110 --
Sun Cable.................. 12,336 -- (1,023) (2,783) 8,530
HITV....................... 6,073 -- (236) 7 5,844
Other...................... 182 -- -- -- 182
Latin America:
VTRH....................... 92,754 -- (10,327) (4,262) 78,165
Megapo..................... 32,496 (1,248) (1,313) (1,604) 28,331
TVSB....................... 7,132 -- (3,771) -- 3,361
UFC........................ 12,099 -- (7,487) -- 4,612
Jundiai.................... 6,652 -- (788) -- 5,864
-------- ------- -------- -------- --------
Total............... $229,436 $(1,248) $(64,087) $(14,883) $149,218
======== ======= ======== ======== ========
</TABLE>
(1) Includes an accrued funding obligation of $3,012 at December 31, 1998.
The Company would face significant and punitive dilution if it did not
make the requested fundings.
(2) Includes an accrued funding obligation of $406 at December 31, 1997.
The Company does not have a contractual funding obligation to XYZ
Entertainment; however, the Company would face significant and punitive
dilution if it did not make the requested fundings.
As of December 31, 1998 and February 28, 1998, the Company had the following
differences related to the excess of cost over its proportionate interest in
each affiliates net tangible assets included in the above table. Such
differences are being amortized over 15 years.
135
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
As of December 31, 1998 As of February 28, 1998
-------------------------- ---------------------------
Basis Accumulated Basis Accumulated
Difference Amortization Difference Amortization
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Europe:
IPS........................ $ 2,216 $ (85) $ 651 $ (53)
Asia/Pacific:
XYZ Entrtainment........... 23,595 -- -- --
Saturn..................... 12,733 (1,005) -- --
Latin America:
VTRH....................... 19,994 (1,941) 11,368 (1,211)
Megapo..................... 19,583 (5,767) 21,528 (4,307)
TVSB....................... -- -- 2,361 (895)
Jundiai.................... -- -- 540 (172)
UFC........................ -- -- 439 (63)
------- ------- ------- -------
Total.................... $78,121 $(8,798) $36,887 $(6,701)
======= ======= ======= =======
</TABLE>
VTRH
Condensed financial information for VTRH stated in U.S. dollars is as follows:
<TABLE>
<CAPTION>
As of December 31,
--------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash...................................................... $ 11,254 $ 11,788
Goodwill, net............................................. 109,464 123,278
Property, plant and equipment, net........................ 186,660 173,264
Other Assets.............................................. 33,486 78,276
-------- --------
Total assets......................................... $340,864 $386,606
======== ========
Accounts payable and accrued liabilities.................. $ 53,877 $ 24,642
Bank debt................................................. 88,495 165,160
Related party debt........................................ 1,663 404
Shareholders' equity...................................... 196,829 196,400
-------- --------
Total liabilities and shareholders' equity........... $340,864 $386,606
======== ========
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenue................................................... $119,005 $114,318 $ 70,717
Operating, selling, general and administrative expense.... (90,983) (92,970) (61,084)
Depreciation and amortization............................. (27,531) (22,707) (14,192)
-------- -------- --------
Net operating loss................................... 491 (1,359) (4,559)
Other..................................................... (19,524) (19,252) (8,928)
-------- -------- --------
Net loss............................................. $(19,033) $(20,611) $(13,487)
======== ======== ========
</TABLE>
136
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
Condensed financial information for Saturn, stated in U.S. dollars, is as
follows:
As of
December 31, 1998
-----------------
Current assets.......................................... $ 4,071
Non-current assets...................................... 59,242
--------
Total assets....................................... $ 63,313
========
Current liabilities..................................... $ 33,608
Non-current liabilities................................. 19
Shareholders' equity.................................... 29,686
--------
Total liabilities and shareholders' equity......... $ 63,313
========
For the Year Ended
December 31, 1998
------------------
Revenue................................................. $ 1,693
Expenses................................................ (16,934)
--------
Net loss........................................... $(15,241)
========
<TABLE>
<CAPTION>
6. PROPERTY, PLANT AND EQUIPMENT As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Cable distribution networks............................................ $ 9,095 $ 22,460
Subscriber premises equipment and converters........................... 193,689 160,728
MMDS/DTH distribution facilities....................................... 55,532 55,093
Office equipment, furniture and fixtures............................... 10,485 11,279
Buildings and leasehold improvements................................... 3,027 5,729
Other.................................................................. 24,720 23,498
-------- --------
296,548 278,787
Accumulated depreciation............................................ (153,860) (80,103)
-------- --------
Net property, plant and equipment................................... $142,688 $198,684
======== ========
</TABLE>
<TABLE>
<CAPTION>
7. GOODWILL AND OTHER INTANGIBLE ASSETS As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Europe:
Other.................................................................. $ -- $ 380
Asia/Pacific:
Austar................................................................. 55,804 51,552
Saturn (1)............................................................. -- 6,100
Other.................................................................. 4,267 2,873
Latin America:
TVSB................................................................... 16,161 --
Cable Star............................................................. 7,887 1,245
-------- -------
84,119 62,150
Accumulated amortization............................................ (18,989) (12,121)
------- -------
Net goodwill and other intangible assets............................ $65,130 $50,029
======= =======
</TABLE>
(1) Saturn was de-consolidated effective January 1, 1998.
137
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
8. SHORT-TERM DEBT As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Austar Bank Facility (see Note 10)..................................... $36,738 $ --
VTRH Note.............................................................. 9,284 --
ULA Revolving Credit Facility.......................................... 8,000 --
TVSB Seller Note (see Note 3).......................................... 5,853 --
------- -------
Total short-term debt............................................... $59,875 $ --
======= =======
</TABLE>
Carrying value approximates fair value for these short-term facilities.
VTRH NOTE
UIH Chile, Inc., a wholly-owned subsidiary of ULA, executed a promissory note in
the amount of $7,770 payable to VTR S.A., the majority shareholder of VTRH, in
exchange for 51,993 shares of VTRH (the "VTRH Note"). The VTRH Note bears
interest at 12.95% per annum and is due April 30, 1999. On April 29, 1999 the
VTRH Note was repaid in conjunction with the VTRH Acquisition (see Note 17).
ULA REVOLVING CREDIT FACILITY
In November 1997, ULA entered into an amended and restated credit agreement with
a bank for a revolving credit facility of up to $40,000 (the "ULA Revolving
Credit Facility"). Borrowings under this facility were due within 12 months at
an interest rate of LIBOR plus 3.5%. The facility was extendable up to 18 months
under certain conditions. In November 1998, ULA exercised its option to extend
the maturity date until February 1999, increasing the interest rate to LIBOR
plus 4.0%. The agreement was also amended to reduce the facility from $40,000 to
$8,000 effective November 20, 1998. As of December 31, 1998, ULA had an
outstanding balance of $8,000 under this facility which was repaid in February
1999.
9. SENIOR DISCOUNT NOTES
As of As of
December 31, February 28,
1998 1998
------------ ------------
Old Notes (as defined below)............ $ 412 $ 368
1996 UIH A/P Notes (as defined below)... 321,687 278,662
1997 UIH A/P Notes (as defined below)... 34,953 30,461
-------- --------
357,052 309,491
Less current portion................. (412) --
-------- --------
Total senior discount notes.......... $356,640 $309,491
======== ========
1998 NOTES AND OLD NOTES
On February 5, 1998, UIH sold $1,375,000 principal amount at maturity of 10.75%
senior secured discount notes due 2008 (the "1998 Notes"). The 1998 Notes were
issued at a discount from their principal amount at maturity, resulting in gross
proceeds to UIH of approximately $812,200.
UIH used approximately $531,800 of the proceeds from the 1998 Notes to complete
a tender offer for the UIH's existing 14.0% senior secured discount notes due
1999 (collectively, the "Old Notes") and the consent solicitation that UIH
conducted concurrently therewith. UIH commenced the tender offer on January 7,
1998, and the tender offer expired on February 4, 1998, with over 99.8% of the
Old Notes being validly tendered. UIH subsequently purchased $500 principal
amount at maturity of the Old Notes on the open market, leaving approximately
$465 principal amount at maturity outstanding as of February 28, 1998. The Old
Notes redeemed had an aggregate accreted value of approximately $466,200 as of
February 5, 1998. The tender premium of approximately $65,600, combined with the
write-off of unamortized deferred financing costs and other transaction-related
costs totaling approximately $13,500, resulted in an extraordinary charge of
$79,091.
The 1998 Notes will accrete at 10.75% per annum, compounded semi-annually to an
aggregate principal amount of $1,375,000 on February 15, 2003, at which time
cash interest will commence to accrue. Commencing August 15, 2003, cash interest
on the 1998 Notes will be payable on February 15 and August 15 of each year
until maturity at a rate of 10.75% per annum. The 1998 Notes will mature on
February 15, 2008, and will be redeemable at the option of UIH on or after
February 15, 2003.
138
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
The remaining Old Notes will mature on November 15, 1999. Holders of the 1998
Notes and the remaining outstanding Old Notes share a first-priority security
interest in the stock and intercompany notes to UIH of UIPI.
The 1998 Notes are senior secured obligations of UIH that rank senior in right
of payment to all future subordinated indebtedness of UIH and rank pari passu in
right of payment with the Old Notes. The 1998 Notes are effectively subordinated
to all future indebtedness and other liabilities and commitments of the UIH's
subsidiaries. Under the terms of the indenture governing the 1998 Notes (the
"Indenture"), UIH's subsidiaries are generally prohibited and/or restricted from
incurring any lien against their assets other than liens incurred in the
ordinary course of business, from paying dividends, and from making investments
in entities that are not "restricted" by the terms of the Indenture. UIH has the
option to invest in "unrestricted entities" in an aggregate amount equal to the
sum of $100,000 plus the aggregate amount of net cash proceeds from sales of
equity, net of payments made on its preferred stock plus net proceeds from
certain litigation settlements. The Indenture generally prohibits UIH from
incurring additional indebtedness with the exception of a general allowance of
$75,000 for debt maturing on or after February 15, 2008, certain guarantees
totaling $15,000, refinancing indebtedness, normal indebtedness to restricted
affiliates and other letters of credit in the ordinary course of business. The
Indenture also limits the amount of additional debt that 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 Indenture at the time of the borrowing. The Indenture also restricts its
subsidiaries' ability to make certain asset sales and certain payments.
1996 UIH A/P NOTES
The 14.0% senior notes, which UIH A/P issued in May 1996 at a discount from
their principal amount of $443,000 (the "1996 UIH A/P Notes"), had an accreted
value of $321,687 as of December 31, 1998. On and after May 15, 2001, cash
interest will accrue and will be payable semi-annually on each May 15 and
November 15, commencing November 15, 2001. The 1996 UIH A/P Notes are due May
15, 2006. Effective May 16, 1997, the interest rate on these notes increased by
an additional 0.75% per annum to 14.75%. On October 14, 1998, UIH A/P
consummated an equity sale resulting in gross proceeds of $70,000 which reduced
the interest rate from 14.75% to 14.0% per annum. Due to the increase in the
interest rate effective May 16, 1997 until consummation of the equity sale, the
1996 UIH A/P Notes will accrete to a principal amount of $447,418 on May 15,
2001, the date cash interest begins to accrue.
1997 UIH A/P NOTES
The 14.0% senior notes, which UIH A/P issued in September 1997 at a discount
from their principal amount of $45,000 (the "1997 UIH A/P Notes"), had an
accreted value of $34,953 as of December 31, 1998. On and after May 15, 2001,
cash interest will accrue and will be payable semi-annually on each May 15 and
November 15, commencing November 15, 2001. The September 1997 Notes are due May
15, 2006. Effective September 23, 1997, the interest rate on these notes
increased by an additional 0.75% per annum to 14.75%. On October 14, 1998, UIH
A/P consummated an equity sale, reducing the interest rate from 14.75% to 14.0%
per annum. Due to the increase in the interest rate effective September 23, 1997
until consummation of the equity sale, the 1997 UIH A/P Notes will accrete to a
principal amount of $45,448 on May 15, 2001, the date cash interest begins to
accrue.
On November 17, 1997, pursuant to the terms of the indentures governing the 1996
and 1997 UIH A/P Notes (collectively, the "UIH A/P Notes"), UIH A/P issued
warrants to purchase 488,000 shares of its common stock, which represented 3.4%
of its common stock. The warrants are exercisable at a price of $10.45 per share
which would result in gross proceeds of approximately $5,100 upon exercise. The
warrants are exercisable through May 15, 2006. The warrants were valued at
$3,678 and have been reflected as an additional discount to the UIH A/P Notes on
a pro-rata basis and as an increase in additional paid-in capital.
139
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
10. OTHER LONG-TERM DEBT As of As of
December 31, February 28,
1998 1998
------------ ------------
Austar Bank Facility........................ $67,352 $ 71,531
ULA Revolving Credit Facility(See Note 8)... -- 33,000
Other Asia/Pacific.......................... 2,923 10,120
------- --------
70,275 114,651
Less current portion..................... (2,189) (36,682)
------- --------
Total other long-term debt............... $68,086 $ 77,969
======= ========
AUSTAR BANK FACILITY
In July 1997, Austar secured a senior syndicated term debt facility in the
amount of A$200,000 ($122,459 as of December 31, 1998) to fund Austar's
subscriber acquisition and working capital needs (the "Austar Bank Facility").
The Austar Bank Facility consisted of three sub-facilities: (i) A$50,000
revolving working capital facility, (ii) A$60,000 cash advance facility and
(iii) A$90,000 term loan facility. All of Austar's assets were pledged as
collateral for the Austar Bank Facility. As of December 31, 1998, Austar had
drawn the entire amount of the working capital facility and the cash advance
facility totaling A$110,000 ($67,352). The working capital facility was fully
repayable on June 30, 2000. The cash advance facility was fully repayable
pursuant to an amortization schedule beginning December 31, 2000 and ending June
30, 2004.
In September 1998, Austar received an amendment to the Austar Bank Facility
which allowed Austar to temporarily draw under the A$90,000 term loan facility
at an increased interest rate of 2.25% above the professional market rate in
Australia. As of December 31, 1998, Austar had drawn A$60,000 ($36,738) on the
term loan facility for a total outstanding balance of A$170,000. Subsequent to
year-end an additional A$30,000 was borrowed against the term loan facility
which, along with the A$60,000 draw, was payable April 30, 1999. On April 23,
1999 (subsequently executed and A$222,000 funded on April 28, 1999), Austar
secured a new A$400,000 Syndicated Senior Secured Debt Facility (the "New Austar
Bank Facility") to refinance the A$200,000 Austar Bank Facility and to fund
Austar's subscriber acquisition and working capital needs. The New Austar Bank
Facility consists of two sub-facilities: (i) A$200,000 amortizing term facility
("Tranche 1") and (ii) A$200,000 cash advance facility ("Tranche 2"). Tranche 1
was used to refinance the Austar Bank Facility, and Tranche 2 is available upon
the contribution of additional equity on a 2:1 debt-to-equity basis. All of
Austar's assets are pledged as collateral for this facility. In addition,
pursuant to this facility, Austar cannot pay any dividends, interest or fees
under its technical assistance agreements without the consent of the majority
banks. The New Austar Bank Facility bears interest at the professional market
rate in Australia plus a margin ranging from 1.75% to 2.25% based upon certain
debt to cash flow ratios. The New Austar Bank Facility is fully repayable
pursuant to an amortization schedule beginning December 31, 2002 and ending
March 31, 2006.
FAIR VALUE OF SENIOR DISCOUNT NOTES AND OTHER DEBT
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>
Carrying Fair
Value Value
-------- --------
<S> <C> <C>
As of December 31, 1998:
Old Notes......................................................................... $ 412 $ 412
1996 UIH A/P Notes................................................................ 321,687 223,700
1997 UIH A/P Notes................................................................ 34,953 22,700
Austar Bank Facility.............................................................. 67,352 67,352
Other debt........................................................................ 2,923 2,923
-------- --------
Total........................................................................ $427,327 $317,087
======== ========
As of February 28, 1998:
Old Notes......................................................................... $ 368 $ 368
1996 UIH A/P Notes................................................................ 278,662 292,380
1997 UIH A/P Notes................................................................ 30,461 29,700
Austar Bank Facility.............................................................. 71,531 71,531
Other debt........................................................................ 10,120 10,120
-------- --------
Total........................................................................ $391,142 $404,099
======== ========
</TABLE>
140
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
DEBT MATURITIES
<TABLE>
<CAPTION>
The maturities of the Company's senior discount notes and other long-term debt
are as follows:
<S> <C>
Year Ended December 31, 1999........................................................ $ 2,601
Year Ended December 31, 2000........................................................ 734
Year Ended December 31, 2001........................................................ --
Year Ended December 31, 2002........................................................ --
Year Ended December 31, 2003........................................................ --
Thereafter.......................................................................... 423,992
--------
Total............................................................................... $427,327
========
</TABLE>
OTHER FINANCIAL INSTRUMENTS
Interest rate swap agreements are used by the Company from time to time, to
manage interest rate risk on its floating rate debt facilities. Interest rate
swaps are entered into depending on the Company's assessment of the market, and
generally are used to convert the floating rate debt to fixed rate debt.
Interest differentials paid or received under these swap agreements are
recognized over the life of the contracts as adjustments to the effective yield
of the underlying debt, and related amounts payable to, or receivable from, the
counterparties are included in the consolidated balance sheet. Currently, the
Company has two interest rate swaps to manage interest rate exposure on the
Austar Bank Facility. These swap agreements expire in 2002 and effectively
convert an aggregate principal amount of A$50,000 ($30,600) of variable rate,
long-term debt into fixed rate borrowings. As of December 31, 1998, the
weighted-average fixed rate under these agreements was 7.94% compared to a
weighted-average variable rate on the Austar Bank Facility of 6.75%. As a result
of these swap agreements, interest expense was increased by approximately A$600
($400) during 1998.
Fair values of the interest rate swap agreements are based on the estimated
amounts that the Company would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
creditworthiness of the counterparties. As of December 31, 1998, the Company
estimates it would have paid approximately A$1,300 ($800) to terminate the
agreements.
11. NOTE PAYABLE TO PARENT
<TABLE>
<CAPTION>
As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Note payable to parent, including accrued interest
of $16,693 and $9,155, respectively............... $107,396 $38,993
======== =======
</TABLE>
In December 1995, UIH loaned the Company $29,838 in connection with the purchase
of the remaining interest of Austar. The loan accrues interest at 14.0% per
annum. Although the terms of the loan state that it is due on demand, UIH does
not intend to demand payment during the next fiscal year. Therefore, the loan
and related accrued interest are classified as long-term.
In March 1998, UIH loaned the Company $60,865 in connection with funding the
general operations of ULA as well as repayment of a portion of the ULA Revolving
Credit Facility. The UIH loan accrues interest at 10.75% per annum. Although the
terms of the loan state that it is due on demand, UIH does not intend to demand
payment during the next fiscal year. Therefore, the loan and related accrued
interest are classified as long-term.
In February 1997, UIH made a bridge loan to ULA of $37,500. Interest on the note
accrued at LIBOR plus 6.0%. In November 1997, ULA repaid the note plus interest
with proceeds from the Argentina Transaction.
UIH provides certain administrative, financial reporting and other services to
the Company, which has no separate employees of its own. In addition, UIH
Management, Inc. ("UIH Management"), a wholly-owned subsidiary of the Company,
has executed technical assistance agreements with various operating systems,
pursuant to which UIH Management provides various management and technical
services to these operating systems for a fee equal to a percentage of that
141
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
operating system's gross revenue. UIH has appointed certain of its employees to
serve in senior management positions at the operating systems. The operating
systems reimburse UIH for certain direct costs incurred by UIH, including
salaries and benefits relating to these senior management positions.
12. PARENT'S DEFICIT
COMMON STOCK
Authorized capital consists of 1,000 shares of Common Stock, $.01 par value, 100
shares issued and outstanding, held by UIH. Such shares have been pledged as
collateral under UIH's 1998 Notes.
CUMULATIVE TRANSLATION ADJUSTMENTS
During the ten months ended December 31, 1998, the Company recorded a negative
change in cumulative translation adjustments of $20,911 primarily due to (i) the
strengthening of the U.S. dollar compared to the Mexican peso of approximately
23.0% and (ii) the strengthening of the U.S. dollar to the Chilean peso of
approximately 7.0%.
STOCK OPTION PLANS
UAP PLAN
In March 1998, UAP's Board of Directors approved a stock option plan (the "UAP
Plan") which permits the grant of phantom stock options or the grant of stock
options to purchase up to 1,600,000 shares of UAP's Class A Common Stock. The
options vest in equal monthly increments over the four-year period following the
date of grant. Concurrent with approval of the UAP Plan, UAP's Board granted a
total of 918,500 phantom stock options to certain employees which gives the
employee the right with respect to vested options to receive a cash payment
equal to the difference between the fair market value of a share of UAP stock
and the option base price of $10 per share. Vesting of these phantom stock
options was retroactive to June 6, 1997.
A summary of phantom stock option activity for the UAP Plan is as follows:
<TABLE>
<CAPTION>
For the Ten Months
Ended December 31, 1998
----------------------------
Number Weighted-
of Average
Shares Exercise Price
--------- --------------
<S> <C> <C>
Outstanding at beginning of period.......... -- $ --
Granted during the period................... 1,779,500 $10.00
Cancelled during the period................. -- $ --
Exercised during the period................. -- $ --
--------- ------
Outstanding at end of period................ 1,779,500 $10.00
========= ======
Exercisable at end of period................ 584,063 $10.00
========= ======
</TABLE>
The combined weighted-average fair values and weighted-average exercise prices
of options granted during the ten months ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
For the Ten Months Ended
December 31, 1998
----------------------------------------
Number Fair Exercise
of Options Value Price
---------- ------- -------
<S> <C> <C> <C>
Exercise price equal to market price........ 1,779,500 $10.00 $10.00
</TABLE>
142
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
The following table summarizes information about the UAP Plan phantom options
outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
Weighted-Average
Number of Remaining Number of
Options Contractual Life Options
Exercise Price Outstanding (Years) Exercisable
- -------------- ----------- ---------------- -----------
<S> <C> <C> <C>
$ 10.00.......................................... 1,779,500 9.08 584,063
</TABLE>
ULA PLAN
In April 1998, ULA's Board of Directors approved a stock option plan (the "ULA
Plan") which permits the grant of phantom stock options or the grant of stock
options to purchase up to 1,631,000 shares of ULA's Class A Common Stock. The
options vest in equal monthly increments over the four-year period following the
date of grant. Concurrent with approval of the ULA Plan, ULA's Board granted a
total of 1,475,500 phantom stock options to certain employees which gives the
employee the right with respect to vested options to receive a cash payment
equal to the difference between the fair market value of a share of ULA stock
and the option base prices in the range of $4.26-$6.76 per share. Vesting of
these phantom stock options was retroactive to June 6, 1997. For the ten months
ended December 31, 1998, ULA recognized $2,669 and $1,060 in non-cash and cash
compensation expense related to these phantom options, respectively.
A summary of phantom stock option activity for the ULA Plan is as follows:
<TABLE>
<CAPTION>
For the Ten Months
Ended December 31, 1998
----------------------------
Number Weighted-
of Average
Shares Exercise Price
--------- --------------
<S> <C> <C>
Outstanding at beginning of period -- --
Granted during the period....................... 1,785,500 $5.6295
Cancelled during the period..................... (317,296) $5.4723
Exercised during the period..................... (279,787) $5.1935
--------- -------
Outstanding at end of period.................... 1,188,417 $5.7741
========= =======
Exercisable at end of period.................... 268,730 $4.8646
========= =======
</TABLE>
The combined weighted-average fair values and weighted-average exercise prices
of options granted during the ten months ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
For the Ten Months Ended
December 31, 1998
----------------------------------------
Number Fair Exercise
of Options Value Price
---------- ------- -------
<S> <C> <C> <C>
Exercise price equal to market price............ 945,500 $5.8075 $5.8075
Exercise price greater than market price........ 840,000 $4.2600 $5.4300
--------- ------- -------
Total........................................ 1,785,500 $5.0795 $5.6295
========= ======= =======
</TABLE>
143
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
The following table summarizes information about the ULA Plan phantom options
outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
Weighted-Average
Number of Remaining Number of
Options Contractual Life Options
Exercise Price Outstanding (Years) Exercisable
-------------- ----------- ---------------- -----------
<S> <C> <C> <C>
$4.26.......................................... 531,750 8.43 140,813
$4.59.......................................... 150,000 8.43 56,250
$4.96.......................................... 100,000 8.43 37,500
$5.93.......................................... 30,000 8.43 11,250
$6.76.......................................... 66,667 8.43 4,167
$8.98.......................................... 310,000 9.72 18,750
--------- ---- -------
Total....................................... 1,188,417 8.77 268,730
========= ==== =======
</TABLE>
13. COMMITMENTS
The Company has entered into various operating lease agreements for office
space, office furniture and equipment, and vehicles. Rental expense under these
lease agreements totaled $1,959, $3,494 and $2,342 for the ten months ended
December 31, 1998 and for the years ended February 28, 1998 and February 28,
1997, respectively.
<TABLE>
<CAPTION>
The Company has operating lease obligations and other non-cancelable
commitments as follows:
<S> <C>
Year ended December 31, 1999.............................................................. $ 2,973
Year ended December 31, 2000.............................................................. 811
Year ended December 31, 2001.............................................................. 592
Year ended December 31, 2002.............................................................. 149
Year ended December 31, 2003 and thereafter............................................... 23
--------
Total.................................................................................. $ 4,548
========
</TABLE>
<TABLE>
<CAPTION>
The Company has MMDS license fees and programming license fees payable
annually as follows:
<S> <C>
Year ended December 31, 1999.............................................................. $ 38,310
Year ended December 31, 2000.............................................................. 45,658
Year ended December 31, 2001.............................................................. 51,541
Year ended December 31, 2002.............................................................. 54,583
Year ended December 31, 2003 and thereafter............................................... 57,152
--------
Total.................................................................................. $247,244
========
</TABLE>
<TABLE>
<CAPTION>
A subsidiary of Austar has a five-year agreement to lease a 54 MHz
satellite transponder. Pursuant to the agreement, which commenced September
1, 1997, Austar will pay approximately $4,440 in satellite service fees
annually as follows:
<S> <C>
Year ended December 31, 1999.............................................................. $ 4,440
Year ended December 31, 2000.............................................................. 4,440
Year ended December 31, 2001.............................................................. 4,440
Year ended December 31, 2002.............................................................. 2,960
Year ended December 31, 2003.............................................................. --
--------
Total.................................................................................. $ 16,280
========
</TABLE>
UIH and certain of its employees serving as senior management in the Company's
operating companies are parties to employment agreements, typically with terms
of three to five years. The agreements generally provide for a specified base
salary as well as a bonus set at a specified percentage of the base salary. The
bonus is based on the performance of the respective company and the employee.
144
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
The agreements often provide for the grant of an incentive interest equal to a
percentage of the residual equity value of the respective company, which is
typically defined as the fair market value of the business less net liabilities
and a reasonable return on shareholders' investment. The Company has recorded a
liability for the estimated amount of the bonus earned during the ten months
ended December 31, 1998 and the years ended February 28, 1998 and 1997. The
employment agreements generally also provide for cost of living differentials,
relocation and moving expenses, automobile allowances and income tax
equalization payments, if necessary, to keep the employee's tax liability the
same as it would be in the United States.
14. CONTINGENCIES
The Company is not a party to any material legal proceedings other than
described below, nor is it currently aware of any other threatened material
legal proceedings. From time to time, the Company may become involved in
litigation relating to claims arising out of its operations in the normal course
of its business.
In April 1997, following a trial in the United States District Court for the
District of Colorado, the Company obtained a jury verdict against The Wharf
(Holdings) Limited ("Wharf Holdings"), its wholly-owned subsidiary, Wharf
Communications Investments Limited and Wharf Holdings' deputy chairman, Stephen
Ng, on claims of securities fraud, fraud, breach of fiduciary duty, breach of
contract and negligent misrepresentation, and was awarded $67,000 in
compensatory damages and $58,500 in exemplary damages. In May 1997, the Court
awarded prejudgment interest of $28,200, and entered judgment on the verdicts.
In October 1997, the Court denied the defendants' motion for a reduction in the
amount of damages, for a new trial, and/or for a judgment as a matter of law. On
November 4, 1997, the defendants appealed the judgment to the United States
Court of Appeals for the Tenth Circuit. On December 31, 1997, Wharf Holdings
filed a separate appeal to the Tenth Circuit related to the contempt sanctions
that the District Court imposed as a result of Wharf Holdings' refusal to turn
over certain assets in satisfaction of the judgment. On January 29, 1998, Wharf
Holdings posted a $173,500 supersedeas bond to secure the judgment entered in
favor of the Company. Although the Company intends to vigorously defend the
appeals, there can be no assurance that the judgment will be affirmed or that
the damages will be collected.
The territorial government of Tahiti (in French Polynesia) had legally
challenged the decree and authority of the Conseil Superieur de l'Audiovisuel
("CSA") to award Telefenua the authorizations to operate an MMDS service in
French Polynesia. The French Polynesian's challenge to France's authority to
award Telefenua an MMDS license in Tahiti was upheld by the Conseil d'Etat, the
supreme administrative court of France. The territorial government of Tahiti
then brought an action in French court seeking cancellation of the MMDS licenses
awarded by the CSA to Telefenua. On November 25, 1998, the Conseil d' Etat
cancelled the MMDS licenses awarded to Telefenua. Telefenua is in the process of
seeking a new authorization. The Company has no reason to believe that a new
authorization will not be granted. If Telefenua does not obtain a new
authorization, there is no assurance that Telefenua will receive any
restitution. In addition, any available restitution could be limited and could
take years to obtain.
On July 14, 1998, UIH SFCC, a wholly-owned subsidiary of the Company, filed a
complaint in the United States District Court for the District of Colorado, for
damages for breach of contract, breach of fiduciary duty and to enforce UIH
SFCC's rights as General Partner in UIH-SFCC LP, a Colorado Limited Partnership
which owns an interest in SFCC, the 100% parent of Telefenua. The three
defendants are Loic Brigato, Winfred Anderson and Yoshiko Payne, limited
partners of UIH-SFCC LP. On September 27, 1998, UIH filed a parallel action in
the District Court for the State of Colorado. Specifically, the complaints
allege that the defendants have refused to abide by the terms of the Partnership
Agreement and have taken actions highly detrimental to Telefenua. UIH SFCC seeks
monetary damages, a decree of specific performance requiring defendants to
perform their obligations and a constructive trust over defendants' partnership
interest. Defendants have filed in the federal court a motion to dismiss the
complaint for lack of subject matter jurisdiction. There has been no decision
issued as of this date. The Company intends to vigorously defend its position.
15. INCOME TAXES
In general, a United States corporation may claim a foreign tax credit against
its federal income tax expense for foreign income taxes paid or accrued. Because
the Company must calculate its foreign tax credit separately for dividends
received from each foreign corporation in which the Company owns 10.0% to 50.0%
of the voting stock, and because of certain other limitations, the Company's
ability to claim a foreign tax credit may be limited, particularly with respect
145
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
to dividends paid out of earnings subject to a high rate of foreign income tax.
Generally, the Company's ability to claim a foreign tax credit is limited to the
amount of U.S. taxes the Company pays with respect to its foreign source income.
In calculating its foreign source income, the Company is required to allocate
interest expense and overhead incurred in the United States between its United
States and foreign activities. Accordingly, to the extent United States
borrowings are used to finance equity contributions to its foreign subsidiaries,
the Company's ability to claim a foreign tax credit may be significantly
reduced. These limitations and the inability of the Company to offset losses in
one foreign jurisdiction against income earned in another foreign jurisdiction
could result in a high effective tax rate on the Company's earnings. The Company
has an ownership interest in Telefenua and Cable Star which are located in
Tahiti and Peru, respectively, with which the United States does not have income
tax treaties. As a result, the Company may be subject to increased withholding
taxes on dividend distributions and other payments from those entities and also
may be subject to double taxation with respect to income generated by those
entities.
The primary differences between taxable loss and net loss for financial
reporting purposes relate to accounting for the share in results of foreign
affiliated companies, the non-consolidation of its consolidated foreign
subsidiaries for United States tax purposes and the current non-deductibility of
interest expense on UIH A/P's senior notes. Since the Company holds the majority
of its foreign investments through affiliates which hold investments accounted
for under the equity method in foreign corporations, taxable income (loss)
generated by these affiliated companies does not flow through to the Company for
United States federal and state tax purposes, even though the Company records
its allocable share of affiliate income (losses) for financial reporting
purposes. Accordingly, due to the indefinite reversal of such amounts in future
periods, no deferred tax asset has been established for tax basis in excess of
the Company's book basis (approximately $133,000 and $79,000 at December 31,
1998 and February 28, 1998, respectively) in investments in affiliated
companies, which in turn have investments in foreign corporations.
The Company's United States tax net operating losses, totaling approximately
$174,000 at December 31, 1998, expire beginning in 2004 through 2014. The
Company's tax net operating loss carryforwards of its consolidated foreign
subsidiaries totaled $286,000 and $6,000 for UAP and ULA, respectively. The
significant components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Deferred Tax Assets:
-------------------
Tax net operating loss carryforward of consolidated foreign subsidiaries... $111,152 $ 70,196
Company's U.S. tax net operating loss carryforward......................... 66,099 65,525
Accrued interest expense on the UIH A/P Notes.............................. 32,885 18,856
Stock-based compensation................................................... -- --
Investment valuation allowance and other................................... 2,605 2,605
Basis difference in marketable equity securities........................... 3,070 3,192
Deferred compensation and severence........................................ 144 144
Other...................................................................... (319) 149
-------- --------
Total deferred tax assets 215,636 160,667
Valuation allowance........................................................ (215,636) (160,667)
-------- --------
Deferred tax assets, net of valuation allowance....................... -- --
Deferred Tax Liabilities:
------------------------
Other...................................................................... $ -- $ --
-------- --------
Total deferred tax liabilities -- --
-------- --------
Deferred tax liabilities, net......................................... $ -- $ --
======== ========
</TABLE>
146
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
Of the Company's 1998 consolidated net loss, $122,797 is derived from the
Company's 1998 foreign operations. 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 Ten For the Years Ended
Months Ended ----------------------------
December 31, February 28, February 28,
1998 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Expected income tax benefit at the U.S. statutory rate of 35%......... $(68,022) $(74,886) $(43,054)
Tax effect of permanent and other differences:
Change in valuation allowance....................................... 65,588 65,257 37,453
Non-deductible expenses............................................. 4,279 987 (1,296)
Amortization of outside basis associated with foreign investments... 1,176 12,119 10,400
State tax, net of federal benefit................................... (5,830) (6,419) (4,920)
International rate differences...................................... (855) (515) (181)
Non-deductible interest accretion on the UIH A/P Notes.............. 2,148 2,145 973
Amortization of licenses............................................ 1,516 1,312 625
-------- -------- --------
Total income tax benefit....................................... $ -- $ -- $ --
======== ======== ========
</TABLE>
16. SEGMENT AND GEOGRAPHIC INFORMATION
The Company adopted SFAS 131 for the ten months ended December 31, 1998. The new
rules establish revised standards for public companies relating to the reporting
of financial information about operating segments. The adoption of SFAS 131 did
not have a material effect on the Company's consolidated financial statements
but did affect the Company's segment information disclosure. The Company's
business has historically been derived from its video entertainment segment.
This service has been provided in various countries where the Company owns and
operates it systems. During 1998, the Company introduced telephony and
internet/data services and during 1999 the Company will continue to introduce
these services to several systems. To date, revenues and net operating results
from these services have not been significant, therefore segment information for
these services is not required. Accordingly, the Company's current reportable
segments are the various countries in which it operates multi-channel
television, programming and/or telephony operations. These reportable segments
are evaluated separately because each geographic region presents different
marketing strategies and technology issues as well as distinct economic climates
and regulatory constraints. The key operating performance criteria used in this
evaluation includes revenue growth, operating income before depreciation,
amortization and stock-based compensation expense ("Adjusted EBITDA"), and
capital expenditures. Senior management of the Company does not view segment
results below Adjusted EBITDA, therefore, interest income, interest expense,
provision for losses on investment related costs, gain on sale of investments,
share in results of affiliated companies, minority interests in subsidiaries and
other expenses are not broken out by segment below.
<TABLE>
<CAPTION>
For the Ten Months Ended December 31, 1998 As of December 31, 1998
------------------------------------------ ----------------------------------------------------
Depreciation Investments Property,
& Adjusted in Plant and Total Capital
Revenue Amortization EBITDA(1) Affiliates Equipment Assets Expenditures
------- ------------ --------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Europe:
Other................... $ -- $ -- $ -- $ 6,639 $ -- $ 6,639 $ --
------- -------- -------- -------- -------- -------- --------
Asia/Pacific:
Australia............... 74,209 (79,538) (25,725) 25,880 122,968 181,169 (71,197)
Other................... 3,060 (208) (7,655) 33,830 61 72,781 (337)
------- -------- -------- -------- -------- -------- --------
Total Asia/Pacific.... 77,269 (79,746) (33,380) 59,710 123,029 253,950 (71,534)
------- -------- -------- -------- -------- -------- --------
Latin America:
Chile................... -- -- -- 84,975 -- 84,975 --
Other................... 4,512 (1,637) (10,264) 23,957 11,715 73,048 (3,238)
------- -------- -------- -------- -------- -------- --------
Total Latin America... 4,512 (1,637) (10,264) 108,932 11,715 158,023 (3,238)
------- -------- -------- -------- -------- -------- --------
Corporate & Other......... -- (834) (1,209) -- 7,944 13,543 (682)
------- -------- -------- -------- -------- -------- --------
Total................. $81,781 $(82,217) $(44,853) $175,281 $142,688 $432,155 $(75,454)
======= ======== ======== ======== ======== ======== ========
</TABLE>
147
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Year Ended February 28, 1998 As of February 28, 1998
------------------------------------------ ---------------------------------------------------
Depreciation Investments Property,
& Adjusted in Plant and Total Capital
Revenue Amortization EBITDA(1) Affiliates Equipment Assets Expenditures
------- ------------ --------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Europe:
Other.................... $ -- $ -- $ -- $ 14,329 $ -- $ 14,329 $ --
------- -------- -------- -------- -------- -------- ---------
Asia/Pacific:
Australia................ 64,370 (77,557) (24,082) -- 147,871 202,325 (84,375)
New Zealand.............. 473 (2,033) (6,688) -- 26,484 43,349 (16,258)
Other.................... 4,118 (1,212) (7,192) 14,556 8,746 48,871 (502)
------- -------- -------- -------- -------- -------- ---------
Total Asia/Pacific..... 68,961 (80,802) (37,962) 14,556 183,101 294,545 (101,135)
------- -------- -------- -------- -------- -------- ---------
Latin America:
Argentina................ 17,627 (3,296) 2,836 -- -- -- (1,329)
Chile.................... -- -- -- 78,165 -- 78,165 --
Other.................... 1,617 (207) (11,114) 42,168 6,541 69,102 (3,112)
------- -------- -------- -------- -------- -------- ---------
Total Latin America.... 19,244 (3,503) (8,278) 120,333 6,541 147,267 (4,441)
------- -------- -------- -------- -------- -------- ---------
Corporate & Other.......... 439 (899) (7,637) -- 9,042 18,288 (1,200)
------- -------- -------- -------- -------- -------- ---------
Total.................. $88,644 $(85,204) $(53,877) $149,218 $198,684 $474,429 $(106,776)
======= ======== ======== ======== ======== ======== =========
</TABLE>
For the Year Ended February 28, 1997
--------------------------------------
Depreciation
& Adjusted
Revenue Amortization EBITDA(1)
------- ------------ ---------
Asia/Pacific:
Australia................ $21,354 $(34,087) $(25,471)
Tahiti................... 3,513 (1,382) (816)
Other.................... 145 (800) (7,935)
------- -------- --------
Total Asia/Pacific..... 25,012 (36,269) (34,222)
------- -------- --------
Latin America:
Argentina................ 4,385 (1,597) (185)
Other.................... 1,409 (192) (3,132)
------- -------- --------
Total Latin America.... 5,794 (1,789) (3,317)
------- -------- --------
Corporate & Other.......... (35) (508) (8,402)
------- -------- --------
Total.................. $30,771 $(38,566) $(45,941)
======= ======== ========
(1) "Adjusted EBITDA" represents earnings before net interest expense, income
tax expense, depreciation and 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. Management believes Adjusted EBITDA helps
investors to assess the cash flow from operations from period to period and
thus to value the Company's 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 Adjusted
EBITDA. 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 presentation 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.
148
<PAGE>
UNITED INTERNATIONAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
Adjusted EBITDA reconciles to the consolidated statement of operations as
follows:
<TABLE>
<CAPTION>
For the Ten For the Years Ended
Months Ended February 28,
December 31, -------------------------
1998 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
Net operating loss.......................... $(129,739) $(139,081) $(84,507)
Depreciation and amortization............... 82,217 85,204 38,566
Stock-based compensation expense............ 2,669 -- --
--------- --------- --------
Consolidated Adjusted EBITDA........... $ (44,853) $ (53,877) $(45,941)
========= ========= ========
</TABLE>
17. SUBSEQUENT EVENTS
VTRH ACQUISITION
On April 29, 1999, an indirect wholly owned subsidiary of the Company acquired a
60.0% interest in VTRH (the "VTRH Acquisition"). This acquisition, combined with
the 40.0% interest in VTRH that is owned by another indirect wholly owned
subsidiary of the Company, gives the Company an indirect 100% interest in VTRH.
The purchase price for the 60.0% interest in VTRH was approximately $258,000 in
cash, which included repayment of advances from the other shareholders of VTRH
and certain other expenses. In addition, the Company provided capital for VTRH
to prepay approximately $126,000 of existing bank indebtedness and a promissory
note from the Company to one of the other shareholders of VTRH.
To finance the prepayment of VTRH's indebtedness and a portion of the purchase
price for the VTRH Acquisition, The Company concurrently sold in a private
transaction $208,900 of 10.875% Senior Discount Notes due 2009 (the "1999
Notes"). The remaining portion of the VTRH Acquisition was funded with cash on
hand and approximately $145,000 borrowed under a Senior Secured Credit Facility
between VTRH and a syndicate of banks (the "VTRH Bank Facility").
The VTRH Bank Facility consists of two tranches - Tranche A, which is a single
term loan facility with an aggregate principal amount of $140,000, substantially
all of which was borrowed for the VTRH Acquisition, and Tranche B, which is a
three-year term loan facility, with an aggregate principal amount of up to
$80,000. Both tranches have been guaranteed by VTRH and its subsidiaries. The
banks are in the process of syndicating the final approximately $50,000 of the
VTRH Bank Facility. The Company has agreed to participate in the syndication as
necessary.
The 1999 Notes have essentially the same terms as the 1998 Notes, except for the
maturity and coupon rate and that the 1999 Notes are not secured.
149
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To United International Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of UIH Europe, Inc.
(a Delaware corporation) and subsidiaries as of December 31, 1998 and February
28, 1998, and the related consolidated statements of operations, parent's equity
and cash flows for the ten months ended December 31, 1998 (see Note 2) and the
years ended February 28, 1998 and February 28, 1997. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of UIH Europe, Inc. and
subsidiaries as of December 31, 1998 and February 28, 1998 and the results of
their operations and their cash flows for the ten months ended December 31, 1998
and for the years ended February 28, 1998 and February 28, 1997 in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
April 30, 1999
150
<PAGE>
<TABLE>
<CAPTION>
UIH EUROPE, INC.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................................................... $ 15,646 $ 49,166
Restricted cash......................................................................................... 16,012 11,000
Subscriber receivables, net of allowance for doubtful accounts of $4,899 and $3,191, respectively....... 6,818 4,663
Costs to be reimbursed by affiliated companies.......................................................... 14,432 7,411
Other receivables....................................................................................... 13,675 4,070
Inventory............................................................................................... 12,762 6,455
Other current assets, net............................................................................... 8,283 7,958
---------- --------
Total current assets.............................................................................. 87,628 90,723
Investments in and advances to affiliated companies, accounted for under the equity method, net........... 254,209 190,565
Marketable equity securities of parent, at fair value..................................................... 53,499 33,074
Property, plant and equipment, net of accumulated depreciation of $46,406 and $3,675, respectively ....... 319,046 239,452
Goodwill and other intangible assets, net of accumulated amortization of $20,693 and $2,411,
respectively............................................................................................. 359,804 359,161
Deferred financing costs, net of accumulated amortization of $4,914 and $109, respectively ............... 11,462 11,853
Non-current restricted cash and other assets, net......................................................... 1,748 25,105
---------- --------
Total assets...................................................................................... $1,087,396 $949,933
========== ========
LIABILITIES AND PARENT'S DEFICIT
Current liabilities
Accounts payable, including related party payables of $8,281 and $6,056, respectively .................. $ 75,078 $ 60,242
Accrued liabilities..................................................................................... 30,097 17,191
Subscriber prepayments and deposits..................................................................... 24,210 --
Short-term debt......................................................................................... 33,504 --
Notes payable to parent................................................................................. 92,609 --
Current portion of other long-term debt................................................................. 60,063 126,643
Other current liabilities............................................................................... -- 12,986
---------- --------
Total current liabilities......................................................................... 315,561 217,062
Other long-term debt...................................................................................... 621,560 497,039
Deferred compensation..................................................................................... 173,251 --
Deferred taxes............................................................................................ 4,580 28,776
Other long-term liabilities............................................................................... 4,655 --
---------- --------
Total liabilities................................................................................. 1,119,607 742,877
Minority interests in subsidiaries........................................................................ 13,722 3,356
---------- --------
Parent's (deficit) equity:
Common stock, $0.01 par value, 1,000 shares authorized, 100 and 100 shares issued and
outstanding, respectively, (pledged as collateral under parent's senior discount notes)................ -- --
Additional paid-in capital.............................................................................. 339,074 329,463
Accumulated deficit..................................................................................... (383,651) (102,844)
Other cumulative comprehensive loss..................................................................... (1,356) (22,919)
---------- --------
Total parent's (deficit) equity................................................................... (45,933) 203,700
---------- --------
Commitments and Contingencies (Note 12 and 13)
Total liabilities and parent's (deficit) equity................................................... $1,087,396 $949,933
========== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
151
<PAGE>
<TABLE>
<CAPTION>
UIH EUROPE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands, except share and per share amounts)
For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------
1998 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Revenue.............................................................................. $ 172,287 $ 9,945 $ --
System operating expense............................................................. (57,123) (2,754) --
System selling, general and administrative expense................................... (56,401) (3,418) --
Corporate general and administrative expense......................................... (178,279) (7,320) (4,693)
Depreciation and amortization........................................................ (76,550) (6,086) --
--------- -------- --------
Net operating loss........................................................... (196,066) (9,633) (4,693)
Interest income ..................................................................... 3,440 -- --
Interest expense..................................................................... (38,524) (2,045) --
Interest expense, related party...................................................... (6,022) -- --
Provision for losses on marketable equity securities and investment related costs.... (3,131) -- --
Other income, net.................................................................... 1,338 74 --
--------- -------- --------
Net loss before other items................................................... (238,965) (11,604) (4,693)
Share in results of affiliated companies, net........................................ (25,679) (42,431) (24,662)
Minority interests in subsidiaries................................................... 793 (117) --
--------- -------- --------
Net loss...................................................................... $(263,851) $(54,152) $(29,355)
========= ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
152
<PAGE>
<TABLE>
<CAPTION>
UIH EUROPE, INC.
CONSOLIDATED STATEMENTS OF PARENT'S (DEFICIT) EQUITY
(Stated in thousands, except share amounts)
Other
Common Stock Additional Cumulative Total
-------------------- Paid-In Accumulated Comprehensive Comprehensive
Shares Amount Capital Deficit Loss(1) Loss Total
---------- -------- ---------- ----------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, February 29, 1996............. 100 $ -- $154,197 $(19,337) $(3,758) $ -- $131,102
Capital contributions from parent....... -- -- 5,044 -- -- -- 5,044
Net loss................................ -- -- -- (29,355) -- (29,355) (29,355)
Change in cumulative translation
adjustments............................ -- -- -- -- (7,289) (7,289) (7,289)
--- ---- -------- --------- ------- --------- --------
Balances, February 28, 1997............. 100 -- 159,241 (48,692) (11,047) $ (36,644) 99,502
=========
Capital contributions from parent....... -- -- 170,222 -- -- $ -- 170,222
Net loss................................ -- -- -- (54,152) -- (54,152) (54,152)
Change in cumulative translation
adjustments............................ -- -- -- -- (11,872) (11,872) (11,872)
--- ---- -------- --------- ------- --------- --------
Balances, February 28, 1998............. 100 -- 329,463 (102,844) (22,919) $ (66,024) 203,700
=========
Non-cash contributions from parent...... -- -- 3,825 -- -- $ -- 3,825
Gain on deemed issuance of stock
by subsidiary.......................... -- -- 5,786 -- -- -- 5,786
Elimination of historical two-month
reporting difference due to change
in fiscal year end..................... -- -- -- (16,956) -- -- (16,956)
Net loss................................ -- -- -- (263,851) -- (263,852) (263,851)
Change in unrealized gain on
investments............................ -- -- -- -- 23,350 23,350 23,350
Change in cumulative translation
adjustments............................ -- -- -- -- (1,787) (1,787) (1,787)
--- ---- -------- -------- ------- --------- --------
Balances, December 31, 1998............. 100 $ -- $339,074 $(383,651) $(1,356) $(242,289) $(45,933)
=== ==== ======== ========= ======= ========= ========
(1) Other Cumulative Comprehensive Loss at the end of each reporting period
consists of the following:
As of As of February 28, As of
February 29, ---------------------- December 31,
1996 1997 1998 1998
------------ --------- --------- ------------
Foreign currency translation adjustments $(3,758) $(11,047) $(22,919) $(24,706)
Unrealized gain on investment........... -- -- -- 23,350
------- -------- -------- --------
Total...................... $(3,758) $(11,047) $(22,919) $ (1,356)
======= ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
153
<PAGE>
<TABLE>
<CAPTION>
UIH EUROPE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)
For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------
1998 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................................................. $(263,851) $(54,152) $(29,355)
Elimination of historical two month reporting difference due to change in
fiscal year end...................................................................... (16,956) -- --
Adjustments to reconcile net loss to net cash flows from operating activities:
Share in results of affiliated companies, net....................................... 31,903 42,431 24,662
Allocation of general, administrative and other expenses accounted for as a net
contribution of capital by parent.................................................. 3,825 7,322 4,693
Minority interests share of (income) losses......................................... (569) 117 --
Depreciation and amortization....................................................... 92,986 6,086 --
Amortization of deferred financing costs............................................ 4,640 109 --
Compensation expense related to stock options....................................... 162,124 -- --
Provision for losses on marketable equity securities and investment
related costs...................................................................... 3,131 -- --
Increase in receivables, net........................................................ (9,919) (709) --
(Increase) decrease in other assets................................................. (5,364) 422 --
Increase in accounts payable, accrued liabilities and other......................... 47,705 5,574 --
---------- -------- --------
Net cash flows from operating activities...................................... 49,655 7,200 --
---------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash released.............................................................. 19,576 -- --
Investments in and advances to affiliated companies................................... (100,665) (111,628) --
Proceeds from sale of investments in affiliated companies............................. 19,968 -- --
New acquisitions, net of cash acquired................................................ (109,881) -- --
Capital expenditures.................................................................. (141,547) (7,461) --
---------- -------- --------
Net cash flows from investing activities...................................... (312,549) (119,089) --
---------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term and long-term borrowings.................................... 281,648 505 --
Deferred financing costs.............................................................. (5,037) -- --
Repayments of long and short-term borrowings.......................................... (138,175) (1,456) --
Proceeds from note payable to parent.................................................. 86,468 -- --
Cash contribution from parent......................................................... -- 162,500 --
Cash paid to minority interest partners............................................... (253) -- --
---------- -------- --------
Net cash flows from financing activities...................................... 224,651 161,549 --
---------- -------- --------
EFFECT OF EXCHANGE RATES ON CASH...................................................... 4,723 (494) --
---------- -------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...................................... (33,520) 49,166 --
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................ 49,166 -- --
---------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................................. $ 15,646 $ 49,166 $ --
========== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
154
<PAGE>
<TABLE>
<CAPTION>
UIH EUROPE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Stated in thousands)
For the Ten For the Years Ended
Months Ended February 28,
December 31, --------------------------
1998 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
NON-CASH INVESTING AND FINANCING ACTIVITIES:
CONTRIBUTION OF DUTCH CABLE SYSTEMS TO NEW JOINT VENTURE:
Working capital................................................................... $ (1,871) $ -- $ --
Investments in affiliated companies............................................... 96,866 -- --
Property, plant and equipment..................................................... 85,037 -- --
Goodwill and other intangible assets.............................................. 78,515 -- --
Senior secured notes and other debt............................................... (111,553) -- --
Other liabilities................................................................. (17,417) -- --
-------- --------- ------
Total net assets contributed................................................ $129,577 $ -- $ --
======== ========= ======
Seller note for purchase of system in Hungary....................................... $ 18,000 $ -- $ --
======== ========= ======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest............................................................ $ 34,706 $ -- $ --
======== ========= ======
Cash received for interest........................................................ $ 3,513 $ -- $ --
======== ========= ======
ACQUISITION OF DUTCH CABLE ASSETS:
Property, plant and equipment and other long-term assets........................... $(51,632) $ -- $ --
Goodwill and other intangible assets............................................... (36,416) -- --
-------- --------- ------
Total cash paid............................................................. $(88,048) $ -- $ --
======== ========= ======
ACQUISITION OF ADDITIONAL 50.0% INTEREST IN EUROPEAN SUBSIDIARY:
Working capital, including cash acquired of $50,872................................ $ -- $ (7,158) $ --
Investment in UIH Class A Common Stock............................................. -- (33,074) --
Investments in affiliated companies................................................ -- (167,945) --
Property, plant and equipment and other long-term assets........................... -- (273,988) --
Goodwill and other intangible assets............................................... -- (383,503) --
Elimination of UIH equity investment............................................... -- 46,319 --
Long-term debt..................................................................... -- 624,633 --
Other liabilities.................................................................. -- 32,216 --
-------- --------- ------
Total cash paid............................................................. $ -- $(162,500) $ --
======== ========= ======
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
155
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in thousands, except share and per share amounts)
1. ORGANIZATION AND NATURE OF OPERATIONS
UIH Europe, Inc. formerly known as Joint Venture, Inc. (the "Company" or "UIHE")
was formed as a Delaware corporation in September 1989, for the purpose of
developing, acquiring and managing European multi-channel television,
programming and telephony operations. The Company is a wholly-owned subsidiary
of United International Holdings, Inc. ("UIH").
The following chart presents a summary of the Company's significant investments
in multi-channel television and telephony operations as of December 31, 1998.
***********************************************************
* *
* UIH *
* *
***********************************************************
100% *
***********************************************************
* *
* UIHE *
* *
***********************************************************
*
100%(1)*
***********************************************************
* *
* United Pan-Europe Communications N.V. ("UPC") *
* *
***********************************************************
*
*
***********************************************************
*Austria: *
* Telekabel Group 95.0% *
*Belgium: *
* Radio Public N.V./S.A. ("TVD") 100.0% *
*Czech Republic: *
* Kabel Net Group ("Kabel Net") 100.0% *
* Ceska Programova Spolecnost SRO ("TV Max") 100.0% *
*France: *
* Mediareseaux Marne S.A. ("Mediareseaux") 99.6% *
*Hungary: *
* Telekabel Hungary BV ("Telekabel Hungary") 79.3% *
* Kabelkom Kabeltelevizio KFT ("Telekabel *
* Hungary Programming") 50.0%(2)*
* Monor Telefon Tarsasag, Rt ("Monor") 44.8% *
*Ireland: *
* Tara Television Limited ("Tara") 80.0% *
*Israel: *
* Tevel Israel International Communications *
* Ltd. ("Tevel") 46.6% *
*Malta: *
* Melita Cable TV PLC ("Melita") 50.0% *
*The Netherlands: *
* United Telekabel Holding NV ("UTH") 51.0%(3)*
*Norway: *
* Janco Multicom AS ("Janco") 100.0% *
*Romania: *
* Control Cable Ventures SRL ("Control Cable") 100.0% *
* Multicanal Holdings SRL ("Multicanal") 100.0% *
* Eurostat CA-TV SRL ("Eurosat") 51.0% *
*Slovak Republic: *
* Kabeltel SRO ("Kabeltel") 100.0% *
* Trnavatel SRO ("Trnavatel") 75.0% *
*Spain/Portugal: *
* Ibercom, Inc. ("IPS") 33.5%(4)*
***********************************************************
(1) As of December 31, 1998, UIHE held effectively all of the voting control of
UPC and owned all of its issued and outstanding shares, including
approximately 7.2% of such shares, which had been registered in the name of
a foundation controlled by UIH to support UPC's employee stock option plan.
In February 1999, UPC successfully completed an initial public offering
selling 44.6 million of its shares on the Amsterdam Stock Exchange and
Nasdaq National Market System and completed a sale of approximately 1.6
million shares to a strategic investor, resulting in an ownership interest
by UIHE of approximately 64.3% subsequent to the offering.
156
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in thousands, except share and per share amounts)
(2) In March 1999, Time Warner Entertainment Company ("TWE") exercised its
option to acquire UPC's interest in Telekabel Hungary Programming (see Note
3).
(3) On February 17, 1999, UPC acquired the remaining 49.0% of UTH for
euro250,187 (approximately $282,738) (see Note 3).
(4) UIH transferred its interest in IPS to UPC in February 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had a net working capital deficit of
$227,933. However, subsequent to December 31, 1998, UPC completed an initial
public offering resulting in approximately $1,431,600 in net proceeds.
Management believes that these funds will enable UPC to fund the operating and
development requirements of its subsidiaries and to cover corporate overhead for
the next year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and all subsidiaries where it exercises a controlling financial interest
through the ownership of a majority voting interest, except for UTH, where
because of certain minority shareholders rights the Company accounts for its
investment in UTH using the equity method of accounting. The Company began
consolidating UPC upon acquisition on December 11, 1997. Prior to December 11,
1997, the Company accounted for its investment in UPC under the equity method.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
CHANGE IN FISCAL YEAR END
Prior to the ten months ended December 31, 1998, the Company's fiscal year end
was February 28, and it accounted for its share of the income or loss of its
operating companies based on the calendar year results of each operating
company. This created a two month delay in reporting the operating company
results in the Company's consolidated results for its fiscal year-end. On
February 24, 1999, the Company changed its fiscal year-end from the last day in
February to the last day in December, effective December 31, 1998. To effect the
transition to the new fiscal year end, the combined results of operations of the
operating companies for January and February 1998, a loss of $16,956, has been
reported as a one-time charge to retained deficit as of March 1, 1998 in the
consolidated statement of parent's deficit. Consequently, the consolidated
statement of operations presents the consolidated results of the Company and its
subsidiaries for the ten months ended December 31, 1998. For comparative
purposes, the Company's consolidated revenue, net operating loss and net loss
were $9,945, $2,318 and $36,750, respectively, for the ten months ended December
31, 1997.
CASH AND CASH EQUIVALENTS AND SHORT-TERM LIQUID INVESTMENTS
Cash and cash equivalents include cash and investments with original maturities
of less than three months. Short-term liquid investments include certificates of
deposit, commercial paper, corporate bonds and government securities which have
original maturities greater than three months but less than twelve months.
Short-term liquid investments are classified as available-for-sale and are
reported at fair market value.
RESTRICTED CASH
Cash held as collateral for letters of credit and other loans is classified
based on the expected expiration of such facilities. Cash held in escrow and
restricted to a specific use is classified based on the expected timing of such
disbursement.
157
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
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.
INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
EQUITY METHOD
For those investments in unconsolidated subsidiaries and companies in which the
Company's voting interest is 20.0% to 50.0%, 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, 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 affiliate, limited to the extent of the Company's investment in
and advances to the affiliate, 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.
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 incorporate overhead expense and interest
charges incurred during the period of construction; investment subsidies are
deducted. Upon disconnection of a subscriber, the remaining book value of the
subscriber equipment, excluding converters which are recovered upon
disconnection, and the capitalized labor are written off and accounted for as an
operating cost. Depreciation is calculated using the straight-line method over
the economic life of the asset.
The economic lives of property, plant and equipment at acquisition are as
follows:
Cable distribution networks.................... 7-20 years
Subscriber premises equipment and converters... 5 years
MMDS/DTH distribution facilities............... 7-20 years
Office equipment, furniture and fixtures....... 3-8 years
Buildings and leasehold improvements........... 20-33 years
Other.......................................... 3-10 years
GOODWILL AND OTHER INTANGIBLE ASSETS
The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized on a straight-line basis over 15 years.
Licenses in newly-acquired companies are recognized at the fair market value of
those licenses at the date of acquisition. Licenses in new franchise areas
include the capitalization of direct costs incurred in obtaining the license.
The license value is amortized on a straight-line basis over the initial license
period, up to a maximum of 20 years.
RECOVERABILITY OF TANGIBLE AND INTANGIBLE ASSETS
The Company evaluates the carrying value of all tangible and intangible assets
whenever events or circumstances indicate the carrying value of assets may
exceed their recoverable amounts. An impairment 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.
158
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
SUBSCRIBER PREPAYMENTS AND DEPOSITS
Payments received in advance for cable television service are deferred and
recognized as revenue when the associated services are provided. Deposits are
recorded as a liability upon receipt and refunded to the subscriber upon
disconnection.
OTHER COMPREHENSIVE LOSS
The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which requires that an enterprise
(i) classify items of other comprehensive income (loss) by their nature in a
financial statement and (ii) display the accumulated balance of other
comprehensive income (loss) separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position.
REVENUE RECOGNITION
Revenue is primarily derived from the sale of cable television services to
subscribers and is recognized in the period the related services are provided.
Initial installation fees are recognized as revenue in the period in which the
installation occurs, to the extent installation fees are equal to or less than
direct selling costs, which are expensed. To the extent installation fees exceed
direct selling costs, the excess fees are deferred and amortized over the
average contract period. All installation fees and related costs with respect to
reconnections and disconnections are recognized in the period in which the
reconnection or disconnection occurs because reconnection fees are charged at a
level equal to or less than related reconnection costs.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. Concentrations of credit
risk with respect to trade receivables are limited due to the Company's large
number of customers and their dispersion across many different countries
worldwide.
STOCK-BASED COMPENSATION
Stock-based compensation is recognized using the intrinsic value method, which
results in compensation expense for the difference between the grant price and
the fair market value at each measurement date. UPC has incentive stock option
plans for their employees. With respect to these plans, the rights conveyed to
employees are the substantive equivalents to stock appreciation rights.
Accordingly, compensation expense and deferred compensation expense are
recognized at each financial statement date based on the difference between the
grant price and the estimated fair value of the respective subsidiary's common
stock.
INCOME TAXES
The Company accounts for income taxes under the asset and liability method which
requires recognition of deferred tax assets and liabilities for the expected
future income tax consequences of transactions which have been included in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and income tax basis of assets, liabilities and loss carryforwards
using enacted tax rates in effect for the year in which the differences are
expected to reverse. Net deferred tax assets are then reduced by a valuation
allowance if management believes it 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.
STAFF ACCOUNTING BULLETIN NO. 51 ("SAB 51") ACCOUNTING POLICY
Gains realized as a result of stock sales by the Company's subsidiaries are
recorded in the statement of operations, except for any transactions which must
be credited directly to equity in accordance with the provisions of SAB 51.
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, except for countries which have
experienced hyper-inflationary economies. For countries which have
hyper-inflationary economies, the financial statements are prepared in U.S.
159
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
dollars. 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 U.S. dollars that result in
unrealized gains or losses are referred to as translation adjustments.
Cumulative translation adjustments are recorded as a separate component of
stockholders' (deficit) equity, included in Other Comprehensive 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.
Certain of the Company's foreign 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 11, 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 (including 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, Hungary, Ireland, Israel and Malta.
NEW ACCOUNTING PRINCIPLES
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"), which requires that a public business
enterprise report certain financial and descriptive information about its
reportable segments. The Company adopted SFAS 131 for the ten months ended
December 31, 1998.
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), which requires that companies recognize all
derivatives as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133, accounting for changes in fair value of a derivative depends on
its intended use and designation. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. The Company is currently assessing the effect of
this new standard.
The American Institute of Certified Public Accountants recently 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 its financial position or results of operations.
The American Institute of Certified Public Accountants recently issued Statement
of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"),
which is required to be adopted by affected companies for fiscal years beginning
after December 15, 1998. SOP 98-5 defines start-up and organization costs, which
must be expensed as incurred. In addition, all deferred start-up and
organization costs existing as of January 1, 1999 must be written-off and
accounted for as a cumulative effect of an accounting change. The Company does
not expect the adoption of SOP 98-5 to have a material effect on its financial
position or results of operations.
160
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
3. ACQUISITIONS AND DISPOSITIONS
COMBIVISIE AND CNBH
Effective January 1, 1998, UPC acquired certain assets, including the Dutch
cable systems of Combivisie for $88,048. The purchase was funded with a Dutch
guilder ("NLG") 60,000 ($29,226) draw on UPC's Senior Revolving Credit Facility
(as defined in Note 10) and NLG120,762 ($58,822) from a UPC credit facility with
a bank which was subsequently refinanced. Subsequent to the transaction, the
assets and liabilities of UPC's other Dutch systems and Combivisie were merged,
forming Cable Network Brabant Holding B.V. ("CNBH"), a wholly-owned subsidiary
of UPC.
TELEKABEL HUNGARY AND TELEKABEL HUNGARY PROGRAMMING
On June 29, 1998, UPC acquired TWE's interest in its Hungarian multi-channel
television system assets for $9,500 in cash and a non-interest bearing
promissory note in the amount of $18,000 (the "Time Warner Note"). UPC and TWE
retained their respective percentage interests in Telekabel Hungary Programming.
UPC granted TWE an option to acquire UPC's interest in Telekabel Hungary
Programming along with certain other assets 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"), along with
the assets acquired from TWE, 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, TWE exercised its option to
acquire UPC's interest in Telekabel Hungary Programming and the Time Warner Note
was cancelled.
UTH
In August 1998, UPC merged its Dutch cable television and telecommunications
assets, consisting of its 50.0% interest in A2000 Holding NV ("A2000") and its
wholly-owned subsidiary CNBH, with those of the Dutch energy company N.V. NUON
Energie-Onderneming voor Gelderland, Friesland en Flevoland ("NUON"), forming a
new company, UTH (the "UTH Transaction"). The transaction was accounted for as a
formation of a joint venture with NUON's and UPC's net assets recorded at their
historical carrying values. Although UPC retained a majority economic and voting
interest in UTH, because of joint governance on most significant operating
decisions, UPC accounted for its investment in UTH using the equity method of
accounting.
On February 17, 1999, UPC acquired the remaining 49.0% of UTH from NUON (the
"NUON Transaction") for euro235,086 ($265,672). In addition, UPC repaid NUON and
assumed from NUON a euro15,101 ($17,066) subordinated loan, including accrued
interest, dated December 31, 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.
The following unaudited pro forma condensed consolidated operating results for
the ten months ended December 31, 1998 and the year ended February 28, 1998
gives effect to the UTH Transaction and the NUON Transaction as if they had
occurred at the beginning of the periods presented. This unaudited 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 dates. The pro forma adjustments are
based upon currently available information and upon certain assumptions that
management believes are reasonable.
<TABLE>
<CAPTION>
For the Ten Months For the Year Ended
Ended December 31, 1998 February 28, 1998
------------------------ -------------------------
Historical Pro Forma Historical Pro Forma
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue................................ $ 172,287 $ 253,295 $ 9,945 $ 9,945
========= ========= ======== ========
Net loss............................... $(263,852) $(299,708) $(54,152) $(68,508)
========= ========= ======== ========
</TABLE>
161
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
TEVEL AND MELITA
In November 1998, UPC (i) acquired from Tele-Communications International, Inc.
("TINTA") its indirect 23.3% and 25.0% interests in the Tevel and Melita systems
for $91,500, doubling UPC's respective ownership in these systems to 46.6% and
50.0%, respectively, (ii) purchased an additional 5.0% interest in Princes
Holdings and 5.0% of Tara in consideration for 384,531 shares of UIH Class A
Common Stock held by UPC, and (iii) sold the 5.0% interest in Princes Holdings,
together with its existing 20.0% interest, to TINTA for $20,500. The net payment
of $71,000 to TINTA ($68,000 after closing adjustments) was funded with the
proceeds of a $90,000 promissory note made by a subsidiary of UPC to its primary
partners in the Tevel system (the "DIC Loan").
UPC
In July 1995, the Company 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 95.0% interest in
cable television systems in Austria, its 100% interest in cable television
systems in Belgium, its minority interests in multi-channel television systems
in Germany, the Netherlands (Eindhoven) and France. The Company contributed its
interests in multi-channel television systems in Israel, Ireland, the Czech
Republic, Malta, Norway, Hungary, Sweden and Spain. The Company also contributed
$78,200 in cash to UPC and issued to Philips 3,169,151 shares of its Class A
Common Stock having a value of $50,000 (at date of closing). In addition, UPC
issued to Philips $133,600 of convertible subordinated pay-in-kind notes (the
"PIK Notes"). As a result of this transaction, the Company and Philips each
owned a 50.0% economic and voting interest in UPC.
On December 11, 1997, the Company acquired Philips' entire interest in UPC (the
"UPC Transaction"). As part of the UPC Transaction, (i) UPC purchased the
3,169,151 shares of Class A Common Stock of the Company held by Philips, (ii)
UIH purchased NLG169,899 ($84,336) of the accreted amount of UPC's PIK Notes and
redeemed them for 15,180,261 shares of UPC, (iii) UPC repaid to Philips the
remaining NLG170,371 ($84,570) accreted amount of the PIK Notes, (iv) UIH
purchased 13,121,604 shares of UPC directly from Philips, and (v) UPC
repurchased Philips' remaining equity interest in UPC (24,378,396 shares). The
Company effectively owned 100% of UPC as a result of the UPC Transaction, except
for shares held by a foundation controlled by UIH which administers the UPC
stock plan for the benefit of UPC employees and management, pursuant to UPC's
equity incentive plans. The final purchase price (excluding transaction-related
costs) was $425,200, comprised of $168,700 for the purchase by the Company and
repayment by UPC of UPC's PIK Notes, $33,200 allocated to the purchase by UPC of
3,169,151 shares of the Company's Class A Common Stock and $223,300 allocated to
the purchase of Philips' interest in UPC. The UPC Transaction was funded by a
long-term revolving credit facility through UPC with a syndicate of banks
($151,500), a bridge bank facility through a subsidiary of UPC ($111,200) and a
cash investment by the Company of $162,500.
Details of the net assets acquired, based on a preliminary allocation of the
purchase price, which were denominated in Dutch guilders and translated to U.S.
dollars using the exchange rate on the date of acquisition, were as follows:
Working capital, including cash acquired of $50,872......... $ (7,158)
Investment in UIH Class A Common Stock...................... (33,074)
Investment in affiliated companies.......................... (167,945)
Property, plant and equipment and other long-term assets.... (273,988)
Goodwill and other intangible assets........................ (383,503)
Elimination of UIH equity investment........................ 46,319
Long-term debt.............................................. 624,633
Other liabilities........................................... 32,216
---------
Total cash paid.......................................... $(162,500)
=========
JANCO
In January 1997 UPC deposited NLG47,000 ($24,867) with a bank as collateral for
an obligation to seller to purchase the remaining 29.8% in Janco that UPC did
not already own. In November 1998, UPC exercised its call option and acquired
the remaining minority shareholder interest in Janco for NLG37,200 ($19,683).
The residual restricted funds held as collateral were released.
162
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
PRO FORMA FINANCIAL INFORMATION FOR THE YEARS ENDED FEBRUARY 28, 1998 AND 1997
The following pro forma condensed consolidated operating results for the years
ended February 28, 1998 and 1997 give effect to the UPC Transaction as if it had
occurred at the beginning of the periods presented. This pro forma condensed
consolidated financial information and notes thereto do not purport to represent
what the Company's results of operations would actually have been if such
transaction had in fact occurred on such dates. The pro forma adjustments are
based upon currently available information and upon certain assumptions that
management believes are reasonable.
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
February 28, 1998 February 28, 1997
------------------------- --------------------------
Historical Pro Forma(1) Historical Pro Forma (2)
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Revenue................................ $ 9,945 $ 173,344 $ -- $145,076
======== ========= ======== ========
Net loss............................... $(54,152) $(104,925) $(29,355) $(75,576)
======== ========= ======== ========
</TABLE>
(1) Represents the historical amounts included in UPC's consolidated statement
of operations for the period from January 1, 1997 to December 10, 1997,
additional depreciation and amortization related to the step-up in basis in
tangible assets and additional goodwill, the net decrease in equity in
losses of affiliated companies, and the net increase in interest expense as
a result of the UPC Transaction.
(2) Represents the historical amounts included in UPC's consolidated statement
of operations for the year ended December 31, 1996, additional depreciation
and amortization related to the step-up in basis in tangible assets and
additional goodwill, the net decrease in equity in losses of affiliated
companies, and the net increase in interest expense as a result of the UPC
Transaction.
4. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER
THE EQUITY METHOD
<TABLE>
<CAPTION>
As of December 31, 1998
-------------------------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation
Affiliated Companies Received Affiliated Companies Adjustments Total
-------------------- --------- -------------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
UTH................................. $135,290 $ -- $(11,447) $8,288 $132,131
Tevel............................... 96,340 (6,090) (390) (306) 89,554
Melita.............................. 14,078 -- 997 724 15,799
Telekabel Hungary Programming....... 12,263 -- (3,881) 28 8,410
Monor............................... 11,301 -- (2,601) (7,849) 851
Other............................... 7,595 -- (531) 400 7,464
-------- ------- -------- ------ --------
Total....................... $276,867 $(6,090) $(17,853) $1,285 $254,209
======== ======= ======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
As of February 28, 1998
---------------------------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation
Affiliated Companies Received Affiliated Companies Adjustments Total
-------------------- --------- -------------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
A2000............................... $109,373 $ -- $(287) $ 4 $109,090
Melita, Princes Holdings and Tevel.. 51,005 -- (32) -- 50,973
Kabelkom............................ 28,605 -- 124 (1) 28,728
Other............................... 1,774 -- -- -- 1,774
-------- ------- ----- --- --------
Total....................... $190,757 $ -- $(195) $ 3 $190,565
======== ======= ===== === ========
</TABLE>
163
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
As of December 31, 1998 and February 28, 1998, the Company had the following
differences related to the excess of its cost over its proportionate interest in
each affiliate's net tangible assets included in the above table. Such
differences are being amortized over 15 years.
<TABLE>
<CAPTION>
As of December 31, 1998 As of February 28, 1998
-------------------------- ---------------------------
Basis Accumulated Basis Accumulated
Difference Amortization Difference Amortization
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
UTH................................... $ 1,471 $ (33) $ -- $ --
Tevel ................................ 80,644 (3,351) -- --
Melita................................ 12,898 (451) -- --
Telekabel Hungary Programming ........ 7,629 (302) -- --
A2000................................. -- -- 90,898 --
Melita, Princes Holdings and Tevel.... -- -- 31,054 --
Kabelkom.............................. -- -- 20,509 --
Monor................................. 885 (69) -- --
Other................................. 3,585 (73) -- --
-------- ------- -------- -----
Total......................... $107,112 $(4,279) $142,461 $ --
======== ======= ======== =====
</TABLE>
Condensed financial information for UPC, stated in U.S. dollars, is presented
below:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1997 (1) December 31, 1996
--------------------- ------------------
<S> <C> <C>
Revenue................................................... $ 172,951 $145,076
Operating, selling, general and administrative expense.... (121,833) (96,814)
Depreciation and amortization............................. (68,148) (47,238)
--------- --------
Net operating (loss) income............................ (17,030) 1,024
Interest, net............................................. (32,936) (21,135)
Share in results of affiliated companies, net............. (10,395) (13,187)
Other..................................................... (29,820) (14,152)
--------- --------
Net loss............................................... $ (90,181) $(47,450)
========= ========
</TABLE>
(1) The Company consolidated the results of UPC effective December 11, 1997.
5. MARKETABLE EQUITY SECURITIES OF PARENT
As a result of the UPC Transaction, UPC acquired 3,169,151 shares of UIH's Class
A Common Stock, valued at cost on December 11, 1997 at $33,074. In November
1998, UPC used 384,531 shares to acquire an additional 5.0% interest in Tara and
Princes Holdings, resulting in 2,784,620 remaining UIH shares held by UPC.
164
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
6. PROPERTY, PLANT AND EQUIPMENT As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Cable distribution networks..................................................... $246,607 $180,555
Subscriber premises equipment and converters.................................... 71,178 40,262
MMDS/DTH distribution facilities................................................ 7,340 6,416
Office equipment, furniture and fixtures........................................ 18,674 6,475
Buildings and leasehold improvements............................................ 6,748 1,838
Other........................................................................... 14,905 7,581
-------- --------
365,452 243,127
Accumulated depreciation................................................... (46,406) (3,675)
-------- --------
Net property, plant and equipment.......................................... $319,046 $239,452
======== ========
</TABLE>
<TABLE>
<CAPTION>
7. GOODWILL AND OTHER INTANGIBLE ASSETS As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Telekabel Group................................................................. $206,092 $192,828
Janco .......................................................................... 87,563 94,200
CNBH (1)........................................................................ -- 39,847
Telekabel Hungary............................................................... 51,550 --
TVD............................................................................. 22,322 20,903
Other........................................................................... 12,970 13,794
-------- --------
380,497 361,572
Accumulated amortization................................................... (20,693) (2,411)
-------- --------
Net goodwill and other intangible assets................................... $359,804 $359,161
======== ========
</TABLE>
(1) Effective August 6, 1998, CNBH was contributed to UTH as part of the
UTH Transaction.
<TABLE>
<CAPTION>
8. SHORT-TERM DEBT As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Time Warner Note................................................................ $18,000 $ --
Telekabel Hungary Facility...................................................... 15,504 --
------- -------
Total short-term debt...................................................... $33,504 $ --
======= =======
</TABLE>
Carrying value approximates fair value for these short-term facilities.
165
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
TIME WARNER NOTE
In December 1998, TWE extended the maturity date of its non-interest bearing
note for a period of 90 days to the earlier of June 30, 1999 or 90 days after
written notice from TWE. Subsequent to December 31, 1998, the Time Warner Note
was cancelled as TWE exercised its option to acquire UPC's 50.0% interest in
Telekabel Hungary Programming.
TELEKABEL HUNGARY FACILITY
In October 1998, Telekabel Hungary entered into a German mark ("DM") 65,600
($39,317) six-month secured bridge facility. Availability under this facility
depends on certain financial covenants. The DM49,200 ($29,488) international
tranche of the facility and half of the DM16,400 ($9,829) local tranche bear
interest at LIBOR plus 2.5% per annum plus an additional cost of funding
calculation. The remaining half of the local tranche must be drawn in Hungarian
forints and bears interest at Budapest interbank offered rates for Hungarian
forints, plus 2.5% per annum plus an additional cost of funding calculation.
Telekabel Hungary is using the facility, among other things, to finance capital
expenditures and to acquire minority shares in UPC's Hungarian systems. UPC has
pledged its indirect 79.25% interest in Telekabel Hungary to secure the
facility. The facility also is secured by a pledge over certain assets of the
Telekabel Hungary group and a negative pledge. Telekabel Hungary is currently
negotiating a long-term facility with the lenders to replace this bridge
facility. As of December 31, 1998, the amount outstanding under this facility
totaled DM25,861 ($15,504).
9. NOTE PAYABLE TO PARENT
<TABLE>
<CAPTION>
As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Note payable to parent, including accrued interest
of $6,141 and $0, respectively........................ $92,609 $ --
======= =======
</TABLE>
UIH loaned the Company a total of $86,468 in connection with funding the general
operations of UPC as well as the repayment of the UPC Bridge Bank Facility (see
Note 10). The UIH loan accrues interest at 10.75% per annum. The Company repaid
$87,499 of principal and interest in February 1999 with proceeds from UPC's
initial public offering.
10. OTHER LONG-TERM DEBT
<TABLE>
<CAPTION>
As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Senior Revolving Credit Facility........................ $512,179 $437,598
Bridge Bank Facility.................................... 60,063 125,000
Mediareseaux Facility................................... 21,346 --
DIC Loan................................................ 84,214 --
Other UPC............................................... 3,821 61,084
-------- --------
681,623 623,682
Less current portion............................... (60,063) (126,643)
-------- --------
Total other long-term debt......................... $621,560 $497,039
======== ========
</TABLE>
SENIOR REVOLVING CREDIT FACILITY
In October 1997, UPC and certain of its subsidiaries entered into a NLG1,100,000
($582,000) multi-currency Senior Revolving Credit Facility with a syndicate of
banks. As of December 31, 1998, a total of NLG968,000 ($512,179) was outstanding
under this facility. The amount outstanding for UPC, Telekabel Group and Janco
was NLG620,000 ($328,042), NLG213,500 ($112,963) and NLG134,500 ($71,174),
166
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
respectively. Amounts advanced under the Senior Revolving Credit Facility bear
interest at the London interbank offered rate ("LIBOR") plus a margin ranging
from 0.5% to 2.0% per annum. The aggregate amount available for borrowing under
the facility is reduced automatically by 5.0% per quarter beginning December 31,
2001. The borrowings of UPC and its subsidiaries in Austria, Belgium and Norway
are limited by financial covenants under the Senior Revolving Credit Facility.
The principal amount of all borrowings by UPC and such subsidiaries may not
exceed certain multiples of total annualized net operating cash flow for UPC and
such subsidiaries. In addition, the principal amount of all borrowings of UPC
and such subsidiaries may not exceed certain multiples of their cable television
net operating cash flow. The Senior Revolving Credit Facility generally
prohibits dividends and other distributions to shareholders of UPC unless, among
other things, UPC achieves for at least two consecutive quarters certain
financial ratios. The Senior Revolving Credit Facility also includes financial
covenants relating to interest and debt service coverage and application of
proceeds from asset sales and securities offerings. Borrowings by UPC and
certain of its subsidiaries in Austria, Belgium and Norway under the Senior
Revolving Credit Facility together with borrowings under the Bridge Bank
Facility may not exceed NLG1,300,000 ($687,831) before September 30, 2001. The
Senior Revolving Credit Facility also generally limits to NLG80,000 ($42,328)
UPC's investments in, loans to and guarantees for, certain of UPC's subsidiaries
and downstream affiliates that are not borrowers or guarantors under the Senior
Revolving Credit Facility. UPC repaid a portion of this facility in February
1999 with proceeds from their initial public offering (see Note 17).
BRIDGE BANK FACILITY
In connection with the UPC Transaction, UPC entered into the $125,000 Bridge
Bank Facility with a syndicate of banks. The Bridge Bank Facility is a one year
bridge originally due December 5, 1998 and bears interest at LIBOR plus a margin
ranging from 4.5% to 6.0% per annum. In November 1998, the lenders granted an
extension of the maturity date to June 5, 1999. The Bridge Bank Facility
generally prohibits dividends and distributions and is secured by various
upstream guarantees from, negative pledges over and, in some cases, share
pledges of, certain share holdings or partnership interests of UPC in operating
systems in The Netherlands, France, Israel and Malta, as well as a first lien
over approximately 2,784,620 shares of UIH's Class A Common Stock which UPC
acquired from Philips as part of the UPC Transaction. The Bridge Bank Facility
prohibits all of the companies whose interests are pledged from incurring
additional indebtedness, subject to certain exceptions. UPC must apply proceeds
from disposals, if any, of certain share holdings and partnership interests to
prepayment of the facility, which restricts the manner and terms on which UPC
may dispose of these assets. UPC must maintain on deposit with the bank a
compensating balance, restricted for payment of interest, until the facility
matures. The balance in this interest reserve account, including proceeds from
the sale of Princes Holdings, was NLG30,263 ($16,012) as of December 31, 1998.
UPC repaid $64,937 of the Bridge Bank Facility during the year ended December
31, 1998, resulting in an outstanding amount of $60,063 as of December 31, 1998.
UPC repaid the remaining balance of this facility in February 1999 with proceeds
from their initial public offering (see Note 17).
MEDIARESEAUX FACILITY
In July 1998, Mediareseaux entered into a 9.5 year term facility with a bank for
an amount of French francs ("FRF")680,000 ($121,400) ("Mediareseaux Facility").
The purpose of the facility is to finance on-going capital expenditures, working
capital and acquisitions with a limit of FRF120,000 ($21,400). The Mediareseaux
Facility bears interest at LIBOR plus a margin ranging from 0.75% to 2.0%. The
availability of the facility depends on revenue generated and debt to equity
ratios. The availability period ends at December 31, 2002. The repayment period
starts from January 1, 2003 to final maturity in 2007. During the repayment
period, Mediareseaux must apply 50.0% of its excess cash flow in prepaying the
facility. The Mediareseaux Facility generally restricts the payment of dividends
and distributions. This facility also restricts Mediareseaux from incurring
additional indebtedness, subject to certain exceptions. In July 1998,
Mediareseaux secured a 9.5 year FRF20,000 ($3,600) overdraft facility, subject
to the same terms and conditions as the Mediareseaux Facility except that the
availability tests are not applicable. As of December 31, 1998 an amount of
FRF120,000 ($21,346) was outstanding under the Mediareseaux Facility.
DIC LOAN
In November 1998, a subsidiary of Discount Investment Corporation ("DIC") loaned
UPC a total of $90,000 to acquire the additional interests in Tevel and Melita.
The DIC Loan matures in November 2000 and is secured by UPC's pledge of its
ownership interest in Tevel. The DIC Loan bears interest at 8.0% and is payable,
together with 106.0% of the principal amount, on maturity. The DIC Loan may be
repaid on quarterly prepayment dates with three months' prior notice by UPC. In
167
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
connection with the DIC Loan, UPC granted to an affiliate of DIC an option to
acquire a total of $90,000, plus accrued interest, of ordinary shares of UPC at
a price equal to 90.0% of the initial public offering price. The exercise price
of this option, which expires upon the initial public offering, is payable in
cash or delivery of the DIC Loan promissory notes. UPC allocated the $90,000 in
loan proceeds between the debt instrument ($84,214) and the equity option
element ($5,786) on the basis of relative fair values. Accordingly, the
effective interest rate on the debt instrument exceeds the stated rate as set
forth above. At the date of UPC's initial public offering, DIC exercised the
option and acquired 1,558,654 ordinary shares of UPC.
FAIR VALUE OF DEBT
Fair value is based on market prices for the same or similar issues. Carrying
value is used when a market price is unavailable.
Carrying Value Fair Value
-------------- ----------
As of December 31, 1998:
Senior Revolving Credit Facility.... $512,179 $512,179
Bridge Bank Facility................ 60,063 60,063
Mediareseaux Facility............... 21,346 21,346
DIC Loan............................ 84,214 84,214
Other UPC........................... 3,821 3,821
-------- --------
Total............................ $681,623 $681,623
======== ========
As of February 28, 1998:
Senior Revolving Credit Facility.... $437,598 $437,598
Bridge Bank Facility................ 125,000 125,000
Other UPC........................... 61,084 61,084
-------- --------
Total............................ $623,682 $623,682
======== ========
DEBT MATURITIES
The maturities of the Company's debt are as follows:
Year Ended December 31, 1999........... $ 60,063
Year Ended December 31, 2000........... 84,737
Year Ended December 31, 2001........... --
Year Ended December 31, 2002........... 46,570
Year Ended December 31, 2003........... 118,537
Thereafter............................. 371,716
--------
Total............................. $681,623
========
1998 NOTES
On February 5, 1998, UIH sold $1,375,000 principal amount at maturity of 10.75%
senior secured discount notes due 2008 (the "1998 Notes"). The 1998 Notes were
issued at a discount from their principal amount at maturity, resulting in gross
proceeds to UIH of approximately $812,200.
UIH used approximately $531,800 of the proceeds from the 1998 Notes to complete
a tender offer for UIH's existing 14% senior secured discount notes due 1999
(collectively, the "Old Notes") and the consent solicitation that UIH conducted
concurrently therewith. UIH commenced the tender offer on January 7, 1998, and
the tender offer expired on February 4, 1998, with over 99.8% of the Old Notes
being validly tendered. UIH subsequently purchased $500 principal amount at
maturity of the Old Notes on the open market, leaving approximately $465
principal amount at maturity outstanding as of February 28, 1998. The Old Notes
redeemed had an aggregate accreted value of approximately $466,200 as of
February 5, 1998. This tender premium of approximately $65,600, combined with
the write-off of unamortized deferred financing costs and other
transaction-related costs totaling approximately $13,500, resulted in an
extraordinary charge of $79,091.
The 1998 Notes will accrete at 10.75% per annum, compounded semi-annually to an
aggregate principal amount of $1,375,000 on February 15, 2003, at which time
cash interest will commence to accrue. Commencing August 15, 2003, cash interest
on the 1998 Notes will be payable on February 15 and August 15 of each year
until maturity at a rate of 10.75% per annum. The 1998 Notes will mature on
168
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
February 15, 2008, and will be redeemable at the option of UIH on or after
February 15, 2003.
The remaining Old Notes will mature on November 15, 1999. Holders of the 1998
Notes and the remaining outstanding Old Notes share a first-priority security
interest in the stock and intercompany notes to UIH of UIPI; however, only
holders of the 1998 Notes have a first-priority security interest in the stock
and intercompany notes to UIH of UIHE.
The 1998 Notes are senior secured obligations of UIH that rank senior in right
of payment to all future subordinated indebtedness of UIH and rank pari passu in
right of payment with the Old Notes. The 1998 Notes are effectively subordinated
to all future indebtedness and other liabilities and commitments of UIH's
subsidiaries. Under the terms of the indenture governing the 1998 Notes (the
"Indenture"), UIH's subsidiaries are generally prohibited and/or restricted from
incurring any lien against their assets other than liens incurred in the
ordinary course of business, from paying dividends, and from making investments
in entities that are not "restricted" by the terms of the Indenture. UIH has the
option to invest in "unrestricted entities" in an aggregate amount equal to the
sum of $100,000 plus the aggregate amount of net cash proceeds from sales of
equity, net of payments made on its preferred stock plus net proceeds from
certain litigation settlements. The Indenture generally prohibits UIH from
incurring additional indebtedness with the exception of a general allowance of
$75,000 for debt maturing on or after February 15, 2008, certain guarantees
totaling $15,000, refinancing indebtedness, normal indebtedness to restricted
affiliates and other letters of credit in the ordinary course of business. The
Indenture also limits the amount of additional debt that 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 Indenture at the time of the borrowing. The Indenture also restricts its
subsidiaries' ability to make certain asset sales and certain payments.
11. PARENT'S (DEFICIT) EQUITY
COMMON STOCK
Authorized capital consists of 1,000 shares of common stock, $0.01 par value,
100 shares issued and outstanding, held by UIH. Such shares have been pledged as
collateral under UIH's 1998 Notes.
SUBSIDIARY STOCK OPTION PLANS
UPC PLAN
In June 1996, UPC adopted a stock option plan (the "UPC Plan") for certain of
its employees and those of its subsidiaries. There are 6,000,000 total shares
available for the granting of options under the UPC Plan, which are held by the
Stichting Administratiekantoor UPC (the "Foundation"), which administers the UPC
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. UIH appoints
the board members of the Foundation and thus controls the voting of the
Foundation's common stock. The options are granted at fair market value
determined by UPC'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 UPC 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 UPC 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. UPC 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 UPC until
expiration of the underlying options. The UPC 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.
169
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
A summary of stock option activity for the UPC Plan is as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------------------------------
1998 1997 1996
------------------------- -------------------------- ---------------------------
Number Weighted- Number Weighted- Number Weighted-
of Average of Average of Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
--------- -------------- --------- -------------- ---------- --------------
(Dutch guilders) (Dutch guilders) (Dutch guilders)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period...... 2,241,552 10.49 2,300,417 10.49 -- --
Granted during the period............... 2,343,000 12.10 -- -- 3,990,000 10.49
Cancelled during the period............. (14,052) 10.49 (58,865) 10.49 (9,583) 10.49
Exercised during the period............. (375,000) 10.49 -- -- (1,680,000) --
--------- ----- --------- ----- --------- -----
Outstanding at end of period............ 4,195,500 11.39 2,241,552 10.49 2,300,417 10.49
========= ===== ========= ===== ========= =====
Exerciseable at end of period (1)....... 4,195,500 11.39 2,241,552 10.49 2,300,417 10.49
========= ===== ========= ===== ========= =====
</TABLE>
(1) Includes certificate rights as well as options.
UPC granted no stock options during the year ended December 31, 1997. The
combined weighted-average fair values and weighted-average exercise prices of
options granted during the year ended December 31, 1998 and the year ended
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1998 December 31, 1996
-------------------------------- -------------------------------
Number Fair Exercise Number Fair Exercise
of Options Value Price of Options Value Price
---------- ----- -------- ---------- ----- --------
(Dutch guilders) (Dutch guilders)
<S> <C> <C> <C> <C> <C> <C>
Exercise price equal to market price...... 2,343,000 12.10 12.10 3,990,000 10.49 10.49
</TABLE>
The following table summarizes information about stock options outstanding and
exercisable as of December 31, 1998:
<TABLE>
<CAPTION>
Weighted-Average
Number of Remaining Number of
Options Contractual Life Options
Exercise Price (Dutch guilders) Outstanding (Years) Exercisable
------------------------------- ----------- ----------------- -----------
<S> <C> <C> <C>
10.49................................ 1,852,500 2.47 1,852,500
12.00................................ 2,195,250 4.63 2,195,250
13.57................................ 147,750 4.71 147,750
--------- ---- ---------
Total........................... 4,195,500 3.68 4,195,500
========= ==== =========
</TABLE>
The UPC Plan is accounted for as a variable plan because, based on the plan's
provisions, the rights conveyed to employees are the substantive equivalents to
stock appreciation rights. Accordingly, compensation expense is recognized at
each financial statement date based on the difference between the grant price
and the estimated fair value of UPC's common stock. Compensation expense of
NLG268,109 ($134,728), NLG4,818 ($2,477) and NLG0 was recognized for the ten
months ended December 31, 1998 and the years ended December 31, 1997 and
December 31, 1996, respectively. UPC's estimate of the fair value of its common
stock as of December 31, 1998 utilized in recording compensation expense under
the UPC Plan was NLG63.91, which is the initial public offering price. Because
UPC will account for the UPC Plan as a variable plan up until the consummation
date of its initial public offering, and thereafter as a fixed plan due to
modifications to the UPC Plan which will occur on that date, the total
compensation expense and deferred compensation expense recognized related to
options granted as of December 31, 1998 will not increase.
170
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
UPC PHANTOM STOCK OPTION PLAN
In March 1998, UPC adopted a phantom stock option plan (the "UPC Phantom Plan")
which permits the grant of phantom stock rights of up to 2,400,000 shares of
UPC's common stock. The rights are granted at fair market value determined by
UPC'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 UPC Phantom Plan gives the employee the right to receive payment equal to
the difference between the fair market value of a share of UPC common stock and
the option base price for the portion of the rights vested. UPC, at its sole
discretion, may make payment in (i) cash, (ii) freely tradable shares of UIH
Class A Common Stock or (iii) if UPC's stock is publicly traded, freely tradable
shares of its stock. If UPC chooses to make a cash payment, even though its
stock is publicly traded, employees have the option to receive an equivalent
number of freely tradable shares of stock instead. Concurrent with the approval
of the UPC Phantom Plan, the Supervisory Board ratified the grant of 1,232,250
and 825,000 phantom stock rights at base prices of NLG12.00 and NLG13.57,
respectively, and specified retroactive vesting for several of the grants. The
UPC Phantom Plan contains anti-dilution protection and provides that, in certain
cases of a change of control, all phantom options outstanding become fully
exercisable.
A summary of stock option activity for the UPC Phantom Plan is as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1998
-------------------------------
Number Weighted-
of Average
Shares Exercise Price
--------- ----------------
(Dutch guilders)
<S> <C> <C>
Outstanding at beginning of period.......... -- --
Granted during the period................... 2,057,250 12.63
Cancelled during the period................. -- --
Exercised during the period................. -- --
--------- -----
Outstanding at end of period................ 2,057,250 12.63
========= =====
Vested and exercisable at end of period..... 470,469 12.15
========= =====
</TABLE>
The combined weighted-average fair values and weighted-average exercise prices
of options granted during the year ended December 31, 1998 are as follows:
Number Fair Exercise
of Options Value Price
---------- ----------------
(Dutch guilders)
Exercise price equal to market price...... 2,057,250 12.63 12.63
The following table summarizes information about stock options outstanding,
vested and exercisable as of December 31, 1998:
<TABLE>
<CAPTION>
Weighted-Average Number of
Number of Remaining Options
Options Contractual Life Vested and
Exercise Price (Dutch guilders) Outstanding (Years) Exercisable
------------------------------- ----------- ----------------- -----------
<S> <C> <C> <C>
12.00.................................. 1,232,250 8.54 425,469
13.57.................................. 825,000 9.70 45,000
--------- ---- -------
Total............................. 2,057,250 9.00 470,469
========= ==== =======
</TABLE>
171
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
The UPC 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 NLG52,374 ($26,319) was recognized for the ten months ended December
31, 1998. UPC's estimate of the fair value of its common stock as of December
31, 1998 utilized in recording compensation expense under the UPC Phantom Plan
was NLG63.91, which is the initial public offering price.
CHELLO STOCK OPTION PLAN
In June 1998, UPC adopted a phantom stock option plan (the "chello Plan"), which
permits the grant of phantom stock rights in up to 1,500,000 shares of chello, a
wholly-owned subsidiary of UPC. The rights are granted at fair market value
determined by chello's Supervisory Board at the time of grant, and generally
vest in equal monthly increments over the four-year period following the
effective date of grant and may be exercised for ten years following the
effective date of grant. The chello Plan gives the employee the right to receive
payment equal to the difference between the fair market value of a share of
chello and the option base price for the portion of the rights vested. UPC, at
its sole discretion, may make payment in (i) cash, (ii) freely tradable shares
of UIH Class A Common Stock or (iii) if UPC's stock is publicly traded, freely
tradable shares of its stock. If UPC chooses to make a cash payment, even though
its stock is publicly traded, employees have the option to receive an equivalent
number of freely tradable shares of stock instead. Concurrent with the approval
of the chello Plan, the Supervisory Board ratified the grant of 570,000 options
at a base price of NLG10.00, and specified retroactive vesting for several of
the grants. For the ten months ended December 31, 1998, UPC recorded
compensation expense of NLG2,144 ($1,077) for options granted under the chello
Plan.
A summary of stock option activity for the chello Plan is as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1998
------------------------------
Number Weighted-
of Average
Shares Exercise Price
-------- ---------------
(Dutch guilders)
<S> <C> <C>
Outstanding at beginning of period......... -- --
Granted during the period.................. 570,000 10.00
Cancelled during the period................ -- --
Exercised during the period................ -- --
------- -----
Outstanding at end of period............... 570,000 10.00
======= =====
Vested and exercisable at end of period.... 70,625 10.00
======= =====
</TABLE>
The weighted-average remaining contractual life for these options is 9.47 years
as of December 31, 1998.
12. COMMITMENTS
The Company has entered into various operating lease agreements for office
space, office furniture and equipment, and vehicles. Rental expense under these
lease agreements totaled $3,374, $0 and $0 for the ten months ended December 31,
1998 and for the years ended February 28, 1998 and February 28, 1997,
respectively.
<TABLE>
<CAPTION>
The Company has operating lease obligations and other non-cancelable commitments as follows:
<S> <C>
Year ended December 31, 1999...................................................... $ 5,849
Year ended December 31, 2000..................................................... 4,640
Year ended December 31, 2001..................................................... 3,623
Year ended December 31, 2002..................................................... 2,568
Year ended December 31, 2003 and thereafter...................................... 2,300
-------
Total....................................................................... $18,980
=======
</TABLE>
In September 1998, UTH entered into a subordinated loan agreement to provide
funding up to $30,000 for A2000. UTH's share of the funding is $15,000. UPC is
obligated to fund drawdowns on the loan in proportion to its 51.0% ownership in
172
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
UTH (representing a total funding obligation of $7,650). As of December 31,
1998, UPC had funded $3,750 of its commitment. 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.
13. CONTINGENCIES
The Company is not a party to any material legal proceedings other than
described below, nor is it currently aware of any threatened material legal
proceedings. From time to time, the Company may become involved in litigation
relating to claims arising out of its operations in the normal course of its
business.
On April 20, 1999, a class action was filed in the District Court of Tel Aviv
against several cable operators in Israel, including Tevel. The complaint
alleges that the cable operators have taken advantage of their monopoly position
in the market by charging excessive prices for the services provided. The
plaintiffs are seeking damages in the amount of approximately NIS1,000.00
(approximately $240.00) per subscriber and a judicial order instructing Tevel to
reduce its subscriber fee to the alleged fair market price. The plaintiffs have
also applied for a judicial order against the Ministry of Communication to avoid
considering the extension of Tevel's cable franchise term for unfair
exploitation and monopoly status. Tevel's cable television service subscription
rates are subject to governmental regulation through franchise agreements and
through the arrangement approved by the Restrictive Trade Practices Tribunal.
Tevel intends to vigorously defend itself against these allegations.
14. INCOME TAXES
In general, a United States corporation may claim a foreign tax credit against
its federal income tax expense for foreign income taxes paid or accrued. Because
the Company must calculate its foreign tax credit separately for dividends
received from each foreign corporation in which the Company owns 10.0% to 50.0%
of the voting stock, and because of certain other limitations, the Company's
ability to claim a foreign tax credit may be limited, particularly with respect
to dividends paid out of earnings subject to a high rate of foreign income tax.
Generally, the Company's ability to claim a foreign tax credit is limited to the
amount of U.S. taxes the Company pays with respect to its foreign source income.
In calculating its foreign source income, the Company is required to allocate
interest expense and overhead incurred in the United States between its United
States and foreign activities. Accordingly, to the extent United States
borrowings are used to finance equity contributions to its foreign subsidiaries,
the Company's ability to claim a foreign tax credit may be significantly
reduced. These limitations and the inability of the Company to offset losses in
one foreign jurisdiction against income earned in another foreign jurisdiction
could result in a high effective tax rate on the Company's earnings.
The primary differences between taxable loss and net loss for financial
reporting purposes relate to accounting for the share in results of foreign
affiliated companies and the non-consolidation of its consolidated foreign
subsidiaries for United States tax purposes. Since the Company holds the
majority of its foreign investments through affiliates which hold investments
accounted for under the equity method in foreign corporations, taxable income
(loss) generated by these affiliated companies does not flow through to the
Company for United States federal and state tax purposes, even though the
Company records its allocable share of affiliate income (losses) for financial
reporting purposes. Accordingly, due to the indefinite reversal of such amounts
in future periods, no deferred tax asset has been established for tax basis in
excess of the Company's book basis (approximately $30,000 and $62,000 at
December 31, 1998 and February 28, 1998, respectively) in investments in
affiliated companies, which in turn have investments in foreign corporations.
The Company's United States tax net operating losses, totaling approximately
$9,000 at December 31, 1998, expire beginning in 2004 through 2014. Tax loss
carry forwards arise primarily in Norway, The Netherlands, Czech Republic and
Austria. The tax loss carry forwards of Norway, aggregating to $147,052 as of
December 31, 1998 will expire during the years 1999-2008. The tax loss carry
forwards of The Netherlands, Belgium and Austria of $61,966 as of December 31,
1998 have no expiration date. The tax loss carry forwards of the Czech Republic
of $15,702 as of December 31, 1998 will expire in the years 2001-2005. The
significant components of the net deferred tax asset are as follows:
173
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION> As of As of
December 31, February 28,
1998 1998
------------ ------------
<S> <C> <C>
Deferred Tax Assets:
--------------------
Tax net operating loss carryforward of consolidated foreign subsidiaries..... $72,504 $ 74,159
Company's U.S. tax net operating loss carryforward........................... 3,266 5,826
Stock-based compensation..................................................... 7,215 --
Other........................................................................ 426 --
------- --------
Total deferred tax assets................................................. 83,411 79,985
Valuation allowance.......................................................... (74,983) (73,439)
------- --------
Deferred tax assets, net of valuation allowance........................... 8,428 6,546
Deferred Tax Liabilities:
------------------------
Intangible assets............................................................ (5,852) (23,800)
Property, plant and equipment, net........................................... (7,156) (5,046)
Other........................................................................ -- 268
-------- --------
Total deferred tax liabilities............................................... (13,008) (28,578)
-------- --------
Deferred tax liabilities, net............................................. $ (4,580) $(22,032)
======== ========
</TABLE>
Of the Company's 1998 consolidated net loss, $238,840 is derived from the
Company's foreign operations. 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 Ten For the Years Ended
Months Ended --------------------------
December 31, February 28, February 28,
1998 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Expected income tax benefit at the U.S. statutory rate of 35% $(83,638) $(4,061) $(1,643)
Tax effect of permanent and other differences:
Change in valuation allowance.............................. 39,951 4,409 1,784
Non-deductible expenses.................................... 49,382 -- --
International rate differences............................. 1,474 -- --
State tax, net of federal benefit.......................... (7,169) (348) (141)
--------- ------- -------
Total income tax benefit................................ $ -- $ -- $ --
========= ======= =======
</TABLE>
During 1996, the Austrian tax authorities passed legislation which had the
effect of eliminating approximately NLG256,000 ($135,450) of tax basis
associated with certain amounts of goodwill recorded at Telekabel Group
effective January 1, 1997. This change in tax law is expected to be challenged
on constitutional grounds. However, there can be no assurance of a successful
repeal of such legislation. Accordingly, this change caused Telekabel Group's
effective tax rate to increase from the historical effective tax rate through
December 31, 1996, due to the non-deductibility of such goodwill amortization
subsequent to January 1, 1997.
15. SEGMENT AND GEOGRAPHIC INFORMATION
The Company adopted SFAS 131 for the ten months ended December 31, 1998. The new
rules establish revised standards for public companies relating to the reporting
of financial information about operating segments. The adoption of SFAS 131 did
not have a material effect on the Company's consolidated financial statements
but did affect the Company's segment information disclosure. The Company's
business has historically been derived from its video entertainment segment.
This service has been provided in various countries where the Company owns and
operates it systems. During 1998, the Company introduced telephony and
internet/data services and during 1999 the Company will continue to introduce
these services to several systems. To date, revenues and net operating results
from these services have not been significant and therefore segment information
for these services is not required. Accordingly, the Company's current
reportable segments are the various countries in which it operates multi-channel
television, programming and/or telephony operations. These reportable segments
are evaluated separately because each geographic region presents different
marketing strategies and technology issues as well as distinct economic climates
174
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
and regulatory constraints. The key operating performance criteria used in this
evaluation includes revenue growth, operating income before depreciation,
amortization and stock-based compensation expense ("Adjusted EBITDA"), and
capital expenditures. Senior management of the Company does not view segment
results below Adjusted EBITDA, therefore, interest income, interest expense,
provision for losses on investment related costs, gain on sale of investments,
share in results of affiliated companies, minority interests in subsidiaries and
other expenses are not broken out by segment below.
The Company's segment information is as follows:
<TABLE>
<CAPTION>
For the Ten Months Ended December 31, 1998 As of December 31, 1998
------------------------------------------ --------------------------------------------------------
Depreciation Investments Property,
& Adjusted in Plant and Total Capital
Revenue Amortization EBITDA(1) Affiliates Equipment Assets Expenditures
------- ------------ --------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Netherlands.............. $ 21,500 $ (9,503) $(3,658) $132,131 $ 5,176 $ 297,068 $ (12,874)
Austria...................... 74,629 (31,527) 30,975 -- 140,550 341,159 (41,458)
Belgium...................... 15,854 (8,357) 5,071 -- 27,558 57,847 (9,930)
Czech Republic............... 3,753 (3,142) (722) -- 8,737 11,497 (523)
France....................... 3,395 (1,684) (1,941) -- 40,328 51,092 (26,329)
Hungary...................... 11,672 (2,743) 3,819 8,410 26,788 86,921 (6,727)
Norway....................... 39,040 (18,487) 12,636 -- 63,335 219,068 (25,725)
Other........................ 2,444 (1,107) (3,572) 113,668 6,574 22,744 (17,981)
-------- -------- ------- -------- -------- ---------- ---------
Total Europe............... $172,287 $(76,550) $42,608 $254,209 $319,046 $1,087,396 $(141,547)
======== ======== ======= ======== ======== ========== =========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended February 28, 1998 As of February 28, 1998
------------------------------------------ --------------------------------------------------------
Depreciation Investments Property,
& Adjusted in Plant and Total Capital
Revenue Amortization EBITDA(1) Affiliates Equipment Assets Expenditures
------- ------------ --------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Netherlands.............. $ -- $ -- $ -- $109,090 $ 20,773 $308,907 $ --
Austria...................... -- -- -- -- 115,786 323,298 --
Belgium...................... -- -- -- -- 24,526 49,204 --
Norway....................... -- -- -- -- 51,369 215,517 --
Other........................ 9,945 (6,086) (3,547) 81,475 26,998 53,007 (7,461)
------ ------- ------- -------- -------- -------- -------
Total Europe............... $9,945 $(6,086) $(3,547) $190,565 $239,452 $949,933 $(7,461)
====== ======= ======= ======== ======== ======== =======
</TABLE>
For the Year Ended February 28, 1997
------------------------------------
Depreciation
& Adjusted
Revenue Amortization EBITDA(1)
------- ------------ ---------
Europe - Other............... $ -- $ -- $(4,693)
======= ======= ========
(1) "Adjusted EBITDA" represents earnings before net interest expense, income
tax expense, depreciation and 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. Management believes Adjusted EBITDA helps
investors to assess the cash flow from operations from period to period and
thus to value the Company's 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 Adjusted
EBITDA. 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 presentation 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.
175
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
Adjusted EBITDA reconciles to the consolidated statement of operations as
follows:
<TABLE>
<CAPTION>
For the Ten For the Years Ended
Months Ended February 28,
December 31, -------------------------
1998 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
Net operating loss....................... $(196,066) $(9,633) $(4,693)
Depreciation and amortization............ 76,550 6,086 --
Stock-based compensation expense......... 162,124 -- --
--------- ------- -------
Cosolidated Adjusted EBITDA.......... $ 42,608 $(3,547) $(4,693)
========= ======= =======
</TABLE>
16. RELATED PARTY TRANSACTIONS
LOANS TO EMPLOYEES
In 1996, UPC loaned certain employees of UPC 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 UPC is
presented in the consolidated financial statements net of UPC's obligation to
the employees under the plan. As of December 31, 1998 and 1997, the receivable
from employees, including accrued interest totaled NLG19,177 ($10,147) and
NLG18,561 ($9,189), respectively.
ACQUISITIONS OF INTEREST IN PRINCES HOLDINGS 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 of UPC, a 5.0% interest in Tara and a 5.0% interest in
Princes Holdings. The price for these interests was 384,531 shares of UIH Class
A Common Stock that UPC acquired as part of the UPC Transaction.
17. SUBSEQUENT EVENTS
INITIAL PUBLIC OFFERING
During February 1999, UPC successfully completed an initial public offering
selling 44,600,000 shares on the Amsterdam Stock Exchange and Nasdaq National
Market System and raising gross and net proceeds at NLG63.91 per share of
approximately NLG2,850,300 ($1,508,100) and NLG2,705,800 ($1,431,600),
respectively. Concurrent with the offering, DIC exercised one of its two option
agreements acquiring 1,558,654 shares for $45,000. Proceeds from the sale of the
shares to DIC were used to repay $45,000 of the DIC Loan and related interest.
Also concurrent with the offering, proceeds were used to reduce the Senior
Revolving Credit Facility totaling NLG635,800 ($336,400), including accrued
interest of NLG15,800 ($8,400), repay in its entirety the Bridge Bank Facility
totaling NLG110,000 ($58,200), net of the interest reserve account, and acquire
NUON's 49.0% interest in UTH. Based on the carrying value of the Company's
investment in UPC as of December 31, 1998, the Company would have recognized a
gain of approximately $825,000 from the resulting step-up in the carrying amount
of the Company's investment in UPC, in accordance with SAB 51. The final gain
will be based on the Company's investment in UPC as of the date of the initial
public offering. No deferred taxes will be recorded related to this gain due to
the Company's intent on holding its investment in UPC indefinitely. UPC's
offering reduced the Company's ownership interest from 100% to approximately
64.3%.
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, UPC agreed to grant Microsoft warrants to
purchase up to 3,800,000 of its shares or ADSs at Microsoft's option, at an
exercise price of $28.00. Half of these warrants will be issued at the earlier
of April 25, 1999 or the signing of the first definitive agreement. These
warrants will be 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
176
<PAGE>
UIH EUROPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Stated in thousands, except share and per share amounts)
expects to record as contract acquisition rights approximately NLG64,400
($34,100) associated with the first half of the warrants. Such costs are
expected to be amortized on a straight-line basis over the expected contract
life, which is yet to be 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. These
warrants will be recorded as such at fair value when it is probable the
performance criteria will be met in accordance with EITF Issue No. 96-18.
DIC LOAN
In connection with the loan from DIC, UPC granted DIC, its partner in the
Israeli system, an option to acquire $90,000, plus accrued interest, of ordinary
shares of UPC at a price equal to 90.0% of the initial public offering price.
Subsequent to December 31, 1998, UPC negotiated an amendment to this option,
resulting in an option to acquire $45,000, plus accrued interest, of ordinary
shares at a price equal to 90.0% of the initial public offering price, and, if
this option is exercised, another option to acquire $45,000, plus accrued
interest, of ordinary shares at a price equal to the 30 day average closing
price of UPC's shares on the Amsterdam Stock Exchange immediately prior to the
second option exercise, or the initial public offering price, whichever is
higher. At the IPO, DIC exercised the first option and thus acquired 1,558,654
ordinary shares of UPC. The other option is exercisable until September 30,
2000.
ACQUISITION OF BRATISLAVA CABLE TV SYSTEM
In March 1999, UPC reached final agreement with Siemens Austria ("Siemens") to
purchase Siemens' 95.63% interest in SKT s.r.o., the company that owns and
operates the cable TV system in Bratislava, Slovak Republic. The completion of
the purchase is subject to obtaining the approval of regulatory authorities. The
purchase price for the 95.63% interest is approximately NLG77,500 ($41,000).
AGREEMENT FOR THE PURCHASE OF TIME WARNER CABLE FRANCE
In March 1999, UPC and TWE reached a definitive agreement for the purchase by
UPC of 100% of Time Warner Cable France, a company which controls and operates
three cable TV systems in the suburbs of Paris and Lyon and the city of Limoges.
Completion of the purchase, which is subject to regulatory approval, is expected
to take place in the third quarter of 1999.
177
<PAGE>
INDEPENDENT AUDITORS' 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.
ARTHUR ANDERSEN
Amstelveen, The Netherlands,
March 19, 1999
178
<PAGE>
UNITED TELEKABEL HOLDING N.V.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
Assets
Fixed assets:
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
=========
Shareholders' Equity and Liabilities
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
=========
179
<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)
Total revenues................................................. 99,122
--------
Operating Expenses:
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)
========
180
<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)
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
========
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
========
181
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(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.
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................................. 684,895
---------
Total shareholders' equity and liabilities........ 1,646,292
=========
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 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.
182
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
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:
Name City Percentage Ownership
---- ---- --------------------
Cable Network Brabant Holding B.V. Eindhoven 100
N.V. Telekabel Beheer Arnhem 100
A2000 Holding N.V. Amsterdam 50 (1)
Uniport Communications B.V. 80
(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:
Networks 7-20 years
Buildings and leasehold improvements 20-33 years
Machinery & Other 3-10 years
183
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
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
184
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
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 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.
185
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
<TABLE>
<CAPTION>
3. INTANGIBLE FIXED ASSETS
Balance as of December 31, 1998
-----------------------------------
Licenses Deferred
and Financing
Total Goodwill Costs
------- -------- ---------
<S> <C> <C> <C>
Value upon contribution..................................... 550,911 547,869 3,042
Investment.................................................. 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 Deferred
and Financing
Total Goodwill 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>
<TABLE>
<CAPTION>
4. TANGIBLE FIXED ASSETS
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>
<TABLE>
<CAPTION>
5. AFFILIATED COMPANIES
Total Investments Advances
------- ----------- --------
<S> <C> <C> <C>
Balance upon contribution................................... 223,698 223,698 -
Additions................................................... 7,120 - 7,120
Share in results............................................ (24,486) (24,486) -
------- ------- -----
Balance as of December 31, 1998............................. 206,332 199,212 7,120
======= ======= =====
</TABLE>
186
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
The investments in affiliated companies as of December 31, 1998 are:
<TABLE>
<CAPTION>
Investments in Cumulative Share
% and Advances to In Results of
Ownership Affiliated Companies Affiliated Companies Total
--------- -------------------- -------------------- -------
<S> <C> <C> <C> <C>
A2000....................................................... 50.0% 229,481 (24,449) 205,032
Interway.................................................... 33.0% 1,337 (37) 1,300
------- ------- -------
Total....................................................... 230,818 (24,486) 206,332
======= ======= =======
</TABLE>
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:
Basis Accumulated
Difference Amortization
---------- ------------
A2000.................................. 249,236 (8,200)
======= ======
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:
Balance sheet As of December 31,
1998
------------------
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)
========
187
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
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 31, 1998 the valuation allowance on trade receivables amounted to 538.
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
Amount
Average Outstanding
Range of Rate of December 31,
Interest Interest 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.
188
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
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 by 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 annual 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 annual 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
Labor cost is specified as follows:
Salaries and wages 9,173
Pension costs 538
Social securities 1,911
------
Total 11,622
======
The information about employees by category is as follows:
Operating 160
Other 184
---
Total 344
===
189
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
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 exempt, 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:
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..................... 34,400
======
The tax loss carry forwards have no expiration date.
190
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
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.
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.
191
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
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>
192
<PAGE>
UNITED TELEKABEL HOLDING N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(AUGUST 6, 1998) TO DECEMBER 31, 1998
(stated in thousands of Dutch guilders)
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 annual 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.
193
<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, in the City of Denver,
State of Colorado, on this 14th day of May 1999.
United International Holdings, Inc.
a Delaware corporation
By: /s/ Valerie L. Cover
------------------------------
Valerie L. Cover
Controller and Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Report to be signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Title of Position
Signature Held With the Registrant
- --------- ------------------------
<S> <C> <C>
*
- ---------------------------------
Gene W. Schneider Chairman of the Board, President and
Chief Executive Officer May 14, 1999
*
- ---------------------------------
Albert M. Carollo Director May 14, 1999
*
- ---------------------------------
John P. Cole, Jr. Director May 14, 1999
/s/ Valerie L. Cover
- --------------------------------- Controller (Principal Accounting Officer)
Valerie L. Cover and Vice President May 14, 1999
*
- ---------------------------------
Lawrence F. DeGeorge Director May 14, 1999
*
- ---------------------------------
Lawrence J. DeGeorge Director May 14, 1999
*
- ---------------------------------
Antony P. Ressler Director May 14, 1999
*
- ---------------------------------
John F. Riordan Director May 14, 1999
*
- ---------------------------------
Curtis W. Rochelle Director May 14, 1999
*
- ---------------------------------
Mark L. Schneider Director and Executive Vice President May 14, 1999
*
- ---------------------------------
Bruce H. Spector Director May 14, 1999
* By: /s/ Valerie L. Cover
---------------------------
Valerie L. Cover
Attorney-in-fact
</TABLE>
194
EXHIBIT 10.16
CONFORMED COPY
DATED 10TH MARCH 1999
----------------------
Borrower
N.V. TELEKABEL (1)
Guaranteed by
CERTAIN SUBSIDIARIES OF
N.V. TELEKABEL (2)
Arranged by
BANK OF AMERICA INTERNATIONAL LIMITED
CITIBANK, N.A.
DEUTSCHE BANK AG LONDON
MEESPIERSON N.V.
PARIBAS (3)
THE BANKS REFERRED TO HEREIN (4)
Overdraft Bank
MEESPIERSON N.V. (5)
Agent
MEESPIERSON N.V. (6)
Security Agent
STICHTING SECURITY AGENT N.V. TELEKABEL (7)
Security Agent Guarantor
MEESPIERSON N.V. (8)
----------------------------------------
LOAN AGREEMENT
FOR FACILITIES OF UP TO EURO340,000,000
----------------------------------------
NORTON ROSE
London
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
--------
CLAUSE HEADING PAGE
<S> <C> <C>
1 Purpose and definitions.......................................................................1
1.1 Purpose..............................................................................1
1.2 Definitions..........................................................................2
1.3 Headings............................................................................19
1.4 Construction of certain terms.......................................................19
1.5 Majority Banks......................................................................21
1.6 Agent's opinion.....................................................................21
2 The Facilities...............................................................................22
2.1 Amount..............................................................................22
2.2 Obligations several.................................................................22
2.3 Interests several...................................................................22
3 Conditions...................................................................................23
3.1 Documents and evidence..............................................................23
3.2 General conditions precedent........................................................23
3.3 Waiver of conditions precedent......................................................24
3.4 Notification........................................................................24
3.5 NUON Security.......................................................................24
3.6 Conditions subsequent...............................................................24
4 Advances.....................................................................................26
4.1 Maximum Revolving Advance Outstandings..............................................26
4.2 Drawdown of Revolving Advances......................................................26
4.3 Term and Amount of Revolving Advances...............................................26
4.4 Notification to Banks...............................................................26
4.5 Termination of Commitments..........................................................27
4.6 Repayment of Revolving Advances.....................................................27
4.7 Conversion to a Term Loan and consolidation.........................................27
4.8 Term Advances.......................................................................27
4.9 First Advance.......................................................................28
4.10 Application of proceeds.............................................................28
5 Interest; alternative interest rates.........................................................29
5.1 Normal interest rate................................................................29
5.2 Applicable Margin...................................................................29
5.3 Interest Periods....................................................................29
5.4 Selection of Interest Periods for Term Advances.....................................30
5.5 Determination of Interest Periods for Term Advances.................................30
5.6 Interest for late payment...........................................................30
5.7 Notification of interest periods and interest rates.................................31
5.8 Reference Bank quotations...........................................................31
5.9 Market disruption; non-availability.................................................31
<PAGE>
6 The Overdraft Facility.......................................................................33
6.1 The Overdraft Facility..............................................................33
6.2 Terms and conditions................................................................33
6.3 Utilisation, interest and repayment.................................................33
7 Repayment, prepayment and cancellation.......................................................34
7.1 Repayment...........................................................................34
7.2 Voluntary prepayment................................................................34
7.3 Additional voluntary prepayment.....................................................34
7.4 Mandatory prepayment................................................................34
7.5 Amounts payable on prepayment.......................................................35
7.6 Notice of prepayment................................................................36
7.7 Cancellation of Commitments.........................................................36
7.8 Application of prepayments to repayment instalments.................................36
8 Fees and expenses............................................................................37
8.1 Fees................................................................................37
8.2 Expenses............................................................................37
8.3 Value Added Tax.....................................................................38
8.4 Stamp and other duties..............................................................38
8.5 Indemnity...........................................................................38
9 Payments and Taxes; accounts and calculations................................................39
9.1 No set-off or counterclaim; distribution to the Banks...............................39
9.2 Payments by the Banks...............................................................39
9.3 Non-Banking Days....................................................................39
9.4 Agent may assume receipt............................................................39
9.5 Grossing-up for Taxes...............................................................40
9.6 Qualifying Banks....................................................................40
9.7 Claw-back of Tax benefit............................................................41
9.8 Certification to secure a Tax benefit...............................................41
9.9 Bank accounts.......................................................................42
9.10 Partial payments....................................................................42
9.11 Calculations........................................................................43
9.12 Certificates conclusive.............................................................43
9.13 Reconventioning.....................................................................43
10 Guarantee....................................................................................44
10.1 Covenant to pay.....................................................................44
10.2 Guarantors as principal debtors; indemnity..........................................44
10.3 No security taken by Guarantors.....................................................44
10.4 Interest............................................................................44
10.5 Continuing security and other matters...............................................45
10.6 New accounts........................................................................45
10.7 Liability unconditional.............................................................45
10.8 Collateral Instruments..............................................................46
10.9 Waiver of Guarantors' rights........................................................46
10.10 Suspense accounts...................................................................47
10.11 Settlements conditional.............................................................47
<PAGE>
10.12 Guarantors to deliver up certain property...........................................47
10.13 Retention of this guarantee.........................................................47
10.14 Changes in constitution or reorganisations of Secured Parties.......................47
10.15 Other Guarantors....................................................................48
10.16 Acceding Guarantors.................................................................48
11 Representations and warranties...............................................................50
11.1 Repeated representations and warranties.............................................50
11.2 Further representations and warranties..............................................52
11.3 First Advance representations and warranties........................................55
11.4 Repetition..........................................................................56
12 Undertakings.................................................................................58
12.1 Positive covenants..................................................................58
12.2 Negative covenants..................................................................65
13 Financial covenants..........................................................................70
13.1 Financial covenants.................................................................70
13.2 Auditors certificate................................................................71
14 Events of Default............................................................................73
14.1 Events of default...................................................................73
14.2 Acceleration........................................................................79
14.3 Demand basis........................................................................80
15 Indemnities..................................................................................81
15.1 Miscellaneous indemnities...........................................................81
15.2 Currency of account: currency indemnity.............................................81
15.3 Environmental indemnity.............................................................82
15.4 ESGB reserve requirements...........................................................82
16 Unlawfulness and increased costs; mitigation.................................................83
16.1 Unlawfulness........................................................................83
16.2 Increased costs.....................................................................83
16.3 Exceptions..........................................................................84
16.4 Mitigation..........................................................................85
17 Set-off and pro rata payments................................................................86
17.1 Set-off.............................................................................86
17.2 Pro rata payments...................................................................86
17.3 No release..........................................................................87
17.4 No charge...........................................................................87
18 Assignment substitution and lending offices..................................................88
18.1 Benefit and burden..................................................................88
18.2 No assignment by Obligors...........................................................88
18.3 Assignment by Banks.................................................................88
18.4 Transfer............................................................................88
<PAGE>
18.5 Reliance on Transfer Certificate....................................................89
18.6 Authorisation of Agent..............................................................89
18.7 Construction of certain references..................................................89
18.8 Lending offices.....................................................................90
18.9 Disclosure of information...........................................................90
19 Joint Arrangers, Agent, Security Agent, the Security Agent Guarantor Overdraft Bank and
Reference Banks..............................................................................91
19.1 Appointment of Agent................................................................91
19.2 Agent's actions.....................................................................91
19.3 Agent's duties......................................................................91
19.4 Agent's rights......................................................................92
19.5 No liability of Joint Arrangers, Security Agent, Security Agent Guarantor and Agent.93
19.6 Non-reliance on Joint Arrangers, Security Agent, Security Agent Guarantor, Overdraft
Bank or Agent.......................................................................94
19.7 No Responsibility on Joint Arrangers, Security Agent, the Security Agent Guarantor,
the Overdraft Bank or Agent for any Obligor's performance...........................94
19.8 Reliance on documents and professional advice.......................................95
19.9 Other dealings......................................................................95
19.10 Rights of Agent, Overdraft Bank and Security Agent Guarantor as Bank: no partnership95
19.11 Amendments: waivers.................................................................95
19.12 Reimbursement and indemnity by Banks................................................96
19.13 Retirement of Agent.................................................................97
19.14 Retirement of Overdraft Bank........................................................98
19.15 Change of Reference Banks...........................................................98
19.16 Prompt distribution of proceeds.....................................................98
20 Notices and other matters....................................................................99
20.1 Notices.............................................................................99
20.2 Notices through the Agent..........................................................101
20.3 No implied waivers remedies cumulative.............................................101
20.4 English translations...............................................................101
20.5 Counterparts.......................................................................101
21 Governing law and Jurisdiction..............................................................102
21.1 Law................................................................................102
21.2 Submission to jurisdiction.........................................................102
21.3 Agent for service of process.......................................................102
<PAGE>
SCHEDULE
1 Part A - The Banks and their Commitments....................................................103
Part B -Charging Subsidiaries and Original Guarantors.......................................104
2 Form of Drawdown Notice.....................................................................106
3 Documents and evidence required as conditions precedent to first Advance....................107
4 Calculation of Additional Cost..............................................................110
5 Form of Transfer Certificate................................................................112
6 Part A - Compliance Certificate to be delivered by an Authorised Officer of the Borrower....116
Part B - Compliance Certificate to be delivered by the auditors of the Group................118
7 Registrations...............................................................................120
8 Principal Agreements........................................................................121
9 Part A - Guarantor's Deed of Accession......................................................122
Part B - Documents and Evidence to be delivered by an Acceding Guarantor....................123
10 Form of Quarterly Management Accounts/Monthly Information...................................125
11 Management Base Case....................................................................... 136
</TABLE>
<PAGE>
74
THIS AGREEMENT is dated 10th March, 1999 and made BETWEEN:
(1) N.V. TELEKABEL as Borrower;
(2) THE ENTITIES listed in part B of schedule 1 as Original Guarantors;
(3) BANK OF AMERICA INTERNATIONAL LIMITED, CITIBANK, N.A., DEUTSCHE BANK
AG LONDON, MEESPIERSON N.V. AND PARIBAS as Joint Arrangers;
(4) THE BANKS AND FINANCIAL INSTITUTIONS whose names and addresses are set
out in part A of schedule 1;
(5) MEESPIERSON N.V. as Overdraft Bank;
(6) MEESPIERSON N.V. as Agent;
(7) STICHTING SECURITY AGENT N.V. TELEKABEL as Security Agent; and
(8) MEESPIERSON N.V. as Security Agent Guarantor.
IT IS AGREED as follows:
1 PURPOSE AND DEFINITIONS
-----------------------
1.1 PURPOSE
-------
This Agreement sets out the terms and conditions upon and subject to
which the Banks agree, according to their several obligations, to make
available to the Borrower a revolving credit facility (converting to a
term loan) of up to euro335,000,000 and the Overdraft Bank agrees to
make available to the Borrower an overdraft facility of up to
euro5,000,000 to be used (in each case) for the purposes of (i)
financing capital expenditure and working capital in relation to the
Project, (ii) repaying inter-company loans made by the Shareholder to
the Borrower in order to refinance the NUON Facility up to a maximum
of NLG 500,000,000, (iii) repaying inter-company loans made by the
Shareholder to the Borrower prior to the date of this Agreement
representing the on-lending of the proceeds of subscriptions in cash
for equity share capital in the Shareholder and/or inter-company loans
made to the Shareholder by UTH and/or NUON and/or UPC, to the extent
that the aggregate of Subordinated Shareholder Loans and equity share
capital in the Borrower subscribed for in cash and/or assets exceeds
on the date of the first Advance NLG 412,000,000; (iv) financing
expenses incurred in connection with the Facilities and (v) repaying
Additional Subordinated Shareholder Loans to the extent permitted by
clause 12.2(k).
1
<PAGE>
1.2 DEFINITIONS
-----------
In this Agreement, unless the context otherwise requires:
"1999 BUDGET" means the budget for the Group for the period commencing
on 1st January, 1999 and ending on 31st December, 1999;
"ACCEDING GUARANTORS" means those entities which have become a party
to this Agreement as Guarantors pursuant to clause 10.16;
"ACCOUNT PLEDGE" means the pledge of claims over the Charged Accounts
and the amounts standing to the credit from time to time thereof
entered into or to be entered into by the Borrower and certain
Original Guarantors in respect of the Charged Accounts in favour of
the Secured Parties in the agreed form;
"ADDITIONAL COST" means in relation to any period a percentage
calculated for such period at an annual rate determined in accordance
with schedule 4;
"ADDITIONAL SUBORDINATED SHAREHOLDER LOAN" means Borrowed Money of up
to euro18,000,000 made available by a Subordinated Creditor to the
Borrower after the date of this Agreement pursuant to the UPC Funding
Undertaking;
"ADVANCE" means a Revolving Advance or a Term Advance (as applicable);
"AGENT" means MeesPierson N.V. of Coolsingel 93, 3012 AE, Rotterdam,
The Netherlands or such other person as may be appointed agent for the
Banks pursuant to clause 19.13;
"AGGREGATE TOTAL COMMITMENTS" means the aggregate of the Total
Commitments and the Overdraft Facility Amount;
"ANNUAL BUDGET" means a budget in respect of the Group for each
financial year containing information of a substantially similar type
and to a substantially similar level of detail as the 1999 Budget or
containing such additional information or additional level of detail
as the Borrower reasonably deems necessary, or, omitting such
information or to such lesser level of detail, as has at the relevant
time, been approved in writing by the Agent acting on the instructions
of the Majority Banks;
"ANNUALISED CONSOLIDATED EBITDA" means twice the aggregate of the
Consolidated EBITDA in respect of the relevant Six Month Period;
"ANNUALISED CONSOLIDATED EBITDA BEFORE MANAGEMENT FEES" means twice
the aggregate of the Consolidated EBITDA before management fees in
respect of the relevant Six Month Period;
"ASSOCIATED COMPANY" of a person means (i) any other person which is
directly or indirectly controlled by, under common control with or
controlling such person or (ii) any other person owning beneficially
and/or legally directly or indirectly 10 per cent. or more of the
equity interest in such person or 10 per cent. of whose equity
2
<PAGE>
interest is owned beneficially and/or legally directly or indirectly
by such person. For the purposes of this definition the term "control"
means possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a person whether
through the ownership of interests or voting securities, by contract
or otherwise;
"AUTHORISED OFFICER" means that officer or officers of the Borrower
authorised to sign Compliance Certificates, Drawdown Notices and other
notices, requests, or confirmations referred to in this Agreement or
relating to the Facilities;
"BANKING DAY" means:
(a) a day (other than a Saturday or Sunday) on which banks are open
for business in London, Rotterdam and Paris; and
(b) in relation to rate fixing a day on which Trans-European
Automated Real-time Gross Settlement Express Transfer system
(TARGET) is operating;
"BANKS" means the banks and financial institutions listed in part A of
schedule 1 and includes their successors in title and Transferees;
"BORROWED MONEY" means Indebtedness in respect of (i) money borrowed or
raised and debit balances at banks, (ii) any bond, note, loan stock,
debenture or similar debt instrument, (iii) acceptance or documentary
credit facilities, (iv) receivables sold or discounted (otherwise than
on a non-recourse basis), (v) payments for assets acquired or services
supplied deferred for a period of over 90 days after the relevant
assets were or are to be acquired or the relevant services were or are
to be supplied, (vi) finance leases and hire purchase contracts, (vii)
any other transaction (including without limitation forward sale or
purchase agreements) having the commercial effect of a borrowing or
raising of money or of any of (ii) to (vi) above and (viii) guarantees
in respect of Indebtedness of any person falling within any of (i) to
(vii) above (for the avoidance of doubt, without double counting
guarantees given by a member of the Charging Group for the Indebtedness
of another member of the Charging Group) provided that Indebtedness
which has been cash collateralised shall not be included in any
calculation of Borrowed Money to the extent so cash collateralised;
"BORROWER" means N.V. TeleKabel a limited liability company
incorporated under the laws of The Netherlands with its registered
office in Amsterdam and its business office at Waterstraat 11, Velp GLD
6882GA, The Netherlands;
"CABLE SYSTEMS" means the telecommunications and/or television systems
constructed or to be constructed in relation to the Project and
includes any part of such system and all modifications, substitutions,
replacements, renewals and extensions made to such systems;
3
<PAGE>
"CHARGED ACCOUNTS" means the accounts of the Borrower and certain
Original Guarantors into which the proceeds of the Earnings are from
time to time placed;
"CHARGING GROUP" means the Borrower and the Charging Subsidiaries of
the Borrower from time to time;
"CHARGING SUBSIDIARIES" means the Original Guarantors together with
such Acceding Guarantors as have given an unlimited Guarantee and
entered into the relevant Security Documents referred to in part B of
schedule 9;
"COLLATERAL INSTRUMENTS" means notes, bills of exchange, certificates
of deposit and other negotiable and non-negotiable instruments,
guarantees and any other documents or instruments which contain or
evidence an obligation (with or without security) to pay, discharge or
be responsible directly or indirectly for, any Indebtedness or
liabilities under this Agreement and includes Encumbrances;
"COMMITMENT" means, in relation to a Bank, at any relevant time the
amount set opposite its name in part A of schedule 1 and/or, in the
case of a Transferee, the amount novated as specified in the relevant
Transfer Certificate, as reduced, in each case, by any relevant term of
this Agreement and so that, if at such time the Total Commitments have
been reduced to zero, references to a Bank's Commitment shall be
construed as a reference to that Bank's Commitment immediately prior to
such reduction to zero;
"COMPLIANCE CERTIFICATE" means either (i) a certificate substantially
in the form set out in part A of schedule 6 in relation to the
compliance (or otherwise) with the undertakings in clause 13 (if not in
compliance indicating the extent of the breach) issued by the
Authorised Officer of the Borrower in relation to Quarterly Management
Accounts or (ii) a certificate substantially in the form set out in
part B of schedule 6 in relation to the compliance (or otherwise) with
the undertakings in clause 13 (if not in compliance indicating the
extent of the breach) issued by the auditors of the Borrower in
relation to annual financial statements;
"CONSOLIDATED EBITDA BEFORE MANAGEMENT FEES" means, in respect of each
Quarterly Period or financial year, the Net Income of the Group (plus
any depreciation, amortisation, other non-cash charges (such as
deferred Taxes), Management Fees accrued (whether paid or not) in
respect of such Quarterly Period or financial year) and interest
expense and other charges in respect of Borrowed Money) for such
Quarterly Period or financial year adjusted as follows:
(a) minus extraordinary income of the Group for such Quarterly Period
or financial year;
(b) plus any extraordinary expenses of the Group for such Quarterly
Period or financial year; and
4
<PAGE>
(c) minus any interest income of the Group for such Quarterly Period
or financial year;
all as determined in accordance with GAAP used in the preparation of,
and as shown in, the relevant annual audited financial statements or
Quarterly Management Accounts prepared and delivered to the Agent
pursuant to clause 12.1(f)(i) and clause 12.1(g) (as the case may be);
"CONSOLIDATED EBITDA" means Consolidated EBITDA before Management Fees
minus any Management Fees (including accrued Management Fees)
constituting Permitted Payments paid during the relevant Quarterly
Period or financial year all as determined in accordance with GAAP used
in the preparation of, and as shown in, the relevant annual audited
financial statements or Quarterly Management Accounts prepared and
delivered to the Agent pursuant to clause 12.1(f)(i) and clause 12.1(g)
(as the case may be);
"CONTRIBUTION" means, in relation to a Bank, the principal amount of
the Loan owing to such Bank at any relevant time;
"DEFAULT" means any Event of Default or any event or circumstance which
would, upon the giving of a notice by the Agent and/or the expiry of
the relevant period and/or the fulfilment of any other condition (in
each case as specified in clause 14.1), constitute an Event of Default;
"DERIVATIVES CONTRACT" means a contract, agreement or transaction
which is:
(i) a rate swap, basis swap, commodity swap, forward rate
transaction, commodity option, equity (or equity or other index)
swap or option, bond option, interest rate option, foreign
exchange transaction, collar or floor, currency swap, currency
option or any other similar transaction; and/or
(ii) any combination of such transactions,
in each case, whether on-exchange or otherwise;
"DRAWDOWN DATE" means the date, being a Banking Day on which an
Advance is or is to be drawn down;
"DRAWDOWN NOTICE" means a notice in the form or substantially in the
form of schedule 2;
"EARNINGS" means all monies whatsoever from time to time due and
payable to any member of the Charging Group arising out of the use or
operation of the Cable Systems including (without limitation) all
revenues and other payments due from Subscribers and damages for breach
of any Subscriber's Agreement;
"EMU" means Economic and Monetary Union as contemplated in the Treaty;
5
<PAGE>
"EMU LEGISLATION" means legislative measures of the European Council
for the introduction of, changeover to, or operation of, a single or
unified European currency;
"ENCUMBRANCE" means any mortgage, charge (whether fixed or floating),
pledge, lien, hypothecation, assignment by way of security, trust
arrangement for the purpose of providing security or other security
interest of any kind securing any obligation of any person or any other
arrangement having the effect of conferring rights of retention or
other disposal rights over an asset (including without limitation title
transfer and/or retention arrangements having a similar effect or a
deposit of money with the primary intention of affording a right of
set-off) and includes any agreement to create any of the foregoing but
does not include liens arising in the ordinary course of trading by
operation of law and not by way of contract;
"ENVIRONMENTAL CLAIM" means any claim, notice prosecution, demand,
action, official warning, abatement or other order (conditional or
otherwise) relating to Environmental Matters or any notification or
order requiring compliance with the terms of any Environmental Licence
or Environmental Law;
"ENVIRONMENTAL LAW" includes all or any law, statute, rule, regulation,
treaty, by-law, code of practice, order, notice, demand, decision of
the courts or of any governmental authority or agency or any other
regulatory or other body in any jurisdiction relating to Environmental
Matters;
"ENVIRONMENTAL LICENCE" includes any permit, licence, authorisation,
consent or other approval required at any time by any Environmental
Law;
"ENVIRONMENTAL MATTERS" includes (a) the generation, deposit, disposal,
keeping, treatment, transportation, transmission, handling,
importation, exportation, processing, collection, sorting, presence or
manufacture of any waste or any Relevant Substance; (b) nuisance,
noise, defective premises, health and safety at work or elsewhere; and
(c) the pollution, conservation or protection of the environment (both
natural and built) or of man or any living organisms supported by the
environment or any other matter whatsoever affecting the environment or
any part of it;
"EURIBOR" means in relation to a particular period:
(a) the percentage rate per annum which is sponsored by the
European Banking Federation and which appears on Telerate page
248 (or such other page as may replace such page 248 on such
system or on any other system of the information vendor for
the time being designated by the Federation Bancaire de
l'Union Europeene to be the official collector, calculator and
distributor of the Euro Interbank Offered Rate; or
6
<PAGE>
(b) if no such rate is to appear on the Telerate Screen, the
arithmetic mean (rounded upward, if necessary, to the nearest
five decimal places) of the annual rates, as supplied to the
Agent at its request, quoted by the Reference Banks to leading
banks in the Interbank Market of any Participating Member
State(s),
at or about 11.00 a.m. Central European Time on the second Banking Day
before the first day of such period for the offering of deposits in
euros in an amount approximately equal to the amount in relation to
which EURIBOR is to be determined for a period equivalent to such
period.
"EURO" and "EUROS" and "euro" means the single currency of
Participating Member States introduced in accordance with the
provisions of Article 109(l)4 of the Treaty and in respect of all
payments to be made under this Agreement in euros means immediately
available, freely transferable funds;
"EURO UNIT" means a currency unit of the euro as defined in EMU
Legislation;
"EVENT OF DEFAULT" means any of the events or circumstances described
in clause 14.1;
"EXCESS CASH FLOW" means the aggregate Consolidated EBITDA of the
Group calculated for the most recently ended financial year (beginning
with the financial year ending on 31st December 2002), as shown in the
Quarterly Management Accounts in respect of the Quarterly Period
ending on 31st December in any relevant year, less (i) any interest
and other charges in respect of Borrowed Money of the Group paid
during such financial year, (ii) repayments and/or prepayments of any
Borrowed Money of the Group paid during such financial year, (iii)
capital expenditure of the Group, whether or not incurred, to the
extent that the same is included in the Annual Budget for such period
as delivered to the Agent under this Agreement and (iv) the amount
required for the creation of a working capital reserve to the extent
that the aggregate of all amounts so allocated do not exceed
euro8,000,000 (or its equivalent) or euro2,000,000 (or its equivalent)
in any financial year;
"FACILITIES" means the Revolving Credit Facility and the Overdraft
Facility;
"FINANCE DOCUMENTS" means this Agreement, the Security Documents and
the Interest Rate Hedging Arrangements;
"FINANCE PARTIES" means the Agent, the Joint Arrangers, the Security
Agent, the Security Agent Guarantor, the Overdraft Bank and the Banks;
"GAAP" means generally accepted accounting principles and practices in
the Netherlands;
"GROUP" means the Borrower and all its Subsidiaries from time to time;
7
<PAGE>
"GUARANTEE" means the guarantee of the Guarantors contained in clause
10 and includes each separate or independent stipulation or agreement
by the Guarantors contained in clause 10;
"GUARANTEED LIABILITIES" means all moneys, obligations and liabilities
expressed to be guaranteed by the Guarantors in clause 10.2;
"GUARANTORS" means (i) the Original Guarantors and (ii) the Acceding
Guarantors;
"HEADENDS" means the part of the Cable System that receives the
programme signals, whether by satellite, broadcast or tape and
processes and transmits them to Subscribers of the network;
"HOLDING COMPANY" in relation to a person, means an entity of which
that person is a Subsidiary;
"IMMATERIAL SUBSIDIARIES" means any Subsidiary of the Borrower which
does not trade and has no interest, legal or beneficial, in the
Registrations, the Cable Systems, the Earnings, the Principal
Agreements, the share capital of any other member of the Group which
is not an Immaterial Subsidiary;
"INCAPACITY" means, in relation to a person, the insolvency,
liquidation, dissolution, winding-up, administration, receivership or
other incapacity of that person whatsoever (and in the case of a
partnership, includes the termination or change in composition of the
partnership);
"INDEBTEDNESS" means any obligation for the payment or repayment of
money, whether as principal or as surety and whether present or
future, actual or contingent;
"INFORMATION MEMORANDUM" means the Information Memorandum in the form
approved by the Borrower and the Joint Arrangers to be distributed by
the Joint Arrangers at the request of the Borrower in connection with
this Agreement;
"INTELLECTUAL PROPERTY RIGHTS" means any patent, trademark, service
mark, registered design, trade name or copyright required to carry on
the business of any member of the Group;
"INTEREST PAYMENT DATE" means the last day of an Interest Period;
"INTEREST PERIOD" means, in relation to any Advance or the Loan, each
period for the calculation of interest in respect of such Advance or
the Loan ascertained in accordance with clauses 5.3, 5.4 and 5.5;
"INTEREST RATE HEDGING ARRANGEMENTS" means the interest rate hedging
arrangements with respect of the interest rate hedging programme
referred to in paragraph (u) of schedule 3;
8
<PAGE>
"INTEREST RATE HEDGING BANKS" means Banks who are party to the
Interest Rate Hedging Arrangements;
"JOINT ARRANGERS" means Bank of America International Limited of New
Broad Street House, 35 New Broad Street, London EC2M 1SH, Citibank,
N.A. of PO Box 200, Cottons Centre, Hays Lane, London SE1 2QT,
Deutsche Bank AG London of 6 Bishopsgate, London EC2N 4DA, MeesPierson
N.V. of Coolsingel 93, 3012 AE, Rotterdam, The Netherlands and Paribas
of 3, Rue d'Antin, 75002 Paris, France;
"LOAN" means the aggregate principal amount owing to the Banks under
this Agreement in respect of the Revolving Credit Facility at any
relevant time;
"MAJORITY BANKS" means at any relevant time Banks the aggregate of
whose Commitments exceeds 662/3 per cent of the Aggregate Total
Commitments provided that, in the case of that Bank which is the
Overdraft Bank, for the purposes of calculating Majority Banks, such
Bank's Commitment shall include the Overdraft Facility Amount;
"MANAGEMENT BASE CASE" means the management base case financial and
operational projections for the Group produced by the Borrower in the
form of schedule 11;
"MANAGEMENT FEES" means any management, consultancy or similar fees
payable by any member of the Group to any Relevant Person;
"MARGIN" means the rate per annum calculated in accordance with clause
5;
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
ability of the Group (taken as a whole) or the Borrower to perform all
or any of their or its respective material obligations under or
otherwise comply with the terms of this Agreement or any Security
Document;
"MATERIAL SUBSIDIARIES" means all the Subsidiaries of the Borrower
other than the Immaterial Subsidiaries;
"MONTH" or "MONTHS" means a period beginning in one calendar month and
ending in the relevant later calendar month on the day numerically
corresponding to the day of the calendar month in which it started,
provided that (i) if the period started on the last Banking Day in a
calendar month or if there is no such numerically corresponding day,
it shall end on the last Banking Day in such later calendar month and
(ii) if such numerically corresponding day is not a Banking Day, the
period shall end on the next following Banking Day in such later
calendar month but if there is no such Banking Day it shall end on the
preceding Banking Day and "MONTHLY" shall be construed accordingly;
"MONTHLY INFORMATION" means the monthly information of the Group to be
delivered (or which may be delivered) to the Agent pursuant to clause
12.1(h) substantially in the form set out in schedule 10 (save that a
9
<PAGE>
balance sheet shall not be required) or containing information of the
same type as is required by such form;
"MORTGAGE DEED" means a mortgage over immoveables entered into or to be
entered into by the relevant member of the Charging Group in respect of
its own immoveables in favour of the Secured Parties in the agreed
form;
"MOVEABLES PLEDGES" means the pledges over moveables entered into or to
be entered into by the Borrower and each relevant Charging Subsidiary
in respect of its own moveables in favour of the Secured Parties in the
agreed form;
"NECESSARY AUTHORISATIONS" means all approvals, authorisations and
licences (including the Registrations) from, all rights granted by and
all filings, registrations and agreements with any person including,
without limitation, any government or other regulatory authority, from
time to time, necessary in order to enable each member of the Group to
carry on such business as may be permitted by the terms of this
Agreement and which is carried on by it at the relevant time;
"NET DERIVATIVES LIABILITY" means, at any time, the net liability (if
any) at such time of the Group taken as a whole in respect of
Derivatives Contracts determined by reference to the amounts (as
determined by the Agent), which would be payable or receivable by the
Group if all Derivatives Contracts to which any member of the Group was
a party at such time were terminated at such time and replaced by the
obligation to make a payment reflecting the economic burden or value to
the relevant member of the Group of the payment flows under those
Derivatives Contracts remaining at the time of termination;
"NET INCOME" means, for any period, the net profit after Management
Fees and Taxes of the Group arising out of the use or operation of
Cable Systems or other businesses or activities permitted to be carried
out under this Agreement for such period as determined in accordance
with GAAP used in the preparation of and as shown in the financial
statements or Quarterly Management Accounts in respect of such period
prepared and delivered to the Agent pursuant to clause 12.1(f) or
12.1(g);
"NLG" means the lawful currency for the time being of The Netherlands;
"NUON" means N.V. NUON Energie-Onderneming voor Gelderland, Friesland
en Flevoland, a Netherlands public limited liability company with its
registered office at Arnhem and its business office at Utrechtseweg 68,
6812BH Arnhem, The Netherlands;
"NUON FACILITY" means the inter-company credit facilities made
available to the Shareholder by NUON of up to NLG 690,000,000 pursuant
to an agreement between the Shareholder and NUON dated 31st August,
1998;
"OBLIGOR" means the Borrower and each Guarantor;
10
<PAGE>
"ORIGINAL GUARANTORS" means those Material Subsidiaries of the
Borrower whose names, country of incorporation and principal place of
business are set out in part B of schedule 1;
"OVERDRAFT BANK" means MeesPierson N.V. of Coolsingel 93, 3012 AE
Rotterdam, The Netherlands;
"OVERDRAFT FACILITY" means an overdraft facility of up to
euro5,000,000 made available to the Borrower by the Overdraft Bank
pursuant to clause 2.1(b);
"OVERDRAFT FACILITY AMOUNT" means at any time euro5,000,000 as reduced
by any relevant provision of this Agreement;
"PARTICIPATING MEMBER STATE" means a member state of the European
Union that adopted a single currency in accordance with the Treaty;
"PERMITTED ACQUISITIONS" means:
(a) any acquisitions of assets or services made in the ordinary
course of business;
(b) any acquisitions of the share capital of, or assets and
liabilities of, a member of the Group by a member of the Charging
Group as part of the solvent reorganisation of the Group;
"PERMITTED BORROWINGS" means, without duplication:
(a) any Borrowed Money arising hereunder or under the Security
Documents;
(b) any Borrowed Money approved in writing by the Agent (acting on
the instructions of the Majority Banks);
(c) any Subordinated Shareholder Loan;
(d) any Borrowed Money owing by any member of the Group arising under
deferred payment agreements incurred in the ordinary course of
business provided that such Borrowed Money is deferred for no
longer than 180 days and is in an aggregate amount of not more
than euro20,000,000 (or its equivalent) outstanding at any time;
(e) any deposits or prepayments constituting Borrowed Money received
by any member of the Group from a customer or subscriber for its
services;
(f) any Borrowed Money owing by any member of the Charging Group to
another member of the Charging Group;
(g) any Borrowed Money owing by any member of the Group being
Management Fees in respect of which payment has been deferred;
11
<PAGE>
(h) any Borrowed Money being Permitted Payments in respect of which
payment has been deferred;
(i) any finance lease arrangements entered into with a supplier of
telecommunications equipment to the Group in an aggregate amount
of not more than euro5,000,000 (or its equivalent) or subject to
the prior written consent of the Majority Banks in excess of
euro5,000,000 (or its equivalent) in aggregate; and
(j) any Borrowed Money in addition to the Borrowed Money falling
within paragraphs (a) to (i) above and not exceeding at any time
more than euro5,000,000 in aggregate (or its equivalent);
"PERMITTED ENCUMBRANCES" means:
(a) any Encumbrance arising hereunder or under any Security Document;
until the date of the first Advance hereunder, any Encumbrance
over the shares of the Borrower or any of its Subsidiaries
securing the NUON Facility;
(b) any liens arising in the ordinary course of business by way of
contract which secure Borrowed Money falling within part (d) of
the definition of "PERMITTED BORROWINGS" above or which secure
any Indebtedness under any agreement for the supply of goods or
services in respect of which payment is not deferred for more
than 90 days;
(c) any Encumbrance approved in writing by the Agent (acting on the
instructions of the Majority Banks); and
(d) any Encumbrance not falling within paragraphs (a) to (d) above
and securing Indebtedness in aggregate not exceeding 5,000,000
(or its equivalent);
"PERMITTED PAYMENTS" means any payments or transfers of assets:
(a) for the purposes referred to in clause 1.1 (ii) and (iii);
(b) by way of the repayment on the date of the first Advance of
inter-company loans made by the Shareholder to the Borrower up to
NLG130,000,000 in order to repay the NUON Facility;
(c) to any Relevant Person in relation to transactions carried out on
bona fide arm's length commercial terms in the ordinary course of
business;
(d) at any time on or after delivery to the Agent of the Compliance
Certificate in respect of the Quarterly Period ending 31st
December, 2000, consisting of repayment of the principal of
Additional Subordinated Shareholder Loans provided that (i) in
respect of each of the two most recently ended consecutive
12
<PAGE>
Quarterly Periods the ratio of Senior Debt to Annualised
Consolidated EBITDA (calculated on the last day of each such
Quarterly Period by reference to the Six Month Period ending on
such date), each as demonstrated in the Compliance Certificate
for such Quarterly Period was 7:1 or less and (ii) no Default has
occurred and is continuing or would occur or be reasonably likely
to occur as a result of such payment;
(e) consisting of Management Fees (other than accrued Management
Fees) not exceeding euro3,400,000 in any financial year of the
Group in respect of which Management Fees are not payable under
paragraphs (f) or (g) below provided that no Default has occurred
and is continuing or would occur or be reasonably likely to occur
as a result of such payment;
(f) consisting of Management Fees (including Management Fees accrued
in respect of that or any previous financial year) not exceeding
euro3,400,000 in any financial year of the Group in respect of
which Management Fees are not paid under paragraph (e) above or
payable under paragraph (g) below as adjusted to reflect the rate
of Euro inflation in such financial year in accordance with the
Consumer Price Index (IFS CPI) reported in the publication of the
International Monetary Fund entitled "International Financial
Statistics" provided that (i) in respect of the two most recently
ended consecutive Quarterly Periods the ratio of Senior Debt to
Annualised Consolidated EBITDA (calculated on the last day of
each such Quarterly Period by reference to the Six Month Period
ending on such date), each as demonstrated in the Compliance
Certificate for such Quarterly Period was 5:1 or less, but not
less than 4:1 and (ii) no Default has occurred and is continuing
or would occur or be reasonably likely to occur as a result of
such payment; and
(g) consisting of dividends or other distributions or the payment of
interest on or the repayment of any Subordinated Shareholder Loan
or the payment of Management Fees (including Management Fees
accrued in respect of that or any previous financial year) to any
Relevant Person after the end of the Revolving Period provided
that: (i) in respect of each of the two most recently ended
Quarterly Periods, the ratio of Senior Debt to Annualised
Consolidated EBITDA (calculated on the last day of each such
Quarterly Period by reference to the Six Month Period ending on
such date), each as demonstrated in the Compliance Certificate
for such Quarterly Period is less than 4:1 and (ii) no Default
has occurred and is continuing or would occur or be reasonably
likely to occur as a result of such distribution or payment;
"PLEDGE OF INTERCOMPANY CLAIMS" means the disclosed pledge of any
present and future claims the Borrower may have, from time to time,
against any of its Subsidiaries, entered into or to be entered into by
the Borrower and the Guarantors in favour of the Secured Parties;
13
<PAGE>
"PLEDGE OF RIGHTS AGAINST CASEMA" means the undisclosed pledge of any
present and future claims the Borrower may have, from time to time,
against Casema in relation to the swap of shares of certain companies
between Casema and the Borrower, entered into or to be entered into by
the Borrower in favour of the Secured Parties;
"PLEDGE OF RIGHTS AGAINST MUNICIPALITIES" means the undisclosed pledge
of any present and future rights and claims the Borrower and/or any of
the Guarantors may have, from time to time, against any relevant
municipality in relation to the Cable Systems, entered into or to be
entered into by the Borrower and the Guarantors in favour of the
Secured Parties;
"PLEDGE OVER PRINCIPAL AGREEMENTS" means the pledges over the Principal
Agreements and/or the UPC Funding Undertaking entered into or to be
entered into by the Borrower or the relevant Charging Subsidiary in
favour of the Secured Parties in the agreed form;
"PRINCIPAL AGREEMENTS" means the documents and agreements listed in
schedule 8 and/or all back-to-back or pass through agreements referred
to in clause 3.6(b)(i) as from time to time amended, varied, restated
or replaced together with any successor agreement, in each case in a
manner that does not constitute an Event of Default under clause
14.1(p);
"PRO-FORMA SENIOR DEBT SERVICE" means the aggregate of (i) the total
forecast amount of interest (calculated by reference to the rate of
interest in effect in relation to the Senior Debt on the date on which
the calculation falls to be made) and any other charges payable in
respect of the Senior Debt payable in respect of the twelve months
immediately following the date on which the relevant calculation under
this Agreement falls to be made and (ii) the principal amount of any
scheduled repayment of Senior Debt due to be made during such period;
"PROJECT" means the carrying on of the business in those locations
where the necessary Registrations have been effected or applied for
where any member of the Group is permitted to carry on the business
pending Registration;
"QUALIFYING BANK" means a person, being a bank or financial institution
(whether incorporated in the United Kingdom or elsewhere), which is
eligible to have payments made to it by the Borrower under this
Agreement without any deduction or withholding in respect of Taxes
either (i) by virtue of a double taxation treaty (assuming for this
purpose only that a direction or consent such as is referred to in
clause 9.8 has been given), or (ii) by virtue of the fact that no such
deduction or withholding is imposed in the jurisdiction to which the
Borrower is subject;
"QUARTER DAY" means 31st March, 30th June, 30th September and 31st
December in any year;
14
<PAGE>
"QUARTERLY MANAGEMENT ACCOUNTS" means the quarterly management
accounts of the Group to be delivered (or which may be delivered) to
the Agent pursuant to clause 12.1(g) substantially in the form set out
in schedule 10 or containing information of the same type as is
required by such form;
"QUARTERLY PERIOD" means each period of approximately three months
commencing on the day after a Quarter Day and ending on the next
following Quarter Day;
"RECEIVABLES PLEDGE" means the pledge over receivables entered into or
to be entered into by the Borrower in favour of the Secured Parties in
the agreed form;
"REFERENCE BANKS" means the principal London offices or, in the case
of Paribas only, Paris office of Bank of America N.T. & S.A.,
Citibank, N.A., Deutsche Bank AG London, MeesPierson N.V. and Paribas
and/or any other Bank appointed as such pursuant to clause 19.15;
"REGISTRATIONS" means the registrations by each relevant member of the
Charging Group with the Onafhankelijke Post en Telecommunicatie
Autoriteit "OPTA" listed in schedule 7 or otherwise required under
Telecommunications and Cable Laws in The Netherlands to carry on the
business from time to time or, as the case may be, replaced from time
to time in accordance with clause 12.1(u);
"RELEVANT JURISDICTION" means each jurisdiction in which a member of
the Group is incorporated or formed or in which such member of the
Group has its principal place of business or owns any material assets;
"RELEVANT PERSON" means UPC, the Shareholder and any company (not
being a member of the Charging Group) which is a Subsidiary of, or an
Associated Company of, UPC (other than Associated Companies of UPC
which are its Associated Companies by virtue of controlling UPC or
owning beneficially and/or legally directly or indirectly 10 per cent.
or more of the equity interests in UPC);
"RELEVANT SUBSTANCE" means any substance whatsoever (whether in a
solid or liquid form or in the form of a gas or vapour and whether
alone or in combination with any other substance) or waste which is
capable of causing harm to man or any other living organism supported
by the environment, or damaging the environment or public health or
welfare;
"RESTRICTED PAYMENT" means, in each case whether in cash, securities,
property or otherwise, (a) any direct or indirect distribution,
dividend or other payment on account of any class of its share capital
or capital stock or other securities, (b) any transfer of assets,
loan, gift or other payment or (c) any payment of principal of, or
interest on, any Subordinated Shareholder Loan, in each case to a
Relevant Person;
15
<PAGE>
"REVOLVING ADVANCE" means each borrowing by way of an advance under
the Revolving Credit Facility during the Revolving Period or, as the
context requires, the principal amount of that borrowing outstanding
at any relevant time;
"REVOLVING CREDIT FACILITY" means the revolving credit facility
(converting to a term loan) of up to euro335,000,000 granted to the
Borrower by the Banks pursuant to clause 2.1(a);
"REVOLVING PERIOD" means the period from (and including) the date
hereof to (and including) 31 December 2001;
"SECURED PARTIES" means the Finance Parties and the Interest Rate
Hedging Banks;
"SECURITY AGENT" means Stichting Security Agent N.V. TeleKabel of
Coolsingel 93, 3012 AE Rotterdam, The Netherlands;
"SECURITY AGENT GUARANTOR" means MeesPierson N.V. of Coolsingel 93,
3012 AE Rotterdam, The Netherlands; or such other person as may be
appointed security agent guarantor pursuant to the Security Deed;
"SECURITY DEED" means the Security Deed entered into or to be entered
into between the Secured Parties, each Subordinated Creditor, each
Security Provider and each Obligor;
"SECURITY DOCUMENTS" means the Subordination Deed, the Account Pledge,
the Receivables Pledge, the Pledge over Principal Agreements, the
Moveables Pledges, the Share Securities, the Pledge of Rights against
Municipalities, the Pledge of Intercompany Claims, the Pledge of
Rights against Casema, the UPC Funding Undertaking, any irrevocable
power of attorney referred to in schedule 3 or part B of schedule 9
and the Security Deed and all other mortgages, charges, pledges,
guarantees, inter-creditor agreements or deeds and other instruments
from time to time entered into in favour of the Secured Parties (or
any of them) by way of guarantee or other assurance and/or security
for or (in the case of inter-creditor agreements) otherwise in
relation to amounts owing to the Secured Parties (or any of them) in
respect of any Indebtedness of the Obligors under this Agreement;
"SECURITY PROVIDERS" means those persons (other than the Secured
Parties and the Obligors) that have entered into any of the Security
Documents from time to time;
"SECURITY PROVIDER'S DEED OF ACCESSION" has the meaning given to it in
the Security Deed;
"SENIOR DEBT CASH INTEREST CHARGES" means, in relation to any period,
the total amount of all interest, fees and commissions accruing in
respect of the Senior Debt during such period (having taken into
account the effect of any Interest Rate Hedging Arrangements);
16
<PAGE>
"SENIOR DEBT" means the aggregate principal amount outstanding under
the Facilities;
"SHAREHOLDER" means N.V. TeleKabel Beheer, a limited liability company
incorporated under the laws of The Netherlands with its registered
office in Arnhem and its business office in Waterstraat 11, 6882 GA
Velp, The Netherlands;
"SHARE SECURITIES" means the TeleKabel Share Securities and the
Subsidiary Share Securities and such other pledges/charges over shares
in any of the Material Subsidiaries as may be executed in favour of
the Secured Parties from time to time as security for amounts owing to
the Secured Parties (or any of them) in respect of any Indebtedness of
the Obligors under this Agreement;
"SIX MONTH PERIOD" means each period of two consecutive Quarterly
Periods ending on a Quarter Day;
"SUBORDINATED CREDITOR" means the Shareholder and any other Relevant
Person who has, at any relevant time, entered into a Subordination
Deed and the Security Deed or a Security Provider's Deed of Accession;
"SUBORDINATION DEED" means the pledge of Subordinated Shareholder
Loans and Restricted Payments (other than Permitted Payments) and deed
of subordination to be entered into (i) by the Shareholder in favour
of the Secured Parties in the agreed form, or (ii) by any other person
in favour of the Secured Parties pursuant to the terms of this
Agreement substantially in the form of the pledge and deed of
subordination referred to in (i) above or such other form as may be
reasonably agreed by the Security Agent (acting on the instructions of
the Majority Banks) having regard to the applicable laws relating to
the pledging and subordination of receivables in the jurisdiction in
which the relevant loan is payable;
"SUBORDINATED SHAREHOLDER LOAN" means any Borrowed Money of any member
of the Group owed to a Subordinated Creditor;
"SUBSCRIBER" means a person who has entered into a Subscriber's
Agreement;
"SUBSCRIBER'S AGREEMENT" means an agreement with a member of the Group
to be provided with services through the operation of the Cable
Systems and/or assets in relation to the provision of such services by
a member of the Group;
"SUBSIDIARY" of a person means any company or entity directly or
indirectly controlled by such person, for which purpose "CONTROL"
means ownership of more than 50 per cent. of the economic and/or
voting share capital (or equivalent right of ownership of such company
or entity);
"SUBSIDIARY SHARE SECURITIES" means the share pledges given, or to be
given, by the Borrower or the relevant Charging Subsidiary to the
17
<PAGE>
Secured Parties in respect of their respective shareholdings in the
Original Guarantors, in the agreed form;
"TAXES" includes all present and future taxes, levies, imposts,
duties, fees or charges of a similar nature together with interest
thereon and penalties in respect thereof and "TAXATION" shall be
construed accordingly;
"TELECOMMUNICATIONS AND CABLE LAWS" means all laws, statutes,
regulations and judgments relating to telecommunications, cable
television and data services applicable to any member of the Group
and/or the business carried on by any member of the Group in any
Relevant Jurisdiction;
"TELEKABEL SHARE SECURITY" means the share pledge given, or to be
given, to the Secured Parties by the Shareholder in respect of its
shareholding in the Borrower in the agreed form;
"TERM" means, in relation to a Revolving Advance, the period for which
such Revolving Advance is, or is to be, made, as specified in the
Drawdown Notice for such Revolving Advance, or as otherwise determined
in accordance with the provisions hereof;
"TERM ADVANCE" means, on the last day of the Revolving Period and
thereafter, each advance deemed to be made pursuant to clause 4.8 and
any advance resulting from the division and/or consolidation of any
Term Advance in accordance with clause 4.8;
"TERM DATE" means, in relation to a Revolving Advance, the last day of
the Term of such Revolving Advance;
"TERM PERIOD" means from (and including) 1 January 2002 to (and
including) 31 December 2007;
"TERM REPAYMENT DATE" means each of the dates referred to in clause
7.1;
"TOTAL COMMITMENTS" means at any relevant time the total of the
Commitments of all the Banks at such time;
"TRANSACTION DOCUMENTS" means this Agreement and the Security
Documents;
"TRANSFEREE" has the meaning given to it in clause 18.4;
"TRANSFER CERTIFICATE" means a certificate substantially in the terms
of schedule 5;
"TREATY" means the Treaty establishing the European Economic
Community, being the Treaty of Rome of 25 March 1957 as amended by the
Single European Act 1986 and the Maastricht Treaty (which was signed
on 7 February 1992 and came into force on 1 November 1993) as amended,
varied or supplemented from time to time;
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"UPC" means United Pan-Europe Communications N.V., a public limited
liability company incorporated under the laws of The Netherlands with
its registered office at Amsterdam and its business office at Frederik
Roeskestraat 123, (1076EE) Amsterdam, The Netherlands;
"UPC FUNDING UNDERTAKING" means the undertaking entered or to be
entered into in the agreed form by UPC in favour of the Borrower and
the Security Agent pursuant to which UPC agrees to procure the
injection of additional funds of up to euro18,000,000 into the
Borrower to meet the Group's capital needs during 1999 and 2000;
"UTH" means United TeleKabel Holding N.V., a limited liability company
incorporated under the laws of The Netherlands with its registered
office in Almere and its business office at Kabelweg 55 Amsterdam
(1014BA), The Netherlands;
"UTILISATION" means each borrowing or other utilisation under the
Overdraft Facility by the Borrower;
"YEAR 2000 ISSUE" means the failure of computer software, hardware and
firmware systems and equipment containing embedded microchips to
properly receive, transmit, process, manipulate, store, retrieve,
re-transmit or in any other way utilise data and information due to
the occurrence of the year 2000 or the inclusion of dates on or after
1 January, 2000.
1.3 HEADINGS
--------
Clause headings and the table of contents are inserted for convenience
of reference only and shall be ignored in the interpretation of this
Agreement.
1.4 CONSTRUCTION OF CERTAIN TERMS
-----------------------------
In this Agreement, unless the context otherwise requires:
(a) references to clauses and schedules are to be construed as
references to the clauses of, and schedules to, this Agreement
and references to this Agreement include its schedules;
(b) references to (or to any specified provision of) this Agreement
or any other document shall be construed as references to this
Agreement, that provision or that document as in force for the
time being and as from time to time amended in accordance with
its terms, or, as the case may be, with the agreement of the
relevant parties and (where such consent is, by the terms of this
Agreement or the relevant document, required to be obtained as a
condition to such amendment being permitted) the prior written
consent of the Agent, all of the Banks or the Majority Banks (as
the case may be);
(c) references to a "REGULATION" include any present or future
regulation, rule, directive, requirement, request or guideline
19
<PAGE>
(whether or not having the force of law but, if not having the
force of law, only if compliance therewith is in accordance with
the general practice of the relevant persons to whom it is
intended to apply or, in the case of clause 16.2 only, the
relevant Bank or its holding company) of any agency, authority,
central bank or government department or any self-regulatory or
other national or supra-national authority;
(d) words importing the plural shall include the singular and vice
versa;
(e) references to a time of day are to London time;
(f) references to a "PERSON" shall be construed as including
references to an individual, firm, company, corporation,
unincorporated body of persons or any State or any of its
agencies;
(g) references to "ASSETS" include all or part of any business,
undertaking, real property, personal property, uncalled capital
and any rights (whether actual or contingent, present or future)
to receive, or require delivery of, any of the foregoing;
(h) references to a "GUARANTEE" include references to an indemnity or
other assurance against financial loss including, without
limitation, an obligation to purchase assets or services as a
consequence of a default by any other person to pay any
Indebtedness and "GUARANTEED" shall be construed accordingly;
(i) references to the "EQUIVALENT" of an amount specified in a
particular currency (the "SPECIFIED CURRENCY AMOUNT") shall be
construed as a reference to the amount of the other relevant
currency which can be purchased with the specified currency
amount in the London foreign exchange market at or about 11 a.m.
on the day on which the calculation falls to be made for spot
delivery as determined by the Agent in accordance with its
customary practices;
(j) references to the "AGREED FORM" means, in relation to any
document, the form of such document as shall have been agreed
between the Borrower and the Agent or the Security Agent, as the
case may be (acting for and on behalf of all of the Banks);
(k) references to "BUSINESS" means any business (i) that consists of
the upgrade, construction, acquisition (to the extent permitted
under this Agreement, operation, utilisation and maintenance of
networks that use existing or future technology for the
transmission, reception and delivery of voice, video and/or other
data (including networks that transmit, receive and/or deliver
services such as multi-channel television and radio, programming,
telephony, Internet services and content, high-speed data
transmission, video, multi-media and related activities) or (ii)
20
<PAGE>
that supports, is incidental to or is related to any such
business, and references to "ordinary course of business" or
"ordinary course of trading" shall be similarly construed; and
(l) references to any enactment shall be deemed to include references
to such enactment as re-enacted, amended or extended.
1.5 MAJORITY BANKS
--------------
Where this Agreement provides for any matter to be determined by
reference to the opinion of the Majority Banks or to be subject to the
consent or request of the Majority Banks or for any action to be taken
on the instructions of the Majority Banks, such opinion, consent,
request or instructions shall (as between the Banks) only be regarded
as having been validly given or issued by the Majority Banks if all the
Banks shall have received prior notice of the matter on which such
opinion, consent, request or instructions are required to be obtained
and the relevant majority of Banks shall have given or issued such
opinion, consent, request or instructions but so that (as between the
Borrower and the Banks), once informed by the Agent that such opinion,
consent, request or instructions have been given, the Borrower shall be
entitled (and bound) to assume that such notice shall have been duly
received by each Bank and that the relevant majority shall have been
obtained to constitute Majority Banks whether or not this is in fact
the case.
1.6 AGENT'S OPINION
---------------
Where this Agreement provides for the Agent's opinion to determine
whether any matter would or is reasonably likely to have a Material
Adverse Effect and/or a material adverse effect, as the case may be,
the Agent shall act in accordance with the instructions of the Majority
Banks in making such determination.
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<PAGE>
2 THE FACILITIES
--------------
2.1 AMOUNT
------
Upon and subject to the terms of this Agreement and in reliance on each
of the representations and warranties in clause 11, for the purposes
set out in clause 1.1:
(a) the Banks agree to make available to the Borrower a revolving
credit facility (converting to a term loan) in the principal sum
of up to euro335,000,000; and
(b) the Overdraft Bank agrees to make available to the Borrower an
overdraft facility in the principal sum of up to euro5,000,000.
The obligation of each Bank under this Agreement shall be to
contribute that proportion of each Advance which, as at the Drawdown
Date of such Advance, its Commitment bears to the Total Commitments
and, in the case of the Overdraft Facility, to assume its obligations
under clause 6.
2.2 OBLIGATIONS SEVERAL
-------------------
The obligations of each Bank under this Agreement are several; the
failure of any Bank to perform such obligations shall not relieve any
other Bank, the Joint Arrangers, the Security Agent, the Security Agent
Guarantor, the Overdraft Bank, the Agent or any Obligor of any of their
respective obligations or liabilities under this Agreement nor shall
the Agent, the Security Agent, the Security Agent Guarantor or the
Joint Arrangers be responsible for the obligations of any Bank (except
for its own obligations, if any, as a Bank) nor shall any Bank be
responsible for the obligations of any other Bank under this Agreement.
2.3 INTERESTS SEVERAL
-----------------
Notwithstanding any other term of this Agreement (but without prejudice
to the provisions of this Agreement relating to or requiring action by
the Majority Banks) the interests of the Secured Parties are several
and the amount due to each Secured Party is a separate and independent
debt. Each Secured Party shall have the right to protect and enforce
their respective rights arising out of this Agreement (but without
prejudice to the provisions of this Agreement relating to or requiring
action by the Majority Banks) and it shall not be necessary for any
other Secured Party to be joined as an additional party in any
proceedings for this purpose.
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<PAGE>
3 CONDITIONS
----------
3.1 DOCUMENTS AND EVIDENCE
----------------------
The obligation of each Bank to make its Commitment available under the
Revolving Credit Facility or for the Overdraft Bank to make the
Overdraft Facility available shall be subject to the condition that the
Agent, or its duly authorised representative, shall have received, not
later than three Banking Days before the day on which the first Advance
is to be made or, if the first drawing under the Facilities is a
Utilisation, not later than three Banking Days before the first
Utilisation, the documents and evidence specified in schedule 3 in form
and substance satisfactory to all of the Banks.
3.2 GENERAL CONDITIONS PRECEDENT
----------------------------
The obligation of each Bank to contribute to any Advance is subject to
the further conditions that at the date of each Drawdown Notice and on
each Drawdown Date:
(a) the representations and warranties set out in clauses 11.1 and
11.2 to be repeated in accordance with clause 11.3 are true and
correct on and as of each such date as if each were made with
respect to the facts and circumstances existing at such date; and
(b) no Default shall have occurred and be continuing or would result
from the making of such Advance.
However, in the case of a Revolving Advance which would not, if drawn,
cause the Loan to be increased (after taking into account of any
Revolving Advance due or to be made or repaid on the Drawdown Date of
such Revolving Advance):
(i) clause 3.2(a) shall apply only if the incorrectness would be
reasonably likely to have a material adverse effect on the
ability of the Borrower to perform its obligations under
this Agreement or on the financial position of the Group
taken as a whole; and
(ii) clause 3.2(b) shall not apply if the Term of the relevant
Revolving Advance is one month.
Nothing in this clause 3.2 shall be construed as constituting a waiver
of any right of the Banks (including, without limitation, their rights
under clause 14.2) arising from any Event of Default which shall have
occurred and be outstanding at the time of the drawing of the relevant
Advance.
23
<PAGE>
3.3 WAIVER OF CONDITIONS PRECEDENT
------------------------------
The conditions specified in this clause 3 are inserted solely for the
benefit of the Banks and the Overdraft Bank and may be waived on their
behalf in whole or in part and with or without conditions by the Agent
acting on the instructions of all of the Banks in respect of the first
Advance or the first Utilisation (whichever is the earliest) and on the
instructions of the Majority Banks with respect to any other Advances
without prejudicing the right of the Agent acting on such instructions
to require fulfilment of such conditions in whole or in part in respect
of any other Advance.
3.4 NOTIFICATION
------------
The Agent shall notify the Banks and the Borrower promptly after
receipt by it of the documents and evidence referred to in clause 3.1
in form and substance satisfactory to it.
3.5 NUON SECURITY
-------------
The Borrower undertakes to procure that the Encumbrances referred to in
paragraph (b) of the definition of Permitted Encumbrances are
discharged before or contemporaneously with the making of the first
Advance.
3.6 CONDITIONS SUBSEQUENT
---------------------
(a) The Borrower and the Guarantors undertake that they will use
commercially reasonable endeavours to ensure that prior to the
date falling 365 days after the date of this Agreement all the
Headends then used in the operation of the Cable Systems will be
located on property owned by the Borrower or any Guarantor or on
property in respect of which it has leasehold rights
(erftachtsrechten) or in respect of which it has rights of
superficies (opstal rechten). If the Borrower and the Guarantors
do not succeed in timely fulfilling the above commitment despite
having used all reasonable endeavours and if they show to the
reasonable satisfaction of the Agent (acting on the instructions
of the Majority Banks) that their failure to succeed is due to
circumstances beyond their control (such as the failure to
receive necessary third party consents, approvals and
co-operation despite having used all commercially reasonable
efforts to obtain such consents, approvals and co-operation)
then, in such circumstances, the Banks will grant the Borrower
and the Guarantors a further period of such term as may
reasonably be requested by the Borrower and the Guarantors, with
a maximum of 365 days after the date falling 365 days after the
date of this Agreement ; and
(b) The Borrower undertakes that it shall within 30 days after the
date of this Agreement enter into with UTH (i) back-to-back or
pass through agreements in respect of the Borrower's rights under
the interconnection agreements dated 29th January 1999 made
24
<PAGE>
between (1) UTH and (2) KPN Telecom and 11th September 1998 made
between (1) UTH and (2) Enertel N.V., and (ii) a Pledge over
Principal Agreements in respect of such back to back or pass
through agreements, in each case, on terms and conditions
satisfactory to the Agent and provide the Agent with such
documents and evidence as it may reasonably require as to its
power and authority to enter into such documents and that the
same constitute valid and legally binding obligations of the
Borrower enforceable in accordance with their terms subject to
substantially similar qualifications to those made in the legal
opinions referred to in schedule 3.
25
<PAGE>
4 ADVANCES
--------
4.1 MAXIMUM REVOLVING ADVANCE OUTSTANDINGS
--------------------------------------
No Revolving Advance shall be made if, following the making of such
Revolving Advance, the aggregate principal amount of Senior Debt
outstanding would exceed the amount calculated by multiplying
Annualised Consolidated EBITDA (determined by reference to the most
recently ended Six Month Period in respect of which Quarterly
Management Accounts have been delivered to the Agent under this
Agreement) by 7.75.
4.2 DRAWDOWN OF REVOLVING ADVANCES
------------------------------
Subject to the terms and conditions of this Agreement, a Revolving
Advance will be made available to the Borrower following receipt by the
Agent from the Borrower of a Drawdown Notice not later than 10 a.m. on
the third Banking Day before the proposed Drawdown Date. A Drawdown
Notice shall be effective on actual receipt by the Agent and, once
given, shall, subject as provided in clause 5.9(a), be irrevocable. No
Drawdown Notice may be given in respect of an amount which is the
subject of a notice received by the Agent under clause 7.7.
4.3 TERM AND AMOUNT OF REVOLVING ADVANCES
-------------------------------------
(a) Revolving Advances may be made only on Banking Days falling
within the Revolving Period and may be borrowed only for a Term
of one month or two, three or six months or (with the prior
agreement of all of the Banks) any other period in any such case
ending not later than the last day of the Revolving Period,
provided that any Revolving Advances made less than one month
prior to the last day of the Revolving Period may only be
borrowed for the period up to and ending on such date;
(b) each Revolving Advance shall be of euro10,000,000 or any larger
sum which is an integral multiple thereof; and
(c) no Revolving Advance may be drawn down if, as a result, there
would be more than eight Revolving Advances then outstanding.
4.4 NOTIFICATION TO BANKS
---------------------
On the date of receipt of a Drawdown Notice complying with the terms of
this Agreement the Agent shall notify each Bank thereof, of the date on
which such Revolving Advance is to be made and the Term thereof.
Subject to the provisions of clauses 3 and 4.6, on the date for the
making of the relevant Revolving Advance each of the Banks shall make
available to the Agent its portion of such Revolving Advance in
accordance with clause 9.2.
26
<PAGE>
4.5 TERMINATION OF COMMITMENTS
--------------------------
Any part of the Commitments undrawn and uncancelled at the end of the
Revolving Period shall thereupon be automatically reduced to zero.
4.6 REPAYMENT OF REVOLVING ADVANCES
-------------------------------
The Borrower agrees to repay each Revolving Advance in respect of which
the Term Date is before the last day of the Revolving Period on such
Term Date. If a Revolving Advance (the "NEW REVOLVING ADVANCE") is to
be made to the Borrower on a day on which another Revolving Advance
made to the Borrower (the "MATURING REVOLVING ADVANCE") is due to be
repaid then, subject to the terms of this Agreement and so long as the
conditions referred to in clause 3.2 shall have been satisfied in
relation to the new Revolving Advance, (i) the maturing Revolving
Advance shall be deemed to have been repaid on its Term Date either in
whole (if the new Revolving Advance is equal to or greater than the
maturing Revolving Advance) or in part (if the new Revolving Advance is
less than the maturing Revolving Advance) and the Borrower shall only
be obliged to repay the principal amount by which the maturing
Revolving Advance exceeds the new Revolving Advance and (ii) to the
extent that the maturing Revolving Advance is so deemed to have been
repaid, the principal amount of the new Revolving Advance to be made on
such date shall be deemed to have been credited to the account of the
Borrower by the Agent on behalf of the Banks in accordance with the
terms of this Agreement and the Banks shall only be obliged to make
available to the Borrower pursuant to clause 4.4 a principal amount (if
any) equal to the amount by which the new Revolving Advance exceeds the
maturing Revolving Advance.
4.7 CONVERSION TO A TERM LOAN AND CONSOLIDATION
-------------------------------------------
On the last day of the Revolving Period the Revolving Credit Facility
shall convert to a term loan and all outstanding Revolving Advances the
Term Date of which is the last day of the Revolving Period shall be
consolidated with any other such Revolving Advances into the Loan and
be repaid in accordance with clause 7.
4.8 TERM ADVANCES
-------------
Following the consolidation referred to in clause 4.7, all Revolving
Advances shall be deemed to have been repaid and the Loan shall be
deemed to be a Term Advance for the purposes of this Agreement. The
Borrower may by notice received by the Agent not later than 10 a.m. on
the third Banking Day before the beginning of each Interest Period in
respect of a Term Advance specify that such Term Advance shall be
divided into more than one Term Advance, or consolidated with any other
Term Advance outstanding in respect of the Loan in respect of which the
then current Interest Period ends on the same day as the current
Interest Period in respect of such Term Advance. No more than five Term
27
<PAGE>
Advances may be outstanding under this Agreement at any time. If more
than one Term Advance is outstanding in respect of the Loan each such
Term Advance shall be either euro10,000,000 or any larger sum which
is an integral multiple thereof or the balance of the Loan.
4.9 FIRST ADVANCE
-------------
Subject to the provisions of clause 3.1, the Borrower undertakes to
comply with the terms of this clause 4 so as to ensure that a Drawdown
Notice is delivered for the first Advance in an amount in euro not less
than the amount referred to in clause 1.1(ii) (the "NUON AMOUNT").
The Borrower irrevocably authorises the Agent, and the Agent agrees, to
remit that part of the proceeds of the first Advance as is equal to the
NUON Amount to the account of NUON notified by NUON to the Agent in
satisfaction pro tanto of the Borrower's obligations to repay the
inter-company loan from the Shareholder representing the on-lending of
the proceeds of the NUON Facility and of the Shareholder's
corresponding obligations under the NUON Facility and the Agent's
obligations under clause 9.2 in respect of the first Advance shall be
to remit any balance following such application to the Borrower
forthwith. The Borrower acknowledges that the making of such payment
shall constitute the making of an Advance by the Banks to the Borrower.
The Borrower further undertakes to repay any other amounts outstanding
under the NUON Facility on the date of the first Advance and to procure
that NUON delivers to the Agent a deed of release of its pledge over
the shares in all relevant members of the Group on such date.
4.10 APPLICATION OF PROCEEDS
-----------------------
Without prejudice to the Borrower' obligations under clause 12.1(c),
none of the Banks, the Joint Arrangers, the Security Agent, the
Security Agent Guarantor or the Agent shall have any responsibility for
the application of the proceeds of any Advance by the Borrower.
28
<PAGE>
5 INTEREST; ALTERNATIVE INTEREST RATES
------------------------------------
5.1 NORMAL INTEREST RATE
--------------------
The Borrower shall pay interest on each Advance in respect of each
Interest Period relating thereto on each Interest Payment Date (and, in
the case of an Advance having an Interest Period of more than six
months, by instalments on the dates falling at six monthly intervals
from the Drawdown Date of such Advance and on the last day of such
Interest Period) at the rate per annum determined by the Agent to be
the aggregate of (a) the applicable Margin, (b) the Additional Cost and
(c) EURIBOR.
5.2 APPLICABLE MARGIN
-----------------
The Margin in relation to any Advance and any unpaid sum due under this
Agreement under clause 5.6 and for the purposes of clause 6.3(b) shall
(subject to the proviso below) be the rate set out in column (I) below
against the ratio of Senior Debt to Annualised Consolidated EBITDA
(determined by reference to the most recently ended Six Months Period
in respect of which Quarterly Management Accounts have been delivered
to the Agent under this Agreement) set out in column II below as at the
first day of the relevant Interest Period or, in relation to any unpaid
sum due under clause 5.6, the first day of the relevant period
determined in accordance with clause 5.6 or, for the purposes of clause
6.3(b), from day to day:
<TABLE>
<CAPTION>
(I) (II)
Rate (per cent. per annum) Ratio of Senior Debt to Annualised
-------------------------- ----------------------------------
Consolidated EBITDA
-------------------
<S> <C>
2.00 6.5:1 or greater (or negative)
1.75 greater than or equal to 5.5:1 but less than
6.5:1
1.50 greater than or equal to 4:1 but less than
5.5:1
1.25 greater than or equal to 3:1 but less than 4:1
0.75 Less than 3:1 (but not negative)
</TABLE>
Provided that if on the relevant date on which the Margin is to be
determined either the Borrower has failed to deliver any relevant
financial statements then due under this Agreement within the time
period for the Borrower so to deliver such financial statements then
the Margin for such Advance or such unpaid sum shall be 2.00 per cent.
per annum.
5.3 INTEREST PERIODS
----------------
The Interest Period in relation to each Revolving Advance shall be of a
duration equal to the Term of such Revolving Advance. Interest Periods
in respect of Term Advances shall be of a duration determined in
accordance with clauses 5.4 and 5.5.
29
<PAGE>
5.4 SELECTION OF INTEREST PERIODS FOR TERM ADVANCES
-----------------------------------------------
The Borrower may by notice received by the Agent not later than 11 a.m.
on the third Banking Day before the beginning of each Interest Period
in respect of a Term Advance specify whether such Interest Period shall
have a duration of one month or two, three or six months or (with the
prior agreement of all of the Banks) any other period.
5.5 DETERMINATION OF INTEREST PERIODS FOR TERM ADVANCES
---------------------------------------------------
Every Interest Period in respect of a Term Advance shall be of the
duration specified by the Borrower pursuant to clause 5.4 but so that:
(a) the initial Interest Period in respect of each Term Advance will
commence on the last day of the Revolving Period and each
subsequent Interest Period in respect of such Term Advance will
commence forthwith upon the expiry of the previous Interest
Period in respect of such Term Advance;
(b) (i) (if there is more than one Term Advance outstanding)
Interest Periods in respect of Term Advances of an aggregate
amount at least equal to the amount of the Loan to be repaid
on any Term Repayment Date shall end on such date; and
(ii) (if there is only one Term Advance outstanding) if any
Interest Period in respect of the Loan would otherwise
overrun a Term Repayment Date then such Interest Period
shall end on such date; and
(c) if the Borrower fails to specify the duration of an Interest
Period in accordance with the provisions of clause 5.4 and this
clause 5.5 such Interest Period shall, subject to this clause
5.5, have a duration of three months.
5.6 INTEREST FOR LATE PAYMENT
-------------------------
If the Borrower fails to pay any sum (including, without limitation,
any sum payable pursuant to this clause 5.6 on its due date for payment
under this Agreement) but excluding any sum payable under clause 6 the
Borrower shall pay interest on such sum from the due date up to the
date of actual payment (as well after as before judgment) at a rate
determined by the Agent pursuant to this clause 5.6. The period
beginning on such due date and ending on such date of payment shall be
divided into successive periods of not more than three months as
selected by the Agent (after consultation with the Banks so far as
reasonably practicable in the circumstances) each of which (other than
the first, which shall commence on such due date) shall commence on the
last day of the preceding such period. The rate of interest applicable
to each such period shall be the aggregate (as determined by the Agent)
30
<PAGE>
of (a) 1.5 per cent per annum, (b) the applicable Margin, (c) the
Additional Cost and (d) EURIBOR, unless such unpaid sum is an amount of
principal which shall have become due and payable, by reason of a
declaration by the Agent under clause 14.2(b) or a prepayment pursuant
to clauses 7.3 or 16.1, other than on an Interest Payment Date, in
which case the first such period selected by the Agent shall end on
such Interest Payment Date and interest shall be payable on such unpaid
sum during such period at a rate 1.5 per cent. above the rate
applicable thereto immediately before it shall have become so due and
payable. Interest under this clause 5.6 shall be due and payable on the
last day of each period determined by the Agent pursuant to this clause
5.6 or, if earlier, on the date on which the sum in respect of which
such interest is accruing shall actually be paid. If, for the reasons
specified in clause 5.9(a)(i) or 5.9(a)(ii), the Agent is unable to
determine a rate in accordance with the foregoing provisions of this
clause 5.6, each Bank shall promptly notify the Agent of the cost of
funds to such Bank and interest on any sum not paid on its due date for
payment shall be calculated for each Bank at a rate determined by the
Agent to be 1.5 per cent per annum above the aggregate of the
applicable Margin and the cost of funds to such Bank.
5.7 NOTIFICATION OF INTEREST PERIODS AND INTEREST RATES
---------------------------------------------------
The Agent shall notify the Borrower and the Banks promptly of the
amount of each Term Advance, the duration of each Interest Period or
other period for the calculation of interest (or, as the case may be,
default interest) and of each rate of interest determined by it under
this clause 5.
5.8 REFERENCE BANK QUOTATIONS
-------------------------
If (at any time when Reference Bank quotations are required having
regard to the definition of "EURIBOR" in clause 1.2) any Reference Bank
is unable or otherwise fails to furnish a quotation for the purpose of
calculating EURIBOR, the interest rate for the relevant Term, Interest
Period or other period shall be determined, subject to clause 5.9, on
the basis of the quotations furnished by the remaining Reference Banks.
5.9 MARKET DISRUPTION; NON-AVAILABILITY
-----------------------------------
(a) If and whenever, at any time prior to the commencement of any
Interest Period:
(i) (at any time when Reference Bank quotations are required
having regard to the definition of "EURIBOR" in clause 1.2)
the Agent shall have determined, after consultation with the
Reference Banks (which determination shall, in the absence
of manifest error, be conclusive), that adequate and fair
means do not exist for ascertaining EURIBOR during such
Interest Period; or
31
<PAGE>
(ii) none or only one of the Reference Banks supplies the Agent
with a quotation for the purpose of calculating EURIBOR; or
(iii) the Agent shall have received notification from Banks with
Contributions aggregating not less than one-third of the
total of the Loan (or, prior to the first Drawdown Date,
Commitments aggregating not less than one-third of the Total
Commitments) that deposits in euros are not available to
such Banks in the ordinary course of business in sufficient
amounts to fund their contributions to such Advance or that
EURIBOR does not accurately reflect the cost to such Banks
of obtaining such deposits;
the Agent shall forthwith give notice (a "Determination Notice") to
the Borrower and to each of the Banks and such Advance shall not be
made. A Determination Notice shall contain particulars of the relevant
circumstances giving rise to its issue.
(b) After the giving of any Determination Notice the undrawn amount
of the Total Commitments shall not be borrowed until the
circumstances giving rise to the issue of the Determination
Notice have ceased.
(c) During the period of 10 days after any Determination Notice has
been given by the Agent under clause 5.9(a), each Bank shall
certify an alternative basis (the "SUBSTITUTE BASIS") for making
available or, as the case may be, maintaining its contribution to
the Advance. The Substitute Basis may (without limitation)
include alternative interest periods, alternative currencies or
alternative rates of interest but shall include a margin above
the cost of funds including Additional Cost, if any, to such Bank
equivalent to the Margin. Each Substitute Basis so certified
shall be binding upon the Borrower and shall take effect in
accordance with its terms from the date specified in the
Determination Notice until such time as none of the circumstances
specified in clause 5.9(a) continues to exist whereupon the
normal interest rate fixing provisions of this Agreement shall
apply.
32
<PAGE>
6. THE OVERDRAFT FACILITY
----------------------
6.1 THE OVERDRAFT FACILITY
----------------------
(a) Utilisations of the Overdraft Facility on current account by the
Borrower may be made subject to the limitation that the amount
outstanding under the Overdraft Facility shall not exceed
euro5,000,000 at any time.
(b) No principal amount in respect of the Overdraft Facility may be
demanded by the Overdraft Bank unless a notice has been given
under clause 14.2, the Total Commitments have been reduced to
zero pursuant to clause 7 or the Commitment of the Overdraft Bank
has been reduced to zero pursuant to clause 7.3 but thereafter
the monies owing in respect of the Overdraft Facility are
repayable on demand.
(c) The Overdraft Bank shall be at liberty at any time to refuse to
allow any Utilisation if the result would be that the limit in
(a) above would be exceeded.
6.2 TERMS AND CONDITIONS
--------------------
The Overdraft Facility is made available on the terms and conditions
set out in this Agreement and the Overdraft Bank's normal terms and
conditions to the extent that the same are not inconsistent with this
Agreement.
6.3 UTILISATION, INTEREST AND REPAYMENT
-----------------------------------
(a) Any borrowing made available under the Overdraft Facility may be
drawn only in euros.
(b) The Borrower shall pay to the Overdraft Bank interest on
Utilisations under the Overdraft Facility at the rate being the
aggregate of (i) the applicable Margin and (ii) the Overdraft
Bank's base rate from time to time. Such interest shall accrue
from day to day on the basis of actual days elapsed and a year of
360 days, and shall be debited to the Borrower's account on the
Overdraft Bank's normal quarterly charging dates.
(c) The Borrower shall repay or discharge the Overdraft Facility in
full on the last day of the Term Period.
33
<PAGE>
7. REPAYMENT, PREPAYMENT AND CANCELLATION
--------------------------------------
7.1 REPAYMENT
---------
The Borrower shall repay the Loan in equal instalments on each Quarter
Day (from and including 31st March 2002) in the years specified in
column (1) below so that the Loan outstanding at the end of the
Revolving Period is reduced in each such year by the percentage
specified opposite the relevant year in column (2) below:
<TABLE>
<CAPTION>
=================================================== ==============================================
(1) (2)
Year Repayment
%
=================================================== ==============================================
<S> <C>
2002 5
=================================================== ==============================================
2003 10
=================================================== ==============================================
2004 20
=================================================== ==============================================
2005 20
=================================================== ==============================================
2006 20
--------------------------------------------------- ==============================================
2007 25
--------------------------------------------------- ==============================================
</TABLE>
7.2 VOLUNTARY PREPAYMENT
--------------------
The Borrower may, without premium or penalty, prepay any Advance (in
whole or in part provided that, in the case of part, the amount of such
part is a minimum of euro10,000,000 and an integral multiple thereof)
at any time subject to the provisions of this clause 7.
7.3 ADDITIONAL VOLUNTARY PREPAYMENT
-------------------------------
The Borrower may also prepay (in whole but not in part only), without
premium or penalty, but without prejudice to its obligations under
clauses 5.9, 9.5 and 16.2, the Contribution of any Bank to which such
Borrower shall have become obliged to pay additional amounts under
clause 5.9, 9.5 or 16.2. Upon any notice of such prepayment being
given, the Commitment of the relevant Bank shall be reduced to zero and
the amount of the Total Commitments shall be reduced accordingly.
7.4 MANDATORY PREPAYMENT
--------------------
(a) The Borrower shall be obliged to prepay the Loan in whole
immediately upon the occurrence of a Change of Ownership. For the
purpose of this clause 7.4(a), "Change of Ownership" means either
(1) the Borrower is not or ceases to be a wholly owned Subsidiary
of the Shareholder or (2) UPC is not or ceases to be the direct
or indirect legal and beneficial owner of more than 50 per cent.
(or such lesser percentage as the Majority Banks agree) of both
(i) the economic interest in the equity share capital of the
Shareholder and (ii) the voting rights attributable to the equity
share capital of the Shareholder.
34
<PAGE>
(b) During the Term Period, the Borrower shall apply 50 per cent. of
Excess Cash Flow (if any) in respect of each financial year of
the Group commencing with the financial year ending on 31st
December, 2002 in prepayment of the Loan provided that no such
prepayment shall be required to be made if the ratio of Senior
Debt (as at the last day of such financial year) to Annualised
Consolidated EBITDA (determined by reference to the Six Months
Period ending on the last day of such financial year) as shown in
the Quarterly Management Accounts in respect of the Quarterly
Period ending on the last day of such financial year delivered to
the Agent in accordance with clause 12.1(g), is less than 4:1.
(c) Each prepayment to be made under paragraph (b) above shall:
(i) be made on Interest Payment Dates falling after the date
upon which the Quarterly Management Accounts in respect of
the Quarterly Period ending on the last day of the relevant
financial year are delivered to the Agent pursuant to clause
12.1(g), beginning with the first such date and continuing
until the prepayment obligation under paragraph (b) above in
respect of such financial year has been satisfied; and
(ii) if on any Interest Payment Date upon which an amount of
Excess Cash Flow is to be applied in prepayment of the Loan:
(A) such amount is less than the amount of the Advances
whose Interest Periods ends on such date, the Borrower may
select against which Advance or Advances the prepayment is
to be made and the proportion of the relevant amount to be
prepaid on each such Advance but shall ensure that the full
amount of such Excess Cash Flow required to be applied is so
applied in prepayment;
(B) such amount is equal to or greater than the amount
of the Advances whose Interest Periods end on such date, the
Borrower shall prepay, or procure the prepayment of, each
such Advance on such date.
7.5 AMOUNTS PAYABLE ON PREPAYMENT
-----------------------------
Any prepayment under this Agreement shall be made in euros together
with: (a) accrued interest to the date of prepayment; (b) any
additional amount payable under clause 5.9, 9.5 or 16.2; and (c) all
other sums payable by the Borrower to the relevant Bank under this
35
<PAGE>
Agreement including, without limitation, any accrued commitment
commission payable under clause 8.1(c) on any undrawn amount that is
cancelled at the same time as such prepayment and any amounts payable
under clause 15.1.
7.6 NOTICE OF PREPAYMENT
--------------------
No prepayment may be effected under clause 7.2 or 7.3 unless the
Borrower shall have given the Agent at least three Banking Days' notice
of its intention to make such prepayment. Every notice of prepayment
shall be effective only on actual receipt by the Agent, shall be
irrevocable and shall oblige the Borrower to make such prepayment on
the date specified. No amount prepaid pursuant to clause 7.3 or, after
the end of the Revolving Period, 7.2 may be reborrowed. The Borrower
may not prepay the Loan or any part thereof save as expressly provided
in this Agreement.
7.7 CANCELLATION OF COMMITMENTS
---------------------------
(a) The Borrower may at any time by notice to the Agent (effective
only on actual receipt) cancel with effect from a date not less
than three Banking Days after the receipt by the Agent of such
notice the whole or any part (being euro10,000,000 or any larger
sum which is an integral multiple thereof) of the Total
Commitments which is not then outstanding or requested in a
Drawdown Notice in respect of which an Advance has not been made.
Any such notice of cancellation, once given, shall be irrevocable
and upon such cancellation taking effect the Commitment of each
Bank shall be reduced proportionately.
(b) Upon any Change of Ownership under clause 7.4(a) the Total
Commitments shall forthwith be reduced to zero.
7.8 APPLICATION OF PREPAYMENTS TO REPAYMENT INSTALMENTS
---------------------------------------------------
Any amounts prepaid under clauses 7.3 and 7.4(b) or, after the end of
the Revolving Period, clause 7.2, shall be applied in reducing the
repayment instalments under clause 7.1 rateably.
36
<PAGE>
8. FEES AND EXPENSES
-----------------
8.1 FEES
----
The Borrower shall pay to the Agent whether or not any part of the
Commitments is ever advanced:
(a) on the earlier of (i) the date of the first Advance and (ii) the
date falling five Banking Days after the date of this Agreement,
for the account of the Joint Arrangers, an arrangement fee of an
amount agreed between the Borrower and the Joint Arrangers in a
letter dated the date hereof;
(b) on the earlier of (i) the date of the first Advance and (ii) the
date falling five Banking Days after the date of this Agreement,
and on each anniversary of the date of this Agreement until all
moneys owing under this Agreement have been paid in full, for the
account of the Agent, an agency fee of an amount agreed between
the Borrower and the Agent in a letter dated the date hereof; and
(c) in arrears on each Quarter Day after the date of this Agreement
and on the last day of the Revolving Period, for the account of
each Bank, commitment commission computed from the date of this
Agreement at the rate of 0.50 per cent. per annum on the daily
undrawn and uncancelled amount of such Bank's Commitment.
8.2 EXPENSES
--------
The Borrower shall pay to the Agent on demand:
(a) all reasonable expenses (including reasonable legal, printing and
out-of-pocket expenses) incurred by the Agent, the Security
Agent, the Security Agent Guarantor the Overdraft Bank and the
Joint Arrangers in connection with the negotiation, preparation
and execution of this Agreement and the Security Documents, the
syndication of the Facilities, the preparation and distribution
of the Information Memorandum and advertising in connection with
this Agreement and of any amendment or extension of, or the
granting of any waiver or consent under, this Agreement or the
Security Documents together with interest at the rate referred to
in clause 5.6 from the date of demand for payment of such
expenses to the date of payment (as well after as before
judgment); and
(b) all expenses (including legal and out-of-pocket expenses)
incurred by the Secured Parties or any of them in contemplation
of, or otherwise in connection with, the enforcement or bona fide
attempted enforcement of, or preservation or bona fide attempted
preservation of any rights under, this Agreement and/or the
Security Documents, including, without limitation, after the
occurrence of a Default or if otherwise agreed with the Borrower,
37
<PAGE>
the fees and expenses of accountants or other experts incurred in
relation to any investigation into the affairs of the Borrower or
any member of the Group, or otherwise in respect of the moneys
owing under this Agreement and/or the Security Documents,
together with interest at the rate referred to in clause 5.6 from
the date on which such expenses were incurred to the date of
payment (as well after as before judgment).
8.3 VALUE ADDED TAX
---------------
All fees and expenses payable pursuant to this clause 8 shall be paid
together with an amount equal to any value added tax payable by the
relevant Secured Party in respect of such fees and expenses.
8.4 STAMP AND OTHER DUTIES
----------------------
The Borrower shall pay all stamp, documentary, registration or other
similar duties or Taxes (including any such duties or Taxes payable by,
or assessed on, any Secured Party) imposed on or in connection with
this Agreement and/or the Security Documents or the Facilities (other
than those imposed by reason of any assignment or novation by any
Bank).
8.5 INDEMNITY
---------
The Borrower shall indemnify the relevant Secured Party against any
liability arising by reason of any delay or omission by the Borrower to
pay such duties or Taxes under clause 8.4.
38
<PAGE>
9. PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS
---------------------------------------------
9.1 NO SET-OFF OR COUNTERCLAIM; DISTRIBUTION TO THE BANKS
-----------------------------------------------------
All payments to be made by the Obligors under this Agreement and/or the
Security Documents shall be made in full, without any set-off or
counterclaim whatsoever and, subject as provided in clause 9.5, free
and clear of any deductions or withholdings, in euros (except for
costs, charges or expenses which shall be payable in the currency in
which they are incurred) on the due date to the account of the Agent or
the Overdraft Bank (as relevant) at such bank as the Agent or the
Overdraft Bank (as relevant) may from time to time specify for this
purpose. Save where the Security Deed otherwise provides or where this
Agreement and/or the Security Documents provide for a payment to be
made for the account of a particular Bank (including, without
limitation, clauses 7.3, 8, 9.5, 15.1, 15.2, 16.1 and 16.2), in which
case the Agent shall distribute the relevant payment to the Bank
concerned, or for the account of the Agent (for its own account), the
Joint Arrangers, the Security Agent or the Overdraft Bank payments to
be made by any Obligor under this Agreement and/or the Security
Documents shall be for the account of all the Banks and the Agent shall
forthwith distribute such payments in like funds as are received by the
Agent to the Banks rateably in accordance with their Commitments or
Contributions, as the case may be.
9.2 PAYMENTS BY THE BANKS
---------------------
All sums to be advanced by the Banks to the Borrower under this
Agreement shall be remitted in euros on the relevant Drawdown Date to
the account of the Agent at such bank as the Agent may have notified to
the Banks and shall be paid by the Agent on such date in like funds as
are received by the Agent to the account of the Borrower specified in
the relevant Drawdown Notice.
9.3 NON-BANKING DAYS
----------------
When any payment under this Agreement would otherwise be due on a day
which is not a Banking Day, the due date for payment or the date of
such reduction shall be postponed to the next following Banking Day
unless such Banking Day falls in the next calendar month in which case
payment shall be made on the immediately preceding Banking Day. If any
date or day specifically referred to in this Agreement is not a Banking
Day all references thereto shall be deemed to be to the immediately
preceding Banking Day.
9.4 AGENT MAY ASSUME RECEIPT
------------------------
Where any sum is to be paid under this Agreement to the Agent for the
account of another person, the Agent may assume that the payment will
be made when due and may (but shall not be obliged to) make such sum
available to the person so entitled. If it proves to be the case that
such payment was not made to the Agent, then the person to whom such
sum was so made available shall on request refund such sum to the Agent
together with interest thereon sufficient to compensate the Agent for
39
<PAGE>
the cost of making available such sum up to the date of such repayment
and the person by whom such sum was payable shall indemnify the Agent
for any and all loss or reasonable expense which the Agent may sustain
or incur as a consequence of such sum not having been paid on its due
date.
9.5 GROSSING-UP FOR TAXES
---------------------
Subject to clause 9.6, at any time any Obligor is required to make any
deduction or withholding in respect of Taxes from any payment due under
this Agreement and/or the Security Documents for the account of any
Secured Party (or if the Agent or the Security Agent is required to
make any such deduction or withholding from a payment to any other
Secured Party), the sum due from the relevant Obligor in respect of
such payment shall, subject to the relevant Secured Party's compliance
with clause 9.8(b), be increased to the extent necessary to ensure
that, after the making of such deduction or withholding, each Secured
Party receives on the due date for such payment (and retains, free from
any liability in respect of such deduction or withholding) a net sum
equal to the sum which it would have received had no such deduction or
withholding been required to be made and the relevant Obligor shall
indemnify each Secured Party against any losses or costs incurred by
any of them by reason of any failure of such Obligor to make any such
deduction or withholding or by reason of any increased payment not
being made on the due date for such payment. The relevant Obligor shall
promptly deliver to the Agent any receipts, certificates or other proof
evidencing the amounts (if any) paid or payable in respect of any such
deduction or withholding.
9.6 QUALIFYING BANKS
----------------
If any Secured Party is not or ceases to be a Qualifying Bank then it
shall promptly notify the relevant Obligor upon becoming aware of the
same and the relevant Obligor shall not be obliged to pay such Secured
Party under clause 9.5 any amount in excess of the amount it would have
been obliged to pay if such Secured Party was or had not ceased to be a
Qualifying Bank provided that this clause 9.6 shall not apply (and the
relevant Obligor shall be obliged to comply with its obligations under
clause 9.5) if after today's date there shall have been any change in,
or in the interpretation or application of, any relevant law,
directive, treaty (including, without limitation, any applicable double
tax treaty) or regulation or practice of any applicable taxation
authority and as a result thereof the relevant Secured Party ceases to
be a Qualifying Bank or the relevant Obligor will be required to make
deduction or withholding on account of tax irrespective of whether the
recipient of the relevant payment is or is not a Qualifying Bank. Each
Secured Party confirms to each of the Obligors that it is, as at the
date of this Agreement, a Qualifying Bank.
40
<PAGE>
9.7 CLAW-BACK OF TAX BENEFIT
------------------------
If following any such deduction or withholding as is referred to in
clause 9.5 any Secured Party shall receive or be granted a credit
against or remission for any Taxes payable by it, the relevant Secured
Party shall, subject to the relevant Obligor having made any increased
payment in accordance with clause 9.5 and to the extent that the
relevant Secured Party can do so without prejudicing the retention of
the amount of such credit or remission and without prejudice to the
right of the relevant Secured Party to obtain any other relief or
allowance which may be available to it, reimburse the relevant Obligor
with such amount as the relevant Secured Party shall in its absolute
discretion certify to be the proportion of such credit or remission as
will leave the relevant Secured Party (after such reimbursement) in no
worse position than it would have been in had there been no such
deduction or withholding from the payment by the relevant Obligor as
aforesaid. Such reimbursement shall be made forthwith upon the relevant
Security Party certifying that the amount of such credit or remission
has been received by it. Nothing contained in this Agreement shall
oblige any Secured Party to rearrange its tax affairs or to disclose
any information regarding its tax affairs and computations. Without
prejudice to the generality of the foregoing, the Obligors shall not,
by virtue of this clause 9.7, be entitled to enquire about any Secured
Party's tax affairs.
9.8 CERTIFICATION TO SECURE A TAX BENEFIT
-------------------------------------
If, in order to make any payment due under this Agreement and/or any
Security Document to any Secured Party without deduction or withholding
for or on account of Tax or to secure the benefit of any reduced rate
of such deduction or withholding, any Obligor requires a direction from
or the consent of a government or taxing authority:
(a) the relevant Obligor agrees to use its reasonable endeavours to
complete (accurately and in a manner reasonably satisfactory to
such Secured Party), execute, arrange for any required
certification of, and deliver to such Secured Party or such
government or taxing authority as such Secured Party reasonably
directs, any form or document reasonably required of it, and to
provide such information that such Secured Party or such
government or taxing authority may reasonably require or request
in order to assist or enable such Secured Party to secure that
such a direction or consent is given to the relevant Obligor in
respect of any payment. Each Obligor shall perform its
obligations under this sub-paragraph (a) promptly upon the
earlier of:
(i) being notified that the form, document or information is
required or requested; and
(ii) demand being made by such Secured Party or the relevant
government or taxing authority, as the case may be;
(b) each Secured Party agrees to use its reasonable endeavours to
complete (accurately and in a manner reasonably satisfactory to
41
<PAGE>
the relevant Obligor), execute, arrange for any required
certification of, and deliver to the relevant Obligor, or such
government or taxing authority as the relevant Obligor may
reasonably direct, any form or document reasonably required of
it, and to provide such information that the relevant Obligor or
such government or taxing authority may reasonably require or
request in order to assist or enable the relevant Obligor to
secure that such a direction or consent is given to the relevant
Obligor in respect of any payment. The obligations of the Secured
Parties under this sub-paragraph (b) shall be performed within 30
days of reasonable demand by the relevant Obligor.
9.9 BANK ACCOUNTS
-------------
Each Bank and the Overdraft Bank shall maintain, in accordance with its
usual practices, an account or accounts evidencing the amounts from
time to time lent by, owing to and paid to it under this Agreement. The
Agent shall maintain a control account showing each Advance and other
sums owing by the Borrower under this Agreement and all payments in
respect thereof made by the Obligors from time to time. The control
account for the Overdraft Facility shall be maintained by the Overdraft
Bank. The control accounts shall, in the absence of manifest error, be
conclusive as to the amount from time to time owing by the Borrower
under this Agreement.
9.10 PARTIAL PAYMENTS
----------------
If, on any date on which a payment is due to be made by any Obligor
under this Agreement and/or the Security Documents, the amount received
by the Agent from the relevant Obligor falls short of the total amount
of the payment due to be made by the relevant Obligor on such date
then, without prejudice to any rights or remedies available to the
Secured Parties under this Agreement and/or the Security Documents, the
Agent shall apply the amount actually received from the relevant
Obligor in or towards discharge of the obligations of the Borrower
under this Agreement in the following order, notwithstanding any
appropriation made, or purported to be made, by the relevant Obligor:
(a) firstly, in or towards payment, on a pro rata basis, of any
unpaid fees, costs and expenses of the Agent under this Agreement
and/or the Security Documents;
(b) secondly, in or towards payment to the Joint Arrangers of any
portion of the arrangement fee payable under clause 8.1(a) which
remains unpaid, to the Agent of any portion of the agency fee
payable under clause 8.1(b) which remains unpaid and to the
Overdraft Bank of any portion of the Overdraft Bank fee payable
under clause 8.1(d);
42
<PAGE>
(c) thirdly, in or towards payment to the Banks, on a pro rata basis,
of any accrued commitment commission payable under clause 8.1(c)
which shall have become due but remains unpaid;
(d) fourthly, in or towards payment to the Banks, on a pro rata
basis, of any accrued interest which shall have become due but
remains unpaid;
(e) fifthly, in or towards payment to the Banks, on a pro rata basis,
of any principal which shall have become due but remains unpaid;
and
(f) sixthly, in or towards payment of any other sum which shall have
become due but remains unpaid (and, if more than one such sum so
remains unpaid, on a pro rata basis).
The order of application set out in this clause 9.10(b)-9.10(f) shall
be varied by the Agent if all Banks so direct, without any reference
to, or consent or approval from, any of the Obligors.
9.11 CALCULATIONS
------------
All interest and other payments of an annual nature under this
Agreement shall accrue from day to day and be calculated on the basis
of actual days elapsed and a 360 day year. In calculating the actual
number of days elapsed in a period which is one of a series of
consecutive periods with no interval between them or a period on the
last day of which any payment falls to be made in respect of such
period, the first day of such period shall be included but the last day
excluded.
9.12 CERTIFICATES CONCLUSIVE
-----------------------
Any certificate or determination of the Agent or any Secured Party as
to any rate of interest or any amount payable under this Agreement
shall, in the absence of manifest error, be conclusive and binding on
the Obligors and (in the case of a certificate or determination by the
Agent) on the Secured Parties.
9.13 RECONVENTIONING
---------------
After consultation between the Agent, the Borrower and the Banks and
notwithstanding clause 19.11 the Agent (acting reasonably) shall be
entitled to make such amendments to the provisions of this Agreement as
it may determine to be necessary to conform them to market practices
(whether as to the settlement or rounding of obligations, the
calculation of interest or otherwise howsoever) then applicable to
instruments denominated in euro.
Any amendment so made to this Agreement by the Agent shall be promptly
notified to the Banks and the Obligors by the Agent and shall be
binding on all the Banks and the Obligors.
43
<PAGE>
10. GUARANTEE
---------
10.1 COVENANT TO PAY
---------------
The Guarantors hereby irrevocably and unconditionally jointly and
severally guarantee to each Secured Party the payment of all moneys now
or hereafter due, owing or incurred by any member of the Group under or
pursuant to the Finance Documents when the same become due whether by
acceleration or otherwise.
10.2 GUARANTORS AS PRINCIPAL DEBTORS; INDEMNITY
------------------------------------------
As a separate and independent stipulation, but subject always to the
provisions of clause 10.1, the Guarantors jointly and severally agree
that if any purported obligation or liability of any member of the
Group which would have been the subject of this Guarantee had it been
valid and enforceable is not or ceases to be valid or enforceable
against such member of the Group on any ground whatsoever whether or
not known to the Secured Parties, or any of them, (including, without
limitation, any irregular exercise or absence of any corporate power or
lack of authority of, or breach of duty by, any person purporting to
act on behalf of such member of the Group or any legal or other
limitation, or any disability or Incapacity or any change in the
constitution of any relevant member of the Group) the Guarantors shall
nevertheless be jointly and severally liable in respect of that
purported obligation or liability as if the same were fully valid and
enforceable and such Guarantor was the principal debtor in respect
thereof. The Guarantors hereby irrevocably and unconditionally jointly
and severally agree to indemnify and keep indemnified the Secured
Parties against any loss or liability arising from any failure of any
member of the Group to perform or discharge any such purported
obligation or liability or from any invalidity or unenforceability of
any of the same against any member of the Group.
10.3 NO SECURITY TAKEN BY GUARANTORS
-------------------------------
The Guarantors hereby jointly and severally warrant that they have not
taken or received, and undertake that until all the Guaranteed
Liabilities have been paid or discharged in full, they will not take or
receive, the benefit of any security from any other Obligor or any
other person in respect of their obligations under this Guarantee save
as may be agreed by the Majority Banks.
10.4 INTEREST
--------
Each Guarantor agrees to pay interest on each amount demanded of it
under this Guarantee from the date of such demand until payment (as
well after as before judgment) at the rate specified in clause 5.6.
Such interest shall be compounded at the end of each period determined
for this purpose by the Agent in the event of it not being paid when
demanded but without prejudice to the Security Agent's right to require
payment of such interest.
44
<PAGE>
10.5 CONTINUING SECURITY AND OTHER MATTERS
-------------------------------------
This Guarantee shall:
(a) extend to the ultimate balance from time to time owing to the
Secured Parties by the members of the Group and shall be a
continuing guarantee, notwithstanding any settlement of account
or other matter whatsoever;
(b) be in addition to any present or future Collateral Instrument,
right or remedy held by or available to the Secured Parties or
any of them; and
(c) not be in any way prejudiced or affected by the existence of any
such Collateral Instrument, rights or remedies or by the same
becoming wholly or in part void, voidable or unenforceable on any
ground whatsoever or by the Secured Parties or any of them
dealing with, exchanging, varying or failing to perfect or
enforce any of the same or giving time for payment or indulgence
or compounding with any other person liable.
10.6 NEW ACCOUNTS
------------
If this Guarantee ceases to be continuing for any reason whatsoever
each Secured Party may nevertheless continue any account of any member
of the Group or open one or more new accounts and the liability of each
Guarantor under this Guarantee shall not in any manner be reduced or
affected by any subsequent transactions or receipts or payments into or
out of any such account.
10.7 LIABILITY UNCONDITIONAL
-----------------------
The liability of each Guarantor shall not be affected nor shall this
Guarantee be discharged or reduced by reason of:
(a) the Incapacity or any change in the name, style or constitution
of any Obligor or any other person liable; or
(b) any of the Secured Parties granting any time, indulgence or
concession to, or compounding with, discharging, releasing or
varying the liability of any other Obligor or any other person
liable or renewing, determining, varying or increasing any
accommodation, Facilities or transaction or otherwise dealing
with the same in any manner whatsoever or concurring in,
accepting or varying any compromise, arrangement or settlement or
omitting to claim or enforce payment from any Obligor or any
other person liable; or
(c) any act or omission which would not have discharged or affected
the liability of such Guarantor had it been a principal debtor
instead of a guarantor or by anything done or omitted which but
for this provision might operate to exonerate such Guarantor.
45
<PAGE>
10.8 COLLATERAL INSTRUMENTS
----------------------
None of the Secured Parties shall be obliged to make any claim or
demand on the Borrower or to resort to any Collateral Instrument or
other means of payment now or hereafter held by or available to them or
it before enforcing this Guarantee and no action taken or omitted by
any of the Secured Parties in connection with any such Collateral
Instrument or other means of payment shall discharge, reduce, prejudice
or affect the liability of any Guarantor under this Guarantee nor shall
any of the Secured Parties be obliged to apply any money or other
property received or recovered in consequence of any enforcement or
realisation of any such Collateral Instrument or other means of payment
in reduction of the Guaranteed Liabilities.
10.9 WAIVER OF GUARANTORS' RIGHTS
----------------------------
Until all the Guaranteed Liabilities have been paid, discharged or
satisfied in full (and notwithstanding payment of a dividend in any
liquidation or under any compromise or arrangement) each Guarantor
agrees that, without the prior written consent of the Agent, it will
not:
(a) exercise its rights of subrogation, reimbursement and indemnity
against any other Obligor or any other person liable; or
(b) demand or accept any security to be executed in respect of any of
its obligations under this Guarantee or any other Indebtedness
now or hereafter due to such Guarantor from any other member of
the Group or from any other person liable; or
(c) take any step or enforce any right against any Obligor or any
other person liable in respect of any Guaranteed Liabilities; or
(d) exercise any right of set-off or counterclaim against any other
Obligor or any other person liable or claim or prove or vote as a
creditor in competition with any of the Secured Parties in the
bankruptcy, liquidation, administration or other insolvency
proceeding of any other Obligor or any other person liable or
have the benefit of, or share in, any payment from or composition
with, any other Obligor or any other person liable or any other
Collateral Instrument now or hereafter held by any of the Secured
Parties of the Guaranteed Liabilities or for the obligations or
liabilities of any other person liable but so that, if so
directed by the Agent, it will prove for the whole or any part of
its claim in the liquidation of any other Obligor on terms that
the benefit of such proof and of all money received by it in
respect thereof shall immediately be transferred to an account to
be designated by the Security Agent for the Secured Parties and
applied in or towards discharge of the Guaranteed Liabilities in
accordance with the Security Deed.
46
<PAGE>
10.10 SUSPENSE ACCOUNTS
-----------------
Any money received in connection with this Guarantee (whether before or
after any Incapacity of any Obligor) may be placed to the credit of a
suspense account with a view to preserving the rights of the Secured
Parties to prove for the whole of their respective claims against any
Obligor or any other person liable or may be applied in or towards
satisfaction of the Guaranteed Liabilities in accordance with the
Security Deed.
10.11 SETTLEMENTS CONDITIONAL
-----------------------
Any release, discharge or settlement between any Guarantor and any of
the Secured Parties shall be conditional upon no security, disposition
or payment to any of the Secured Parties by any Obligor or any other
person liable being void, set aside or ordered to be refunded pursuant
to any enactment or law relating to bankruptcy, liquidation,
administration or insolvency or for any other reason whatsoever and if
such condition shall not be fulfilled the Secured Parties shall be
entitled to enforce this Guarantee subsequently as if such release,
discharge or settlement had not occurred and any such payment had not
been made.
10.12 GUARANTORS TO DELIVER UP CERTAIN PROPERTY
-----------------------------------------
If, contrary to clauses 10.3 or 10.9, any Guarantor takes or receives
the benefit of any security or receives or recovers any money or other
property, such security, money or other property shall be held on trust
for the Secured Parties and shall be delivered to the Security Agent on
demand.
10.13 RETENTION OF THIS GUARANTEE
---------------------------
The Secured Parties shall be entitled to retain this Guarantee after as
well as before the payment or discharge of all the Guaranteed
Liabilities for such period as the Agent may reasonably determine.
10.14 CHANGES IN CONSTITUTION OR REORGANISATIONS OF SECURED PARTIES
-------------------------------------------------------------
For the avoidance of doubt and without prejudice to the provisions of
clause 19, this Guarantee shall remain binding on each Guarantor
notwithstanding any change in the constitution of the Secured Parties
or any of them or their or its absorption in, or amalgamation with or
the acquisition of all or part of their or its undertaking or assets
by, any other person, or any reconstruction or reorganisation of any
kind, to the intent that this Guarantee shall remain valid and
effective in all respects in favour of the Security Agent, and any
successor or additional Security Agent appointed pursuant to the
Security Deed for the benefit of each Secured Party in the same manner
as if such successor or additional Security Agent had been named in
this guarantee as a party instead of, or in addition to the Security
Agent.
47
<PAGE>
10.15 OTHER GUARANTORS
----------------
Each Guarantor agrees to be bound by this Guarantee notwithstanding
that any other person intended to execute or to be bound by any other
guarantee or assurance under or pursuant to this Agreement may not do
so or may not be effectually bound and notwithstanding that such other
guarantee or assurance may be determined or be or become invalid or
unenforceable against any other person, whether or not the deficiency
is known to the Secured Parties or any of them.
10.16 ACCEDING GUARANTORS
-------------------
(a) To the extent legally possible, the Borrower shall procure that
each Material Subsidiary of the Borrower (other than the Original
Guarantors) become an Acceding Guarantor either (i) in the case
of a company which is a member of the Group as at the date of
this Agreement within 30 days of it ceasing to be an Immaterial
Subsidiary or (ii) in any other case within 30 days of it
becoming a Subsidiary of the Borrower by delivering to the Agent
a Guarantor's Deed of Accession duly executed by such Subsidiary
and the Borrower.
(b) The Borrower shall procure that, at the same time as a
Guarantor's Deed of Accession is delivered to the Agent, there is
delivered to the Agent all the documents and evidence listed in
schedule 9, part B in respect of the relevant Subsidiary in each
case in form and substance satisfactory to the Agent acting
reasonably.
(c) Delivery of a Guarantor's Deed of Accession duly executed by an
Acceding Guarantor and the Borrower constitutes confirmation by
the relevant Acceding Guarantor (with respect to itself only)
that the representations and warranties set out in clauses
11.1(a) to (e) inclusive and 11.2(a), (b), (c), (g) and (h) to be
made by it on the date of the Guarantor's Deed of Accession in
accordance with clause 11.4 are correct as if made by it with
reference to the facts and circumstances then existing.
(d) To the extent legally possible in any Relevant Jurisdiction, each
Acceding Guarantor, before entering into such a Guarantor's Deed
of Accession, shall comply with all relevant legislation in its
country of incorporation, to the satisfaction of the Agent, to
ensure that the proposed guarantee to be given is in compliance
with any relevant provisions of such legislation and to ensure
that the proposed guarantee to be given is to be legal valid and
binding on the proposed Acceding Guarantor.
(e) Each Secured Party irrevocably authorises the Security Agent to
countersign each Guarantor's Deed of Accession on its behalf
without any further consent of, or consultation with, any of the
other Secured Parties.
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<PAGE>
(f) Each of the other Obligors irrevocably authorises the Borrower to
countersign each Guarantor's Deed of Accession on its behalf
without any further consent of or consultation with, any of the
other Obligors.
49
<PAGE>
11. REPRESENTATIONS AND WARRANTIES
------------------------------
11.1 REPEATED REPRESENTATIONS AND WARRANTIES
---------------------------------------
Each Obligor in respect of itself and its Material Subsidiaries
represents and warrants to each of the Secured Parties that:
(a) DUE INCORPORATION
-----------------
all of the members of the Group are duly incorporated and validly
existing under the laws of the respective countries of their
incorporation as limited liability companies and have power to
carry on their respective businesses as they are now being
conducted and to own their respective property and other assets;
(b) POWER TO BORROW ETC.
--------------------
each Obligor has power to execute, deliver and perform its
obligations under this Agreement and the Security Documents to
which it is a party and, in the case of the Borrower, to borrow
the Commitments; all necessary corporate, shareholder and other
action has been taken to authorise the execution, delivery and
performance of the same and no limitation on the powers of the
Borrower to borrow or on the powers of any Guarantor to give
guarantees will be exceeded as a result of borrowings under this
Agreement or as a result of the giving of the Guarantee;
(c) BINDING OBLIGATIONS
-------------------
this Agreement constitutes and the Security Documents to which it
is a party, when executed and delivered by the relevant Obligor
will constitute, valid and legally binding obligations of such
Obligor enforceable in accordance with their respective terms
subject to the qualifications contained in the legal opinions
referred to in schedule 3 and mandatory provisions of law
affecting creditors rights generally;
(d) NO CONFLICT WITH OTHER OBLIGATIONS
----------------------------------
the execution and delivery of, the performance of its obligations
under, and compliance with the provisions of, this Agreement and
the Security Documents to which it is a party by the Obligors
will not (i) contravene any existing applicable law, statute,
rule or regulation or any judgment, decree or permit to which any
Obligor is subject, (ii) conflict with, or result in any breach
of any of the terms of, or constitute a default under, any
agreement or other instrument to which any Obligor is a party or
is subject or by which it or any of its property is bound, (iii)
contravene or conflict with any provision of any Obligor's
constitutive documents, (iv) breach in any material respect any
term of the Necessary Authorisations or (v) save for the
50
<PAGE>
Encumbrances granted to the Secured Parties pursuant to the
Security Documents, result in the creation or imposition of or
oblige any member of the Group to create any Encumbrance (other
than a Permitted Encumbrance) on any member of the Group's
undertakings, assets, rights or revenues;
(e) NO LITIGATION
-------------
no litigation, arbitration or administrative proceeding is taking
place, pending or, to the knowledge of the officers of any
Obligor, threatened against any member of the Group in which
there is a reasonable likelihood of an adverse determination, if
adversely determined would or is reasonably likely to have a
Material Adverse Effect;
(f) FINANCIAL STATEMENTS CORRECT AND COMPLETE:
------------------------------------------
(i) the audited consolidated financial statements of the
Shareholder and its Subsidiaries in respect of the financial
year ended on 31st December 1997 as delivered to the Agent
have been prepared in accordance with GAAP which principles
have been consistently applied and present fairly and
accurately the consolidated financial position of the
Shareholder and its Subsidiaries as at such date and the
consolidated results of the operations of the Shareholder
and its Subsidiaries respectively for the financial year
ended on such date and, as at such date, no member of the
Group had any liabilities (contingent or otherwise other
than liabilities payable to the Shareholder representing the
on-lending of the proceeds of the NUON Facility) which are
significant in the context of the Group (taken as a whole)
or any losses which are not disclosed by, or reserved
against or provided for in, such financial statements;
(ii) the unaudited Quarterly Management Accounts for the
Shareholder and its Subsidiaries in respect of the Quarterly
Period ended 31st December 1998 as delivered to the Agent
have been prepared in accordance with GAAP (other than year
end adjustments and absence of footnotes) which principles
have been consistently applied and present fairly and
51
<PAGE>
accurately the results of the operations of the Group for
such Quarterly Period as at such date; and
(iii) the combined financial projections for the Group for the
financial years ending 1999 to 2008 inclusive, the operating
statistics projections for such financial years and the
Management Base Case have been prepared based upon
historical financial information and upon the assumptions
set forth therein, which assumptions were reasonable when
made in light of current and reasonably foreseeable business
conditions and are reasonable on the date hereof.
11.2 FURTHER REPRESENTATIONS AND WARRANTIES
--------------------------------------
Each Obligor in respect of itself and its Material Subsidiaries further
represents and warrants to each of the Secured Parties that as at the
date of this Agreement, or, in the clause of 11.2(i) only, as at the
date of the Information Memorandum:
(a) NO FILINGS REQUIRED
-------------------
save for the filings, registrations and notarisations referred to
in the legal opinions referred to in schedule 3, it is not
necessary to ensure the legality, validity, enforceability or
admissibility in evidence of this Agreement or the Security
Documents that any of them or any other instrument be notarised,
filed, recorded, registered or enrolled in any court, public
office or elsewhere in any Relevant Jurisdiction or that any
stamp, registration or similar tax or charge be paid in any
Relevant Jurisdiction on or in relation to this Agreement or any
of the Security Documents and this Agreement and the Security
Documents are in proper form for their enforcement in the courts
of any Relevant Jurisdiction;
(b) CHOICE OF LAW
-------------
the choice by the Obligors of English law to govern this
Agreement and the submission by the Obligors to the non-exclusive
jurisdiction of the High Court of Justice in England are valid
and binding;
(c) TITLE TO ASSETS
---------------
each Obligor is the legal and/or beneficial owner of and has a
good and marketable interest in its material assets free and
clear of any Encumbrance other than Permitted Encumbrances;
(d) INTELLECTUAL PROPERTY RIGHTS:
----------------------------
(i) the Intellectual Property Rights owned by or licensed to
each member of the Group are free from any Encumbrance (save
for those created or to be created by or pursuant to the
Security Documents, those arising by, through or under the
terms on which any such Intellectual Property Rights are
licensed to the relevant member of the Group and Permitted
Encumbrances) and any other rights or interests in favour of
third parties;
(ii) the Intellectual Property Rights owned by or licensed to
each member of the Group are all the Intellectual Property
Rights required by them in order to carry on, maintain and
operate in all material respects their respective
businesses, properties and assets and no member of the Group
in carrying on its business, to its knowledge, infringes any
Intellectual Property Rights of any third party where any
52
<PAGE>
action taken by such third party in respect of any such
infringement would or is reasonably likely to have a
Material Adverse Effect; and
(iii) to the knowledge of the Obligor, no Intellectual Property
Rights owned by any member of the Group are being infringed,
nor is there any threatened infringement of any such
Intellectual Property Rights which, in either case would or
is reasonably likely to have a Material Adverse Effect;
(e) COPYRIGHT MATTERS
-----------------
each member of the Group has obtained all consents and taken all
other action required in connection with the secondary
transmission by it of any broadcast television signals (other
than where failure to do so would or is reasonably likely to have
a Material Adverse Effect) and no member of the Group has any
knowledge, nor is it aware of any claim, that it is or may be
liable to any person for any copyright infringement of any nature
whatsoever as a result of the operation of its business which
liability would or is reasonably likely to have a Material
Adverse Effect;
(f) NECESSARY AUTHORISATIONS
------------------------
each member of the Group has secured all the Necessary
Authorisations, all such Necessary Authorisations are in full
force and effect and each member of the Group is in compliance in
all material respects with all provisions thereof. To the best of
its knowledge and belief after due enquiry, none of the Necessary
Authorisations are the subject of any pending or threatened in
writing attack or revocation;
(g) CONSENTS OBTAINED
-----------------
every consent, authorisation, licence or approval of or
registration with or declaration to, governmental or public
bodies or authorities of courts (other than Necessary
Authorisations) required by each member of the Group to
authorise, or required by any member of the Group in connection
with, the execution, delivery, validity, enforceability or
admissibility in evidence of this Agreement and the Security
Documents to which it is a party or the performance by each
member of the Group of their respective obligations under this
Agreement and the Security Documents to which they are a party
has been obtained or made and is in full force and effect and
there has been no material default in the observance of the
conditions or restrictions (if any) imposed in, or in connection
with, any of the same;
(h) NO WITHHOLDING TAXES
--------------------
(assuming the correctness of the confirmation set out in clause
9.6) under the law and practice at the date of this Agreement no
Taxes are imposed by withholding or otherwise on any payment to
be made to or for the account of any Finance Party by any member
53
<PAGE>
of the Group under this Agreement or any Security Document or are
imposed on or by virtue of the execution or delivery by any
member of the Group of this Agreement or any Security Document to
which it is a party or any document or instrument to be executed
or delivered under this Agreement or any such Security Document;
(i) INFORMATION MEMORANDUM
----------------------
to the best of the Borrower's knowledge and belief after due
enquiry, as at the date of the Information Memorandum the factual
information relating to the Group and the Shareholder contained
in the Information Memorandum is true and accurate in all
material respects and not misleading in any material respect and
the Information Memorandum does not omit any material facts; as
at the date of the Information Memorandum all reasonable
enquiries have been made by the Borrower to verify the facts and
statements relating to the Group and the Shareholder contained
therein as at the date of the Information Memorandum; all
opinions, projections and forecasts contained therein and the
assumptions on which such opinions, projections and forecasts
were based on and arrived at after due and careful consideration
and enquiry and have been prepared by the Borrower on the basis
of assumptions which the Borrower believed were reasonable as of
the date of such projections in the light of current and
reasonably foreseeable business conditions; there are no material
facts or circumstances which have not been disclosed to the Joint
Arrangers prior to the date hereof the omission of which could
make any factual information contained in the Information
Memorandum inaccurate or misleading in any material respect as at
the date of the Information Memorandum or any of the opinions,
projections and forecasts contained in the Information Memorandum
(and the assumptions on which such opinions, projections and
forecasts were made) misleading in any material respect at the
date of the Information Memorandum. Notwithstanding the above, no
warranty or representation is made in respect of (i) any
information, facts, statements, opinions, projections, forecasts,
demographic statistics or circumstances relating to the cable,
media, telecommunications and data services industry as a whole,
and (ii) any person other than any member of the Group and the
Shareholder;
(j) ENVIRONMENTAL MATTERS
---------------------
(i) each member of the Group complies, in all respects, with all
requirements of Environmental Laws where failure to do so
has or is reasonably likely to have a Material Adverse
Effect; and
(ii) after due enquiry, no Environmental Claim is, to the
knowledge of any member of the Group, pending, threatened or
existing, as at the date of this Agreement, which has or is
reasonably likely to have a Material Adverse Effect;
54
<PAGE>
(k) YEAR 2000 ISSUE
---------------
there is an ongoing review of the effect of the Year 2000 Issue
on the computer software, hardware and firmware systems and
equipment containing embedded microchips owned or operated by or
for each member of the Group or used or relied upon in the
conduct of the business of each member of the Group (including
systems and equipment supplied by others or with which such
computer systems of such member of the Group interface). The
costs to the Group of any reprogramming required in respect of
the systems and equipment owned or operated by any member of the
Group as a result of the Year 2000 Issue to permit the proper
functioning of, and the proper processing of data by such systems
and equipment, and the testing of such reprogramming, and of the
reasonably foreseeable consequences of the Year 2000 Issue to the
Group (including reprogramming errors and the failure of systems
or equipment supplied by others) are not expected to result in an
Event of Default or to have a Material Adverse Effect;
(l) SHARES
------
all shares issued by each member of the Group have been validly
allotted;
(m) WORKS COUNCILS
--------------
if any works council has been instituted by an Obligor, all
action has been taken by or in relation to such works council
necessary to authorise the performance by the Obligors of their
respective obligations under this Agreement and the Security
Documents;
(n) DORMANT COMPANIES
-----------------
each member of the Group which is not a Guarantor is an
Immaterial Subsidiary; and
(o) NO DEFAULT
----------
no other Default has occurred and is continuing.
11.3 FIRST ADVANCE REPRESENTATIONS AND WARRANTIES
--------------------------------------------
Each Obligor in respect of itself and its Material Subsidiaries which
are members of the Group further represents and warrants to each of the
Secured Parties that:
(a) PRINCIPAL AGREEMENTS:
--------------------
55
<PAGE>
(i) the Principal Agreements which have been entered into on or
prior to the date of this Agreement are in full force and
effect; and
(ii) to the best of its knowledge and belief after due enquiry,
(1) no party is in breach of any material term thereof; (2)
there is no material dispute subsisting between the parties
thereto and (3) no written amendments have been made
thereto;
(b) TELECOMMUNICATIONS AND CABLE LAWS
---------------------------------
to the best of its knowledge and belief after due enquiry, each
member of the Group is in compliance in all material respects
with all Telecommunications and Cable Laws applicable to it but
excluding, for these purposes only, breaches of
Telecommunications and Cable Laws which have been expressly
waived by the relevant regulatory authority;
(c) NO MATERIAL ADVERSE CHANGE
--------------------------
there has been no material adverse change in the consolidated
financial position of the Group from that set forth in the
financial statements referred to in clause 11.1(f)(i) and (ii);
and
(d) CONTRACTUAL COMMITMENTS
-----------------------
since the unaudited consolidated accounts of the Group for the
year ended 31st December 1998, no dividends (in cash or specie)
of the Borrower or any other rights or benefits have been
declared, made or paid by the Borrower and no member of the Group
has entered into any contractual commitments of a material
nature, (other than (i) the Principal Agreements, (ii) for the
purpose of the Project, or (iii) contractual commitments
constituting Permitted Borrowings or Permitted Encumbrances).
11.4 REPETITION
----------
The representations and warranties in (i) clause 11.1 (so that (a) the
representation and warranty in clause 11.1 (f)(i) shall for this
purpose refer to the then latest audited consolidated financial
statements of each of UTH and its Subsidiaries and commencing with the
financial year ending 31st December, 1999, the Group verified by the
auditors to each of UTH and its Subsidiaries and the Group and
delivered to the Agent under clause 12.1, (b) the representation and
warranty in clause 11.1 (f)(ii) shall for this purpose refer to the
then latest Quarterly Management Accounts delivered to the Agent under
clause 12.1, (c) the representation and warranty contained in clause
11.1 (f)(iii) shall for this purpose refer to the then latest combined
financial projections of the Group and the then latest operating
statistics projections and shall not include a representation or
warranty as to the Management Base Case) shall be deemed to be repeated
56
<PAGE>
by the Obligors on and as of each Drawdown Date and each Interest
Payment Date, (ii) clause 11.2 shall be deemed to be repeated by the
Obligors on and as of each Drawdown Date if, taking into account any
repayment made on such Drawdown Date, the Loan increases as if made
with reference to the facts and circumstances existing on each such
date. In the case of an Obligor which becomes a party to this Agreement
after the date hereof the representations and warranties in clause 11.1
(amended as set out above) and clause 11.2 (where applicable, in
respect of itself only), shall be deemed to be made by that Obligor on
the date that it executes a Guarantor's Deed of Accession as if made
with reference to the facts and circumstances existing on such day.
57
<PAGE>
12. UNDERTAKINGS
------------
12.1 POSITIVE COVENANTS
------------------
Each Obligor in respect of itself and its Material Subsidiaries
undertakes with each of the Secured Parties that, from the date of this
Agreement and so long as any moneys are owing under this Agreement or
remain available for drawing by the Borrower, it will:
(a) NOTICE OF DEFAULT ETC.
----------------------
procure that the Agent is promptly informed of (i) any Default
and any potential breach of any of the undertakings set out in
clause 12 or 13 forthwith upon becoming aware thereof and will
from time to time, if so requested by the Agent, confirm to the
Agent in writing that, save as otherwise stated in such
confirmation, no Default has occurred and is continuing, (ii) any
lapse, suspension or termination of or refusal by any person to
renew or extend any Necessary Authorisation of which it becomes
aware or any breach of any Necessary Authorisation where in the
case of a Necessary Authorisation from any person other than a
governmental or regulatory authority, any such lapse, suspension,
termination, refusal or breach would or is reasonably likely to
have a Material Adverse Effect, (iii) (to the extent known to any
member of the Group) the commencement of all proceedings and
investigations by or before any governmental body and all actions
and proceedings in any court or before any arbitrator where any
such proceedings, investigations or actions would, if adversely
determined, have a Material Adverse Effect, (iv) any application
of which it becomes aware for any other licence or franchise
agreement by means of cable television systems (including
satellite master antennae television systems and multi-point
microwave distributions systems) with respect to the territory
covered by the Registrations where any such application, if
successful, would or is reasonably likely to have a Material
Adverse Effect, (v) any material dispute under any Principal
Agreement and (vi) any breach of any Telecommunications and Cable
Laws by any member of the Group which would or is reasonably
likely to have a Material Adverse Effect;
(b) CONSENTS AND LICENCES
---------------------
without prejudice to clauses 3 and 11.1, ensure that all action
required to be taken by or in relation to any works council in
relation to the Finance Documents is taken promptly and, for the
avoidance of doubt, excluding such consents, licences and
registrations required for the construction, installation and
operation of the Cable Systems, obtain or cause to be obtained,
maintain in full force and effect and comply in all material
respects with the conditions and restrictions (if any) imposed
in, or in connection with, every consent, authorisation, licence,
58
<PAGE>
registration or approval of governmental or public bodies or
authorities or courts and do, or cause to be done, all other acts
and things which may from time to time be necessary under
applicable law for the continued due performance of all its
obligations under this Agreement and the Security Documents;
(c) USE OF PROCEEDS
---------------
use the proceeds of drawings under this Agreement exclusively for
the purposes specified in clause 1.1;
(d) PARI PASSU
----------
ensure that its obligations under this Agreement shall, without
prejudice to the provisions of clause 12.2 or to the security
intended to be created pursuant to the Security Documents, at all
times rank at least pan passu with all its other present and
future unsecured and unsubordinated Indebtedness with the
exception of any obligations which are mandatorily preferred by
law and not by contract;
(e) BUSINESS
--------
engage solely in the Project and/or in the business of acting as
the holding company of its Subsidiaries (which shall include the
raising of Permitted Borrowings and the on-lending of such
Borrowed Money to its Subsidiaries in accordance with the
provisions of this Agreement and the entry into of hedging
arrangements on behalf of its Subsidiaries);
(f) FINANCIAL STATEMENTS
--------------------
prepare:
(i) annual audited:
(A) consolidated financial statements of UTH
and its Subsidiaries; and
(B) commencing with the financial year ending
31st December, 1999, consolidated financial state-
ments of the Group,
each in accordance with GAAP and cause such financial
statements to be reported on by its auditors and deliver to
the Agent sufficient copies of the same for distribution to
all of the Banks as soon as practicable but not later than
120 days after the end of the financial year to which they
relate; and
(ii) semi-annual unaudited consolidated financial statements of
the Group (on the same basis as that used for the annual
financial statements referred to in (i) above) and deliver
to the Agent sufficient copies of the same for distribution
59
<PAGE>
to all of the Banks as soon as practicable but not later
than 60 days after the end of the Six Month Period to which
they relate.
Each set of consolidated financial information or financial
statements of the Group delivered pursuant to this clause 12.1(f)
shall be accompanied by a calculation in reasonable detail of
Consolidated EBITDA for the Group;
(g) QUARTERLY MANAGEMENT ACCOUNTS
-----------------------------
in respect of each Quarterly Period commencing with the Quarterly
Period ending 30th December 1998, prepare unaudited consolidated
Quarterly Management Accounts for the Group and deliver a copy of
the same to the Agent for distribution to all of the Banks as
soon as practicable but not later than 60 days after the
Quarterly Period to which they relate;
(h) MONTHLY INFORMATION
-------------------
in respect of each calendar month commencing with March 1999,
prepare consolidated Monthly Information for the Group and
deliver a copy of the same to the Agent for distribution to all
the Banks as soon as practicable but not later than 30 days after
the month to which they relate.
(i) DELIVERY OF REPORTS
-------------------
deliver to the Agent, for distribution to the Banks, in each case
at the time of issue thereof or (in the case of the Compliance
Certificates referred to in (ii) below) together with the audited
financial statements prepared in respect of each financial year
(in the case of a Compliance Certificate from the auditors of the
Group) or Quarterly Management Accounts prepared in respect of
each Quarterly Period (in the case of a Compliance Certificate
from an Authorised Officer) delivered pursuant to clause 12.1(g)
in respect of the financial period to which such Compliance
Certificate relates:
(i) every material document issued by the Borrower or any of its
Subsidiaries to its creditors generally;
(ii) a Compliance Certificate from the auditors of the Group in
respect of each financial year and an Authorised Officer of
the Borrower in respect of each Quarterly Period;
(iii) an Annual Budget for each financial year for the Group no
later than the last day of the preceding financial year; and
(iv) no later than 30th June in each year, revised financial
projections and revised operating statistics projections in
relation to the Group containing information of a
60
<PAGE>
substantially similar type and to a substantially similar
level of detail as the base case financial projections and
operating statistics projections contained in the Management
Base Case, such projections to extend to at least the 31st
December 2008 and to contain details of the assumptions on
the basis of which such projections have been prepared and
an explanation of any discrepancies from the most recently
delivered financial projections and projections for
operating statistics delivered under this sub-paragraph
(i)(iv) (or, in the case of the first such financial
projections, from the base case financial projections or
operating statistics projections (as the case may be)
contained in the Management Base Case)
(j) CHANGE IN BASIS OF ACCOUNTS
---------------------------
(in the case of the Borrower) ensure that all financial
statements delivered under clause 12.1(f) are prepared in
accordance with GAAP and in accordance with the accounting
principles and practices used in the preparation of the financial
statements referred to in clause 11.1(g) and the 1999 Budget (the
"ORIGINAL Basis") consistently applied in respect of each
financial year unless to do so would be inconsistent with then
current GAAP (the "NEW BASIS"). If the preparation of financial
statements on the Original Basis is contrary to the New Basis
then the Borrower shall promptly notify the Agent in writing of
the relevant change and (at the option of the Borrower) shall
either (1) prepare and deliver to the Agent audited financial
statements on both the Original Basis and the New Basis (or shall
prepare and deliver financial statements on the New Basis only
but shall also prepare and deliver an audited reconciliation
statement (a "RECONCILIATION STATEMENT") showing those
adjustments necessary in order to reconcile the financial
statements produced on the New Basis to the Original Basis) or
(2) request the Agent to enter into good faith negotiations for
such amendments (if any) as are necessary to the covenants
contained in clause 13.1 and any other provisions of this
Agreement affected by such change, in which event the Agent will
enter into such negotiations for a period of not more than 28
days. If agreement is reached between the Borrower and the Agent
(acting on the instructions of the Majority Banks) within such
period as to the amendment of any such covenants or provisions,
then the parties hereto will enter into such documentation and
take such other steps as are required to put such amendments into
effect following which the Borrower shall then be obliged to
produce financial statements on the New Basis only. If no such
agreement is reached then the Borrower shall be obliged to
prepare and deliver financial statements on both the Original
Basis and the New Basis (or shall prepare and deliver audited
financial statements on the New Basis accompanied by a
Reconciliation Statement).
61
<PAGE>
Where the Borrower is under an obligation to deliver financial
statements under clause 12.1(f) on both the Original Basis and
the New Basis (or on the New Basis but accompanied by a
Reconciliation Statement), Monthly Information and Quarterly
Management Accounts shall also be delivered on both bases or on
the New Basis but accompanied by a Reconciliation Statement.
All financial statements, Quarterly Management Accounts, Monthly
Information and Reconciliation Statements delivered pursuant to
this clause 12.1 (j) shall be delivered within the relevant time
period set out in clause 12.1.
The provisions of this clause 12.1 (j) shall also apply, mutatis
mutandis, to the preparation and delivery of the Annual Budget
under clause 12.1 (i)(iii) and the revised financial projections
under clause 12.1 (i)(iv).
(k) FINANCIAL YEAR END
------------------
maintain a financial year end of 31 December for each member of
the Group save with the prior written consent of the Majority
Banks;
(l) AUTHORISED OFFICERS
-------------------
ensure that any new or replacement Authorised Officer has
provided the Agent with evidence satisfactory to it of such new
officer(s)' authority and a specimen of his or their signature(s)
prior to signing any Compliance Certificates, Drawdown Notices,
or any other notices, requests or confirmations referred to in
this Agreement or relating to the Facilities;
(m) AUDITORS
--------
ensure that Arthur Andersen & Co. is appointed as auditor of the
Borrower and each of its Subsidiaries and not change such
appointment without appointing a major accounting firm of
recognised international standing and repute;
(n) PROVISION OF FURTHER INFORMATION
--------------------------------
provide the Agent with a copy of (i) each Principal Agreement
entered into after the date of this Agreement and (ii) any
material report, notice or other communication relating to or
alteration of the Principal Agreements, the Necessary
Authorisations and such financial and other information
concerning each member of the Group and their respective affairs
as the Agent or any Bank (acting through the Agent) may from time
to time reasonably request;
(o) INSURANCE
---------
62
<PAGE>
maintain insurance cover of a type and level which a prudent
company in the same business would effect;
(p) INSPECTION
----------
if required by the Agent (acting on the instructions of the
Majority Banks), at any time whilst a Default is continuing,
permit, to the extent it is able to do so, representatives of the
Agent or any of the Banks upon reasonable prior written notice to
the Borrower or its relevant Subsidiary, after having made
arrangements with the Borrower so to do and after entering into a
confidentiality undertaking if reasonably required by the
Borrower (a) visit and inspect the properties of any member of
the Group during normal business hours, (b) inspect and make
extracts from and copies of its books and records other than
records which the relevant member of the Group is prohibited by
law from disclosing to the Agent and/or any relevant Bank and (c)
discuss with its principal officers and auditors its business,
assets, liabilities, financial position, results of operations
and business prospects provided that any such discussion with the
auditors shall only be on the basis of the audited accounts of
the Group and Compliance Certificates issued by the auditors;
(q) COMPLIANCE WITH LAWS AND REGULATIONS
------------------------------------
comply with the terms and conditions of all laws (including
Telecommunications and Cable Laws and the Necessary
Authorisations), regulations, agreements, licences and
concessions including, without limitation, all Environmental Laws
and all Environmental Licences if the failure to comply
therewith, would or is reasonably likely, in the opinion of the
Agent acting reasonably, to have a Material Adverse Effect;
(r) TAXES
-----
file or cause to be filed all tax returns required to be filed in
all jurisdictions in which it is situated or carries on business
or is otherwise subject to Taxation and will pay all Taxes shown
to be due and payable on such returns or any assessments made
against it within the period stipulated for such payment (other
than those being contested in good faith);
63
<PAGE>
(s) COST CAPITALISATION POLICY
--------------------------
maintain a cost capitalisation policy consistent with the cost
capitalisation policy used in the preparation of the financial
statements referred to in clause 11.1 (f)(i) or such other cost
capitalisation policy as may be approved by the Agent (acting on
the instructions of the Majority Banks) and the Borrower, after
consultation with its auditors, from time to time;
(t) AGREED HEDGING PROGRAMME
------------------------
as from the date falling 60 days after the date of this Agreement
maintain interest rate protection arrangements with a Bank in
respect of 50 per cent. of the Loan. Any such interest rate
protection arrangements shall be for an initial period of at
least 3 years and interest rate protection arrangement in respect
of 50 per cent. of the Loan must extend for a period of at least
one year at all times;
(u) REGISTRATIONS AND NECESSARY AUTHORISATIONS
------------------------------------------
obtain or cause to be obtained, every consent, authorisation,
licence or approval of or registration with or declaration to,
governmental or public bodies or authorities or courts in any
Relevant Jurisdiction necessary for the construction,
installation or operation of the Cable Systems (including,
without limitation, the Necessary Authorisations) and (A) ensure
that none of the same (to the extent that it is required to
enable any member of the Group to carry on its business) is
revoked, cancelled, suspended, withdrawn, terminated, expires and
is not renewed or otherwise ceases to be in full force and effect
without a new one having first been put in place with a member of
the Group on substantially identical terms, on terms more
beneficial to the Group or on terms then required by the relevant
governmental or public body or authority or court in the Relevant
Jurisdiction and (B) ensure that none of the same is modified in
any respect (other than modifications of the same so that
following such modification the same is on terms more beneficial
to the Group or required by the relevant governmental or public
body or authority or court in the Relevant Jurisdiction) and that
no member of the Group commits any default in the observance of
the conditions or restrictions (if any) imposed in, or in
connection with, any of the same which, in the case of any of the
events listed in this subparagraph (B), in the reasonable opinion
of the Majority Banks, would or is reasonably likely to have a
Material Adverse Effect;
(v) CHARGED ACCOUNTS
----------------
promptly pay, or cause to be paid, the monies received or to be
received constituting the Earnings into the Charged Accounts;
64
<PAGE>
(w) SUBORDINATION OF LOANS FROM SUBORDINATED CREDITOR
-------------------------------------------------
procure that prior to any Relevant Person making any Borrowed
Money (other than Permitted Payments) available to any member of
the Group, such Relevant Person shall enter into a Subordination
Deed on terms and conditions satisfactory to the Agent and a
Security Provider's Deed of Accession and provides the Agent with
such documents and evidence as it may reasonably require as to
the power and authority of the Relevant Person to enter into such
Subordination Deed and Security Provider's Deed of Accession and
that the same constitute valid and legally binding obligations of
such Relevant Person enforceable in accordance with their terms
subject to substantially similar qualifications to those made in
the legal opinions referred to in schedule 3;
(x) MORTGAGE DEED
-------------
enter into a Mortgage Deed, on terms and conditions satisfactory
to the Agent, in respect of any individual immoveable asset which
has a book value or purchase price in excess of euro5,000,000
(other than a Headend) acquired after the date of this Agreement
and provide the Agent with such documents and evidence as it may
reasonably require as to the power and authority of the relevant
member of the Charging Group to enter into such Mortgage Deed and
that the same constitute valid and legally binding obligations of
such member of the Charging Group and ensure that the aggregate
book value or purchase price of all assets which are properly not
the subject of a Mortgage Deed or a Moveables Pledge does not
exceed eurol2,500,000 (in aggregate); and
(y) UPC FUNDING UNDERTAKING
-----------------------
in the case of the Borrower only, if in respect of any Quarterly
Period falling during 1999 and 2000 the actual financial
performance of the Group indicates that the Borrower will not be
able to fund its operating or capital expenditure requirements
for the relevant Quarterly Period through the results of its
operations, Advances, Utilisations or otherwise, make demand on
UPC to fund the shortfall prior to the end of the relevant
Quarterly Period by making the Additional Subordinated
Shareholder Loan and to borrow any such Additional Shareholder
Loan.
12.2 NEGATIVE COVENANTS
------------------
Each Obligor in respect of itself and its Material Subsidiaries
undertakes with each of the Secured Parties that, from the date of this
Agreement and so long as any moneys are owing under this Agreement or
remain available for drawing by the Borrower, without the prior written
consent of the Agent acting on the instructions of the Majority Banks:
65
<PAGE>
(a) NEGATIVE PLEDGE
---------------
save for Encumbrances created by the Security Documents, it will
not permit any Encumbrance (other than the Permitted
Encumbrances) by any member of the Group to subsist, arise or be
created or extended over all or any part of their respective
present or future undertakings, assets, rights or revenues to
secure or prefer any present or future Indebtedness of any member
of the Group or any other person;
(b) NO MERGER
it will not merge or consolidate with any other company or person
and it will procure that no member of the Group merges or
consolidates with any other company or person save for mergers
between any members of the Group with any or all of the other
members of the Group ("ORIGINAL ENTITIES") into one or more
entities (each a "MERGED ENTITY") provided that:
(i) reasonable details of the proposed merger in order to
demonstrate satisfaction with paragraphs (ii) to (v) below
are provided to the Agent at least 10 days before the merger
is to be entered into;
(ii) such Merged Entity is a member of the Group and is liable
for the obligations of the relevant Original Entities
(including the obligations under this Agreement and the
Security Documents) which remain unaffected thereby and
entitled to the benefit of all the rights of such Original
Entities;
(iii) such Merged Entity has entered into Security Documents which
provide security over the same assets of at least an
equivalent nature and ranking to the security provided by
the relevant Original Entities pursuant to any Security
Documents entered into by them and any possibility of the
Security Documents referred to in this paragraph or
paragraph (iv) below being challenged or set aside is not
greater than any such possibility in relation to the
Security Documents entered into by or in respect of the
share capital of any relevant Original Entity;
(iv) (if all or any part of the share capital of any of the
relevant Original Entities was charged pursuant to a
Security Document) the equivalent part of the issued share
capital of such Merged Entity is charged pursuant to a
Security Document on terms of at least an equivalent nature
and equivalent ranking as any Security Document relating to
the shares in each relevant Original Entity; and
(v) that all the property and other assets of the relevant
Original Entities are vested in the Merged Entity and that
66
<PAGE>
the Merged Entity has assumed all the rights and obligations
of the relevant Original Entities under the Principal
Agreements and all material Necessary Authorisations;
(c) DISPOSALS
---------
it will not and will procure that no other member of the Group
will sell, transfer, lend or otherwise dispose of or cease to
exercise direct control over any part of its present or future
undertaking, assets, rights or revenues whether by one or a
series of transactions related or not (other than (i) transfers,
sales or disposals on arms' length terms in the ordinary course
of trading for full consideration; and (ii) transfers, sales or
disposals by the Borrower or a Charging Subsidiary from or, as
the case may be, to another Charging Subsidiary provided that, if
the relevant asset or revenues are charged to the Secured Parties
pursuant to a Security Document, the relevant assets or revenues
remain at all times charged to the Secured Parties pursuant to a
Security Document to the same extent they were charged by the
transferring entity);
(d) INTRA-GROUP ACCOUNTS
--------------------
(without limiting the generality of and subject to the exceptions
set out in clause 12.2(c)) it will not subordinate, postpone,
defer, assign or otherwise dispose of or deal with, any
Indebtedness owing to it by any member of the Group and will
procure that no member of the Group will subordinate, postpone,
defer, assign or otherwise dispose of or deal with, any
Indebtedness owing to it by any other member of the Group save as
required pursuant to this Agreement for the benefit of the
Secured Parties;
(e) LOANS AND GUARANTEES
--------------------
it will not, and will procure that no member of the Group will,
make any loans, grant any credit or give any guarantee to or for
the benefit of, or enter into any transaction having the effect
of lending money with, any person other than (i) to or for the
benefit of another member of the Charging Group, (ii) normal
trade credit in the ordinary course of day to day trading, (iii)
as permitted by clause 12.2(f), (iv) loans to employees of the
Borrower up to an aggregate amount of not more than euro100,000
outstanding at any time and (v) to the extent that the same
constitute Permitted Payments;
(f) BORROWED MONEY
--------------
it will not and will procure that the Group will not create,
incur or otherwise permit to be outstanding any Borrowed Money
(other than Permitted Borrowings);
67
<PAGE>
(g) ISSUE OF SHARES
---------------
(i) the Borrower will not and will procure that no member of the
Group (other than in respect of such other members of the Group
in order to permit a solvent reorganisation permitted under
clause 12.2(b)) reduce its capital or purchase or redeem any
class of its shares or any other ownership in it and (ii) it will
not and will procure that no member of the Charging Group issues
any shares of any class save that any member of the Charging
Group may issue shares to or otherwise acquire additional rights
from any other member of the Charging Group so long as such
shares are charged or pledged in favour of the Secured Parties
pursuant to the terms of a Security Document and there are
delivered at the same time to the Security Agent the relevant
share certificates and blank stock transfer forms (or equivalent
documents) in respect thereof together with such other documents
and evidence and legal opinions as the Agent may require;
(h) INVESTMENTS
it will not and will procure that no member of the Group:
(i) makes any loan or advance to, or enters into any transaction
having the effect of lending money with, any person (other
than a member of the Charging Group); or
(ii) acquires for a consideration any document evidencing
Indebtedness, capital stock or other securities of any
person; or
(iii) acquires all or any substantial part of the assets, property
or business of any other person or any assets that
constitute a division or operating unit of the business of
any other person; or
(iv) creates or acquires any Subsidiary or Associated Company or
otherwise enters into any joint venture arrangement or
partnership or similar undertaking with any person
other than (i) (in each case) Permitted Acquisitions and (ii) (in
the case of (ii), (iii) and (iv)) members of the Group may
undertake such transactions referred to provided that such
investment is in the nature of the business carried on by the
Group and the aggregate consideration in money or monies worth
paid or payable in respect of such investment does not exceed
euro10,000,000 (or its equivalent) and (iii) (in the case of (i)
and (ii)) members of the Group may undertake such transactions
referred to in sub-clauses (i)-(v) of clauses 12.2(e);
(i) CAPITAL EXPENDITURE
-------------------
it will not and will procure that no member of the Group incurs
any capital expenditure other than in relation to the Project;
68
<PAGE>
(j) SWAPS AND HEDGING
-----------------
it will not and will procure that no member of the Group enters
into any interest rate or currency swaps or other hedging
arrangements other than non-speculative arrangements directly
relating to the risk management of any Borrowed Money permitted
to subsist by the terms of this Agreement and entered into in the
ordinary course of the business for the genuine hedging of the
relevant underlying transaction;
(k) RESTRICTED PAYMENTS
-------------------
it will not and will procure that no member of the Group makes
any Restricted Payments other than Permitted Payments; and
(l) CONSTITUTIVE DOCUMENTS
----------------------
it will not, and will procure that none of members of the Group
amends its constitutive documents in any way which would or is
reasonably likely to adversely affect (in terms of value,
enforceability or otherwise) the charge or pledge granted to the
Secured Parties pursuant to the Share Securities.
69
<PAGE>
13. FINANCIAL COVENANTS
-------------------
13.1 FINANCIAL COVENANTS
-------------------
The Borrower undertakes with each of the Secured Parties that, from the
date of this Agreement and so long as any moneys are owing under this
Agreement or any of the Commitments remain outstanding, it will ensure
that:
(a) MAXIMUM SENIOR DEBT ANNUALISED CONSOLIDATED EBITDA
--------------------------------------------------
on each Quarter Day falling within the period set out in column
(1) below the ratio of Senior Debt to Annualised Consolidated
EBITDA (calculated on each Quarter Day by reference to the Six
Month Period ending on such day) shall not exceed the number set
out against such period in column (2) below:
<TABLE>
<CAPTION>
------------------------------------------------------ ------------------------------
(1) (2)
Period Ratio
------------------------------------------------------ ------------------------------
<S> <C>
from the date of this Agreement to (and including) 7.75
31st December, 2001
------------------------------------------------------ ------------------------------
from (and including) 1st January, 2002 to(and 6.0
including) 31st December 2002
------------------------------------------------------ ------------------------------
from (and including) 1st January, 2003 to (and 5.0
including) 31st December, 2003
------------------------------------------------------ ------------------------------
from (and including) 1st January, 2004 and thereafter 4.0
------------------------------------------------------ ------------------------------
</TABLE>
(b) ANNUALISED CONSOLIDATED EBITDA
------------------------------
to ensure that on each Quarter Day Annualised Consolidated EBITDA
before Management Fees (calculated on each Quarter Day by
reference to the Six Month Period ending on such date) shall
exceed 85 per cent. of twice the base case Consolidated EBITDA
before Management Fees for such Six Month Period shown in the
Management Base Case;
(c) SENIOR DEBT CASH INTEREST CHARGES
---------------------------------
to ensure that on each Quarter Date falling within the period set
out in column (1) below the ratio of Annualised Consolidated
EBITDA (calculated on each Quarter Day by reference to the Six
Month Period ending on such day) to the amount of Senior Debt
Cash Interest Charges attributable to the 12 month period ending
on such Quarter Date shall be greater than the number set out
against such period in column (2) below:
70
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------ ------------------------------
(1) (2)
Period Ratio
------------------------------------------------------ ------------------------------
<S> <C>
from the date of this Agreement to (and including 2:1
31st December, 2001)
------------------------------------------------------ ------------------------------
1st January, 2002 and thereafter 3:1
------------------------------------------------------ ------------------------------
</TABLE>
(d) SENIOR DEBT SERVICE COVER
-------------------------
to ensure that on each Quarter Day falling within the period set
out in column (1) below the ratio of Annualised Consolidated
EBITDA (calculated on each Quarter Day by reference to the Six
Month Period ending on such day) to Pro Forma Senior Debt Service
in respect of the period of twelve months immediately following
such Quarter Day shall be greater than the number set out against
such period in column (2) below:
<TABLE>
<CAPTION>
------------------------------------------------------ ------------------------------
(1) (2)
Period Ratio
------------------------------------------------------ ------------------------------
<S> <C>
from (and including) 1 January, 2002 to (and 1.1:1
including) 31st December, 2002
------------------------------------------------------ ------------------------------
from (and including) 1st January, 2003 to(and 1.1:1
including) 31st December 2003
------------------------------------------------------ ------------------------------
from (and including) 1st January, 2004 to (and 1.4:1
including) 31st December, 2004
------------------------------------------------------ ------------------------------
from (and including) 1st January, 2005 to (and 1.6:1
including) 31st December, 2005
------------------------------------------------------ ------------------------------
from (and including) 1st January, 2006 to (and 1.7:1
including) 31st December, 2006
------------------------------------------------------ ------------------------------
from (and including) 1st January, 2007 and thereafter 2.0:1
------------------------------------------------------ ------------------------------
</TABLE>
13.2 AUDITORS CERTIFICATE
--------------------
If at any time the Majority Banks (acting reasonably and following
consultation with the Borrower) do not consider that any figure set out
in any Compliance Certificate issued by any Authorised Officer is
correct, they shall be entitled within 30 days of the date of the
delivery of such Compliance Certificate to the Agent pursuant to clause
12.1 to call for a certificate from the Borrower's auditors as to such
71
<PAGE>
figure. For such purposes the Borrower's auditors shall act as
independent experts and not as arbiters and every such certificate
shall be addressed to the Agent (on behalf of the Banks) and be at the
expense of the Borrower (unless the certificate so provided by the
Borrower's auditors shows that the relevant figures set out in the
Compliance Certificate are in fact correct in which case such
certificate shall be at the expense of the Banks). The Majority Banks
may only call for one such certificate in any financial year unless the
relevant figures set out in the Compliance Certificate are in fact
incorrect in which case the Majority Banks may call for up to three
further such certificates in such financial year, provided that if; in
any of such certificates, the relevant figures set out in the
Compliance Certificate are certified as being in fact correct, then the
Majority Banks may not call for such further certificates in such
financial year. If the Majority Banks call for such a certificate all
calculations under this Agreement by reference to the relevant figure
shall (i) until the Borrower's auditors deliver the relevant
certificate under this clause 13.2 be made by reference to the figure
set out in the relevant Compliance Certificate delivered to the Agent
under this Agreement and (ii) following the delivery by the Borrower's
auditors of a certificate under this clause 13.2 be made by reference
to such certificate and the Borrower undertakes forthwith to take all
action including, without limitation, the prepayment of all or part of
the Loan so as to procure that all action taken on the basis of the
relevant Compliance Certificate which on the basis of such auditors'
certificate would not have been permitted is reversed.
72
<PAGE>
14. EVENTS OF DEFAULT
-----------------
14.1 EVENTS OF DEFAULT
-----------------
Each of the events and circumstances set out below is an Event of
Default (whether or not caused by any reason outside the control of a
member of the Group):
(a) NON-PAYMENT
-----------
the Borrower fails to pay any principal sum due from it under
this Agreement in the currency, at the time and in the manner
stipulated in this Agreement, or any other sum due from it under
this Agreement within three Banking Days of the due date in the
currency and in the manner stipulated in this Agreement; or
(b) BREACH OF CERTAIN OBLIGATIONS
-----------------------------
any Obligor commits any breach of or omits to observe any of the
obligations or undertakings expressed to be assumed by it under
clauses 12.1(c), (d), (e), (f), (g), (h), (i)(ii), (k) and (y),
clause 12.2(a), (b), (c), (f),(g), (h), (i) and (k) and clause
13; or
(c) BREACH OF OTHER OBLIGATIONS
---------------------------
the Shareholder or any Obligor commits any breach of or omits to
observe any of the obligations or undertakings expressed to be
assumed by it under this Agreement or the Security Documents
(other than failure to pay any sum when due or any breach of the
undertakings referred to in (b) above) and, in respect of any
such breach or omission which is capable of remedy, such action
as the Agent may require shall not have been taken within 21 days
of the Agent notifying the Shareholder or the relevant Obligor
(as the case may be) of such default and of such required action;
or
(d) MISREPRESENTATION
-----------------
any representation or warranty made or deemed to be made or
repeated by or in respect of the Shareholder or any Obligor or
any other member of the Group in or pursuant to this Agreement or
the Security Documents or in any notice, certificate or statement
referred to in or delivered under this Agreement or the Security
Documents is or proves to have been incorrect or misleading in
any material respect and, in the event that the act or
circumstance which led to such representation or warranty being
incorrect or misleading is capable of remedy, such action as the
Agent may require shall not have been taken within 21 days of the
Agent notifying the person who made or was deemed to have made or
repeated such representation or warranty of such act or
circumstance and such required action; or
73
<PAGE>
(e) CHALLENGE TO SECURITY
---------------------
any Security Document is not or ceases to be effective or the
Shareholder or any member of the Group shall in any way
challenge, or proceedings shall in any way be brought to
challenge, the prior status of the charges created by the
Security Documents or the validity or enforceability of the
Security Documents; or
(f) CROSS-DEFAULT
(i) any Borrowed Money of UTH, the Shareholder or any member of
the Group (other than Borrowed Money made available to such
person by any of its Subsidiaries or Holding Companies) is not
paid when due (or within any applicable grace period expressly
contained in the agreement relating to such Borrowed Money in its
original terms) or (ii) any Borrowed Money of UTH, the
Shareholder or any member of the Group (other than Borrowed Money
made available to such person by any of its Subsidiaries or
Holding Companies) becomes (whether by declaration or
automatically in accordance with the relevant agreement or
instrument constituting the same) due and payable prior to the
date when it would otherwise have become due or (iii) any
creditor of UTH, the Shareholder or any member of the Group
becomes entitled to declare any Borrowed Money (other than
Borrowed Money made available to such person by any of its
Subsidiaries or Holding Companies) of UTH, the Shareholder or any
member of the Group so due and payable or to require cash
collateralisation or security for any such Borrowed Money or (iv)
any facility or commitment available to UTH, the Shareholder or
any member of the Group relating to Borrowed Money (other than
facility or commitment made available to such person by any of
its Subsidiaries or Holding Companies) is withdrawn, suspended or
cancelled by reason of any default (however described) of the
company concerned and the amount, or aggregate amount at any one
time, of all Borrowed Money (other than Borrowed Money made
available to such person by any of its Subsidiaries or Holding
Companies) in relation to which any of the foregoing events set
out in (i), (ii), (iii) or (iv) shall have occurred and be
continuing is equal to or greater than euro5,000,000 or its
equivalent in the currency in which the same is denominated and
payable; or
(g) DERIVATIVES CONTRACT DEFAULT
----------------------------
UTH, the Shareholder or any member of the Group fails to make
payment in relation to a Derivatives Contract of any sum equal to
or greater than euro2,000,000 in aggregate at any one time (or
its equivalent in the relevant currency of payment) with respect
to any member of the Group and euro5,000,000 in aggregate at any
one time (or its equivalent in the relevant currency payment)
with respect to UTH or the Shareholder on its due date (or within
74
<PAGE>
any applicable grace period expressly contained in the agreement
relating to such Derivatives Contract in its original terms) or
the counterparty to a Derivatives Contract becomes entitled to
terminate that Derivatives Contract early by reason of default on
the part of UTH, the Shareholder or any member of the Group and
the Net Derivatives Liability of the Shareholders or members of
the Group, in the aggregate, under all its Derivatives Contracts
in relation to which any of the foregoing events shall have
occurred at the relevant time is equal to or greater than the
amount set forth herein for the applicable entity (or its
equivalent in the relevant currency); or
(h) LEGAL PROCESS
-------------
(i) any judgment or order for an amount of euro1,000,000 (or its
equivalent) or more made against UTH, the Shareholder or any
member of the Group is not stayed, complied with or being
appealed against in good faith by appropriate proceedings
(provided that such appeal is being diligently pursued and
the Borrower has demonstrated to the Agent by providing an
opinion of reputable legal advisers in the relevant
jurisdiction to the effect that the appeal has good
prospects of success) within 14 days; or
(ii) a creditor attaches or takes possession of; or a distress,
execution, sequestration or other process is levied or
enforced upon or sued out against, any material part of the
undertakings, assets, rights or revenues of UTH, the
Shareholder or any member of the Group and is not discharged
within 14 days save where UTH, the Shareholder or the
relevant member of the Group is, in good faith, contesting
the relevant process by appropriate proceedings diligently
pursued and the Majority Banks are satisfied that the
ability of the Group to comply with its obligations under
the Finance Documents will not be materially and adversely
affected whilst such process is being so contested; or
(i) INSOLVENCY
----------
UTH, the Shareholder or any member of the Group is declared
bankrupt (in staat van faillissement verklaard) or enters into a
preliminary or definitive moratorium (in voorlopige of
definitieve surseance van betaling gaan) pursuant to the Dutch
Bankruptcy Act (Faillissementswet); or
(j) REDUCTION OR LOSS OF CAPITAL
a meeting is convened by the Borrower for the purpose of passing
any resolution or agreeing to, or the Borrower does, purchase,
reduce or redeem any of its share capital; or
75
<PAGE>
(k) WINDING UP
----------
any petition is presented and is not discharged within 14 days or
other step is taken for the purpose of winding up UTH, the
Shareholder or any member of the Group (not being a petition
which UTH, the Shareholder or the relevant member of the Group
(as the case may be) can demonstrate to the satisfaction of the
Agent, by providing an opinion of leading counsel to that effect,
is frivolous, vexatious or an abuse of the process of the court
or relates to a claim to which UTH, the Shareholder or the
relevant member of the Group (as the case may be) has a good
defence and which is being vigorously contested by UTH, the
Shareholder or the relevant member of the Group (as the case may
be)) or an order is made or resolution passed for the winding up
of UTH, the Shareholder or any member of the Group or a notice is
issued convening a meeting for the purpose of passing any such
resolution other than of a member of the Group other than the
Borrower in relation to, or for the purpose of, a solvent
reorganisation (i) permitted under clause 12.2(b) or (ii) on
terms previously approved by the Agent (acting on the
instructions of the Majority Banks); or
(l) COMPOSITIONS
------------
any steps are taken, or negotiations commenced, by UTH, the
Shareholder or any member of the Group or by any of their
respective creditors with a view to proposing any kind of
composition, compromise or arrangement involving such company and
any of its creditors; or
(m) ANALOGOUS PROCEEDINGS
---------------------
there occurs, in relation to UTH, the Shareholder or any member
of the Group, in any country or territory in which it carries on
business or to the jurisdiction of whose courts any part of its
assets is subject, any event which corresponds with, or have an
effect equivalent or similar to, any of those mentioned in
clauses 14.1(h) to 14.1(n) (inclusive) or UTH, the Shareholder or
any member of the Group otherwise becomes subject, in any such
country or territory, to the operation of any law relating to
insolvency, bankruptcy or liquidation; or
(n) CESSATION OF BUSINESS
---------------------
UTH, the Shareholder or the Group (taken as a whole) suspends or
ceases or threatens to suspend or cease to carry on their
respective businesses; or
(o) SEIZURE
-------
all or a material part of the undertakings, assets, rights or
revenues of; or shares or other ownership interests in the Group
76
<PAGE>
(taken as a whole) are seized, nationalised, expropriated or
compulsorily acquired by or under the authority of any
government; or
(p) PRINCIPAL AGREEMENTS AND UPC FUNDING UNDERTAKING
------------------------------------------------
(i) save as is required by any term of this Agreement, the UPC
Funding Undertaking or any Principal Agreement is
terminated, suspended, revoked or cancelled or otherwise
ceases to be in full force and effect (unless, in the case
of a Principal Agreement only, services of a similar nature
to those provided pursuant to such Principal Agreement are
at all times provided to the Group on terms which are not
materially more onerous on the relevant member of the Group
or on the terms imposed by the mandatory requirements of any
regulatory body and, in the case of a Principal Agreement
only, such termination, suspension, revocation, cancellation
or cessation (in the reasonable opinion of the Agent) would
or is reasonably likely to have a Material Adverse Effect;
or
(ii) any alteration or variation is made to any term of the UPC
Funding Undertaking or any Principal Agreement which, in the
case of a Principal Agreement only, individually or
cumulatively (in the reasonable opinion of the Agent) would
or is reasonably likely to have a Material Adverse Effect;
or
(iii) any party breaches any term of or repudiates any of its
obligations under any of the Principal Agreements or the UPC
Funding Undertaking where, in the case of a Principal
Agreement only, such breach or repudiation (in the opinion
of the Agent exercised reasonably) would or is reasonably
likely to have a Material Adverse Effect unless, in the case
of a breach of a Principal Agreement by any person other
than any member of the Group, the relevant services are at
all relevant times provided to the appropriate members of
the Group on the basis set out in clause 14.1(p)(i); or
(q) UNLAWFULNESS
------------
it becomes unlawful at any time for the Shareholder, any Obligor
or any Subordinated Creditor to perform any of their respective
material obligations under this Agreement or the Security
Documents or any of the material obligations of the Shareholder,
any Obligor or any Subordinated Creditor under this Agreement or
the Security Documents becomes unenforceable in any way or there
ceases to be security over the relevant property or assets of the
Shareholder or the relevant Obligor as intended and created by
the Security Documents; or
77
<PAGE>
(r) ENVIRONMENTAL MATTERS
---------------------
as a result of any Environmental Law the Agent, the Joint
Arrangers, the Security Agent, the Security Agent Guarantor or
any of the Banks becomes subject to a material, in the opinion of
the Agent, obligation (actual or contingent, in the case of any
contingent obligation, being one which, at the relevant time,
would be likely to arise) as a result of it entering into the
Agreement or any of the Security Documents which was not caused
by its negligence or wilful default; or
(s) REPUDIATION
-----------
the Shareholder, any Obligor or any Subordinated Creditor
repudiates this Agreement or any Security Document to which it is
a party or does or causes or permits to be done any act or thing
evidencing an intention to repudiate this Agreement or any such
Security Document; or
(t) SUBORDINATED CREDITORS
----------------------
(i) the Subordinated Creditor commits any breach of or omits to
observe any of the obligations or undertakings expressed to
be assumed by it under a Subordination Deed and in respect
of any such breach or omission which, in the opinion of the
Agent (acting on the instructions of the Majority Banks
(acting reasonably)) is capable of remedy, such action as
the Agent may require shall not have been taken within 21
days of the Agent notifying the Subordinated Creditor
thereof and of such required action; or
(ii) any representation or warranty made or deemed to be made or
repeated by or in respect of the Subordinated Creditor in or
pursuant to any Subordination Deed is or proves to have been
incorrect or misleading in any material respect on the date
on which it was made or deemed to be made or repeated and,
in the event that the act or circumstance which led to such
representation or warranty being incorrect or misleading is
capable of remedy, such action as the Agent may require
shall not have been taken within 21 days of the Agent
notifying the Subordinated Creditor of such act or
circumstance and such required action; or
(iii) the Subordinated Creditor is not or ceases to be bound by a
Subordination Deed; or
(iv) any payment due from a member of the Group to a Subordinated
Creditor is not or ceases to be subordinated to the amounts
owing under this Agreement other than any payment that is
not required to be so subordinated according to the terms of
this Agreement or any other Finance Document; or
78
<PAGE>
(v) any Subordinated Creditor or any liquidator, administrator
or administrative or other receiver (or similar officer) of
any Subordinated Creditor takes steps to contest the
subordination effected by a Subordination Deed; or
(u) MATERIAL EVENTS
---------------
any other event occurs or circumstances arise which in the
opinion of the Agent would or is reasonably likely to have a
Material Adverse Effect; or
(v) QUALIFICATION OF ACCOUNTS
-------------------------
the auditors of UTH or the Shareholder or any member of the Group
qualify their report on the audited financial statements of UTH
or the Shareholder or the relevant member of the Group (as the
case may be) and/or the audited consolidated financial statements
of the Group in any way whatsoever except where the qualification
is of a technical nature and the remedy for the matter giving
rise to the qualification would have no effect on the results of
UTH or the Shareholder or the relevant member of the Group (as
the case may be) and/or the Group for the period to which such
accounts relate or on the financial position of UTH or the
Shareholder or the relevant member of the Group (as the case may
be) and/or the Group as at the end of such period.
14.2 ACCELERATION
------------
The Agent may and if so requested by the Majority Banks shall, without
prejudice to any other rights of the Banks, at any time after the
happening of an Event of Default so long as the same is continuing,
unremedied or unwaived by notice to the Borrower declare that:
(a) the obligation of each Bank to make its Commitment available
shall be terminated, whereupon the Commitments shall be reduced
to zero forthwith; and/or
(b) the Loan and all interest and commitment commission accrued and
all other sums payable under this Agreement have become
immediately due and payable or have become due and payable on
demand, whereupon the same shall, immediately or in accordance
with the terms of such notice, become so due and payable; and/or
(c) the Security Documents (or any of them) have become enforceable
whereupon the same shall be enforceable.
On or at any time after the making of any such declaration, the Agent
shall be entitled, to the exclusion of the Borrower (and without
prejudice to clause 5.6), to select the duration of each period for the
calculation of interest in relation to any outstanding Advances or
other sums payable under this Agreement.
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14.3 DEMAND BASIS
------------
If, pursuant to clause 14.2(b), the Agent declares the Loan to be due
and payable on demand then the Agent may (and, if so instructed by the
Majority Banks, shall) at any time by written notice to the Borrower
(a) call for repayment of the Advances and Utilisations on such date
as may be specified in such notice whereupon the Advances and
Utilisations shall become due and payable on the date so specified
together with all interest and commitment commission accrued and all
other sums payable under this Agreement or (b) withdraw such
declaration with effect from the date specified in such notice.
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15. INDEMNITIES
-----------
15.1 MISCELLANEOUS INDEMNITIES
-------------------------
The Borrower shall on demand indemnify each Finance Party without
prejudice to any of their other rights under this Agreement and the
Transaction Documents, against any loss (including loss of Margin) or
expense which such Finance Party shall certify as sustained or incurred
by it as a consequence of:
(a) any default in payment by any Obligor of any sum under any
Finance Documents when due;
(b) the occurrence of any other Event of Default;
(c) any repayment or prepayment of the Advances or part thereof being
made otherwise than on an Interest Payment Date relating thereto;
or
(d) any Advance not being made or issued for any reason (excluding
any default by any relevant Finance Party) after a Drawdown
Notice has been given;
including, in any such case, but not limited to, any loss or expense
sustained or incurred by such Finance Party in maintaining or funding
all or any part of its Contribution or in liquidating or re-employing
deposits from third parties acquired or contracted for to fund all or
any part of its Contribution or any other amount owing to such Finance
Party.
15.2 CURRENCY OF ACCOUNT: CURRENCY INDEMNITY
---------------------------------------
No payment by any Obligor under this Agreement which is made in a
currency other than the currency ("CONTRACTUAL CURRENCY") in which such
payment is required to be made pursuant to this Agreement shall
discharge the obligation in respect of which it is made except to the
extent of the net proceeds in the Contractual Currency received by the
Agent or the Security Agent as the case may be upon the sale of the
currency so received, after taking into account any premium and costs
of exchange in connection with such sale. For the avoidance of doubt,
the Secured Parties shall not be obliged to accept any such payment in
a currency other than the Contractual Currency nor shall the Secured
Parties be liable to any Obligor for any loss or alleged loss arising
from fluctuations in exchange rates between the date on which such
payment is so received by the Agent or the Security Agent as the case
may be and the date on which the Agent or the Security Agent as the
case may be effects such sale, as to which the Agent or the Security
Agent as the case may be shall (as against the relevant Obligor) have
an absolute discretion but shall consult with the Borrower. If any sum
due from any Obligor under this Agreement or any order or judgment
given or made in relation hereto is required to be converted from the
Contractual Currency or the currency in which the same is payable under
such order or judgment (the "FIRST CURRENCY") into another currency
(the "SECOND CURRENCY") for the purpose of (a) making or filing a claim
or proof against the relevant Obligor, (b) obtaining an order or
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judgment in any court or other tribunal or (c) enforcing any order or
judgment given or made in relation to this Agreement, the relevant
Obligor shall indemnify and hold harmless the Secured Parties from and
against any loss suffered as a result of any difference between (i) the
rate of exchange used for such purpose to convert the sum in question
from the first currency into the second currency and (ii) the rate or
rates of exchange at which such Secured Party may in the ordinary
course of business purchase the first currency with the second currency
upon receipt of a sum paid to it in satisfaction, in whole or in part,
of any such order, judgment, claim or proof. Any amount due from any
Obligor under the indemnity contained in this clause 14.2 shall be due
as a separate debt and shall not be affected by judgment being obtained
for any other sums due under or in respect of this Agreement and the
term "RATE OF EXCHANGE" includes any premium and costs of exchange
payable in connection with the purchase of the first currency with the
second currency.
15.3 ENVIRONMENTAL INDEMNITY
-----------------------
The Borrower agrees to indemnify on demand each Secured Party, and
their respective officers, employees, agents and delegates (together
the "INDEMNIFIED PARTIES") in respect of which each Secured Party holds
this indemnity on trust, without prejudice to any of their other rights
under this Agreement, against any loss, liability, action, claim,
demand, cost, expense, fine or other outgoing whatsoever whether in
contract, tort, delict or otherwise and whether arising at common law,
in equity or by statute which the relevant Indemnified Party shall
certify as sustained or incurred by it at any time as a consequence of,
or relating to, or arising directly or indirectly out of, any
Environmental Claims made or asserted against such Indemnified Party
which would not have arisen if this Agreement had not been executed and
which was not caused by the negligence or wilful default of the
relevant Indemnified Party.
15.4 ESGB RESERVE REQUIREMENTS
-------------------------
The Borrower agrees to indemnify on demand each Bank against any cost
or loss suffered by it as a result of complying with the reserve
requirements of the European System of Central Banks to the extent such
requirements relate to its participation in the Facilities and are not
recoverable by such Bank under clause 16.2.
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16 UNLAWFULNESS AND INCREASED COSTS; MITIGATION
--------------------------------------------
16.1 UNLAWFULNESS
------------
If it is or becomes contrary to any law or regulation for any Bank to
contribute to Advances or to maintain its Commitment or fund its
Contribution, such Bank shall promptly, through the Agent, notify the
Borrower whereupon (a) such Bank's Commitment under the Facilities
shall be reduced to zero and (b) the Borrower shall be obliged to
prepay the Contribution of such Bank either (A) forthwith, if such
unlawfulness has immediate or retrospective effect, or (B) on a future
specified date not being earlier than the latest date permitted by the
relevant law or regulation. Any prepayment pursuant to this clause 16.1
shall be made together with all amounts referred to in clause 7.4.
16.2 INCREASED COSTS
---------------
If the result of any change in, or in the interpretation or application
of; or the introduction of; any law or any regulation, request or
requirement (whether or not having the force of law, but, if not having
the force of law, with which the relevant Bank or, as the case may be,
its holding company habitually complies), including (without
limitation) those relating to Taxation, capital adequacy, liquidity,
reserve assets, cash ratio deposits and special deposits, is to:
(a) subject any Bank to Taxes or change the basis of Taxation of any
Bank with respect to any payment under this Agreement (other than
Taxes or Taxation on the overall net income, profits or gains of
such Bank); and/or
(b) increase the cost to, or impose an additional cost on, any Bank
or its holding company in making or keeping available all or part
of such Bank's Commitment or maintaining or funding all or part
of such Bank's Contribution; and/or
(c) reduce the amount payable or the effective return to any Bank
under this Agreement; and/or
(d) reduce any Bank's or its holding company's rate of return on its
overall capital by reason of a change in the manner in which it
is required to allocate capital resources to such Bank's
obligations under this Agreement; and/or
(e) require any Bank or its holding company to make a payment or
forgo a return calculated by reference to or on any amount
received or receivable by such Bank under this Agreement; and/or
(f) require any Bank or its holding company to incur or sustain a
loss (including a loss of future potential profits) by reason of
being obliged to deduct all or part of such Bank's Commitment or
Contribution from its capital for regulatory purposes,
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(g) then and in each such case (but subject to clause 16.3):
(i) such Bank shall notify the Borrower through the Agent in
writing of such event promptly upon its becoming aware of
the same; and
(ii) the Borrower shall on demand, made at any time whether or
not such Bank's Contribution has been repaid, pay to the
Agent for the account of such Bank the amount which such
Bank specifies (in a certificate setting forth the basis of
the computation of such amount but not including any matters
which such Bank or its holding company regards as
confidential) is required to compensate such Bank and/or its
holding company for such liability to Taxes, increased or
additional cost, reduction, payment, forgone return or loss.
For the purposes of this clause 16.2 and clause 16.4 "HOLDING COMPANY"
means, in relation to a Bank, the company or entity (if any) within the
consolidated supervision of which such Bank is included.
16.3 EXCEPTIONS
----------
Nothing in clause 16.2 shall entitle any Bank to receive any amount in
respect of compensation for any such liability to Taxes, increased or
additional cost, reduction, payment, forgone return or loss to the
extent that the same:
(a) is taken into account in calculating the Additional Cost; or
(b) is the subject of an additional payment under clause 9.5; or
(c) arises as a consequence of (or of any law or regulation
implementing) (i) the proposals for international convergence of
capital measurement and capital standards published by the Basle
Committee on Banking Regulations and Supervisory Practices in
July 1988 and/or (ii) any applicable directive of the European
Union (in each case) unless it results from any change in, or in
the interpretation or application of; such proposals or any such
applicable directive (or any law or regulation implementing the
same) occurring after the date hereof; or
(d) arises as a result of a breach by such Bank of any regulation,
request or requirement (which either (i) is in existence at the
date of this Agreement or (ii) which comes into effect after the
date of this Agreement and with which such Bank would have
complied if such regulation, request or requirement was in effect
on the date of this Agreement) of any applicable central bank or
other fiscal, monetary or other authority (whether or not having
the force of law).
For the purposes of clause 16.3(c) the term "APPLICABLE DIRECTIVE"
means (exclusively) each of the Own Funds Directive (89/299/EEC of 17th
April 1989) and the Solvency Ratio Directive (89/647/EEC of 18th
December 1989).
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16.4 MITIGATION
----------
If circumstances arise which would or would upon the giving of notice,
result in:
(a) the application of clause 5.9 in relation to any Bank;
(b) any Obligor being required to make an increased payment to any
Bank pursuant to clause 9.5;
(c) the reduction of any Bank's Commitment to zero or the Borrower
being required to prepay any Bank's Contribution pursuant to
clause 16.1; or
(d) the Borrower being required to make a payment to any Bank to
compensate such Bank or its holding company for a liability to
Taxes, increased or additional cost, reduction, payment, forgone
return or loss pursuant to clause 16.2;
then, without in any way limiting, reducing or otherwise qualifying
the obligations of the Borrower or the Borrower under clause 9 and
this clause 16, such Bank shall, in consultation with the Agent,
endeavour to take such reasonable steps (and/or, in the case of clause
16.2 and where the increased or additional cost, reduction, payment,
forgone return or loss is that of its holding company, endeavour to
procure that its holding company takes such reasonable steps) as are
open to it (or, as the case may be, its holding company) to mitigate
or remove such circumstances (including (in the case of such Bank) the
transfer of its rights and obligations under this Agreement to another
bank or financial institution acceptable to the Borrower) unless the
taking of such steps might (in the opinion of such Bank) be
prejudicial to such Bank (or, as the case may be, its holding company)
or be in conflict with such Bank's (or, as the case may be, its
holding company's) general banking policies or involve such Bank (or,
as the case may be, its holding company) in any material expense or
any material increased administrative burden.
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17 SET-OFF AND PRO RATA PAYMENTS
-----------------------------
17.1 SET-OFF
-------
If an Event of Default has occurred and is continuing, each Obligor
authorises each Finance Party to apply any credit balance to which such
Obligor is then entitled on any account of such Obligor with such Bank
at any of its branches in or towards satisfaction of any sum then due
and payable from such Obligor to such Finance Party under this
Agreement. For this purpose each Finance Party is authorised to
purchase with the moneys standing to the credit of such account such
other currencies as may be necessary to effect such application. No
Finance Party shall be obliged to exercise any right given to it by
this clause 17.1. Each Finance Party shall notify the Agent and the
relevant Obligor (giving full details) forthwith upon the exercise or
purported exercise of any right of set-off and the Agent shall inform
the other Finance Parties.
17.2 PRO RATA PAYMENTS
-----------------
(a) If at any time any Finance Party receives or recovers any amount
owing to it by any Obligor under this Agreement by direct
payment, set-off or in any manner other than by payment through
the Agent pursuant to clause 9.1 or 9.10 (not being a payment
received, in the case of a Bank, from a Transferee in such Bank's
Contribution or any other payment of an amount due to the
Recovering Bank for its sole account pursuant to clauses 7.3, 8,
9.5, 15.1, 15.2, 16.1 or 16.2) (the "RECOVERING Bank"), the
Recovering Bank shall, within two Banking Days of such receipt or
recovery (a "RELEVANT RECEIPT") notify the Agent of the amount of
the Relevant Receipt. If the Relevant Receipt exceeds the amount
which the Recovering Bank would have received if the Relevant
Receipt had been received by the Agent and distributed pursuant
to clause 9.1 or 9.10 (as the case may be) then:
(i) within two Banking Days of demand by the Agent, the
Recovering Bank shall pay to the Agent an amount equal (or
equivalent) to the excess;
(ii) the Agent shall treat the excess amount so paid by the
Recovering Bank as if it were a payment made by the relevant
Obligor and shall distribute the same to the Finance Parties
(other than the Recovering Bank) in accordance with clause
9.10; and
(iii) as between the relevant Obligor and the Recovering Bank the
excess amount so re-distributed shall be treated as not
having been paid but the obligations of the relevant Obligor
to the other Finance Parties shall, to the extent of the
amount so re-distributed to them, be treated as discharged.
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(b) If any part of the Relevant Receipt subsequently has to be wholly
or partly refunded by the Recovering Bank (whether to a
liquidator or otherwise) each Finance Party to which any part of
such Relevant Receipt was so re-distributed shall on request from
the Recovering Bank repay to the Recovering Bank such Finance
Party's pro rata share of the amount which has to be refunded by
the Recovering Bank.
(c) Each Finance Party shall on request supply to the Agent such
information as the Agent may from time to time request for the
purpose of this clause 17.2.
(d) Notwithstanding the foregoing provisions of this clause 17.2 no
Recovering Bank shall be obliged to share any Relevant Receipt
which it receives or recovers pursuant to legal proceedings taken
by it to recover any sums owing to it under this Agreement with
any other party which has a legal right to, but does not, either
join in such proceedings or commence and diligently pursue
separate proceedings to enforce its rights in the same or another
court (unless the proceedings instituted by the Recovering Bank
are instituted by it without prior notice having been given to
such party through the Agent).
17.3 NO RELEASE
----------
For the avoidance of doubt it is hereby declared that failure by any
Recovering Bank to comply with the provisions of clause 17.2 shall not
release any other Recovering Bank from any of its obligations or
liabilities under clause 17.2.
17.4 NO CHARGE
---------
The provisions of this clause 17 shall not, and shall not be construed
so as to, constitute a charge by a Finance Party over all or any part
of a sum received or recovered by it in the circumstances mentioned in
clause 17.2.
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18. ASSIGNMENT SUBSTITUTION AND LENDING OFFICES
-------------------------------------------
18.1 BENEFIT AND BURDEN
------------------
This Agreement shall be binding upon, and enure for the benefit of; the
Finance Parties and the Obligors and their respective successors and
permitted assigns.
18.2 NO ASSIGNMENT BY OBLIGORS
-------------------------
None of the Obligors may assign or otherwise transfer any of its rights
or obligations under this Agreement other than pursuant to a merger in
accordance with clause 12.2(b).
18.3 ASSIGNMENT BY BANKS
-------------------
Each Bank (an "ASSIGNOR BANK") may assign all or any part (being at
least euro2,500,000 and an integral multiple of euro500,000) of its
rights to a Qualifying Bank (an "Assignee") with the prior consent in
writing of the Borrower, such consent not to be unreasonably withheld
or delayed. The Assignor Bank shall promptly notify the Borrower and
the Agent of any such assignment.
18.4 TRANSFER
--------
Each Bank (a "TRANSFEROR BANK") may transfer all or any part (being at
least euro2,500,000 and an integral multiple of euro500,000) of its
rights, benefits and/or obligations under this Agreement to a
Qualifying Bank (a "TRANSFEREE") with the prior consent in writing of
the Borrower, such consent not to be unreasonably withheld or delayed.
Any such transfer shall be effected upon not less than 5 Banking Days'
prior notice by delivery to the Agent of a duly completed Transfer
Certificate duly executed by the Existing Bank and the Transferee. On
the Effective Date (as specified and defined in a Transfer Certificate
so executed and delivered), to the extent that the Commitment and
Contribution of the Existing Bank are expressed in a Transfer
Certificate to be the subject of the transfer in favour of the
Transferee effected pursuant to this clause 18.3, by virtue of the
counter-signature of the Transfer Certificate by the Agent (for itself
and the other parties to this Agreement and the Security Deed):
(a) to the extent that in such Transfer Certificate the Transferor
Bank seeks to transfer such obligations and rights hereunder the
existing parties to this Agreement and the Security Deed and the
Transferor Bank shall be released from their respective
obligations towards one another, other than the obligations
outstanding from the Borrower to the Transferor Banks under this
Agreement and the Security Deed ("DISCHARGED OBLIGATIONS") and
their respective rights against one another, other than the
outstanding rights of the Transferor Bank against the Borrower,
under this Agreement and the Security Deed ("DISCHARGED RIGHTS")
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shall be cancelled and the rights of the Transferor Bank against
the Borrower shall be assigned to the Transferee party to the
relevant transfer certificate (the "ASSIGNED RIGHTS");
(b) the Transferee party to the relevant Transfer Certificate and the
existing parties to this Agreement and the Security Deed (other
than such Transferor Bank) shall assume obligations towards each
other which differ from the discharged obligations only insofar
as they are owed to or assumed by such Transferee instead of to
or by such Transferor Bank as a result of such transfer; and
(c) the Transferee party to the relevant Transfer Certificate and the
existing parties to this Agreement and the Security Deed (other
than such Transferor Bank) shall acquire rights against each
other which differ from the discharged rights and the assigned
rights only insofar as they are exercisable by or against such
Transferee instead of by or against such Transferor Bank as a
result of such transfer;
and, on such Effective Date, the Transferee shall pay to the Agent for
its own account a fee of euro1,000 except in the case such transfers
are made by any of the Banks listed in Schedule 1 within 3 months of
the date of this Agreement. The Agent shall promptly notify the
Borrower of the receipt by it of any Transfer Certificate and shall
promptly deliver a copy of such Transfer Certificate to the Borrower.
18.5 RELIANCE ON TRANSFER CERTIFICATE
--------------------------------
The Finance Parties and the Obligors shall be fully entitled to rely on
any Transfer Certificate delivered to the Agent in accordance with the
foregoing provisions of this clause 18 which is complete and regular on
its face as regards its contents and purportedly signed on behalf of
the relevant Transferor Bank and the Transferee and none of the Finance
Parties or the Obligors shall have any liability or responsibility to
any party as a consequence of placing reliance on and acting in
accordance with any such Transfer Certificate if it proves to be the
case that the same was not authentic or duly authorised.
18.6 AUTHORISATION OF AGENT
----------------------
Each party to this Agreement irrevocably authorises the Agent to
counter-sign each Transfer Certificate on its behalf for the purposes
of clause 18.3 or 18.4 without any further consent of; or consultation
with, any such party except, in the case of the Borrower, the consent
required pursuant to clause 18.3 or 18.4.
18.7 CONSTRUCTION OF CERTAIN REFERENCES
----------------------------------
If any Bank assigns all or any part of its rights or transfers all or
any part of its rights, benefits and obligations as provided in clause
18.3 or 18.4 all relevant references in this Agreement and the Security
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Deed to such Bank shall thereafter be construed as a reference to such
Bank and/or its Transferee to the extent of their respective interests.
18.8 LENDING OFFICES
---------------
Each Bank shall lend through its office at the address specified in
part A of schedule 1 or, as the case may be, in any relevant Transfer
Certificate or through any other office of such Bank selected from time
to time by such Bank through which such Bank wishes to lend for the
purposes of this Agreement, Provided that no such change of lending
office may take place if it would involve any Obligor having to pay any
amount under clause 16.2 with respect to its obligations under this
Agreement. If the office through which a Bank is lending is changed
pursuant to this clause 18.8, such Bank shall notify the Agent promptly
of such change.
18.9 DISCLOSURE OF INFORMATION
-------------------------
Subject to such person first executing a confidentiality undertaking in
a form acceptable to the Borrower, acting reasonably, any Bank may
disclose to a prospective transferee or to any other person who may
propose entering into contractual relations with such Bank in relation
to this Agreement such information about the Group as such Bank shall
consider appropriate.
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19. JOINT ARRANGERS, AGENT, SECURITY AGENT, THE SECURITY AGENT GUARANTOR
-----------------------------------------------------------------------
OVERDRAFT BANK AND REFERENCE BANKS
----------------------------------
19.1 APPOINTMENT OF AGENT
--------------------
Each Bank irrevocably appoints the Agent as its agent for the purposes
of this Agreement and irrevocably authorises the Agent in such
capacity:
(a) to execute all documents as may be approved by the Majority Banks
for execution by the Agent; and
(b) (whether or not by or through employees or agents) to take such
action on such Bank's behalf and to exercise such rights,
remedies, powers and discretions as are specifically delegated to
the Agent by this Agreement or, (as the case may be) the Security
Documents, together with such powers and discretions as are
reasonably incidental thereto (but subject to any restrictions or
limitations specified in this Agreement). None of the Agent, or
the Joint Arrangers or the Security Agent, the Security Agent
Guarantor shall, however, have any duties, obligations or
liabilities (whether fiduciary or otherwise) to the Banks beyond
those expressly stated in this Agreement and/or the Security
Documents.
Notwithstanding that the Agent, the Security Agent Guarantor and the
Overdraft Bank may from time to time be the same entity, the Agent, the
Security Agent Guarantor and the Overdraft Bank have entered into this
Agreement in their separate capacities as agent for the Banks under and
pursuant to this Agreement and as Security Agent Guarantor and as
Overdraft Bank for the Overdraft Facility. However, where this
Agreement provides for the Agent to communicate with or provide
instructions to the Security Agent Guarantor, while the Agent and the
Security Agent Guarantor and the Overdraft Bank are the same entity, it
will not be necessary for there to be any such formal communications or
instructions notwithstanding that this Agreement provides in certain
cases for the same to be in writing.
19.2 AGENT'S ACTIONS
---------------
Any action taken by the Agent under or in relation to this Agreement
with requisite authority, or on the basis of appropriate instructions,
received from the Majority Banks (or as otherwise duly authorised)
shall be binding on all the Banks.
19.3 AGENT'S DUTIES
--------------
The Agent shall:
(a) promptly notify each Bank of the contents of each notice,
certificate or other document received by the Agent from the
Borrower or any other Obligor under or pursuant to this
Agreement;
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(b) consult with the Banks as to whether and, if so, how a discretion
vested in the Agent is, either in any particular instance or
generally, to be exercised but so that this shall not prevent the
Agent in exceptional circumstances where time does not permit
such consultation and urgent action is required, from exercising
its rights and powers, or from instructing the Security Agent to
exercise its rights and powers, to preserve the security
constituted by the Security Documents so long as the Agent
promptly notifies the Banks subsequently of such exercise; and
(b) (subject to the other provisions of this clause 19) take such
action or, as the case may be, refrain from taking such action
with respect to the exercise of any of its rights, remedies,
powers and discretions as agent or security agent, as the
Majority Banks may reasonably direct.
19.4 AGENT'S RIGHTS
--------------
The Agent may:
(a) in the exercise of any right, remedy, power or discretion in
relation to any matter, or in any context, not expressly provided
for by this Agreement, act or, as the case may be, refrain from
acting in accordance with the instructions of the Majority Banks,
and shall be fully protected in so doing;
(b) unless and until it shall have received directions from the
Majority Banks, take such action, or refrain from taking such
action in respect of a Default of which the Agent has actual
knowledge as it shall deem advisable in the best interests of the
Banks (but shall not be obliged to do so);
(c) refrain from acting in accordance with any instructions of the
Majority Banks to institute, or to instruct the Security Agent to
institute any legal proceedings arising out of or in connection
with this Agreement and/or the Security Documents until it and/or
the Security Agent, has been indemnified and/or secured to its
satisfaction against any and all costs, expenses or liabilities
(including legal fees) which it and/or the Security Agent would
or might incur as a result;
(d) deem and treat (i) each Bank as the person entitled to the
benefit of the Contribution of such Bank for all purposes of this
Agreement and the Security Documents unless and until a Transfer
Certificate shall have been filed with the Agent and shall have
become effective, and (ii) the office set opposite the name of
each Bank in part A of schedule 1 or, as the case may be, in any
relevant Transfer Certificate as such Bank's lending office
unless and until a written notice of change of lending office
shall have been received by the Agent; and the Agent may act upon
any such notice unless and until the same is superseded by a
further such notice;
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(e) rely as to matters of fact which might reasonably be expected to
be within the knowledge of any Obligor upon a certificate signed
by any director of the relevant Obligor on behalf of such
Obligor; and
(f) refrain from doing anything which would, or might in its opinion,
be contrary to any law or regulation of any jurisdiction and may
do anything which is in its opinion necessary or desirable to
comply with any such law or regulation.
19.5 NO LIABILITY OF JOINT ARRANGERS, SECURITY AGENT, SECURITY AGENT
-----------------------------------------------------------------------
GUARANTOR AND AGENT
-------------------
None of the Joint Arrangers, the Security Agent, the Security Agent
Guarantor, the Agent or any of their respective employees and agents
shall:
(a) be obliged to request any certificate or opinion under clause
12.1 or any provision of the Security Documents or to make any
enquiry as to the use of the proceeds of the Facilities unless
(in the case of the Agent) so required in writing by any Bank, in
which case the Agent shall promptly make the appropriate request
of the relevant Obligor; or
(b) be obliged to make any enquiry as to any breach or default by any
Obligor in the performance or observance of any of the provisions
of this Agreement or as to the existence of a Default unless (in
the case of the Agent) the Agent has actual knowledge thereof or
has been notified in writing thereof by a Bank, in which case the
Agent shall promptly notify the Banks of the relevant event or
circumstance; or
(c) be obliged to enquire whether or not any representation or
warranty made by any Obligor pursuant to this Agreement or any of
the Security Documents is true; or
(d) be obliged to do anything (including, without limitation,
disclosing any document or information) which would, or might in
its opinion, be contrary to any law or regulation or be a breach
of any duty of confidentiality or otherwise be actionable or
render it liable to any person; or
(e) be obliged to account to any Bank for any sum or the profit
element of any sum received by it for its own account; or
(f) be obliged to institute any legal proceedings arising out of or
in connection with, or otherwise take steps to enforce, this
Agreement and/or the Security Documents other than on the
instructions of the Majority Banks; or
(g) be liable to any Bank for any action taken or omitted under or in
connection with this Agreement and/or the Security Documents or
the Loan unless caused by its gross negligence or wilful
misconduct.
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For the purposes of this clause 19 neither the Agent, nor the Security
Agent shall be treated as having actual knowledge of any matter of
which the corporate finance or any other division outside the agency or
loan administration department of the person for the time being acting
as the Agent or the Security Agent, as the case may be, may become
aware in the context of corporate finance, advisory or lending
activities from time to time undertaken by the Agent or the Security
Agent, as the case may be, for the Borrower or any of its Subsidiaries
or Associated Companies or any other person which may be a trade
competitor of any of the Obligors or may otherwise have commercial
interests similar to those of any of the Obligors.
19.6 NON-RELIANCE ON JOINT ARRANGERS, SECURITY AGENT, SECURITY AGENT
-----------------------------------------------------------------------
GUARANTOR, OVERDRAFT BANK OR AGENT
----------------------------------
Each Bank acknowledges, by virtue of its execution of this Agreement
or, as the case may be, a Transfer Certificate, that it has not relied
on any statement, opinion, forecast or other representation made by the
Joint Arrangers, the Security Agent, the Security Agent Guarantor,
Overdraft Bank or the Agent to induce it to enter into this Agreement
and that it has made and will continue to make, without reliance on the
Agent, the Security Agent, the Security Agent Guarantor, Overdraft Bank
or the Joint Arrangers and based on such documents as it considers
appropriate, its own appraisal of the creditworthiness of the Borrower
and its Subsidiaries and its own independent investigation of the
financial condition, prospects and affairs of the Borrower and its
Subsidiaries in connection with the making and continuation of the Loan
under this Agreement. None of the Joint Arrangers, the Security Agent,
the Security Agent Guarantor, Overdraft Bank or the Agent shall have
any duty or responsibility, either initially or on a continuing basis,
to provide any Bank with any credit or other information with respect
to the Obligors whether coming into its possession before the making of
any Advance or at any time or times thereafter, other than (in the case
of the Agent) as provided in clause 19.3(a).
19.7 NO RESPONSIBILITY ON JOINT ARRANGERS, SECURITY AGENT, THE SECURITY
-----------------------------------------------------------------------
AGENT GUARANTOR, THE OVERDRAFT BANK OR AGENT FOR ANY OBLIGOR'S
-----------------------------------------------------------------------
PERFORMANCE
-----------
None of the Joint Arrangers, the Security Agent, the Security Agent
Guarantor, the Overdraft Bank or the Agent shall have any
responsibility or liability to any Bank:
(a) on account of the failure of any Obligor to perform its
obligations under this Agreement or any Security Document; or
(b) for the financial condition of any Obligor; or
(c) for the completeness or accuracy of any statements,
representations or warranties in this Agreement, any Security
Document or the Information Memorandum or any document delivered
under this Agreement or any Security Document; or
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<PAGE>
(d) for the execution, effectiveness, adequacy, genuineness,
validity, enforceability or admissibility in evidence of this
Agreement or any of the Security Documents or of any certificate,
report or other document executed or delivered under this
Agreement or any of the Security Documents; or
(e) otherwise in connection with the Facilities or its negotiation or
for acting (or, as the case may be, refraining from acting) in
accordance with the instructions of the Majority Banks.
19.8 RELIANCE ON DOCUMENTS AND PROFESSIONAL ADVICE
---------------------------------------------
The Joint Arrangers, the Security Agent, the Security Agent Guarantor
and the Agent shall be entitled to rely on any communication,
instrument or document believed by it to be genuine and correct and to
have been signed or sent by the proper person and shall be entitled to
rely as to legal or other professional matters on opinions and
statements of any legal or other professional advisers selected or
approved by it (including those in the Agent's employment).
19.9 OTHER DEALINGS
--------------
The Joint Arrangers, the Security Agent, the Security Agent Guarantor
and the Agent may, without any liability to account to the Banks,
accept deposits from, lend money to, and generally engage in any kind
of banking or other business with, and provide advisory or other
services to, the Borrower or any of its Subsidiaries or associated
companies or any of the Banks as if it were not the Joint Arrangers or
the Agent, as the case may be.
19.10 RIGHTS OF AGENT, OVERDRAFT BANK AND SECURITY AGENT GUARANTOR AS BANK:
-----------------------------------------------------------------------
NO PARTNERSHIP
--------------
With respect to its own Commitment and Contribution (if any) the Agent,
Overdraft Bank and the Security Agent Guarantor shall have the same
rights and powers under this Agreement and the Security Documents as
any other Bank and may exercise the same as though it were not
performing the duties and functions delegated to it under this
Agreement and/or the Security Documents and the term "BANKS" shall,
unless the context clearly otherwise indicates, include the Agent in
its individual capacity as a Bank. This Agreement shall not and shall
not be construed so as to constitute a partnership between the parties
or any of them.
19.11 AMENDMENTS: WAIVERS
-------------------
(a) Subject to clause 19.11(b), the Agent may, with the consent of
the Majority Banks (or if and to the extent expressly authorised
by the other provisions of this Agreement) and, if so instructed
by the Majority Banks, shall (i) agree amendments or
modifications to this Agreement with the Obligors and/or (ii)
vary or waive breaches of; or defaults under, or otherwise excuse
performance of; any provision of this Agreement by any Obligor.
95
<PAGE>
Any such action so authorised and effected by the Agent shall be
documented in such manner as the Agent shall (with the approval
of the Majority Banks) determine, shall be promptly notified to
the Banks by the Agent and (without prejudice to the generality
of clause I 9.2) shall be binding on all the Banks.
(b) Except with the prior written consent of all the Banks, the Agent
shall not have authority on behalf of the Banks (A) to agree with
any Obligor any amendment or modification to this Agreement or to
grant waivers in respect of breaches or defaults or to vary or
excuse performance of or under this Agreement by any Obligor, if
the effect of such amendment, modification, waiver, variation or
excuse would be to (i) reduce the Margin, (ii) postpone the due
date or reduce the amount of any reduction in availability, any
payment of principal, interest, commitment commission or other
amount payable by any Obligor under this Agreement or any of the
Security Documents, (iii) change the currency in which any amount
is payable by any Obligor under this Agreement or any of the
Security Documents, (iv) increase any Bank's Commitment, (v)
change the definition of "Majority Banks" in clause 1.2, (vi)
change any provision of this Agreement which expressly or
impliedly requires the approval or consent of all the Banks such
that the relevant approval or consent may be given otherwise than
with the sanction of all the Banks, (vii) change clause 4.1,
(viii) change the order of distribution under clause 9.10, (ix)
change clause 17.2, (x) change this clause 19.11 or (B) release
any member of the Group or any of their respective assets from
the security created by any of the Security Documents unless such
release is to permit the disposal or other dealing with such
asset in accordance with the terms of this Agreement and any
relevant Security Document or (C) release any Guarantor from its
obligations under any Guarantee to which it is a party other than
pursuant to a merger in accordance with clause 12.2(b).
(c) For the purposes of this clause 19.11 it is expressly agreed and
acknowledged that the execution of a Guarantor's Deed of
Accession or any deed or instrument pursuant to a further
assurance provision in the Security Documents shall not
constitute an amendment or modification to, or variation of; this
Agreement or any of the Security Documents.
19.12 REIMBURSEMENT AND INDEMNITY BY BANKS
------------------------------------
Each Bank shall reimburse the Joint Arrangers, the Overdraft Bank and
the Agent (rateably in accordance with such Bank's Commitment or
Contribution), to the extent that the Joint Arrangers or the Agent is
not reimbursed by the Obligors, for the costs, charges and expenses
incurred by the Arranger, the Overdraft Bank and the Agent in
connection with the negotiation, preparation and execution of this
Agreement and the Security Documents and/or in contemplation of; or
otherwise in connection with, the enforcement or attempted enforcement
of; or the preservation or attempted preservation of any rights under,
or in carrying out its duties under, this Agreement and/or any of the
Security Documents including (in each case) the fees and expenses of
96
<PAGE>
legal or other professional advisers. Each Bank shall on demand
indemnify the Agent (rateably in accordance with its Commitment or
Contribution) against all liabilities, damages, costs and claims
whatsoever incurred by the Agent in connection with this Agreement and
the Security Documents or the performance of its duties under this
Agreement and the Security Documents or any action taken or omitted by
the Agent under this Agreement and/or any of the Security Documents,
unless such liabilities, damages, costs or claims arise from the
Agent's own gross negligence or wilful misconduct.
19.13 RETIREMENT OF AGENT
-------------------
(a) The Agent may retire from its appointment as Agent under this
Agreement having given to the Borrower and each of the Banks not
less than 30 days' notice of its intention to do so, provided
that no such retirement shall take effect unless there has been
appointed by the Banks as a successor agent:
(i) a Bank nominated by the Majority Banks with the consent of
the Borrower (not to be unreasonably withheld or delayed)
or, failing such a nomination,
(ii) any reputable and experienced bank or financial institution
with offices in London nominated by the Agent with the
consent of the Borrower (not to be unreasonably withheld or
delayed).
Any corporation into which the Agent may be merged or converted
or any corporation with which the Agent may be consolidated or
any corporation resulting from any merger, conversion,
amalgamation, consolidation or other reorganisation to which the
Agent shall be a party shall, to the extent permitted by
applicable law, be the successor Agent under this Agreement
without the execution or filing of any document or any further
act on the part of any of the parties to this Agreement, save
that notice of any such merger, conversion, amalgamation,
consolidation or other reorganisation shall forthwith be given to
the Borrower and the Banks.
(b) Upon any such successor as aforesaid being appointed, the
retiring Agent shall be discharged from any further obligation
under this Agreement (but shall continue to have the benefit of
this clause 18 in respect of any action it has taken or refrained
from taking prior to such discharge) and its successor and each
of the other parties to this Agreement shall have the same rights
and obligations among themselves as they would have had if such
successor had been a party to this Agreement in place of the
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<PAGE>
retiring Agent. The retiring Agent shall (at the expense of the
Borrower) provide its successor with copies of such of its
records as its successor reasonably requires to carry out its
functions under this Agreement.
19.14 RETIREMENT OF OVERDRAFT BANK
----------------------------
With the prior consent of the Borrower, not to be unreasonably withheld
or delayed, the Overdraft Bank may resign from its appointment as
Overdraft Bank under the Agreement provided that no such retirement
shall take effect unless a successor Overdraft Bank has been appointed
by the Borrower and has entered into such arrangements as may be
required to become a party to this Agreement as Overdraft Bank and to
assume rights and obligations by the original Overdraft Bank.
19.15 CHANGE OF REFERENCE BANKS
-------------------------
If (a) the whole of the Contribution (if any) of any Reference Bank is
prepaid, (b) the Commitment (if any) of any Reference Bank is reduced
to zero in accordance with clause 6.3 or 15.1, (c) a Reference Bank
novates the whole of its rights and obligations (if any) as a Bank
under this Agreement or (d) any Reference Bank ceases to provide
quotations to the Agent for the purposes of determining EURIBOR, the
Agent may, acting on the instructions of the Majority Banks, terminate
the appointment of such Reference Bank and after consultation with the
Borrower appoint another Bank to replace such Reference Bank.
19.16 PROMPT DISTRIBUTION OF PROCEEDS
-------------------------------
Moneys received by the Security Agent (whether from a Receiver or
otherwise) pursuant to the exercise of (or otherwise by virtue of the
existence of) any rights and powers under or pursuant to any of the
Security Documents shall be paid to the Agent for distribution in
accordance with the terms of the Security Deed shall be distributed by
the Agent as soon as is practicable after the relevant moneys are
received by, or otherwise become available to, the Agent save that
(without prejudice to any other provision contained in any of the
Security Documents) the Agent (acting on the instructions of the
Majority Banks) may credit any moneys received by it to a suspense
account for so long and in such manner as the Agent may from time to
time determine with a view to preserving the rights of the Finance
Parties or any of them to prove for the whole of their respective
claims against any Obligor or any other person liable.
98
<PAGE>
20. NOTICES AND OTHER MATTERS
-------------------------
20.1 NOTICES
-------
Every notice, request, demand or other communication under this
Agreement shall:
(a) be in writing delivered personally or by first-class prepaid
letter (airmail if available) or telefax;
(b) be deemed to have been received, subject as otherwise provided in
this Agreement, in the case of a letter when delivered and, in
the case of a telefax, when a complete and legible copy is
received by the addressee (unless the date of despatch is not a
business day in the country of the addressee or the time of
despatch of any telefax is after the close of business in the
country of the addressee in which case it shall be deemed to have
been received at the opening of business on the next such
business day); and
(c) be sent:
(i) to each Obligor at:
p/a United TeleKabel Holding N.V.
Kabelweg 55
1014 BA Amsterdam
The Netherlands
Telefax: 00 31 20 776 6899
Attention: General Counsel
with a copy to:
United Pan-Europe Communications N.V.
Fred. Roeskestraat 123
1076 EE Amsterdam
The Netherlands
Telefax: 00 31 20 778 9841
Attention: Managing Director of Treasury and General
Counsel
(ii) to the Overdraft Bank and the Security Agent Guarantor at:
Coolsingel 93
3012 AE Rotterdam
The Netherlands
Telefax: 0031 10 401 5906
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<PAGE>
Attention: Mr. J.E. Post
(iii) to the Agent and Security Agent at:
MeesPierson N.V.
Coolsingel 93
3012 AE Rotterdam
The Netherlands
Telefax: 0031 10 401 5161
Attention: Mr. L.J.M. Van Der Knaap
(iv) to the Joint Arrangers at:
Bank of America International Limited
New Broad Street House
35 New Broad Street
London EC2M lSH
Telefax: 00 44 181 313 2140
Attention: Clare Godley
Citibank, N.A.
PO Box 2OO
Cottons Centre
Hays Lane
London SE1 2QT
Telefax: 00 44 171 500 2331
Attention: Graham Thrower
Deutsche Bank AG London
6 Bishopsgate
London EC2N 4DA
Telefax: 00 44 171 545 7430
Attention: Martin Flaherty/Alison Pring
MeesPierson N.V.
Coolsingel 93
3012 AE Rotterdam
The Netherlands
Telefax: 00 31 10 401 5906
Attention: Mr. J.E. Post
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<PAGE>
Paribas
3 Rue d'Antin
75002 Paris
France
Telefax: 00 33 1 42 98 0979
Attention: D.de Paillerets/L.Giesen
(v) to each Bank
at its address or telefax number specified in part A of
schedule 1 or in any relevant Transfer Certificate
or to such other address or telefax number as is notified by the
relevant party to the other parties to this Agreement.
20.2 NOTICES THROUGH THE AGENT
-------------------------
Every notice, request, demand or other communication under this
Agreement to be given by any Obligor to any other party shall be given
to the Agent for onward transmission as appropriate and to be given to
the Obligors (or any of them) shall (except as otherwise provided in
this Agreement) be given by the Agent.
20.3 NO IMPLIED WAIVERS REMEDIES CUMULATIVE
--------------------------------------
No failure or delay on the part of the Finance Parties or any of them
to exercise any power, right or remedy under this Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise
by the Finance Parties or any of them of any power, right or remedy
preclude any other or further exercise thereof or the exercise of any
other power, right or remedy. The remedies provided in this Agreement
are cumulative and are not exclusive of any remedies provided by law.
20.4 ENGLISH TRANSLATIONS
--------------------
All certificates, instruments and other documents to be delivered under
or supplied in connection with this Agreement shall be in the English
language or shall be accompanied by a certified English translation
upon which the Agent, the Joint Arrangers and the Banks shall be
entitled to rely.
20.5 COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts and by the
different parties on separate counterparts, each of which when so
executed and delivered shall be an original, but all counterparts shall
together constitute one and the same instrument.
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<PAGE>
21. GOVERNING LAW AND JURISDICTION
------------------------------
21.1 LAW
---
This Agreement shall be governed by English law.
21.2 SUBMISSION TO JURISDICTION
--------------------------
The parties to this Agreement agree for the benefit of the Finance
Parties that:
(a) if any party has any claim against any other arising out of or in
connection with this Agreement such claim shall (subject to
clause 21.2(c)) be referred to the High Court of Justice in
England, to the jurisdiction of which each of the parties
irrevocably submits;
(b) the jurisdiction of the High Court of Justice in England over any
such claim against the any Finance Party shall be an exclusive
jurisdiction and no courts outside England shall have
jurisdiction to hear or determine any such claim; and
(c) nothing in this clause 21.2 shall limit the right of the Finance
Party to refer any such claim against any Obligor to any other
court of competent jurisdiction outside England, to the
jurisdiction of which each Obligor hereby irrevocably agrees to
submit, nor shall the taking of proceedings by any Finance Party
before the courts in one or more jurisdictions preclude the
taking of proceedings in any other jurisdiction whether
concurrently or not.
21.3 AGENT FOR SERVICE OF PROCESS
----------------------------
Each Obligor irrevocably designates, appoints and empowers HRO
Registrars Limited at present of Mellier House, 26a Albemarle Street,
London W1X 3FA to receive for it and on its behalf service of process
issued out of the High Court of Justice in England in relation to any
claim arising out of or in connection with this Agreement.
IN WITNESS whereof the parties to this Agreement have caused this Agreement to
be duly executed on the date first above written.
102
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
----------
PART A - THE BANKS AND THEIR COMMITMENTS
----------------------------------------
- ------------------------------------ ----------------------------------------- ----------------------------
<S> <C> <C>
NAME ADDRESS AND TELEFAX NUMBER COMMITMENT
euro
- ------------------------------------ ----------------------------------------- ----------------------------
Citibank N.A. 2 Penns Way 68,000,000
Suite 200
Newcastle
DE 19720
USA
Telefax: 001 302 894 6094/95
Attention: Leonard Mudlock
- ------------------------------------ ----------------------------------------- ----------------------------
Deutsche Bank AG London 6 Bishopsgate 68,000,000
London EC2N 4DA
Telefax: 00 44 171545 4638
Attention: Roger Penn/ Brenda Hill,
Credit Administration
Department
- ------------------------------------ ----------------------------------------- ----------------------------
MeesPierson N.V. Coolsingel 93 68,000,000
3012 AE Rotterdam
The Netherlands
Telefax: 00 31 10 401 5161
Attention: Mr. L.J.M. Van der
Knaap
- ------------------------------------ ----------------------------------------- ----------------------------
NB International Finance B.V. Parnassustoren 68,000,000
Locatellikade
P.O. Box 75215
1076 AZ Amsterdam
Telefax: 00 31 20 57 57 141
Attention: Allan Kerr
- ------------------------------------ ----------------------------------------- ----------------------------
Paribas 3, Rue d'Antin 68,000,000
75002 Paris
France
Telefax: 0033 142 98 0979
Attention: D. de Paillerets/
L.Giese
- ------------------------------------ ----------------------------------------- ----------------------------
</TABLE>
103
<PAGE>
<TABLE>
<CAPTION>
PART B - ORIGINAL GUARANTORS
----------------------------
- ----------------------------------------- ------------------------------ --------------------------------
<S> <C> <C>
COMPANY COUNTRY OF INCORPORATION ADDRESS
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Geldermalsen B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Wijchen B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Tiel B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Buren B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Dodewaard B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Neerijnen-West B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Midden-Betuwe B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
Kabelexploitatiemaatschappij CAI-Renkum The Netherlands Waterstraat 11
B.V. Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Wageningen B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Over-Betuwe B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Heteren B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Elst B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
104
<PAGE>
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Bemmel B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Valburg B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Gendt B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Almere B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Lingewaal B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Dronten B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Lelystad B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-Druten B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
CAI-NKM Nijmegen B.V. The Netherlands Waterstraat 11
Velp (6882 GA)
The Netherlands
- ----------------------------------------- ------------------------------ --------------------------------
</TABLE>
105
<PAGE>
SCHEDULE 2
----------
FORM OF DRAWDOWN NOTICE
-----------------------
To: MeesPierson N.V.
Coolsingel 93
3012 AE Rotterdam
The Netherlands * 19*
euro340,000,000 LOAN FACILITY AGREEMENT DATED * 1999 (AS FROM TIME
TO TIME AMENDED, VARIED, EXTENDED, RESTATED, REFINANCED OR
REPLACED, THE "AGREEMENT")
We refer to the Agreement and hereby give you notice that we wish to draw down a
Revolving Advance of * on *19* for a Term of * months credited to [NAME AND
NUMBER OF ACCOUNT] with [DETAILS OF BANK IN THE NETHERLANDS].
We confirm that:
1 so far as we are aware, no event or circumstance has occurred and is
continuing or will result from the making of such Advance which
constitutes a Default; [and]
2 the representations and warranties contained in clauses 11.1 and 11.2
of the Agreement to be repeated in accordance with clause 11.4 of the
Agreement are true and correct as at the date of this notice as if made
with respect to the facts and circumstances existing at the date of
this notice.
We confirm that Annualised Consolidated EBITDA (determined by reference to the
most recently ended Six Month Period in respect of which Quarterly Management
Accounts have been delivered under the Agreement) was [ ].
We further confirm that the ratio of Senior Debt (including for these purposes,
the amount of the Advance the subject of this notice) to Annualised Consolidated
EBITDA (determined as above) was [ ].
Words and expressions defined in the Agreement shall have the same meanings
where used in this notice.
For and on behalf of
N.V. TeleKabel
................................................
106
<PAGE>
SCHEDULE 3
----------
DOCUMENTS AND EVIDENCE REQUIRED AS CONDITIONS PRECEDENT TO FIRST ADVANCE
------------------------------------------------------------------------
(a) A copy, certified as a true, complete and up-to-date copy by an
Authorised Officer of the Borrower, of the constitutive documents of
each Obligor amended as agreed between the Borrower and the Agent.
(b) A copy, certified as true, complete and up-to-date copy by an
authorised officer of the Shareholder, of the constitutive documents of
the Shareholder.
(c) A copy, certified as a true, complete and up-to-date copy by an
authorised officer of UPC, of the constitutive documents of UPC.
(d) A copy, certified as a true copy by an Authorised Officer of the
Borrower, of resolutions of the Supervisory Board of Directors of the
Borrower evidencing approval of this Agreement, the Security Documents
to which it is a party and authorising its appropriate officers to
execute and deliver this Agreement, such Security Documents and to give
all notices and take all other action required by the Borrower under
this Agreement and each such Security Document.
(e) A copy, certified as a true copy by an Authorised Officer of the
Borrower or a director or the secretary of the relevant other Security
Provider or Obligor of resolutions of the Board of Directors of each
Obligor and Security Provider evidencing approval of this Agreement and
the Security Documents to which they are a party and authorising their
respective appropriate officers to execute and deliver this Agreement
and such Security Documents and to give all notices and take all other
action required by such Obligor or Security Provider thereunder.
(f) Specimen signatures, authenticated by an Authorised Officer of the
Borrower or a director or the secretary of the relevant other Security
Provider or Obligor, of the persons authorised in the resolutions
referred to in paragraphs (d) and (e) above, together with originals of
the powers of attorney granted by the Borrower and any Obligor or
Security Provider in connection with the Finance Documents.
(g) A copy, certified as a true copy by an Authorised Officer of the
Borrower or a director or the secretary of the relevant other Security
Provider or Obligor, of all consents, authorisations, licences and
approvals required by each Obligor and Security Provider to authorise,
or required by the same in connection with, the execution, delivery,
validity, enforceability and admissibility in evidence of this
Agreement and the Security Documents and the performance by the same of
their respective obligations under this Agreement and the Security
Documents.
(h) (i) An opinion of Norton Rose, dated not more than five Banking Days
prior to the first Drawdown Date.
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<PAGE>
(ii) An opinion of Nauta Dutilh, legal advisers to the Banks in The
Netherlands, dated not more than five Banking Days prior to the
first Drawdown Date.
(iii) An opinion of Houthoff, legal advisers to the Borrower in The
Netherlands dated not more than five Banking Days prior to the
first Drawdown Date.
(i) A copy, certified as a true copy by an Authorised Officer of the
Borrower of a letter from each agent for receipt of service of process
referred to this Agreement and the Security Deed accepting its
appointment.
(j) The Share Securities, the Account Pledge, the Subordination Deed, the
Receivables Pledges, the Moveables Pledges, the Pledge over Principal
Agreements, the Pledge of Rights against Municipalities, the Pledge of
Rights against Casema, the Pledge of Intercompany Claims, the UPC
Funding Undertaking and the Security Deed duly executed by the Obligors
and Security Providers as party thereto together with all documents,
deeds, notices and certificates required to be delivered pursuant to
the terms thereof.
(k) Original irrevocable power of attorney to the Security Agent
authorising the Security Agent to execute a Mortgage Deed.
(l) The audited financial statements for the financial year ended on 31
December 1997 of the Shareholder and its Subsidiaries.
(m) Quarterly Management Accounts in respect of the Shareholder and its
Subsidiaries in respect of the Quarterly Periods ended 31st December
1998 and Monthly Information in respect of the Shareholder and its
Subsidaries in respect of the month ended 31st January 1999.
(n) The report of A.D. Little, independent consultants to the Banks.
(o) PricewaterhouseCoopers audit on the financial model together with a
reliance letter in respect thereof from PricewaterhouseCoopers to the
Agent.
(p) Certified copies of all insurance policies and cover notes.
(q) Copies, certified by the Authorised Officer of the Borrower to be true,
complete and up to date copies of:
(i) the Principal Agreements; and
(ii) the Necessary Authorisations.
(r) A legal opinion of Holme Roberts & Owen LLP, legal advisers to the
Borrower, confirming that the entry into the Facilities by the Borrower
will not result in any default under the United International Holdings,
Inc. Indenture dated 5th February, 1998.
108
<PAGE>
(s) Evidence that a minimum amount of NLG 412,000,000 has been on lent to
the Borrower by the Shareholder by way of Subordinated Shareholder Loan
and/or subscribed in cash and/or assets by the Shareholder for equity
share capital in the Borrower.
(t) Due diligence reports from (i) Houthoff and (ii) Nauta Dutilh.
(u) A certificate from NUON as to the outstanding amount of the NUON
Facility as at the anticipated date of drawdown of the first Advance
together with account payment details.
(v) The fees letter referred to in clauses 6 and 8 duly signed by the
Borrower.
(w) A list of receivables for the purposes of the Receivables Pledge.
109
<PAGE>
SCHEDULE 4
----------
CALCULATION OF ADDITIONAL COST
------------------------------
1 The Additional Cost for any period shall be calculated by the Agent in
respect of each period for which it falls to be calculated in
accordance with the following formula:
Y001F
----- = per. cent per annum
100
F = The amount of Sterling per (pound)1,000,000 of the fee
base of an authorised institution payable to the
Financial Services Authority per annum (disregarding any
minimum fee payable under the Fees Regulations)
Y = The fraction of foreign currency liabilities taken into
account under the Fees Regulations in calculating the fee
base (disregarding any offset for claims on non-resident
offices)
2 For the purposes of calculating the Additional Cost:
(a) the formula is applied on the first day of each period for
which it falls to be calculated (and the result shall apply
for the duration of such period);
(b) each amount is rounded up to the nearest four decimal places;
and
(c) if the formula produces a negative percentage, the percentage
shall be taken as zero.
3 If alternative or additional financial requirements are imposed by the
Bank of England, the Financial Services Authority or any other United
Kingdom governmental authority or agency which in the Agent's opinion
(after consultation with the Banks) make the formula no longer
appropriate, the Agent shall be entitled by notice to the Borrower to
stipulate such other formula as shall be suitable to apply in
substitution for the formula. Any such other formula so stipulated
shall take effect in accordance with the terms of such notice.
4 In this schedule 4:
"AUTHORISED" and "INSTITUTION" have the meanings given to those terms
in the Banking Act 1987;
"BANK OF ENGLAND ACT" means the Bank of England Act 1998;
"FEE BASE" has the meaning given to that term in the Fees Regulations;
and
110
<PAGE>
"FEES REGULATIONS" means the Banking Supervision (Fees) Regulations
1998 or the applicable substitute regulations made under the Bank of
England Act as are in force on the date of application of the formula.
111
<PAGE>
SCHEDULE 5
----------
FORM OF TRANSFER CERTIFICATE
----------------------------
BANKS ARE ADVISED NOT TO EMPLOY TRANSFER CERTIFICATES WITHOUT FIRST ENSURING
THAT THE TRANSACTION COMPLIES WITH ALL APPLICABLE LAWS AND REGULATIONS,
INCLUDING THE FINANCIAL SERVICES ACT 1986 AND REGULATIONS MADE THEREUNDER.
To: MeesPierson N.V.
Coolsingel 93
PO Box 749
3000 AS Rotterdam
Attention: * * 19*
TRANSFER CERTIFICATE
This Transfer Certificate relates to an Agreement (as from time to time amended,
varied, extended, restated, refinanced or replaced, the "AGREEMENT") dated *
1999 between N.V. TeleKabel as Borrower (1), the entities listed in part B of
schedule 1 thereto as Original Guarantors (2), Bank of America N.T & S.A.,
Citibank, N.A., Deutsche Bank AG London, MeesPierson N.A. and Paribas as Joint
Arrangers (3), the banks and financial institutions whose respective names and
addresses are set out in part A of schedule 1 thereto as Banks (4), MeesPierson
N.V. as Overdraft Bank (5), MeesPierson N.V. as Agent (6), Stichting Security
Agent N.V. TeleKabel as Security Agent (7) and MeesPierson N.V. as Security
Agent Guarantor (8). Terms defined in the Agreement shall have the same meaning
in this Transfer Certificate.
1 [Name of Existing Bank] (the "Existing Bank") (a) confirms the
accuracy of the summary of its Commitment and Contribution set out in
the schedule to this Transfer Certificate; and (b) requests
[Transferee Bank] (the "TRANSFEREE") to accept and procure the
transfer to the Transferee of the portion of its Commitment and
Contribution specified in the schedule to this Transfer Certificate by
counter-signing and delivering this Transfer Certificate to the Agent
at its address for the service of notices specified in the Agreement.
2 The Transferee requests the Agent (on behalf of itself, the other
Secured Parties, the Obligors and the Security Providers) to accept
this Transfer Certificate as being delivered to the Agent pursuant to
and for the purposes of clause 18.4 of the Agreement, so as to take
effect in accordance with its terms on [date of transfer], [being not
earlier than 5 Banking Days after date of delivery of the Certificate
to the Agent] (the "Effective Date").
3 The Agent (on behalf of itself and the other parties to the Agreement)
confirms the assignment and transfer effected by this Transfer
Certificate pursuant to and for the purposes of clause 18.4 of the
Agreement.
112
<PAGE>
4 The Transferee confirms:
(a) that it has received a copy of the Agreement, the Security Deed
and all other Security Documents and other documentation and
information required by it in connection with the transactions
contemplated by this Transfer Certificate;
(b) that it has made its own assessment of the execution,
effectiveness, adequacy, genuineness, validity, enforceability
and admissibility in evidence of the Agreement, the Security
Documents and this Transfer Certificate and has not relied and
will not rely on the Existing Bank or any statements made by the
Existing Bank in that respect;
(c) that it has made and will continue to make its own appraisal of
the creditworthiness of the Borrower and its Subsidiaries and its
own independent investigation of the financial condition,
prospects and affairs of the Borrower and its Subsidiaries and
has not relied and will not rely on the Existing Bank or any
other Charging Entity or any statement, opinion, forecast or
other representation made by the Existing Bank or any other
Charging Entity in that respect;
(d) accordingly, neither the Existing Bank nor any other Charging
Entity shall have any liability or responsibility to the
Transferee in respect of any of the foregoing matters[; and]
(e) it is a Qualifying Bank.
5 Execution of this Transfer Certificate by the Transferee constitutes
its representation to the Existing Bank and all other parties to the
Agreement and the Security Deed that it has power to become party to
the Agreement and the Security Deed as a Bank on the terms herein and
therein set out and has taken all necessary steps to authorise
execution and delivery of this Transfer Certificate.
6 The Transferee hereby undertakes to the Existing Bank, the Obligors
and the other Finance Parties that it will perform in accordance with
their terms all those obligations which by the respective terms of the
Agreement, the Security Deed and all other Security Documents will be
assumed by it after acceptance of this Transfer Certificate by the
Agent.
7 The Transferee acknowledges that the Existing Bank has no obligation
to repurchase or reacquire any of the rights and obligations
transferred by virtue of this Transfer Certificate or to support,
indemnify or compensate the Transferee for any losses suffered by the
Transferee as a consequence of the transfer effected by virtue of this
Transfer Certificate.
8 The Transferee hereby undertakes to the Existing Bank and the other
Charging Entities that it will perform in accordance with their terms
113
<PAGE>
all those obligations which by the respective terms of the Agreement
and the Security Deed will be assumed by it after acceptance of this
Transfer Certificate by the Agent.
9 This Transfer Certificate and the rights and obligations of the
parties hereunder are governed by and shall be construed in accordance
with English law.
NOTE: This Transfer Certificate is not a security, bond, note, debenture,
investment or similar instrument.
AS WITNESS the hands of the authorised signatories of the parties hereto on the
date appearing below.
<TABLE>
<CAPTION>
THE SCHEDULE
AMOUNT OF CONTRIBUTION NEXT INTEREST PAYMENT DATE PORTION NOVATED
euro euro
<S> <C> <C>
AMOUNT OF PORTION NOVATED
COMMITMENT euro
euro
ADMINISTRATIVE DETAILS OF TRANSFEREE
Lending office:
Account for payments:
Telephone:
Telefax:
Attention:
[Existing Bank] [Transferee]
By: By:
Date:
Date:
</TABLE>
114
<PAGE>
The Agent
By:
on its own behalf
and on behalf of the other parties to the Agreement and the Security Deed
Date:
115
<PAGE>
SCHEDULE 6
----------
PART A - COMPLIANCE CERTIFICATE TO BE DELIVERED BY AN AUTHORISED OFFICER OF THE
- --------------------------------------------------------------------------------
BORROWER
- --------
MeesPierson N.V.
Coolsingel 93
3012 AS Rotterdam
The Netherlands
Attention: Mr L. J. M. Van Der Knaap [Date]
Dear Sirs
N.V. TELEKABEL euro340,000,000 CREDIT FACILITIES
LOAN AGREEMENT DATED [ ], 1999 (AS FROM TIME TO TIME AMENDED, VARIED, EXTENDED,
RESTATED, REFINANCED OR REPLACED THE "LOAN AGREEMENT")
We refer to the Loan Agreement and deliver this Certificate in respect of the
Quarterly Period ended [Quarter Day] pursuant to clause 12.1(i)(ii) thereof.
Terms defined in the Loan Agreement shall have the same meaning when used in
this Certificate.
We confirm that on or as of the last day of the Quarterly Period ending [*]:
1 Consolidated EBITDA for the Quarterly Period ending on [Quarter Day]
was [ ] [insert calculation details].
2 Consolidated EBITDA before Management Fees for the Quarterly Period
ending on [Quarter Day] was [ ] [insert calculation details].
3 Annualised Consolidated EBITDA calculated by reference to the Six Month
Period ending on [Quarter Day] was [ ] [insert calculation details]
4 Annualised Consolidated EBITDA before Management Fees calculated by
reference to the six month period ending on [Quarter Day] was [insert
calculation details].
5 As at [Quarter Day] Senior Debt was [ ] [insert
calculation details].
6 Senior Debt Cash Interest Charges for the 12 month period ending on
[Quarter Day] were [ ] [insert calculation details].
7 1 Pro-Forma Senior Debt Service for the twelve months commencing [*] is
[*].
- --------------------------------------------------------------------------------
1 From and including 1st January 2002 only
116
<PAGE>
Based on the above, we confirm that on [Quarter Day]:
1 The ratio of Senior Debt to Annualised Consolidated EBITDA was [o]
[insert calculation details].
2 Annualised Consolidated EBITDA before Management Fees exceeded 85 per
cent. of twice the base case Consolidated EBITDA before Management Fees
for the Six Month Period ending on [*] as shown in the Management Base
Case.
3 The ratio of Annualised Consolidated EBITDA to Senior Debt Cash
Interest Charges was [*] [insert calculation details].
4 The ratio of Annualised Consolidated EBITDA to Pro Forma Senior Debt
Service was [*] [insert calculation details].1
5 Excess Cash Flow was [*]2.
Accordingly, we confirm that [save as disclosed in this certificate] on [Quarter
Day] the Borrower was in compliance with those covenants contained in clause
13.1 inclusive of the Loan Agreement which were applicable as at [Quarter Day].
We confirm that the representations and warranties contained in clause 11.1 of
the Loan Agreement to be repeated in accordance with clause 11.4 of the Loan
Agreement, are true and correct as at the date hereof as if made with reference
to the facts and circumstances existing at such date.
For and on behalf of
N.V. TeleKabel
.............................
Authorised Officer
- --------------------------------------------------------------------------------
2 In respect of Quarterly Periods ending on 31st december only, commencing with
the Quarterly Period ending on 31st January 2002.
117
<PAGE>
SCHEDULE 6
----------
PART B - COMPLIANCE CERTIFICATE TO BE DELIVERED BY THE AUDITORS OF THE GROUP
----------------------------------------------------------------------------
MeesPierson N.V.
Coolsingel 93
3012 AS Rotterdam
The Netherlands
Attention: Mr L. J. M. Van Der Knaap [Date]
Dear Sirs
N.V. TELEKABEL euro340,000,000 CREDIT FACILITIES
LOAN AGREEMENT DATED [ ], 1999 (AS FROM TIME TO TIME AMENDED, VARIED, EXTENDED,
RESTATED, REFINANCED OR REPLACED THE "LOAN AGREEMENT")
We refer to the Loan Agreement and deliver this Certificate in respect of the
Quarterly Period ended [Quarter Day] pursuant to clause 12.1(i)(ii) thereof.
Terms defined in the Loan Agreement shall have the same meaning when used in
this Certificate.
We confirm that on or as of the last day of the Quarterly Period ending [*]:
1 Consolidated EBITDA for the Quarterly Period ending on [Quarter Day]
was [ ] [insert calculation details].
2 Consolidated EBITDA before Management Fees for the Quarterly Period
ending on [Quarter Day] was [ ] [insert calculation details].
3 Annualised Consolidated EBITDA calculated by reference to the Six Month
Period ending on [Quarter Day] was [ ] [insert calculation details]
4 Annualised Consolidated EBITDA before Management Fees calculated by
reference to the six month period ending on [Quarter Day] was [insert
calculation details].
5 As at [Quarter Day] Senior Debt was [ ] [insert
calculation details].
6 Senior Debt Cash Interest Charges for the 12 month period ending on
[Quarter Day] were [ ] [insert calculation details].
7 Pro-Forma Senior Debt Service for the twelve months commencing [*] is
[*].
Based on the above, we confirm that on [Quarter Day]:
1 The ratio of Senior Debt to Annualised Consolidated EBITDA was [*]
[insert calculation details].
118
<PAGE>
2 Annualised Consolidated EBITDA before Management Fees exceeded 85 per
cent. of twice the base case Consolidated EBITDA before Management Fees
for the Six Month Period ending on [*] as shown in the Management Base
Case.
3 The ratio of Annualised Consolidated EBITDA to Senior Debt Cash
Interest Charges was [*] [insert calculation details].
4 The ratio of Annualised Consolidated EBITDA to Pro Forma Senior Debt
Service was [*] [insert calculation details].1
5 Excess Cash Flow was [*].
Accordingly, we confirm that in our opinion [and save as disclosed in this
Certificate] as at [year end] the Borrower was in compliance with those
covenants contained in clause 13.1 of the Loan Agreement which were applicable
as at [year end].
For and on behalf of
..............................
Auditors
119
<PAGE>
<TABLE>
SCHEDULE 7
----------
REGISTRATIONS
-------------
- -------------------------------------- -------------------------- ---------------------------------
<S> <C> <C>
DESCRIPTION REGISTERED NUMBER HELD BY
- -------------------------------------- -------------------------- ---------------------------------
Construction or offering a broadcast 900045 N.V. TeleKabel
network ("Aanleggen of aanbieden van (2 Feb 1999)
een omroepnetwerk")
- -------------------------------------- -------------------------- ---------------------------------
Construction or offering of leased 900044 N.V. TeleKabel
lines ("Aanleggen of aanbieden van (2 Feb 1999)
huurlijnen")
- -------------------------------------- -------------------------- ---------------------------------
Construction or offering of a public 900059 N.V. Telekabel
telecommunication network (12 Feb 1999)
("Aanleggen of aanbieden van een
openbaar telecommunicatienetwerk")
- -------------------------------------- -------------------------- ---------------------------------
Offering of a public 900043 United TeleKabel Holding N.V.
telecommunication service (2 Feb 1999)
("Aanbieder van een openbare
telecommunicatiedienst")
- -------------------------------------- -------------------------- ---------------------------------
Registration Interconnection 40.012 N.V. TeleKabel
(26 Sept 1997)
- -------------------------------------- -------------------------- ---------------------------------
Registration Special Access 40.514 N.V. TeleKabel
(26 Sept 1997)
- -------------------------------------- -------------------------- ---------------------------------
</TABLE>
120
<PAGE>
SCHEDULE 8
----------
PRINCIPAL AGREEMENTS
--------------------
1 Management Services Agreement dated on or about 5th March, 1999, made
between (1) UTH and (2) the Borrower.
121
<PAGE>
SCHEDULE 9
----------
PART A - GUARANTOR'S DEED OF ACCESSION
--------------------------------------
To: STICHTING SECURITY AGENT N.V. TELEKABEL as Security Agent
From: [PROPOSED GUARANTOR] and [N.V. TELEKABEL]
Date: [*]
N.V. TELEKABEL [euro]* Revolving Credit Agreement converting to a term loan
dated *, 1999 (as from time to time amended, varied, extended, restated,
refinanced or replaced the "FACILITY AGREEMENT")
We refer to clause [10.16] of the Facility Agreement. Words and expressions
defined in the Facility Agreement have the same meanings when used in this Deed.
We, [name of company] of [address] agree to become an Acceding Guarantor and to
be bound by the terms of the Facility Agreement as an Acceding Guarantor in
accordance with clause 10.16 of the Facility Agreement and the Security Deed as
a Guarantor in accordance with clause 10.5 of the Security Deed.
[LOCAL LAW LIMITATIONS ON AMOUNTS GUARANTEED BY ACCEDING GUARANTOR (IF ANY)]
Our address for notices for the purposes of clause 19.1 of the Facility
Agreement is:
[*]
This Deed is intended to be executed as a deed and is governed by English law.
[PROPOSED GUARANTOR] [N.V. TELEKABEL]
[Appropriate execution clause] [Appropriate execution clause]
By: By:
By:
STICHTING SECURITY AGENT N.V. TELEKABEL
[Appropriate execution clause]
By:
122
<PAGE>
SCHEDULE 9
----------
PART B - DOCUMENTS AND EVIDENCE TO BE DELIVERED BY AN ACCEDING GUARANTOR
------------------------------------------------------------------------
(a) Guarantor's Deed of Accession, duly executed under seal by the
Acceding Guarantor and the Borrower;
(b) a Share Security over the shares of the Acceding Guarantor, duly
executed as a deed by the parties to it (the "Relevant Shareholders");
(c) a Moveables Pledge, a Pledge over any Principal Agreements, a Pledge of
Intercompany Claims and a Pledge of Rights against Municipalities to
which the Acceding Guarantor is a party duly executed as a deed by the
Acceding Guarantor and such other Security Documents as the Agent may
require;
(d) an original irrevocable power of attorney to the Security Agent
authorising the Security Agent to execute an Immovables Pledge;
(e) a copy of the constitutional documents of each of the Acceding
Guarantor and the Relevant Shareholders;
(f) a copy of a resolution of the board of directors of each of the
Acceding Guarantor and Relevant Shareholders approving the terms of,
and the transactions contemplated by, the Guarantor's Deed of
Accession, the relevant Security Documents (as appropriate) and
authorising its appropriate officers to execute and deliver the
Guarantor's Deed of Accession, the relevant Security Documents (as
appropriate) and give all notices and take all other action required by
it under the Finance Documents;
(g) a certificate of a director of the Acceding Guarantor certifying that
the amounts to be guaranteed by the Acceding Guarantor would not cause
any guaranteeing limit binding on it to be exceeded;
(h) a copy of any other authorisation or other document, opinion or
assurance which is necessary for the execution, delivery and validity
and enforceability of the Guarantor's Deed of Accession, the relevant
Security Documents or the Share Security;
(i) a specimen of the signature of each person authorised by a resolution
referred to in paragraph (f) above;
(j) if available, a copy of the latest audited accounts of the Acceding
Guarantor;
(k) a legal opinion of English legal advisers, acceptable to the Agent,
addressed to the Security Agent Guarantor on behalf of the
Beneficiaries (as defined in the Security Deed)
(l) if the Acceding Guarantor and/or a Relevant Shareholder is incorporated
in a jurisdiction outside England, a legal opinion of legal advisers,
acceptable to the Agent, in the jurisdiction of incorporation of the
Acceding Guarantor and/or Relevant Shareholder (as appropriate),
123
<PAGE>
addressed to the Security Agent Guarantor on behalf of the
Beneficiaries (as defined in the Security Deed);
(m) a certificate of an authorised signatory of the Acceding Guarantor and
each Relevant Shareholder certifying that each copy document specified
in part B of this schedule 9 and relating to it is correct, complete
and in full force and effect as at a date no earlier than the date of
the Guarantor's Deed of Accession or relevant Security Documents (as
appropriate);
(n) a certificate of an authorised signatory of the Borrower confirming
that its constitutional documents have not been amended (or, if they
have, enclosing a copy of the amended constitutional documents) and
that all authorisations and resolutions authorising its appropriate
officers to execute and deliver the Guarantor's Deed of Accession
remain in full force and effect;
(o) if applicable, share certificates and stock transfer forms executed in
blank and all other documents required to be delivered to the Security
Agent in connection with the relevant Share Security and such other
documents as may be required pursuant to the relevant Security
Documents; and
(p) such other documents as the Agent may reasonably require after taking
the advice of the legal advisers referred to in paragraphs (k)and (l)
above.
124
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 10
-----------
FORM OF QUARTERLY MANAGEMENT ACCOUNTS/MONTHLY INFORMATION
---------------------------------------------------------
CABLE TELEVISION - STATISTICS
-----------------------------
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
OPERATING STATISTICS MONTHLY MONTHLY VARIANCE YTD YTD VARIANCE
[MONTH,YEAR] [MONTH,YEAR] [MONTH,YEAR] [MONTH,YEAR]
ACTUAL BUDGET ACTUAL BUDGET
<S> <C> <C> <C> <C> <C> <C>
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Homes in Franchise
Area
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Homes Passed
(serviceable)
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
% of Homes Passed in
Franchise Area
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Subscribers
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Basic
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Enhanced Basic
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Premium
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Pay Per View Events
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Other
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Penetration
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Basic
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Enhanced Basic
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Premium
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Average revenue per
subscriber
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Lifeline
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Basic
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Enhanced Basic
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Premium
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Pay Per View Events
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Other Key Statistics
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Number of Employees
(period end)
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Hit Ratio (PPV)
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
First Connections
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Reconnections
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Disconnections
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
Churn Rate (basic
subscribers)
- ----------------------- ---------------- --------------- ------------- ---------------- ---------------- -------------
</TABLE>
125
<PAGE>
<TABLE>
<CAPTION> CABLE TELEPHONY - STATISTICS
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
OPERATING STATISTICS MONTHLY MONTHLY VARIANCE YTD YTD VARIANCE
[MONTH,YEAR] [MONTH,YEAR] [MONTH,YEAR] [MONTH,YEAR]
ACTUAL BUDGET ACTUAL BUDGET
<S> <C> <C> <C> <C> <C> <C>
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Homes in Franchise
Area
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Homes Passed
(serviceable)
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business Passed
(serviceable)
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Small Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Medium Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Large Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
% of Homes Passed in
Franchise Area
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
% of Bus. Passed in
Franchise Area
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Subscribers
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Residential
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Small Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Medium Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Large Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Lines Served
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Residential
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Small Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Medium Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Large Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Penetration
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Residential
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Small Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Medium Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Large Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Average revenue per
subscriber
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Residential
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Small Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Medium Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Large Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
126
<PAGE>
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Average revenue per
line
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Residential
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Small Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Medium Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Large Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Other Key Statistics
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Number of Employees
(period end)
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Lines per subscriber
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Residential
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Small Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Medium Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Large Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
First Connections
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Reconnections
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Disconnections
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Churn Rate (total
subscribers)
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
</TABLE>
127
<PAGE>
<TABLE>
<CAPTION>
CABLE DATASERVICES - STATISTICS
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
OPERATING STATISTICS MONTHLY MONTHLY VARIANCE YTD YTD VARIANCE
[MONTH,YEAR] [MONTH,YEAR] [MONTH,YEAR] [MONTH,YEAR]
ACTUAL BUDGET ACTUAL BUDGET
<S> <C> <C> <C> <C> <C> <C>
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Homes in Franchise
Area
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Homes Passed
(serviceable)
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Businesses Passed
(serviceable)
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Small Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Medium Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Large Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
% of Homes Passed in
Franchise Area
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
% of Bus. Passed in
Franchise Area
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Subscribers
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Residential
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business - Small
Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business - Medium
Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business - Large
Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Other
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Total Subscribers
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Penetration
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Residential
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Small Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Medium Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Large Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Average revenue per
subscriber
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Residential
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Business
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Small Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Medium Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Large Office
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Other Key Statistics
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Number of Employees
(period end)
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
128
<PAGE>
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
First Connections
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Reconnections
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Disconnections
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Churn Rate
- ----------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
</TABLE>
129
<PAGE>
<TABLE>
<CAPTION> PROFIT AND LOSS ACCOUNT (NLG `000)
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
PROFIT & LOSS MONTLY MONTHLY VARIANCE YTD YTD VARIANCE
ACCCOUNT [MONTH,YEAR] [MONTH,YEAR] [MONTH,YEAR] [MONTH,YEAR]
ACTUAL BUDGET ACTUAL BUDGET
<S> <C> <C> <C> <C> <C> <C>
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Revenue
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Cable Television
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Cable Telephony
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Cable Dataservices
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Other
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Total revenue
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Direct Costs
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Cable Television
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Cable Telephony
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Cable Dataservices
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Other
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Total Direct Costs
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Expenses
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Expenses
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - Franchise Fees
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Total Expenses
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Net Operating
Income/(Loss)/EBITDA
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
% NOI versus Revenue
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Depreciation and
Amortisation
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Management Fee/GSA
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Internal Financial
Expenses/(Income)
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
External Financial
Expenses/(Income)
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Other Business
(Income)/Charges
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Income/(Loss) Before
Taxes
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Dividend Income
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Income Taxes
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Minority Share
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Income
Unconsolidated
Companies
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Other Income
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
130
<PAGE>
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Net Income/(Loss)
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
</TABLE>
131
<PAGE>
<TABLE>
<CAPTION>
CASH FLOW STATEMENT (NLG `000)
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
CASH FLOW MONTHLY MONTHLY VARIANCE YTD YTD VARIANCE
[MONTH,YEAR] [MONTH,YEAR] [MONTH,YEAR] [MONTH,YEAR]
ACTUAL BUDGET ACTUAL BUDGET
<S> <C> <C> <C> <C> <C> <C>
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Sources of Operation
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Net Income/(Loss)
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Add: Depreciation &
Amortisation
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Increase/(Decrease)
in Working Capital
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - plus Management
Fees payable
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- - less Management
Fees paid
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Total Sources of
Operation
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Investments
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Cable Television
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Cable Telephony
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Cable Dataservices
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Capex Other
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Total Investments
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Financing
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Internal Financing
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
External Financing
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Senior Facility
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Other Bankloans
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Total Financing
Sources
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Increase/(Decrease)
in Cash
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Beginning Cash
Balance
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Exchange Rate
Adjustment BB
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
Ending Cash Balance
- ---------------------- ---------------- ---------------- ------------- --------------- ---------------- -------------
</TABLE>
132
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET (NLG `000)
- ---------------------------------- ------------------ ----------------- -----------------
ASSETS MONTHLY MONTHLY VARIANCE
[MONTH,YEAR] [MONTH,YEAR]
ACTUAL BUDGET
<S> <C> <C> <C>
- ---------------------------------- ------------------ ----------------- -----------------
ASSETS
- ---------------------------------- ------------------ ----------------- -----------------
Gross Intangible Fixed Assets
- ---------------------------------- ------------------ ----------------- -----------------
Accumulated Amortisation
- ---------------------------------- ------------------ ----------------- -----------------
NET INTANGIBLE FIXED ASSETS
- ---------------------------------- ------------------ ----------------- -----------------
- ---------------------------------- ------------------ ----------------- -----------------
Gross Tangible Fixed Assets
- ---------------------------------- ------------------ ----------------- -----------------
Accumulated Depreciation
- ---------------------------------- ------------------ ----------------- -----------------
NET TANGIBLE FIXED ASSETS
- ---------------------------------- ------------------ ----------------- -----------------
- ---------------------------------- ------------------ ----------------- -----------------
Investment in Non Cons. Companies
- ---------------------------------- ------------------ ----------------- -----------------
Advances
- ---------------------------------- ------------------ ----------------- -----------------
Loans receivable from
Participations
- ---------------------------------- ------------------ ----------------- -----------------
Loans receivable from Uncons.
Companies
- ---------------------------------- ------------------ ----------------- -----------------
Non Current Financial Assets
- ---------------------------------- ------------------ ----------------- -----------------
Stocks and Bonds
- ---------------------------------- ------------------ ----------------- -----------------
Assets held for sale
- ---------------------------------- ------------------ ----------------- -----------------
FINANCIAL FIXED ASSETS
- ---------------------------------- ------------------ ----------------- -----------------
- ---------------------------------- ------------------ ----------------- -----------------
Liquid Assets
- ---------------------------------- ------------------ ----------------- -----------------
Trade Debtors
- ---------------------------------- ------------------ ----------------- -----------------
Sundry Debtors
- ---------------------------------- ------------------ ----------------- -----------------
Prepaid Expenses
- ---------------------------------- ------------------ ----------------- -----------------
VAT Receivable
- ---------------------------------- ------------------ ----------------- -----------------
IC Receivables from
Participations
- ---------------------------------- ------------------ ----------------- -----------------
IC Interest Receivable from
Participations
- ---------------------------------- ------------------ ----------------- -----------------
IC GSA Receivable from
Participations
- ---------------------------------- ------------------ ----------------- -----------------
Accounts Rec. Uncons. Companies
- ---------------------------------- ------------------ ----------------- -----------------
Inventory
- ---------------------------------- ------------------ ----------------- -----------------
Other
- ---------------------------------- ------------------ ----------------- -----------------
- ---------------------------------- ------------------ ----------------- -----------------
TOTAL CURRENT ASSETS
- ---------------------------------- ------------------ ----------------- -----------------
- ---------------------------------- ------------------ ----------------- -----------------
TOTAL ASSETS
- ---------------------------------- ------------------ ----------------- -----------------
</TABLE>
133
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET (NLG `000)
- ------------------------------------ ---------------- ----------------- ----------------
LIABILITIES & CAPITAL MONTHLY MONTHLY VARIANCE
[MONTH,YEAR] [MONTH,YEAR]
ACTUAL BUDGET
<S> <C> <C> <C>
- ------------------------------------ ---------------- ----------------- ----------------
EQUITY
- ------------------------------------ ---------------- ----------------- ----------------
Share Capital
- ------------------------------------ ---------------- ----------------- ----------------
Additional Paid-In Capital Current
Year
- ------------------------------------ ---------------- ----------------- -----------------
Reserves
- ------------------------------------ ---------------- ----------------- ----------------
Transaction difference
- ------------------------------------ ---------------- ----------------- ----------------
Retained Earnings
- ------------------------------------ ---------------- ----------------- ----------------
Result Current Year
- ------------------------------------ ---------------- ----------------- ----------------
Transl. Adjustm. Result for the
Year
- ------------------------------------ ---------------- ----------------- ----------------
Minority Interest
- ------------------------------------ ---------------- ----------------- ----------------
TOTAL SHAREHOLDERS EQUITY
- ------------------------------------ ---------------- ----------------- ----------------
- ------------------------------------ ---------------- ----------------- ----------------
Liabilities
- ------------------------------------ ---------------- ----------------- ----------------
Pensions/Early Retirement
- ------------------------------------ ---------------- ----------------- ----------------
Deferred Taxes
- ------------------------------------ ---------------- ----------------- ----------------
Other Provisions
- ------------------------------------ ---------------- ----------------- ----------------
TOTAL PROVISIONS
- ------------------------------------ ---------------- ----------------- ----------------
- ------------------------------------ ---------------- ----------------- ----------------
Loans from Participations
- ------------------------------------ ---------------- ----------------- ----------------
Third Party Term Loan - Facility A
- ------------------------------------ ---------------- ----------------- ----------------
LONG TERM DEBT
- ------------------------------------ ---------------- ----------------- ----------------
- ------------------------------------ ---------------- ----------------- ----------------
Trade Creditors
- ------------------------------------ ---------------- ----------------- ----------------
IC Accounts Payable Cons. Companies
- ------------------------------------ ---------------- ----------------- ----------------
Deferred Revenue
- ------------------------------------ ---------------- ----------------- ----------------
Accrued Liabilities
- ------------------------------------ ---------------- ----------------- ----------------
Accrued Management Fees
- ------------------------------------ ---------------- ----------------- ----------------
Accrued Interest
- ------------------------------------ ---------------- ----------------- ----------------
Subscriber Deposits
- ------------------------------------ ---------------- ----------------- ----------------
Sundry Creditors
- ------------------------------------ ---------------- ----------------- ----------------
TOTAL CURRENT LIABILITIES
- ------------------------------------ ---------------- ----------------- ----------------
- ------------------------------------ ---------------- ----------------- ----------------
TOTAL LIABILITIES
- ------------------------------------ ---------------- ----------------- ----------------
- ------------------------------------ ---------------- ----------------- ----------------
TOTAL EQUITY & LIABILITIES
- ------------------------------------ ---------------- ----------------- ----------------
</TABLE>
134
<PAGE>
SCHEDULE 11
MANAGEMENT BASE CASE
135
<PAGE>
THE BORROWER
- ------------
SIGNED for and on behalf of )
N.V. TELEKABEL ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
THE GUARANTORS
- --------------
SIGNED for and on behalf of )
CAI-GELDERMALSEN B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-WIJCHEN B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-TIEL B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-BUREN B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-DODEWAARD B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-NEERIJNEN-WEST B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-MIDDEN-BETUWE B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
157
<PAGE>
SIGNED for and on behalf of )
KABELEXPLOITATIEMAATSCHEPPIJ )
CAI-RENKUM B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-WAGENINGEN B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-OVER-BETUWE B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-HETEREN B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-ELST B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-BEMMEL B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-VALBURG B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-GENDT B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-ALMERE B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
158
<PAGE>
SIGNED for and on behalf of )
CAI-LINGEWAAL B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-DRONTEN B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-LELYSTAD B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-DRUTEN B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
SIGNED for and on behalf of )
CAI-NKM NIJMEGEN B.V. ) /S/ ONNO ZUIDEMA
by: ) (as attorney)
THE JOINT ARRANGERS
- -------------------
SIGNED for and on behalf of )
BANK OF AMERICA INTERNATIONAL LIMITED ) /S/ MARTIN CROCKER
by: )
SIGNED for and on behalf of )
CITIBANK, N.A. ) /S/ GRAHAM THROWER
by: )
SIGNED for and on behalf of )
DEUTSCHE BANK AG LONDON ) /S/ MARTIN FLAHERTY
by: ) ALISON PRING
SIGNED for and on behalf of )
MEESPIERSON N.V. ) /S/ KEVIN HARBER
by: ) (as attorney)
159
<PAGE>
SIGNED for and on behalf of )
PARIBAS ) /S/ KEVIN HARBER
by: ) (as attorney)
THE OVERDRAFT BANK
- ------------------
SIGNED for and on behalf of )
MEESPIERSON N.V. ) /S/ KEVIN HARBER
by: ) (as attorney)
THE BANKS
- ---------
SIGNED for and on behalf of )
NB INTERNATIONAL FINANCE B.V. ) /S/ KEVIN HARBER
by: )
SIGNED for and on behalf of )
CITIBANK, N.A. ) /S/ GRAHAM THROWER
by: )
SIGNED for and on behalf of )
DEUTSCHE BANK AG LONDON ) /S/ MARTIN FLAHERTY
by: ) ALISON PRING
SIGNED for and on behalf of )
MEESPIERSON N.V. ) /S/ KEVIN HARBER
by: ) (as attorney)
SIGNED for and on behalf of )
PARIBAS ) /S/ KEVIN HARBER
by: ) (as attorney)
160
<PAGE>
THE AGENT
- ---------
SIGNED for and on behalf of )
MEESPIERSON N.V. ) /S/ KEVIN HARBER
by: ) (as attorney)
THE SECURITY AGENT
SIGNED for and on behalf of )
STICHTING SECURITY AGENT N.V. TELEKABEL ) /S/ KEVIN HARBER
by: ) (as attorney)
THE SECURITY AGENT GUARANTOR
SIGNED for and on behalf of )
MEESPIERSON N.V. ) /S/ KEVIN HARBER
by: ) (as attorney)
161
EXHIBIT 10.17
A$400,000,000
Syndicated Senior Secured Debt Facility
Agreement
Date: April 23, 1999
AUSTAR Entertainment Pty Limited
Borrower
Each Company specified as a Guarantor in Schedule 1
Guarantor
Each Financial Institution specified as a Bank in Schedule 2
Bank
Chase Securities Australia Limited
Facility Agent
Chase Securities Australia Limited
Security Agent
(C) Copyright Clayton Utz
<PAGE>
TABLE OF CONTENTS
Clause Page
1. DEFINITIONS AND INTERPRETATION 1
1.1 Definitions 1
1.2 Interpretation 14
1.3 Joint and several liability 15
1.4 Debenture Stock Trust Deed 15
1.5 Specified Rate 15
1.6 Dual lender 15
2. THE FACILITY 16
2.1 Facilities 16
2.2 Banks' Commitments 17
2.3 Several obligations 17
2.4 Several interests 17
2.5 Purpose 17
2.6 Termination 17
2.7 Nature of Borrower's rights and obligations hereunder 18
2.8 Voting 18
3. CONDITIONS PRECEDENT 18
3.1 Conditions precedent to the first Utilisation 18
3.2 Conditions precedent to all Utilisations 19
3.3 Waiver 20
3.4 Condition Precedent to all Tranche 2 Utilisations 20
3.5 Agent not liable 20
3.6 Agent satisfied 20
4. UTILISATIONS 20
4.1 Notice 20
4.2 Contents of Utilisation Notice 20
4.3 Requirements of Utilisation Notice 21
4.4 Agent Notify Banks 21
4.5 Making of Advances 21
4.6 Disbursement 21
4.7 Facility Agent's right to vary 21
5. COMMITMENTS 22
5.1 Tranche 1 Commitments 22
5.2 Tranche 2 Commitments 22
5.3 Voluntary Cancellation 22
5.4 Reduction consequent on Repayment or Prepayment 22
5.5 Limitations 22
(i)
<PAGE>
TABLE OF CONTENTS
Clause Page
6. REPAYMENT AND PREPAYMENTS 23
6.1 Repayment of Tranche 1 Advances and Tranche 2 Advances 23
6.2 Recalculation of Repayments 23
6.3 Repayment Instructions 23
6.4 Voluntary Prepayment 23
6.5 Facility Agent to notify Banks 24
6.6 Mandatory Prepayment 24
6.7 Date for Prepayment 25
6.8 General provisions relating to prepayment 25
7. INTEREST 25
7.1 Interest Periods 25
7.2 Restrictions on Selection 25
7.3 Calculation of Interest 26
7.4 Payment of Interest 26
8. INTEREST ON OVERDUE AMOUNTS 26
8.1 Payment of Interest 26
8.2 Accrual of Interest 26
9. BILL RELIQUIFICATION 27
9.1 Drawing of Bills 27
9.2 Attorney 27
9.3 Appointment Revoked 27
9.4 Indemnity 27
9.5 Notice 27
10. FEES 28
10.1 Commitment Fee 28
10.2 Arrangement/Underwriting Fee 28
10.3 Establishment Fee 28
10.4 Agency Fees 28
10.5 Ratio Range 28
11. PAYMENTS 29
11.1 Payment to Security Agent 29
11.2 Time and place 29
11.3 Merger 29
11.4 Conversion of Foreign Currency receipts to Dollars 29
11.5 Costs of Conversion 30
(ii)
<PAGE>
TABLE OF CONTENTS
Clause Page
11.6 Application 30
11.7 Foreign Currency indemnity 30
11.8 Insufficient payment 31
11.9 Anticipatory payments 31
11.10 Rounding 31
12. TAXES 31
12.1 No deduction for Taxes and no set-off or counterclaim 31
12.2 Payment net of Taxes 32
12.3 Funding 33
12.4 Termination 33
12.5 Right to Prepay Individual Bank 33
12.6 Goods and Services Tax 33
13. ILLEGALITY 34
14. INCREASED COST 34
14.1 Obligation to Indemnify 34
14.2 Right to Prepay Individual Bank 35
15. MITIGATION 35
15.1 Mitigation 35
15.2 Replacement of Bank 36
15.3 Costs and Expenses 36
16. REPRESENTATIONS AND WARRANTIES 36
16.1 General representations and warranties 36
16.2 Information representations and warranties 38
16.3 Corporate representations and warranties 39
16.4 Representations and warranties repeated 40
17. UNDERTAKINGS 40
17.1 Duration and Benefit 40
17.2 Information 40
17.3 Security Value 43
17.4 Liabilities 45
17.5 Use of Funds 46
17.6 Dividends and Share Capital 46
17.7 Intellectual Property Rights 47
17.8 Insurance 48
17.9 Licences 48
17.10 Material Contracts 49
17.11 Security Property 49
(iii)
<PAGE>
TABLE OF CONTENTS
Clause Page
17.12 General undertakings 50
18. FINANCIAL COVENANTS 52
18.1 Financial Covenants 52
18.2 Compliance Certificate 53
18.3 Stamp Duty Certificate 53
19. DEFAULT AND TERMINATION 53
19.1 Events of Default 53
19.2 Facility Agent's rights upon Event of Default 57
20. GUARANTEE AND INDEMNITY 58
20.1 Guarantee 58
20.2 Indemnity 58
20.3 Performance of Obligations 58
20.4 Liability as Guarantor and indemnifier 58
20.5 Principal obligation 58
20.6 Absolute liability 58
20.7 Unconditional liability 59
20.8 No obligation to gain consent 61
20.9 No marshalling 61
20.10 Void or voidable transactions 61
20.11 Insolvency 62
20.12 No set-off, counterclaim, etc. 62
20.13 Restriction on Guarantor's dealings 62
20.14 Release of Obligor 63
20.15 Conditions precedent 63
20.16 Claim on the Guarantors 63
20.17 Subrogation 63
20.18 General waiver by Guarantors 63
20.19 Judgment 64
21. ADDITIONAL GUARANTORS AND SECURITY 64
21.1 Additional Guarantors 64
21.2 Security 64
21.3 Additional Security 65
22. RELEASE OF GUARANTORS AND SECURITY 65
22.1 Guarantors 65
22.2 Assets 65
22.3 Conditions for Release 66
(iv)
<PAGE>
TABLE OF CONTENTS
Clause Page
22.4 Release of Group Members 66
22.5 Restructure of Group 67
23. INDEMNITY 67
24. AGENTS 67
24.1 Appointment 67
24.2 Relationships 67
24.3 Communications 68
24.4 Instructions of Majority 68
24.5 Amendment 68
24.6 No need for inquiries 69
24.7 Delegation 69
24.8 Agent not bound to Enquire 69
24.9 Default 69
24.10 Agents as Banks 70
24.11 Agent's dealings 70
24.12 Notices and reports 70
24.13 Not responsible 70
24.14 Indemnity 71
24.15 Observe laws 71
24.16 Replacement 71
24.17 No authority 72
24.18 Security Agent as Trustee 72
24.19 Permitted Lease Transaction 73
25. SET-OFF 73
26. PRO RATA SHARING 73
27. EXPENSES AND STAMP DUTIES 74
27.1 Expenses 74
27.2 Stamp duties 75
28. ASSIGNMENTS AND CONFIDENTIALITY 75
28.1 Successors and assigns 75
28.2 Assignments by the Borrower 75
28.3 Banks 75
28.4 Substitution 76
28.5 Increased Costs and Illegality 76
28.6 Sub-participation 77
28.7 Stock Certificates 77
28.8 Related Entities 77
28.9 Confidentiality 78
28.10 Bond Issue or Refinancing 78
(v)
<PAGE>
TABLE OF CONTENTS
Clause Page
29. GOVERNING LAW AND JURISDICTION 79
29.1 Governing law 79
29.2 Jurisdiction 79
30. MISCELLANEOUS 79
30.1 Certificate of Agent 79
30.2 Notices 79
30.3 Continuing obligation 80
30.4 Settlement conditional 80
30.5 Indemnities 80
30.6 Further assurance 80
30.7 Attorney 80
30.8 Severability of provisions 81
30.9 Remedies cumulative 81
30.10 Waiver 81
30.11 Consents and approvals 81
30.12 Written waiver, consent and approval 81
30.13 Time of essence 82
30.14 Consultants fees 82
30.15 Moratorium legislation 82
30.16 Binding on each signatory 82
30.17 Counterparts 82
30.18 Proceeds Account 82
31. NO REPRESENTATION BY OR RELIANCE ON THE BANK OR AGENT 82
32. REVIEW 83
SCHEDULE 1 - ORIGINAL GUARANTORS 84
SCHEDULE 2 - BANKS 86
SCHEDULE 3 - LICENCES 88
SCHEDULE 4 - DOCUMENTARY CONDITIONS PRECEDENT 89
SCHEDULE 5 - FORMS OF UTILISATION NOTICE 91
SCHEDULE 6 - ACCESSION AGREEMENT 92
SCHEDULE 7 - SUBSTITUTION CERTIFICATE 94
SCHEDULE 8 - NOTICE FROM UIH 99
(vi)
<PAGE>
TABLE OF CONTENTS
Clause Page
SCHEDULE 9 - COMPLIANCE CERTIFICATE 100
SCHEDULE 10 - FORM OF STAMP DUTY CERTIFICATE 102
SCHEDULE 11 - MATERIAL CONTRACTS 103
SCHEDULE 12 - PERMITTED LEASE TRANSACTION 104
(vii)
<PAGE>
FACILITY AGREEMENT made at on 1999 at am/pm
BETWEEN AUSTAR ENTERTAINMENT PTY LIMITED, ACN 068 104 530 of Level 29,
AAP Centre, 259 George Street, Sydney, New South Wales (the
"Borrower")
AND EACH COMPANY SPECIFIED AS A GUARANTOR in Schedule 1 (each an
"Original Guarantor")
AND EACH FINANCIAL INSTITUTION SPECIFIED AS A BANK in Schedule 2
(each a "Bank")
AND CHASE SECURITIES AUSTRALIA LIMITED, ACN 002 888 011 of Level
35, AAP Centre, 259 George Street, Sydney, New South Wales as
facility agent for the Banks (in this capacity the "Facility
Agent")
AND CHASE SECURITIES AUSTRALIA LIMITED, ACN 002 888 011 of Level
35, AAP Centre, 259 George Street, Sydney, New South Wales as
security agent and trustee for the Banks (in this capacity the
"Security Agent")
RECITALS
A. At the request of the Borrower and the Guarantors the Banks have
agreed, subject to the terms of this Agreement, to provide the
facilities described herein to the Borrower.
B. The Guarantors confirm that they enter into this Agreement for valuable
consideration and that the provision of the guarantee contained in this
Agreement is in their best interests and will give rise to a commercial
benefit for them.
THE PARTIES AGREE:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement:
"A$200 Million Syndicated Senior Secured Debt Facility Agreement" means
the agreement so entitled dated 31 July 1997 between the Borrower, the
Guarantors, the Banks (as defined therein) and the Security Agent.
"Access Agreement" means:
(a) one or more shareholders' agreements between Austar Satellite
Ventures Pty Limited ACN 082 617 829, the Borrower, Satellite
Platform Investments Pty Limited ACN 083 164 505, Optus
Network Pty Limited ACN 008 570 330, Optus Vision Pty Limited
ACN 066 518 821 and Satellite Platform Pty Limited or another
joint venture company;
1.
<PAGE>
(b) one or more service agreements in respect of the satellite
platform to be between Satellite Platform Pty Limited or the
relevant joint venture entity and a member of the Group; and
(c) one or more contribution agreements in respect of the
satellite platform parties.
"Accession Agreement" means an agreement substantially in the form of
Schedule 6 made pursuant to clause 21.1.
"Accounts" means from time to time:
(a) the latest audited consolidated annual accounts of CTV and
STV;
(b) the latest audited notionally consolidated annual accounts
of the Group;
(c) the latest audited consolidated semi-annual accounts of CTV
and STV;
(d) the latest audited notionally consolidated semi-annual
accounts of the Group;
(e) the latest unaudited consolidated monthly management
accounts of the Group; and
(f) any other audited or unaudited consolidated or
unconsolidated accounts (if any) of the Group or any member
thereof, delivered or required to be delivered to the
Facility Agent pursuant to this Agreement, or such of those
accounts as the context requires.
"Additional Guarantor" means any entity which becomes a party hereto as
a Guarantor pursuant to an Accession Agreement.
"Advance" means:
(a) when designated "Tranche 1" or "Tranche 2" the principal
amount of each borrowing under this Agreement from the Tranche
1 Commitments or the Tranche 2 Commitments respectively or the
principal amount of such borrowing outstanding from time to
time, as the context requires (collectively the "Tranche 1
Advances" and the "Tranche 2 Advances");
(b) without any such designation, a Tranche 1 Advance or a Tranche
2 Advance as the context requires, and "Advances" without any
such designation means some
or all of the Tranche 1 Advances and/or the Tranche 2 Advances
as the context requires.
"Adverse Title Retention Arrangement" means any title retention
arrangement entered into with any person in connection with the
acquisition of goods in the course of business on terms that the
vendor's title is or may be retained in respect of any goods which have
been paid for in full.
2.
<PAGE>
"Agent" means:
(a) when designated "Facility Agent", Chase Securities Australia
Limited or any of its successors pursuant to clause 24.16;
(b) when designated "Security Agent", Chase Securities Australia
Limited or any of its successors pursuant to any relevant
provision of any of the Securities; and
(c) without any such designation, the Facility Agent or the
Security Agent, as the context requires, and "Agents" without
any such designation means one or more of the Facility Agent
and the Security Agent, as the context requires.
"Amortisation Schedule" means the schedule of dates and payments set
out in clause 6.1.
"Availability Period" means the period from the date of this Agreement
to:
(a) when designated "Tranche 1", close of business in Sydney 90
days after the date of this Agreement;
(b) when designated "Tranche 2", close of business in Sydney on 30
June 2002, or such later date as all the Banks may agree in
writing on or after the date hereof.
"Bank" means each of the following:
(a) each bank or other financial institution whose name is set out
in Schedule 2;
(b) each bank or other financial institution to which rights
and/or obligations under this Agreement are assigned or
transferred pursuant to clause 28;
(c) any successor or successors in title to any of the foregoing,
provided that upon (i) termination in full of all the Commitments of
any Bank, and (ii) irrevocable payment in full of all amounts which
may be or become payable to such Bank under the Transaction Documents,
such Bank shall not be regarded as being a Bank for the purposes of
determining whether any provision of any of the Transaction Documents
requiring consultation with or the consent or approval of or
instructions from the Banks or the Majority Banks has been complied
with (together the "Banks").
"Banking Day" means a day (not being a Saturday or Sunday) on which
banks are open for business generally in Sydney and Melbourne.
"Bill" means a bill of exchange within the meaning given to the
expression "bill of exchange" in the Bills of Exchange Act 1909 of the
Commonwealth of Australia, but does not include a cheque or payment
order, and any reference to the drawing, acceptance, indorsement or
other dealing of or with a Bill refers to a drawing, acceptance,
indorsement or other dealing within the meaning of that Act.
3.
<PAGE>
"Bill Rate" in relation to each Interest Period means the rate
(expressed as a percentage per annum) which is the average of the bid
rates shown at approximately 11.00 am on page "BBSY" on the Reuters
Monitor System on the first day of that Interest Period for a term
equal to the duration of that Interest Period (or if that Interest
Period is subject to. 4. marginal adjustment, for a term equal to the
duration of the Interest Period prior to such adjustment) provided that
if such rate is no longer available or, in the opinion of the Facility
Agent such rate becomes inappropriate, unfair or incapable of
application, the Bill Rate shall mean the rate reasonably determined by
the Facility Agent to be the appropriate equivalent rate having regard
to prevailing market conditions.
"Chase" means The Chase Manhattan Bank, ARBN 074 112 011.
"Commitment" in relation to a Bank means:
(a) when designated "Tranche 1" or "Tranche 2", the amount
appearing and designated as such against that Bank's name in
Schedule 2 or in the Substitution Certificate or other
document by which it became a party to or acquired rights
under this Agreement (collectively the "Tranche 1 Commitments"
and the "Tranche 2 Commitments";
(b) without any such designation, a Bank's Tranche 1 Commitment or
Tranche 2 Commitment, as the context requires,
in each case as reduced or increased pursuant to clause 5.4 or by
substitution or transfer pursuant to clause 28 and any Substitution
Certificates to which such Bank is party, and to the extent not
cancelled, reduced or terminated under this Agreement (collectively
the "Total Commitments").
"Compliance Certificate" means a certificate in the form of Schedule 9
signed by two members of the Board of Directors of the Borrower
stating that the financial covenants listed in clause 18.1 and the
representations and warranties listed in clause 16 are true and
correct and, when given at the end of the financial year, will be
based on audited Accounts.
"Controller" has the meaning given in section 419(1) of the
Corporations Law.
"CTV" means CTV Pty. Limited, ACN 064 416 128.
"Debentures" means the perpetual, subordinated, convertible debentures
issued by CTV or STV, as the case may be.
"Debenture Stock Trust Deed" means the deed so entitled dated 2 April
1997 entered into by, amongst others, the Security Agent and the
Borrower.
"Dollar" or "$" means the lawful currency for the time being of the
Commonwealth of Australia.
"EBITDA" means, on a consolidated basis for any period, cash revenue
minus:
(a) all corporate overhead;
4.
<PAGE>
(b) all scheduled licence and service fees and programming
payments; and
(c) all operating expenses except depreciation, amortisation
(including programming amortisation), interest expenses,
other non-cash charges, income taxes accrued for such
period, extraordinary abnormal and non recurring gains or
losses, and gains or losses from the sale of assets to the
extent such items are included in operating expenses.
"Encumbrance" means any mortgage, charge, pledge, lien, encumbrance,
security interest, title retention, preferential right, security trust
arrangement, contractual right of set-off or any other security
agreement or arrangement in favour of any person.
"Equipment" means receiving equipment consisting of antennae, down
converters, satellite dishes, set-top boxes, ancillary equipment and
installation costs.
"Equity Contribution" means the amount contributed as cash to CTV
and/or STV by UIH Australia/Pacific, Inc. or a Related Body Corporate
of UIH Australia/Pacific, Inc. (in the form of equity, Subordinated
Debt or other type of financial accommodation acceptable to the
Facility Agent) which has been used or which is available to be used
for the purpose of purchasing Equipment and for working capital
purposes calculated from 16 March 1999, but does not include any
amounts contributed pursuant to the Equity Contribution Agreement or
clause 3.1(f).
"Equity Contribution Deed" means the deed so entitled between the
Borrower and UIH Asia/Pacific Communications Inc. dated on or about
the date of this Agreement.
"Event of Default" means any of the events set out or referred to in
clause 19 as an Event of Default.
"Event of Insolvency" means:
(a) a receiver, manager, receiver and manager, trustee,
administrator, Controller or similar officer is appointed in
respect of an Obligor or any asset of an Obligor;
(b) a liquidator or provisional liquidator is appointed in respect
of any Obligor;
(c) any application (not being an application withdrawn or
dismissed within 7 days or an application which the Facility
Agent agrees is frivolous or vexatious and will be dismissed)
is made to a court for an order, or an order is made, or a
meeting is convened, or a resolution is passed, for the
purpose of:
(i) appointing a person referred to in paragraphs (a) or
(b);
(ii) winding up an Obligor; or
(iii) proposing or implementing a scheme of arrangement in
respect of an Obligor;
(d) a moratorium of any debts of an Obligor or an official
assignment or a composition or an arrangement (formal or
5.
<PAGE>
informal) with an Obligor's creditors or any similar
proceeding or arrangement by which the assets of an Obligor
are subjected conditionally or unconditionally to the control
of an Obligor's creditors is ordered, declared or agreed to,
or is applied for and the application is not withdrawn or
dismissed within 7 days;
(e) an Obligor becomes, or admits in writing that it is, or is
declared to be, is deemed under any applicable law to be,
insolvent or unable to pay its debts;
(f) any writ of execution, garnishee order, mareva injunction or
similar order, attachment, distress or other process is made,
levied or issued against or in relation to any asset of an
Obligor in respect of a claim greater than $100,000.
"Excess Cash Flow" means, for any financial year, all cash inflows
during that period of the Group from whatever source (not including
cash proceeds from new equity and Subordinated Debt issues), less all
cash outflows during that period of the Group (including debt
amortisation in accordance with the Amortisation Schedule but excluding
any payments made pursuant to clause 17.6), determined on a
consolidated basis and based on audited accounts.
"Excluded Taxes" means any Taxes imposed by any jurisdiction on the
overall net income of a Bank but not Taxes:
(a) which are calculated on or by reference to the gross amount of
any payments (without the allowance of any deduction) derived
under this Agreement or any Transaction Document or any other
document referred to in this Agreement or a Transaction
Document by the Bank; or
(b) which are imposed as a result of the Bank being considered a
resident of or organised or doing business in that
jurisdiction solely as a result of it being a party to this
Agreement or a Transaction Document or any transaction
contemplated by this Agreement or a Transaction Document.
"Facility" means:
(a) when designated "Tranche 1 Facility", the A$200,000,000
amortising cash advance facility referred to in clause 2.1(a);
(b) when designated "Tranche 2 Facility", the A$200,000,000
amortising cash advance facility referred to in clause 2.1(b);
and
(c) without any such designation, the Tranche 1 Facility or the
Tranche 2 Facility as the context requires,
and "the Facilities" means the Tranche 1 Facility and the Tranche 2
Facility taken together.
"Financial Liability" means present or future, actual or contingent
indebtedness in respect of financial accommodation, credit or hedging
6.
<PAGE>
arrangements, finance leases or hire purchase arrangements or any
guarantee or other assurance in respect of any such indebtedness.
"financial year" means a calendar year ending on 31 December.
"Foreign Currency" means the currency for the time being of any country
other than the Commonwealth of Australia.
"Funding Bank" means Chase or Toronto Dominion Australia Limited, ACN
004 958 020.
"Funding and LC Bank Agreement" means each document so named entered
into between the Funding Bank and an LC Bank.
"Group" means the Borrower, CTV and STV and each Subsidiary of the
Borrower, CTV or STV.
"GST" means any goods and services tax, consumption tax, value added
tax or any similar tax, impost or duty imposed by any law of the
Commonwealth of Australia or any State or Territory of Australia
(whether in force before or coming into force after the date of this
Agreement).
"Guarantor" means each entity identified as an Original Guarantor in
Schedule 1 and each Additional Guarantor (together the "Guarantors").
"Hedging Agreements" means any interest rate or currency hedging
agreement entered into between the Borrower and a Bank (or its
affiliate).
"Information Memorandum" means the memorandum dated February 1999
prepared by the Facility Agent on the basis of information supplied by
the Obligors to assist the Facility Agent in obtaining persons to
provide financial accommodation pursuant to the Facility and containing
information, financial and otherwise, regarding Obligors.
"Insolvency Provision" means any law relating to insolvency,
sequestration, liquidation or bankruptcy (including any law relating to
the avoidance of conveyances in fraud of creditors or of preferences
and any law under which a liquidator or trustee in bankruptcy may set
aside or avoid transactions) and any provision of any agreement,
arrangement or scheme, formal or informal, relating to the
administration of any of the assets of any person.
"Intended Obligations" means any payment or other act the making or
doing of which would have formed part of the Obligations but for a
circumstance referred to in clause 20.7(c).
"Interest Expense" means all Senior Debt interest and financing costs,
whether paid as cash or accrued as a liability on all direct,
contingent (including imputed interest on capital equipment lease
obligations), and other permitted indebtedness of the Group, determined
on a consolidated basis less any interest revenue earned by the Group
during that period.
"Interest Period" means each period determined in accordance with
clause 7.1.
7.
<PAGE>
"LC Bank" means any person, other than a Bank, who has or hereafter
enters into a Funding and LC Bank Agreement with the Funding Bank.
"Licence" means each of the licences listed in Schedule 3.
"Long Range Plan" means the long term financial model prepared by the
Borrower dated 8 January 1999 and contained in the Information
Memorandum certified as such by 2 directors of the Borrower, or any
revised version of such model, agreed by the Facility Agent acting on
instructions from the Majority Banks to be the Long Range Plan for the
purposes of this Agreement.
"Majority Banks" means at any time:
(a) whilst no Advance is outstanding, a Bank or Banks the
aggregate of whose Commitments at the relevant time represent
by value more than 66-2/3% of the Total Commitments at such
time; or
(b) if an Advance is then outstanding, a Bank or Banks the
aggregate of whose participation in the Advances outstanding
at such time represent by value more than 66-2/3% of the
aggregate of all the Advances.
"Material Adverse Effect" means any effect which is, or is reasonably
likely:
(a) to be materially adverse to:
(i) the ability of CTV, STV or the Borrower to perform
its material obligations under any of the Transaction
Documents to which it is a party; or
(ii) the ability of any Obligor (except CTV, STV or the
Borrower) toperform its material obligations under
any of the Transaction Documents to which it is a
party and which are material to the Group as a whole;
or
(iii) the business, assets, financial condition of the
Borrower or of the Group taken as a whole; and/or
(b) (where the context so admits) to result in any of the Transaction
Documents not being legal, valid and binding on, and enforceable
substantially in accordance with its material terms against, any
party (other than a Bank, the Facility Agent or the Security
Agent) to that Transaction Document and/or (in the case of any of
the Securities) not providing to the Security Agent for itself
and on behalf of the Banks, perfected, enforceable security over
the assets to be covered by that Security, in a manner and to an
extent reasonably considered by the Majority Banks to be
materially adverse to their interests under the Transaction
Documents.
"Material Contract" means:
(a) each document referred to in Schedule 11; and
(b) each other contract entered into by a member of the Group
after the date of this Agreement which is of similar
8.
<PAGE>
importance to the net cash flow or operation of the business
of the Group as the contracts listed in paragraph (a) of this
definition and which the Facility Agent (acting on the
instructions of the Majority Banks) designates to be a
Material Contract by notice to the Borrower.
"Net Proceeds" means the consideration received by any member or
members of the Group in respect of the disposal to a person not in the
Group of any member of the Group or of all or any part of the business,
undertaking or assets of any member of the Group (including the amount
of any intercompany debt repaid to continuing members of the Group),
after deduction of all Taxes applicable on, or to any gain resulting
from, the disposal and of all reasonable costs, fees, expenses and the
like properly incurred by continuing members of the Group in arranging
and effecting that disposal.
"Obligations" means all the liabilities of the Borrower or any
Guarantor to the Agents and the Banks under or by reason of any
Transaction Document and, without limiting the generality of the
foregoing, includes any liabilities which:
(a) are liquidated or unliquidated;
(b) are present, prospective or contingent;
(c) are in existence before or come into existence upon or after
the date of this document;
(d) relate to the payment of money or the performance or omission
of any act;
(e) sound in damages only; or
(f) accrue as a result of an Event of Default,
and irrespective of:
(i) whether the Borrower or any other Obligor is liable
or obligated solely, or jointly and severally with
another person;
(ii) the circumstances in which the Banks come to be owed
each liability or obligation and in which each
liability or obligation came to be secured by this
document, including, without limitation any
assignment of any liability or obligation or of this
document; or
(iii) the capacity in which the Borrower, any other Obligor
and the Banks come to owe or to be owed such
liability or obligation.
"Obligor" means a several reference to the Borrower, each Guarantor,
any other member of the Group which has been required to enter into
(whether or not it has yet entered into) any Accession Agreement and/or
Security and, when used in clause 20, also means any person from whom a
Guarantor, but for any provision of this Agreement, would be entitled
to seek contribution in respect of money paid or payable by virtue of
the guarantee contained herein (together the "Obligors").
9.
<PAGE>
"Original Securities" means:
(a) Deed of Fixed and Floating Charge in favour of the Security
Agent over the whole of the assets and undertakings of the
Borrower and the Original Guarantors (other than CTV) which
are located in Queensland, dated 2 April 1997;
(b) Deed of Fixed and Floating Charge in favour of the Security
Agent over the whole of the assets and undertakings of CTV
which are located in Queensland, dated 2 April 1997;
(c) Deed of fixed and Floating Charge in favour of the Security
Agent over the whole of the assets and undertakings of the
Borrower and the Original Guarantors which are located in
jurisdictions other than Queensland, South Australia,
Western Australia and Tasmania, dated 2 April 1997;
(d) Deed of Fixed and Floating Charge in favour of the Security
Agent over the whole of the assets and undertakings of the
Borrower and the Original Guarantors which are located in
South Australia and Tasmania, dated 2 April 1997;
(e) Deed of Fixed and Floating Charge over the whole of the assets
and undertakings of the Borrower and the Original Guarantors
which are located in Western Australia, dated 2 April 1997;
(f) the Share Mortgage;
(g) Deed of Charge (Property Situated in South Australia and
Tasmania) dated 31 December 1998 between Wollongong
Microwave Pty Limited and the Security Agent; and
(h) Deed of Charge (Property Situated in Jurisdictions other than
Queensland, South Australia, Western Australia and Tasmania)
dated 31 December 1998 between Wollongong Microwave Pty
Limited, Chippawa Pty Limited, Ilona Investments Pty Limited
and the Security Agent.
"Permitted Lease Transaction" means a sale and lease-back transaction
of the kind referred to in Schedule 12 or any replacement of Schedule
12 which is approved by the Facility Agent acting on the instructions
of all of the Banks.
"Potential Event of Default" means any event which, with the giving of
notice, lapse of time, satisfaction of a condition or any determination
would be likely to constitute an Event of Default.
"Prescribed Rate" for each Interest Period means the aggregate of the
Bill Rate in relation thereto and the Utilisation Margin.
"Proportion" means the amount of a Bank's participation in an Advance
in the proportion (applied to the requested amount of the Advance)
which its Commitment bearing the same Tranche designation as such
10.
<PAGE>
Advance bears to the amount of the Total Commitments having such
designation.
"Quarterly Date" means, in any year, 31 March, 30 June, 30 September
and 31 December.
"Ratio Range" on any date means the amount of Total Debt divided by
actual EBITDA for the last quarter annualised period.
"Related Body Corporate" has the meaning given in section 9 of the
Corporations Law, but on the basis that "Subsidiary" for the purposes
of that definition has the meaning given in this Agreement.
"Repayment Date" means each repayment date specified in clause 6.1.
"Salstel Holdings" means Salstel Media Holdings Pty Limited, ACN 072
016 383.
"Salstel Investments" means Salstel Media Investments Pty Limited, ACN
072 016 132.
"Securities" means the Original Securities together with any other
security held by the Security Agent as agent of the Banks at any time
for the due performance, observance and fulfilment of the Obligations,
and "Security" means each or any one of them as the context requires.
"Security Property" means any property subject to a Security.
"Senior Debt" means all direct and contingent borrowings (excluding
non-financial corporate guarantees) of the Group which are not
subordinated.
"Share Mortgage" means the Deed of Mortgage of Securities in favour of
the Security Agent dated 1 July 1997 granted by Salstel Holdings,
Salstel Investments and UIH Austar, Inc. in respect of the whole of the
share capital in CTV and STV and certain other property.
"Specified Rate" means the aggregate of the Prescribed Rate and 2% per
annum.
"Stamp Duty Certificate" means a certificate in the form of Schedule 10
signed by an authorised officer of the Borrower as to the location and
value of the Security Property.
"Stock" means debenture stock issued under the Debenture Stock Trust
Deed.
"STV" means STV Pty Limited, ACN 065 312 450.
"Subordinated Debt" means any indebtedness the payment of which is
subordinated to the Senior Debt.
"Subsidiary" in relation to any person, has the meaning given in the
Corporations Law but so that:
11.
<PAGE>
(a) an entity will also be deemed to be a Subsidiary of a company
if it is controlled by that company (expressions used in this
paragraph have the meanings given for the purposes of Parts
3.6 and 3.7 of the Corporations Law);
(b) a trust may be a Subsidiary, for the purposes of which any
units or other beneficial interests will be deemed shares; and
(c) a corporation or trust may be a Subsidiary of a trust if it
would have been a Subsidiary if that trust were a corporation.
A determination by any auditors of the Borrower for the time being as
to whether an entity is a Subsidiary of another entity will be
evidence of the same until the contrary is proved.
"Substitution Certificate" means a certificate in the form of Schedule
7 completed and entered into in accordance with clause 28.4, and
references to "substitutes" shall be construed as references to persons
becoming party to this Agreement pursuant to Substitution Certificates.
"Tax" and "Taxes" mean all income tax, stamp duty and other taxes,
levies, imposts, deductions, charges and withholdings plus interest
thereon and penalties, if any, and charges, fees or other amounts made
on or in respect thereof and "Taxation" shall be construed
accordingly.
"Termination Date" means the earlier of:
(a) (i) when designated "Tranche 1 Termination Date", 31 March
2006;
(ii) when designated "Tranche 2 Termination Date", 31 March
2006;
or in each case such other date as is agreed in writing
between the Facility Agent (acting on the instructions of all
Banks) and the Borrower; and
(b) such earlier date on which the Facility is terminated
or cancelled in accordance with this Agreement.
"Total Debt" means Senior Debt plus Subordinated Debt.
"Total Subscribers" means, on a day, the subscription revenue for the
most recently ended month divided by the greater of:
(a) the average monthly residential customer revenue per home; or
(b) $35.95,
as certified to the Facility Agent by two of the Borrower's directors
on a monthly basis.
12.
<PAGE>
"Transaction Document" means:
(a) this agreement (together with each Accession Agreement and
Substitution Certificate);
(b) each Hedging Agreement;
(c) the Debenture Stock Trust Deed and each Stock issued under
that deed;
(d) each Security;
(e) the Equity Contribution Deed;
(f) the Tripartite Agreement;
(g) each other document to which any Obligor (on the one hand) and
an Agent or a Bank (on the other hand) are parties at any time
that:
(i) relates to any money that is declared by that documen
to be part of the Obligations; or
(ii) is expressed to be, or is agreed by the said parties
to be, a Transaction Document for the purposes
hereof;
(h) the Funding and LC Bank Agreements; and
(i) any other document which is, or which is expressed to be,
collateral or supplemental to any other document that is then
a Transaction Document.
"Tripartite Agreement" means the agreement so entitled between the
Borrower, the Facility Agent and UIH Asia/Pacific Communications Inc.
dated on or about the date of this Agreement.
"Utilisation" means:
(a) when designated "Tranche 1 Utilisation" or "Tranche 2
Utilisation", a utilisation under this Agreement of the
Tranche 1 Facility or the Tranche 2 Facility respectively;
(b) without any such designation, a utilisation of the Tranche 1
Facility or the Tranche 2 Facility, as the context requires.
"Utilisation Date" means the date on which an Advance is made or, where
the context requires, is proposed to be made.
"Utilisation Margin" means the percentage per annum determined in
accordance with clause 10.5.
"Utilisation Notice" means a notice given under clause 4 in respect of
an Advance.
13.
<PAGE>
1.2 Interpretation
In this Agreement unless the context indicates a contrary intention:
(a) the expression "person" includes an individual, the estate
of an individual, a body politic, a corporation and a
statutory or other authority or association (incorporated or
unincorporated);
(b) a reference to any party includes that party's executors,
administrators, successors, substitutes and assigns, including
any person taking by way of novation;
(c) a reference to any Transaction Document however described or
to any other document includes the Transaction Document or
other document as amended, novated, supplemented, varied or
replaced from time to time;
(d) a reference to any legislation or to any section or provision
thereof includes any statutory modification or re-enactment or
any statutory provision substituted therefor and all
ordinances, by-laws, regulations and other statutory
instruments issued thereunder;
(e) words importing the singular include the plural (and vice
versa) and words denoting a given gender include all other
genders;
(f) headings are for convenience only a nd do not affect
interpretation;
(g) a reference to a clause or Schedule is a reference to a clause
or Schedule of this Agreement;
(h) where any word or phrase is given a defined meaning any other
part of speech or other grammatical form in respect of such
word or phrase has a corresponding meaning;
(i) where the day on or by which any sum is payable or any act,
matter or thing is to be done is a day other than a Banking
Day, that sum will be paid and such act, matter or thing will
be done on the immediately preceding Banking Day;
(j) all accounting terms used have the meaning given to those
terms under accounting principles and practices generally
accepted in Australia from time to time;
(k) representations, warranties, covenants, undertakings and
agreements made or given in favour of the Agents in their
capacity as Agents enure for the benefit of and, subject to
the Transaction Documents, be capable of enforcement by the
Banks and each of them; and
(l) a reference to a law includes an Australian or applicable
foreign law, regulation, rule, directive or policy of any
government or regulatory authority whether or not having the
force of law.
14.
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1.3 Joint and several liability
The obligations of the Guarantors under this Agreement will bind each
of them severally and every 2 or more of them jointly and unless the
context indicates a contrary intention, the expression "Guarantors"
will be deemed to include any person who has guaranteed, or in the
future guarantees to the Agents and the Banks the due performance of
the whole or any part of the Obligations.
1.4 Debenture Stock Trust Deed
This Agreement and each of the Transaction Documents as defined in this
Agreement are "Transaction Documents" for the purposes of the Debenture
Stock Trust Deed.
1.5 Specified Rate
A reference to the Specified Rate in the Securities is agreed to be a
reference to the Specified Rate as defined in clause 1.1.
1.6 Dual lender
(a) The Borrower, the Guarantors, the Facility Agent, the Security
Agent and each Bank acknowledge and agree that the Commitment
of ABN AMRO Australia Limited and ABN AMRO Bank N.V.,
Australian Branch, as Banks, is one and the same Commitment
made by them jointly and severally. Where ABN AMRO Australia
Limited and ABN AMRO Bank N.V., Australian Branch are obliged
to provide an Advance, which of them actually provides that
Advance will be determined by ABN AMRO Australia Limited in
its absolute discretion.
(b) Each reference in any Transaction Document to a "Bank" in
relation to an Advance will, so far as that reference
relates to ABN AMRO Australia Limited and ABN AMRO Bank
N.V., Australian Branch be deemed to be a reference to
whichever of ABN AMRO Bank N.V., Australian Branch or ABN
AMRO Australia Limited has actually provided that Advance.
Each other reference in any Transaction Document to a "Bank"
will, so far as that reference relates to ABN AMRO Australia
Limited and ABN AMRO Bank N.V., Australian Branch be deemed
to be a reference to either or both of ABN AMRO Australia
Limited and ABN AMRO Bank N.V., Australian Branch, as the
context requires.
(c) Unless otherwise agreed in writing, all payments in respect of
fees are to be made for the account of ABN AMRO Australia
Limited and all payments to ABN AMRO Australia Limited, as a
Bank in respect of an obligation to pay ABN AMRO Bank N.V.,
Australian Branch will satisfy, to the extent of that payment,
the obligation to pay ABN AMRO Bank N.V., Australian Branch.
(d) A consent from, a communication to or by, or the exercise of a
discretion by, one of ABN AMRO Bank N.V., Australian Branch or
ABN AMRO Australia Limited in its capacity as a Bank will bind
the other of them as a Bank.
15.
<PAGE>
(e) A payment to ABN AMRO Bank N.V., Australian Branch, in respect
of an obligation to pay ABN AMRO Australia Limited will
satisfy, to the extent of that payment, the obligation to pay
ABN AMRO Australia Limited and a payment to ABN AMRO Australia
Limited, in respect of an obligation to pay ABN AMRO Bank
N.V., Australian Branch, shall satisfy, to the extent of that
payment the obligation to pay ABN AMRO Bank N.V., Australian
Branch.
(f) Any additional costs and expenses incurred by ABN AMRO Bank
N.V., Australian Branch, or ABN AMRO Australia Limited as a
result of ABN AMRO Bank N.V., Australian Branch, and ABN AMRO
Australia Limited providing Advances instead of just ABN AMRO
Bank N.V., Australian Branch or ABN AMRO Australia Limited
providing those Advances will be borne by ABN AMRO Bank N.V.,
Australian Branch and ABN AMRO Australia Limited and will not
be passed on to the Borrower.
(g) This clause 1.6 applies for so long as ABN AMRO Australia
Limited is a wholly owned subsidiary of ABN AMRO Bank N.V.. If
ABN AMRO Australia Limited ceases to be a wholly owned
subsidiary of ABN AMRO Bank N.V. or if ABN AMRO Bank N.V.
elects that ABN AMRO Australia Limited will not provide future
Advances and notifies the Borrower of that election:
(i) this clause 1.6 ceases to apply to any Advances after
the date of that cessation or election;
(ii) ABN AMRO N.V., Australian Branch will provide its
Commitment and each Advance previously provided by
ABN AMRO Australia Limited; and
(iii) ABN AMRO N.V., Australian Branch, will do all things
and execute all documents (at its cost) to give
effect to sub-clauses (i) and (ii).
2. THE FACILITY
2.1 Facilities
Subject to the terms of this Agreement and in reliance upon the
representations and warranties set out in clause 16, the Banks grant to
the Borrower the following facilities:
(a) Tranche 1 Facility: a cash advance facility whereby the Banks,
when requested by the Borrower pursuant to a Utilisation
Notice, during the Tranche 1 Availability Period, will make
Tranche 1 Advances in an aggregate amount which will not
exceed the Tranche 1 Commitments; and
(b) Tranche 2 Facility: a cash advance facility whereby the Banks,
when requested by the Borrower pursuant to a Utilisation
Notice, during the Tranche 2 Availability Period, will make
Tranche 2 Advances in an aggregate amount which will not
exceed the Tranche 2 Commitments.
16.
<PAGE>
2.2 Banks' Commitments
No Bank is obliged to participate in the making of a Tranche 1 Advance
or a Tranche 2 Advance if to do so would cause the aggregate of its
participation in Tranche 1 Advances or Tranche 2 Advances (as the case
may be) outstanding under this Agreement to exceed its Tranche 1
Commitment or its Tranche 2 Commitment (as the case may be).
2.3 Several obligations
The obligations of each Bank under this Agreement and each Transaction
Document are several. The failure of a Bank to perform its obligations
under this Agreement or a Transaction Document shall not relieve any
other Bank, the Agents or an Obligor of any of its respective
obligations or responsibilities under this Agreement or the Transaction
Documents. The Agents shall not be responsible for the obligations of
any Bank (except for its own obligations, if any, as a Bank), nor shall
any Bank be responsible for the obligations of any other Bank.
2.4 Several interests
The interests of the Agents and each Bank under this Agreement and each
Transaction Document are several. The amounts due to the Facility Agent
on its own account, the Security Agent on its own account and to each
Bank under this Agreement or a Transaction Document constitutes a
separate and independent debt.
2.5 Purpose
(a) The Facilities will be used as follows:
(i) the Tranche 1 Facility will be used for the purpose
of repaying in full the moneys owing pursuant to the
A$200 Million Syndicated Senior Secured Debt Facility
Agreement and thereafter for the purchase and
installation of Equipment and working capital
requirements; and
(ii) the Tranche 2 Facility will be used for the purpose
of implementing the Long Range Plan, including but
not limited to purchasing and installing Equipment
and working capital requirements.
(b) The Facilities will not be used for any other purpose than
that described in clause 2.5(a).
2.6 Termination
(a) The Tranche 1 Facility terminates on the Tranche 1 Termination
Date.
(b) The Tranche 2 Facility terminates on the Tranche 2 Termination
Date.
17.
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2.7 Nature of Borrower's rights and obligations hereunder
(a) (Borrower as Agent): Each Obligor (other than the Borrower) by
its execution of this Agreement or an Accession Agreement
irrevocably authorises the Borrower on its behalf to give all
notices and instructions under the Transaction Documents, to
execute on its behalf any Accession Agreement and to make such
agreements capable of being given or made by any Obligor
relating to the Transaction Documents notwithstanding that
they may affect such Obligor, without further reference to or
the consent of such Obligor.
(b) (Borrower's acts binding): Every act, omission, agreement,
undertaking, settlement, waiver, notice o r other
communication given or made by the Borrower under this
Agreement, or in connection with this Agreement, (whether or
not known to any other Obligor and whether occurring before
or after such other Obligor became an Obligor under this
Agreement) shall be binding for all purposes on all other
Obligors as if the other Obligors had expressly concurred
with the same. In the event of any conflict between any
notices or other communications of the Borrower and any
other Obligor, those of the Borrower shall prevail.
2.8 Voting
(a) When the Funding Bank enters into a Funding and LC Bank
Agreement, it may notionally divide any or all of its
Commitments and/or participation in the Advances into separate
amounts to reflect each LC Bank's Commitment (as defined in
the relevant Funding and LC Bank Agreement) and may vote or
abstain from voting, with respect to any such separate amount,
on any matter separately and differently from its vote or
abstention with respect to any other such separate amount on
such matter.
(b) LC Banks may attend any meeting of Banks.
(c) Subject to clause 28.3(a), if a Bank assigns its participation
in some or all of the Advances to another person pursuant to
clause 28.3(c), it may vote or abstain from voting the
participation in these Advances separately and differently
from its vote or abstention with respect to its remaining
participation in any Advances.
3. CONDITIONS PRECEDENT
3.1 Conditions precedent to the first Utilisation
The obligations of each Bank under this Agreement are subject to the
conditions precedent that:
(a) (Finance Documents): the Facility Agent has received original
copies of this Agreement and the Securities, duly executed by
the Borrower and the Original Guarantors, together with an
undertaking by the Borrower (which it hereby gives) that it
will pay all applicable stamp duty, including further stamp
duty on the Securities when, and if, required;
18.
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(b) (Documents): the Facility Agent has received all of the
documents listed in Schedule 4 in form and substance
satisfactory to it;
(c) (Fees): all fees referred to in clauses 10.2, 10.3 and 10.4
and all other fees and expenses owing to the Banks and their
consultants have been paid, other than those disputed in good
faith or confirmation that the Borrower will pay
simultaneously with the first Utilisation those fees and
expenses;
(d) (Total Subscribers): the Facility Agent has received evidence
in the form of a statement from two directors of the Borrower,
that the Group has achieved and maintains a minimum Total
Subscribers level of 280,000;
(e) (Indenture): the Facility Agent has received a notice
substantially in the form of Schedule 8 from UIH
Australia/Pacific, Inc.;
(f) (Equity): the Facility Agent has received evidence
satisfactory to it that UIH Asia/Pacific Inc. has contributed
$2,500,000 in cash to CTV and/or STV (in the form of equity,
Subordinated Debt or other type of financial accommodation
acceptable to the Facility Agent) in respect of adverse
foreign exchange movements in the first quarter of 1999;
(g) ( Compliance Certificate): the Facility Agent has received a
Compliance Certificate; and
(h) (Stamp Duty Certificate): the Facility Agent has received a
Stamp Duty Certificate.
3.2 Conditions precedent to all Utilisations
The obligations of the Facility Agent and each Bank in respect of each
Utilisation are subject to the Facility Agent being satisfied that both
at the date of the relevant Utilisation Notice and at the Utilisation
Date:
(a) (Representations and warranties true): the representations
and warranties listed in clause 16 are true and correct and
will be correct immediately after the making of the Advance;
(b) (No Event of Default): no Event of Default or Potential Event
of Default is subsisting or will result from the making of the
Advance;
(c) (No Material Adverse Effect): no event has occurred which
would have a Material Adverse Effect;
(d) (No Change in Law): no change has occurred in applicable laws
or regulations which would have a Material Adverse Effect; and
(e) (Further Guarantees and Security): all Accession Agreements
and Securities required by the terms of this Agreement to be
entered into on or before such Utilisation Date have been or
will on such Utilisation Date be duly executed and delivered
to the Facility Agent together with all other documents
required to be delivered to the Facility Agent in relation
thereto.
19.
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3.3 Waiver
The conditions precedent listed in clauses 3.1 and 3.2 may be waived by
the Facility Agent when so instructed by:
(a) all Banks, in relation to clause 3.1; and
(b) the Majority Banks, in relation to clause 3.2.
3.4 Condition Precedent to all Tranche 2 Utilisations
The obligations of the Facility Agent and each Bank in respect of each
Tranche 2 Utilisation are subject to the Facility Agent being satisfied
that at the relevant date of the Tranche 2 Utilisation Notice the
amount of the Equity Contribution is at least 50% of the aggregate of
the amount of Tranche 2 Advances outstanding and the amount requested
in the Tranche 2 Utilisation Notice.
3.5 Agent not liable
The Facility Agent shall be deemed to be satisfied with the form and
substance of a document under clause 3.1(b) if to the Facility Agent
the document appears on its face to conform with its description and
the Facility Agent shall not be liable for any cost, loss damage or
expense suffered or incurred by any person as a result of its being so
satisfied.
3.6 Agent satisfied
The Facility Agent will be deemed to be satisfied that the conditions
precedent to Utilisations referred to in clauses 3.2 and 3.4 have been
met if, prior to each Utilisation Date, the Facility Agent receives
from the Borrower a written notice certifying that the relevant
conditions precedent have been met and information in support of that
certification and the information appears, on its face, to support the
certification made.
4. UTILISATIONS
4.1 Notice
The Borrower may request a Utilisation under the Facility on a Banking
Day by giving written notice of its intention to do so to the Facility
Agent.
4.2 Contents of Utilisation Notice
Each Utilisation Notice for an Advance shall be in the form of Schedule
5 and shall specify:
(a) whether the Utilisation is a Tranche 1 Advance or a Tranche 2
Advance;
20.
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(b) the amount of the Utilisation (which shall not be less than
$5,000,000 and must be an integral multiple of $1,000,000);
(c) the proposed Utilisation Date which must be a Banking Day
prior to expiration of the applicable Availability Period;
(d) the proposed duration of its (or its first) Interest Period
(which must be of either 1, 2, 3 or 6 months duration);
(e) payment instructions; and
(f) such other particulars as the Facility Agent may from time to
time require.
4.3 Requirements of Utilisation Notice
Each Utilisation Notice shall:
(a) be received by the Facility Agent 3 clear Banking Days before
the proposed Utilisation Date;
(b) be signed by a person duly authorised by the Borrower to do
so;
(c) be irrevocable; and
(d) not be given until the conditions precedent to a Utilisation
have been satisfied or waived.
4.4 Agent Notify Banks
Promptly after its receipt of a Utilisation Notice the Facility Agent
shall notify each Bank.
4.5 Making of Advances
Subject to the terms of this Agreement, each Bank shall, on the
Utilisation Date, make available to the Facility Agent its Proportion
in Dollars for the account of the Borrower. All such amounts shall be
made available to the Facility Agent in accordance with clause 11 for
disbursement to or to the order of the Borrower in accordance with the
provisions of this Agreement.
4.6 Disbursement
Amounts received by the Facility Agent under clause 4.5 or 5.1 shall be
applied by it in accordance with the payment instructions specified in
the relevant Utilisation Notice.
4.7 Facility Agent's right to vary
Without limitation to the rights and powers vested in it under this
Agreement, the Facility Agent may vary any of the times at or by which
21.
<PAGE>
any act, matter or thing is to be done under this clause 4 if it
determines that such a variation is necessary or desirable to ensure
the effective operation of the Facility. Any such variation shall be
binding on all parties to this Agreement.
5. COMMITMENTS
5.1 Tranche 1 Commitments
Any part of the Tranche l Commitments not borrowed hereunder before
expiry of the Tranche 1 Availability Period shall be cancelled
automatically at close of business in Sydney on such expiry.
5.2 Tranche 2 Commitments
Any part of the Tranche 2 Commitments not drawn hereunder before expiry
of the Tranche 2 Availability Period shall be cancelled automatically
at close of business in Sydney on such expiry.
5.3 Voluntary Cancellation
The Borrower may, on giving not less than 30 days' prior written notice
to the Facility Agent (which shall promptly give notice of the same to
the Banks), cancel or reduce any of the Tranche 1 Commitments or the
Tranche 2 Commitments in whole or in part specified by the Borrower
without incurring any penalty or other cost, provided that such
cancellation or reduction may only be effected to the extent of the
amount of the applicable Commitments undrawn on that date and the
applicable Commitments of each Bank must be reduced pro rata. Any such
notice by the Borrower shall be irrevocable and shall specify the
relevant Commitments being cancelled, the date upon which the reduction
is to become effective and the amount of the reduction.
5.4 Reduction consequent on Repayment or Prepayment
(a) The Commitments shall be reduced (such reduction being applied
pro rata as between all the Tranche 1 Commitments and/or the
Tranche 2 Commitments as the case may be), by the amount of
any repayment or prepayment of any Tranche 1 Advance or
Tranche 2 Advance made pursuant to clauses 6.1, 6.4 and 6.6.
(b) An individual Bank's Tranche 1 Commitment and Tranche 2
Commitment shall be reduced by the amount of any prepayment of
that Bank's participation in any. 22. Tranche 1 Advance or
Tranche 2 Advance (as the case may be) made pursuant to any
other provision of this Agreement.
5.5 Limitations
Save as expressly provided, any amount of the Total Commitments
cancelled or otherwise extinguished under this Agreement may not be
reinstated. Save as expressly provided neither the Total Commitments
nor any constituent part thereof may be reduced or cancelled under this
Agreement.
22.
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6. REPAYMENT AND PREPAYMENTS
6.1 Repayment of Tranche 1 Advances and Tranche 2 Advances
At the end of the Tranche 2 Availability Period, the Facility Agent
will calculate the repayment instalments for each Repayment Date
specified below having regard to the outstanding Advances. The amount
to be repaid on each Repayment Date will be calculated so that the
remaining Advances outstanding after such repayment are equal to the
amount of Advances outstanding on the last day of the Availability
Period multiplied by the percentage set out opposite the relevant date.
Repayment Dates %
31 December 2002 96.50
31 March 2003 93.00
30 June 2003 87.75
30 September 2003 82.50
31 December 2003 77.25
31 March 2004 72.00
30 June 2004 63.50
30 September 2004 55.00
31 December 2004 46.50
31 March 2005 38.00
30 June 2005 28.50
30 September 2005 19.00
31 December 2005 9.50
31 March 2006 0
6.2 Recalculation of Repayments
If during the period from the end of the Tranche 1 Availability Period
or the Tranche 2 Availability Period (whichever is later) to the
Tranche 1 Termination Date or the Tranche 2 Termination Date (whichever
is later), the Borrower prepays any part of the Tranche 1 Advances or
Tranche 2 Advances under any of clauses 6.4, 6.6, 6.7, 12.4, 13, 14.2
or 19, the Facility Agent will recalculate the repayment installments
for each remaining Repayment Date by applying the amount of the
prepayment pro rata against all remaining repayment instalments.
6.3 Repayment Instructions
Upon completion of the calculations referred to in clauses 6.1 and 6.2,
the Facility Agent will notify the Borrower in writing of the
repayments required to be made by the Borrower in accordance with those
calculations.
6.4 Voluntary Prepayment
(a) The Borrower may prepay an Advance or part thereof on the last
day of its current Interest Period on giving not less than 10
Banking Days' prior written notice to the Facility Agent.
23.
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(b) Any notice of prepayment given by the Borrower is irrevocable
and the Borrower is thereby bound to prepay in accordance with
the notice.
(c) Interest accrued on any amount prepaid under this Agreement
shall be paid at the time of prepayment.
(d) Any prepayment is permanent, and the Facility will be
cancelled to the extent of the prepayment.
6.5 Facility Agent to notify Banks
Promptly after its receipt of a notice of prepayment the Facility Agent
shall notify each Bank of the prepayment, the date on which the
prepayment is to be made and its pro rata share thereof.
6.6 Mandatory Prepayment
(a) After the expiry of the Tranche 2 Availability Period, the
Borrower will apply on an annual basis towards the repayment
of the Facility, without limitation, 50% of the Excess Cash
Flow for the preceding 12 month period. The amount to be
prepaid will be calculated by the Facility Agent on receipt of
the audited annual Accounts.
(b) If any member of the Group or any of the assets, business or
undertaking of any member of the Group are disposed of, the
Borrower, unless the Majority Banks shall otherwise consent in
writing, shall apply, or shall procure that there shall be
applied, forthwith an amount equal to the Net Proceeds arising
from the disposal, in or towards prepayment of the
Utilisations in accordance with clause 6, provided that the
foregoing shall not apply to Net Proceeds arising from:
(i) a disposal of trading stock in the ordinary course of
trading; or
(ii) a disposal of assets not constituting trading stock
which are to be replaced by other assets being
acquired for use for like purposes and are so
replaced within 3 months of the date of such disposal
(save to the extent the Net Proceeds exceed the
acquisition cost of those other assets); or
(iii) any disposal the consideration for which, when taken
together with the consideration for any related
disposals or recoveries, does not exceed $500,000
unless or until the aggregate thereof exceeds
$5,000,000 in any 12 month period; or
(iv) a Permitted Lease Transaction.
(c) At any time during the term of the Facility, the Borrower must
apply in prepayment of any Advances outstanding at the time
all of the proceeds (in excess of replacement costs) of any
property or casualty insurance, other than business
interruption insurance.
24.
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6.7 Date for Prepayment
If the Borrower becomes obliged to prepay or procure the prepayment of
any amount under clause 6.6, the prepayment shall be made on the last
day of the Interest Period relating to the Advance to be repaid.
6.8 General provisions relating to prepayment
(a) The Facility Agent's certificate as to the repayments and date
for repayments required to be made by the Borrower will be
conclusive and binding on the Borrower and the Guarantors in
the absence of manifest error on the face of the certificate.
(b) Amounts repaid and prepaid in respect of the Advances under
any provision of this Agreement may not be reborrowed
hereunder.
7. INTEREST
7.1 Interest Periods
(a) Not later than 3 Banking Days before the commencement of each
Interest Period in respect of an Advance, the Borrower will
notify the Facility Agent whether the Interest Period for that
Advance is to be of 1, 2, 3 or 6 months' duration (or such
other period as the Facility Agent may agree to facilitate
compliance with clause 7.2(a)).
(b) The first Interest Period in relation to an Advance is the
period commencing on the Utilisation Date for that Advance.
(c) If the Borrower fails to select an Interest Period for an
Advance in accordance with clause 7.1(a), the Interest Period
shall be 3 months.
(d) The term of each Interest Period is subject to such marginal
adjustment as the Facility Agent in its discretion
determines so that the first and last days of it are Banking
Days and the final Interest Period in relation to a Facility
terminates on the Termination Date for that Facility.
7.2 Restrictions on Selection
(a) The Borrower shall, in relation to Advances drawn by it,
select the duration of Interest Periods pursuant to clause 7.1
so as to ensure that:
(i) in relation to each Facility, no more than 5 different
Interest Periods are current at any one time;
(ii) each date for repayment of part of the Facility will
also be the last day of an Interest Period in
relation to an amount at least equal to the amount
due to be paid on such date; and
(iii) that no Advance shall have an Interest Period
expiring after the Termination Date.
25.
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(b) If it appears to the Facility Agent in good faith that the
requirements of paragraph (a) above will not be met by either
the Borrower's selection of any Interest Period or the
operation of clause 7.1(c), the Facility Agent, on behalf of
and after consultation with the Borrower, shall select a
different duration for such Interest Period.
7.3 Calculation of Interest
(a) Interest on each Advance accrues daily and is to be computed
on a daily basis on a year of 365 days. Interest is to be
calculated from and including the first day of an Interest
Period but excluding the last day of the Interest Period.
(b) The rate of interest for each Advance for each Interest Period
is the Prescribed Rate in relation thereto.
(c) The Facility Agent's certificate as to the Prescribed Rate and
the Specified Rate at any time will be conclusive and binding
on the Borrower and the Guarantors in the absence of manifest
error on the face of the certificate.
7.4 Payment of Interest
(a) The Borrower will pay to the Facility Agent for the account of
the Banks the accrued interest in relation to that Advance at
the end of each Interest Period.
(b) The Facility Agent will promptly distribute the interest
received by it from the Borrower among the Banks in
accordance with their Proportions with respect to that
Advance.
8. INTEREST ON OVERDUE AMOUNTS
8.1 Payment of Interest
(a) The Borrower and the Guarantors will pay to the Facility Agent
for the account of the Banks interest on all amounts due and
payable by them under or in respect of this Agreement or the
Securities and unpaid, including any interest payable under
this clause.
(b) The Facility Agent will distribute the interest received by it
from the Borrower among the Banks in accordance with their
Proportions with respect to that Advance.
8.2 Accrual of Interest
date of actual payment, before and (as a separate and independent
obligation but without duplication) after judgment, at the Specified
Rate for successive 3 month periods (as if the same were 3 month
Interest Periods) commencing on the date of default and, if not paid
when due, shall itself bear interest in accordance with this clause.
26.
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9. BILL RELIQUIFICATION
9.1 Drawing of Bills
The Borrower agrees (at the relevant Bank's cost) to draw Bills in
connection with any Advance made to it in the manner required by any
Bank whenever requested by a Bank to do so except that:
(a) the discounted value of those Bills when added to the
aggregate discounted value of all other Bills drawn under this
clause for the relevant Bank and which are outstanding at any
time may not exceed that Bank's participation in all Advances
which are outstanding;
(b) the obligations of the Borrower as drawer or otherwise under
those Bills are non-recourse.
9.2 Attorney
The Borrower irrevocably appoints each Bank (severally) as its
attorney to draw Bills in its name or on its behalf under clause 9.1
and agrees to ratify all action taken by any Bank as its attorney
under this clause.
9.3 Appointment Revoked
The requirement to draw Bills under clause 9.1 and the appointment
under clause 9.2 will cease and be revoked without necessity for
notice when all Advances are repaid. Nothing in clause 9.1 or 9.2
requires the Borrower or authorises any Bank as attorney to draw a
Bill which matures after the Termination Date.
9.4 Indemnity
Each Bank (severally) indemnifies the Borrower against loss, cost,
expense or liability on any Bill drawn by the Borrower at the request
of that Bank under clause 9.1 or drawn by that Bank under clause 9.2.
Each Bank agrees to pay the costs of preparation of and all stamp duty
on each Bill drawn at its request under this clause 9. Each indemnity
in this clause 9.4 is a continuing obligation of each Bank (severally)
and survives the termination of this Agreement or the repayment of any
Bill drawn under this clause 9.
9.5 Notice
On request from the Borrower through the Facility Agent (not more often
than once each quarter) the Banks will notify the Borrower through the
Facility Agent of the total face value of Bills outstanding at that
time under this clause.
27.
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10. FEES
10.1 Commitment Fee
(a) The Borrower will pay in Dollars to the Facility Agent for
distribution among the Banks pro rata to their respective
Commitments, a commitment fee ("Commitment Fee") computed in
accordance with clause 10.5 on the daily undrawn balance of
the Commitments, during the period from and including the date
of this Agreement until the expiry of the Availability Period.
(b) Accrued Commitment Fee shall be payable quarterly in arrears
from the date of this Agreement and also on any date on
which the Total Commitments shall be terminated.
(c) The Commitment Fee shall accrue from day to day and be
calculated on the basis of a year of 365 days and for the
actual number of days elapsed.
10.2 Arrangement/Underwriting Fee
The Borrower must pay to the Facility Agent out of the proceeds of the
First Utilisation of the Facility, the arrangement/underwriting fee as
set out in a letter from the Facility Agent to the Borrower dated 1
September 1998 unless that fee or an equivalent fee has already been
paid to the Facility Agent.
10.3 Establishment Fee
The Facility Agent must pay each Bank (from the
arrangement/underwriting fee paid pursuant to clause 10.2) an
establishment fee upon first Utilisation of the Facility of an amount
by reference to the terms set out in the Information Memorandum and the
accompanying invitation letter from the Facility Agent to each Bank.
10.4 Agency Fees
The Borrower must pay to the Facility Agent out of the proceeds of the
First Utilisation of the Facility, an agency fee as set out in a letter
from the Facility Agent to the Borrower dated 1 September 1998.
10.5 Ratio Range
(a) Subject to paragraph (c) below, the Commitment Fee and the
Utilisation Margin will be set in accordance with the Ratio
Range for the most recent financial quarter as follows:
<TABLE>
<CAPTION>
Ratio Range Commitment Fee Utilisation Margin
<S> <C> <C>
Greater than 4.00 0.90% pa 2.25% pa
Between 3.00 and 4.00 inclusive 0.80% pa 2.00% pa
Less than 3.00 0.70% pa 1.75% pa
</TABLE>
28.
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(b) The Ratio Range will be calculated quarterly by the Facility
Agent upon receipt of the relevant Accounts showing the
results of the latest financial quarter. If the Ratio Range
for the last quarter results in a change to the Utilisation
Margin or Commitment Fee the Facility Agent will notify the
Borrower and the Banks and the change will take effect from
the date of delivery of the relevant Accounts to the Facility
Agent.
(c) If an Event of Default has occurred and while it subsists
the Utilisation Margin will be 4.25% per annum.
(d) From the date of this Agreement until first changed pursuant
to sub-clause (b) above the Utilisation Margin is 2.25% per
annum and the Commitment Fee is 0.90% per annum.
11. PAYMENTS
11.1 Payment to Security Agent
All payments to be made by any Obligor under any Transaction Document
shall be paid to or to the order of the Security Agent, provided that
the Security Agent hereby consents to all such payments being made to
the Facility Agent in accordance with the terms of this Agreement until
the Securities shall become enforceable and the Security Agent
withdraws such consent by notice to the Facility Agent and the
Obligors.
11.2 Time and place
Subject to clause 11.1 all payments by any Obligor under any
Transaction Document, or by any Bank under this Agreement (unless
expressly provided otherwise in writing), are to be made to the
Facility Agent in Dollars in immediately available funds not later than
11.00 am local time on the due date to such accounts as the Facility
Agent may from time to time designate.
11.3 Merger
If the liability of any Obligor to pay any money the payment or
repayment of which forms part of the Obligations becomes merged in any
judgment or order, as an independent obligation the Obligor will pay to
the Facility Agent on behalf of the Banks interest at the rate which is
the higher of that payable under this Agreement and that fixed by or
payable under such judgment or order.
11.4 Conversion of Foreign Currency receipts to Dollars
(a) Notwithstanding the Obligor's obligation under clause 11.2 to
make all payments in Dollars, if any payment is tendered to an
Agent or a Bank under any Transaction Document in a Foreign
Currency, the Agent or Bank, as the case may be, at its
absolute discretion may accept payment in the Foreign Currency
as tendered.
(b) If any payment in a Foreign Currency is tendered to and
accepted by an Agent or Bank, or if any funds are recovered by
29.
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an Agent or Bank under any Transaction Document in a Foreign
Currency, the Agent or Bank as the case may be at its
absolute discretion may actually or notionally convert such
payment or funds to Dollars at such time or times as it sees
fit and at such rate or rates as it is, or considers it
would be, able to obtain in the market at the time of such
conversion. The amount of Dollars actually or notionally
received after such conversion will be applied in reduction
of the Obligations.
11.5 Costs of Conversion
The Borrower will pay to an Agent or a Bank all commissions and
expenses involved in actually or notionally converting any payment or
receipt in a Foreign Currency into Dollars.
11.6 Application
Each payment received by any Agent for the account of another person
pursuant to clause 11.1 or 11.2 shall:
(a) in the case of a payment received for the account of the
Borrower, be made available by that Agent to the Borrower by
application, on the date of receipt:
(i) first, in or towards payment of any amounts then due
and payable (and unpaid) by the Borrower under this
Agreement; and
(ii) second, in payment to such account as the Borrower
shall have properly designated for the purpose in the
relevant Utilisation Notice or otherwise in writing;
and
(b) in the case of any other payment, be made available by the
Agent to the person for whose account the payment was
received on the date of receipt to such account of the
person as that person shall have previously notified to the
Agent for the purposes of this Agreement.
The Facility Agent or the Security Agent (as the case may be) shall
promptly distribute payments received for the account of the Banks
among the Banks pro rata to their respective entitlements provided
that the Facility Agent may deduct therefrom any amount due to the
Facility Agent or the Security Agent pursuant to clause 11.8, 24.14 or
26.
11.7 Foreign Currency indemnity
If Foreign Currency is received by an Agent or a Bank as a result of a
court or tribunal order or as a result of a distribution under an
Insolvency Provision, then as a separate, additional and continuing
liability (notwithstanding such order or distribution) the Borrower
will pay to the Agent or Bank any deficiency in the amount of Dollars
actually received by the Agent or Bank resulting from any variation
between:
(a) the rate of exchange at which the amount of Foreign Currency was
calculated for the purposes of the court or tribunal order or the
distribution; and
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(b) the rate of exchange at which the Agent or Bank is able to
purchase Dollars with the amount of Foreign Currency actually
received by the Agent or Bank.
11.8 Insufficient payment
If an amount required to be paid to the Facility Agent under this
Agreement is not paid in full when due, the Facility Agent may
apportion such amount between principal, interest, commission, fees,
charges and other amounts payable under this Agreement in such manner
as it may determine and any such determination shall be binding on
each party hereto.
11.9 Anticipatory payments
The Facility Agent will not be obliged to make a payment to a Bank or
the Borrower out of any sum which it is expecting to receive for the
account of the Bank or the Borrower until it has been able to establish
that it has received the sum. The Facility Agent may elect to make such
payment, whereupon to the extent such payment is made but the Facility
Agent does not receive the sum when due in whole or in part:
(a) each person to which such payment was made shall, on request
by the Facility Agent, immediately refund it to the Facility
Agent;
(b) if the person who has failed to pay the sum when due is an
Obligor, interest payable by the Obligor on the amount of
the sum not paid when due and not refunded under clause
11.9(a) shall, notwithstanding any other provision of this
Agreement, belong to the Facility Agent absolutely; and
(c) if the person who has failed to pay the sum is a Bank, the
Bank will pay interest on the amount of the sum not paid when
due and not refunded under clause 11.9(a) at a rate determined
by the Facility Agent to be equal to its cost of funds.
The provisions of this clause are without prejudice to any rights
which any person may have against the party who fails to pay any sum.
11.10 Rounding
In making any payment under this Agreement, the Facility Agent may
round amounts to the nearest dollar.
12. TAXES
12.1 No deduction for Taxes and no set-off or counterclaim
All payments by the Obligors under any Transaction Document, whether of
principal, interest or other amounts due thereunder, shall be:
(a) free of any set-off or counterclaim; and
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(b) without deduction or withholding for any present or future
Taxes unless the Obligor is compelled by law to deduct or
withhold the same.
12.2 Payment net of Taxes
If:
(a) an Obligor is legally compelled to make any deduction or with-
holding on account of Taxes (other than Excluded Taxes);
(b) an Agent is legally compelled to make any deduction or
withholding on account of Taxes (other than Excluded Taxes)
from any payment to a Bank;
(c) a Bank does not receive a payment to which it is entitled
under this Agreement or a Transaction Document free and clear
of Taxes (other than Excluded Taxes);
(d) a Bank or an Agent is obliged to pay any Taxes in respect of a
payment made or to be made by an Obligor under this Agreement
or a Transaction Document (other than Excluded Taxes); or
(e) a Bank is obliged, in respect of financial accommodation
("Funding") raised or proposed to be raised by the Bank to
permit or facilitate its participation in an Advance:
(i) to make any additional payments as a result of any
deduction or withholding from any payment or
repayment which the Bank is obliged to make in
respect of the Funding (other than in respect of
Excluded Taxes); or
(ii) to pay any Taxes (other than Excluded Taxes) as a
result of or in connection with the Funding or any
payment or repayment to be made by it in connection
with the Funding,
then:
(f) where clause 12.2(a), (b), (c) or (d) apply, the Obligor
shall on demand by the Facility Agent pay to the Facility
Agent such additional amounts, by way of additional
interest, as may be necessary to ensure that the Agent or
Bank affected receives when due a net amount (after payment
of any Taxes, other than Excluded Taxes) equal to the full
amount which it would have been entitled to receive and
retain had the deduction or withholding not been made or had
the payment been free and clear of Taxes or had the Agent or
Bank not been obliged to pay any Taxes in respect of the
payment; and
(g) where clause 12.2(e) applies in relation to a Bank, the
relevant Obligor shall on demand by the Facility Agent pay to
the Facility Agent on account of the Bank an amount equal to
the amount required to be paid, or paid, in respect of or as a
result of any deduction or withholding or payment of Taxes to
which the paragraph applies; and
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(h) in addition to clause 12.2(f), where any Obligor is legally
compelled to make any deduction or withholding on account of
Taxes the relevant Obligor, shall:
(i) pay to the appropriate governmental authority or
department any amount deducted or withheld in respect
of Taxes; and
(ii) within 20 Banking Days after making the deduction or
withholding provide to the Facility Agent evidence
satisfactory to it of that payment having been made.
12.3 Funding
(a) The Banks will use their best efforts to raise all Funding
free and clear of Taxes.
(b) If a Bank is obliged to make any deduction or withholding or
pay any Taxes as referred to in clause 12.2(e), the Bank will
promptly notify the Facility Agent and the Borrower of that
obligation and its amount.
12.4 Termination
If any Obligor fails to comply with the provisions of clause 12.2 in
relation to a Bank, the Bank may by notice to the Borrower through the
Facility Agent terminate its obligations under this Agreement
notwithstanding that any obligation of an Obligor under clause 12.2 may
be void, voidable or unenforceable. Upon such a notice being given, the
Borrower will within 5 Banking Days prepay the relevant Bank's
participation in all affected Utilisations together with accrued
interest thereon and all other money payable under this Agreement to
the Bank. Any such prepayment shall be permanent and the Facility shall
be cancelled to the extent of the prepayment.
12.5 Right to Prepay Individual Bank
In the event that any Borrower is or would be obliged under clause 12.2
to pay any additional amounts to a Bank, such Borrower may prepay the
whole (but not part) of the then outstanding amount of such Bank's
participation in the affected Utilisations made by it, together with
all interest and other charges accrued on those participation and all
other amounts payable to such Bank under the Transaction Documents, on
giving not less than 10 Banking Days' prior written notice to such Bank
(through the Facility Agent) provided that consent to the making of
such prepayment shall have been given by the Majority Banks, which
consent will not be unreasonably withheld or delayed (ignoring for the
purpose such Bank, its Commitments and its participation in the
Utilisations).
12.6 Goods and Services Tax
If any supply of goods or services by the Facility Agent, the Security
Agent or any Bank under any Transaction Document is subject to GST,
then the recipient of that supply must pay to the supplier, in
addition to any consideration provided for under the relevant
Transaction Document, such amount as is necessary to ensure that the
supplier (after payment of any GST which is imposed or levied in
respect of the supply) is in the same financial position that it would
have been in had that GST not been imposed or levied in respect of
that supply.
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13. ILLEGALITY
If any change in applicable law, regulation, treaty or official
directive or in the interpretation or administration thereof by any
governmental authority charged with the administration thereof makes it
unlawful or impossible for a Bank to give effect to its obligations
under this Agreement:
(a) the Bank's obligations under this Agreement will be suspended
immediately for the duration of such illegality or
impossibility;
(b) the Bank may by notice to the Borrower through the Facility
Agent terminate its obligations under this Agreement;
(c) if required by or as a result of the applicable event, or if
necessary to prevent or remedy a breach of, or to comply
with, any applicable law, regulation, treaty or official
directive, the Borrower will prepay an amount equal to the
Bank's participation in all Utilisations together with all
interest and fees accrued thereon and such other amounts as
are payable to the Bank under this Agreement in full
immediately, or if delay in prepayment does not compound
such breach or affect such compliance, at the end of the
current Interest Period (or such lesser period if the
applicable law, regulation, treaty or official directive
requires); and
(d) the Borrower will indemnify the Bank and notwithstanding
termination of its obligations under this Agreement keep it
indemnified against any cost, loss, damage or expense
suffered, incurred or payable by it as a result of the
operation of clause 13(a), (b) and (c) and shall pay to the
Facility Agent for the account of the Bank prior to
termination of the Bank's obligations under this Agreement
such amount as the Bank estimates in good faith to be, then or
in the future, payable to it by the Borrower under this
indemnity.
14. INCREASED COST
14.1 Obligation to Indemnify
(a) If by reason of any change in law or in its interpretation or
administration or by reason of compliance with any request
from or requirement of any fiscal, monetary or other
authority:
(i) a Bank incurs a cost as a result of its having
entered into or performed its obligations under the
Facility or as a result of any Advance being
outstanding hereunder;
(ii) there is any increase in the cost to a Bank of
funding or maintaining any Utilisation made or to be
made hereunder;
(iii) the amount of principal, interest or other amount
payable to a Bank or the effective return to a Bank
on the Utilisations under this Agreement or the
anticipated rate of return at the date of this
Agreement on the Bank's overall capital is reduced;
or
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(iv) a Bank becomes liable to make any payment (not being
a payment of Tax on its overall net income) on or
calculated by reference to the amount of Utilisations
made hereunder or Bills outstanding hereunder,
then from time to time on notification by the Bank through the
Facility Agent the Borrower shall pay to the Facility Agent on
account of the Bank amounts sufficient to indemnify the Bank
against such cost, increased cost, reduction or liability.
(b) The notification referred to in clause 14.1(a) shall set out
in reasonable detail (excluding confidential information) the
basis for the notification.
(c) If a Bank has acted in good faith it is no defence that any
such cost, increased cost, reduction or liability could have
been avoided.
(d) A Bank's certificate as to the amount of, and basis for
arriving at, any such cost, increased cost, reduction or
liability is conclusive and binding on the Borrower and the
Guarantors in the absence of manifest error on the face of the
certificate.
14.2 Right to Prepay Individual Bank
Where clause 14.1 applies the relevant Borrower subject to the prior
consent of the Majority Banks, which consent will not be unreasonably
withheld or delayed (ignoring for this purpose the relevant Bank, its
Commitments and its participation in the Utilisations), upon giving
not less than 10 Banking Days' notice to that Bank (through the
Facility Agent) may prepay the whole (but not part only) of that
Bank's participation in all (and not some only of) the Advances
together with all interest and other charges on or in respect thereof,
and all other amounts payable by it under the Transaction Documents to
such Bank, provided always that any such notice by such Borrower is
given whilst circumstances exist entitling such Bank to claim
compensation under this clause.
15. MITIGATION
15.1 Mitigation
If circumstances arise in respect of any Bank which would, or upon the
giving of notice would, result in the operation of clause 12, 13 or 14
to the detriment of an Obligor:
(a) such Bank shall use best endeavours to promptly notify the
Facility Agent and the Borrower and, upon the request of the
Borrower, shall enter into discussions with the Borrower with
a view to determining what mitigating action might be taken by
such Bank, including discussion of the possibility of a change
in its lending office, a change in the method of funding
Advances or a transfer of its participation in the Facilities
and its Commitments to another bank or financial institution;
and
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(b) at the request of the Borrower, the Facility Agent will enter
into discussions with the Borrower with a view to determining
what mitigating action might be taken by the Facility Agent
with respect to the administration of this Agreement by the
Facility Agent,
PROVIDED THAT nothing in this clause shall oblige any Bank or the
Facility Agent to incur any costs or expenses or to take any action or
refrain from taking any action.
15.2 Replacement of Bank
If such circumstances as are referred to in clause 15.1 shall arise,
the Facility Agent, at the request of the Borrower, will consult with
the Borrower with a view to identifying and approaching bank(s) and
financial institution(s) acceptable to the Borrower who may be willing
to become party to this Agreement as Bank(s) in replacement for the
relevant Bank(s).
15.3 Costs and Expenses
Any reasonable costs and expenses reasonably incurred by any Bank or
the Facility Agent pursuant to this clause shall be paid by the
Borrower within 5 Banking Days after receipt of a demand specifying the
same in reasonable detail.
16. REPRESENTATIONS AND WARRANTIES
16.1 General representations and warranties
The Borrower and each Guarantor hereby represents and warrants in
respect of itself only, or where a representation or warranty does not
relate to the Borrower or a Guarantor, the Borrower hereby represents
and warrants, to the Agents and each Bank that:
(a) (Legally binding obligation): each Transaction Document to
which it is a party constitutes a valid and legally binding
obligation of it in accordance with its terms;
(b) (Execution, delivery and performance): the execution, delivery
and performance of each Transaction Document to which it is a
party does not violate any existing law or regulation or any
document or agreement to which it is a party or which is
binding upon it or any of its assets;
(c) (Authorisation): all consents, licences, approvals and
authorisations of every government authority required to be
obtained by it in connection with the execution, delivery and
performance of each Transaction Document to which it is a
party have been obtained and are valid and subsisting;
(d) (No litigation): no litigation, arbitration, criminal or
administrative proceedings are current, pending or, to the
knowledge of the Borrower or Guarantor, threatened in which
there is a reasonable likelihood of an adverse determination
and which if adversely determined would have a Material
Adverse Effect;
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(e) (No Event of Default): no event has occurred which
constitutes an Event of Default or a Potential Event of
Default;
(f) (Laws): it has complied in all material respects with all
statutes and regulations relative to it and the businesses
(if any) carried on by it the non-compliance with which
would have a Material Adverse Effect;
(g) (Financial Liabilities): save as disclosed to the Facility
Agent prior to the date of this Agreement or any date on which
this representation and warranty is repeated, it is not in
default in the payment of any material sum, or in the
performance or observance of any material obligation in
respect of any Financial Liability greater than $500,000, and
no event has occurred which with the giving of notice, lapse
of time or other condition could constitute such a default in
respect of any Financial Liability greater than $500,000;
(h) (No trusts): it is not the trustee of any trust and does not
hold any property subject to or impressed by any trust;
(i) (Title): it is the sole legal and beneficial owner of the
Security Property subject to the Security free and clear of
all Encumbrances other than those of the type referred to in
clause 17.3(a);
(j) (Intellectual Property Rights):
(i) it owns or has licensed to it all the intellectual
property rights which are material in the context of
its business and which are required by it in order
for it to carry on its business as it is being
conducted and it does not, in carrying on its
business and to the best of its knowledge, infringe
any intellectual property rights of any third party
in any material respect; and
(ii) none of the intellectual property rights which are
material in the context of its business is, to its
knowledge, being infringed nor, to its knowledge,
is there any threatened infringement of those
intellectual property rights, by any third party;
(k) (Tax liabilities):
(i) no claims are being or are reasonably likely to be
asserted against it with respect to Taxes which are
reasonably likely to be determined adversely to it
and which, if so adversely determined, would have a
Material Adverse Effect; and
(ii) it is not materially overdue in the filing of any Tax
returns required to be filed by it and it has paid
all Taxes shown to be due on such returns or on any
assessments made against it non-payment, or a claim
for payment, of which would have a Material Adverse
Effect;
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(l) (Licences): each of the Licences held by it is legally and
beneficially owned by the licensee referred to in Schedule 3
and the Obligor is not aware of any fact or circumstance
which would cause any of the Licences to be suspended,
revoked or cancelled prior to its normal expiry date or
which would cause the non-renewal of any of the Licences
where such suspension, revocation, cancellation or non-
renewal would, having regard to all of the circumstances
(including, but not limited to, the suspension, revocation,
cancellation or non-renewal of other Licences at any prior
time) and taking into account the cumulative effect of all
such previous events and circumstances, be reasonably likely
to have an adverse effect on the Obligor's business or
financial condition or on its ability to perform its
material obligations under any of the Transaction Documents
and so far as it is aware, no other authorisations, permits
or licences are required by any member of the Group to
enable that person to lawfully conduct its business as it is
being carried on at the date of this Agreement; and
(m) (Material Contracts): save as disclosed to the Facility Agent
prior to the date of this Agreement or any date on which this
representation and warranty is repeated, each of the Material
Contracts to which it is a party is in full force and effect
and it is not aware of any breach by it of any material term
of any Material Contract to which it is a party nor, (to the
best of its knowledge) is any other party to any Material
Contract in breach of any such material term.
16.2 Information representations and warranties
The Borrower and each Guarantor hereby represents and warrants in
respect of itself only, or where a representation or warranty does not
relate to the Borrower or a Guarantor, the Borrower hereby represents
and warrants, to the Agents and each Bank that:
(a) (Information): all information relating to an Obligor provided
to the Banks by an Obligor or at their direction in connection
with the Facility and each Transaction Document is true in all
material respects and is not, by omission or otherwise,
misleading in any material respect;
(b) (Accounts): the Accounts provided to the Facility Agent:
(i) have been prepared in accordance with accounting
principles and practices generally accepted in
Australia; and
(ii) give a true and fair view of the financial condition
of the relevant entity as at the date to which such
accounts relate and the results of operations for the
accounting period ending on that date and since that
date there has been no material adverse change in the
financial condition of CTV, STV or the Group as shown
in such accounts which would have a Material Adverse
Effect;
(c) (Documents): the documents delivered to the Facility Agent by
or on behalf of any Obligor pursuant to clause 3.1(b) and any
other provision of the Transaction Documents were genuine and
in the case of copy documents, were true, complete and
accurate copies in all material respects, of originals which
have not been amended, varied, supplemented or superseded in
any way which would be likely materially to have a Material
Adverse Effect;
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(d) (Information Memorandum): save as disclosed in writing to
the Facility Agent all material written factual information
contained in the Information Memorandum is true in all
material respect a the date (if any) ascribed thereto in
the Information Memorandum, all expressions of opinion or
intention and all forecasts and projections contained in the
Information Memorandum were arrived at after careful
consideration and were based on reasonable grounds, and so
far as it is aware the Information Memorandum as of its date
was not misleading in any material respect and as at its
date did not omit to disclose any matter failure to disclose
which would result in any information contained in the
Information Memorandum being misleading in any material
respect in the context of this Agreement;
(f) (Long Range Plan): save as disclosed in writing to the
Facility Agent all material factual information contained in
the Long Range Plan is true in all material respects at the
date (if any) ascribed thereto in the Long Range Plan or (if
none) at the date of the relevant Long Range Plan, all
expressions of opinion or intention and all forecasts and
projections contained in the Long Range Plan were arrived at
after careful consideration, were based on reasonable
grounds, and the Long Range Plan as of its date was not
misleading in any material respect and as at its date did
not omit to disclose any matter failure to disclose which
would result in any information contained in the Long Range
Plan being misleading in any material respect in the context
of this Agreement; and
(f) (Recent Events): save as disclosed in writing to the
Facility Agent so far as it is aware, reasonable enquiry
having been made, since the date of the material contained
in the Information Memorandum and the Long Range Plan
respectively, nothing has occurred of which it is aware and
which is not in the public domain which, as at the date of
this Agreement, renders any of the material information,
expressions of opinion or intention, projections or
conclusions referred to in (d) or (e) above and contained in
the Information Memorandum or the Long Range Plan inaccurate
or misleading (or in the case of expressions of opinion,
conclusions or projections, other than fair and reasonable)
in any material respect in the context of the Group and the
transaction contemplated by this Agreement.
16.3 Corporate representations and warranties
The Borrower and each Guarantor hereby represents and warrants to the
Agents and each Bank in respect of itself only that:
(a) (Due incorporation): it is duly incorporated and has the
corporate power to own its own property and to carry on its
own business as is now being conducted;
(b) (Constitution): the execution, delivery and performance of
each Transaction Document to which it is a party does not
violate its constitution;
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(c) (Corporate power): it has the power, and has taken all
corporate and other action required, to enter into any
Transaction Document to which it is a party and to authorise
the execution and delivery thereof and the performance of its
obligations thereunder; and
(d) (Filings): it has filed all corporate notices and effected all
registrations with the Australian Securities and Investments
Commission or similar office in its jurisdiction of
incorporation and in any other jurisdiction as required by law
where failure to file or effect registration would reasonably
be expected to have a Material Adverse Effect, and all such
filings and registrations are current, complete and accurate
in all material respects.
16.4 Representations and warranties repeated
Each representation and warranty contained in clause 16.1, 16.2 (except
for paragraphs (c), (d), (e) and (f)) and 16.3 shall be repeated on the
date of each Advance and at the end of each Interest Period with
reference to the facts and circumstances then subsisting, as if made on
each such day and each quarter the Borrower will deliver a Compliance
Certificate to the Facility Agent in respect of the same.
17. UNDERTAKINGS
17.1 Duration and Benefit
The undertakings in this Agreement are given for the benefit of the
Agents and each Bank and shall remain in force from and after the date
of this Agreement and so long as any amount is or may be outstanding
under this Agreement or any Commitment is in force. The Facility Agent
(acting at the direction of the Majority Banks) may waive compliance
with any undertaking contained in this clause 17 either for a specific
purpose or generally by providing the Borrower with a letter in
writing specifying the waiver being granted.
17.2 Information
(a) (Financial information): The Borrower and each Guarantor will
ensure that there is delivered to the Facility Agent:
(i) as soon as practicable and in any event not later
than 120 days after the close of each of its
financial years, a copy of the consolidated audited
balance sheet and profit and loss statement for STV
and CTV and a consolidated balance sheet and profit
and loss statement for the Group for that financial
year certified as correct by an auditor approved by
the Facility Agent it being acknowledged that Arthur
Andersen is acceptable;
(ii) as soon as practicable and in any event not later
than 90 days after each half of each of its financial
years, a copy of the consolidated balance sheet and
profit and loss statement for STV, CTV and the Group
for that half-year certified as correct by 2
directors of the Borrower;
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(iii) within 30 days of the beginning of each quarter, a
copy of the management accounts of the Group for the
preceding quarter, including details of EBITDA and
capital expenditure and a statement of the Total
Subscribers (which includes reasonable details of new
installations and monthly churn rate) at the end of
the preceding month;
(iv) as soon as practicable and in any event not later
than 90 days after the commencement of its financial
year, a copy of the Group's annual budget and an
updated Long Range Plan; and
(v) promptly such further information regarding its
financial condition and business operations as the
Facility Agent from time to time reasonably requires.
(b) (Compliance with accounting standards): The Borrower and
each Guarantor will ensure that the Accounts (except for
management accounts of the Group given under clause
17.2(a)(iii)) are prepared in accordance with the relevant
constitution, the Corporations Law, any applicable statute
and all accounting principles and practices generally
accepted in Australia consistently applied, or if not
consistently applied, accompanied by details of the
inconsistencies, and shall give a true and fair view of its
financial condition and the result of its operations as at
the date, and for the period ending on the date, to which
those Accounts are prepared.
(c) (Projections): The Borrower shall ensure that there is
delivered to the Facility Agent in sufficient copies for
each of the Banks not later than the commencement of each
financial year, a projected consolidated balance sheet,
profit and loss account, cash flow statement and rolling
monthly cash forecast of the Group for (or in the case of a
balance sheet, as at the end of) such annual financial year,
together with details of the principal assumptions
underlying such projections and a description of the
proposed activities of the Group during such period.
(d) (Provision of further information): The Borrower and each
Guarantor will:
(i) (Special resolutions): deliver to the Facility Agent
before the date of the relevant meeting, a copy of
any notice calling an extraordinary general meeting
of any Obligor or proposing any special or
extraordinary resolution thereof;
(ii) (Reports to members etc.): d eliver to the Facility
Agent, upon issue, a copy of all material reports,
accounts, notices and circulars issued by any Obligor
(in order to comply with any applicable legislative
requirement or its Memorandum or Articles of
Association) to any of its members, to UIH Australia/
Pacific, Inc., to the members of UIH Asia/Pacific
Communications, Inc., to the holders of any discount
notes (or their trustees) or to the Australian Stock
Exchange Limited or any of its subsidiaries or to any
other stock exchange;
(iii) (Certificate of default): as and when reasonably
required by the Facility Agent, furnish the Facility
Agent with a statement made by 2 directors of the
Borrower stating to the best knowledge of such
directors whether or not an Event of Default or a
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Potential Event of Default has occurred and, if it
has, setting out details thereof and the steps (if
any) taken or proposed to be taken to remedy or cure
the same;
(iv) (Evidence of compliance): as and when reasonably
required by the Facility Agent, furnish to the
Facility Agent proof to the reasonable satisfaction
of the Facility Agent that the Obligations of the
Borrower and each Guarantor have been and continue to
be performed and observed;
(v) (Long Range Plan): provide a revised Long Range Plan
to the Facility Agent whenever there is any material
change to the timing of the payments, budgets or
assumptions contained therein; and
(vi) (Copies of Contracts): provide the Facility Agent
with a copy of any contract entered into by a member
of the Group after the date of this Agreement which
is of similar importance to the net cash flow or
operation of the business of the Group as the
contracts listed in Schedule 11 in a timely manner
after execution of such a contract.
(e) (Notification of certain events): The Borrower and each Guarantor
will promptly notify the Facility Agent in writing as soon as it
becomes aware of the occurrence of:
(i) (Event of Default): any Event of Default or Potential
Event of Default;
(ii) (Litigation): any litigation, arbitration, criminal
or administrative proceedings or labour disputes
relating to an Obligor or any Obligor's property,
assets or revenues that, if decided adversely to the
Obligor, is reasonably likely to have a Material
Adverse Effect and provide periodic reports on the
status of the litigation;
(iii) (Shutdown of Transmission): any actual threatened
shutdown or suspension of transmission of the
subscriber television service operated by the Group
except shutdown or suspension in the ordinary course
of business;
(iv) (Material Adverse Effect): any event which would
reasonably be expected to have a Material Adverse
Effect;
(v) (Authorised persons): any change in the persons
authorised by it to sign Bills, notices, certificates
or other documents in connection with the Facility,
giving specimen signatures of any new person so
authorised and giving to the satisfaction of the
Facility Agent evidence, where requested by the
Facility Agent, of the authority of that person; or
(vi) (Trustee): if any Obligor becomes or is appointed the
trustee of any trust or comes to hold any property
subject to or impressed by any trust.
(f) (Security Property): The Borrower and each Guarantor will
maintain and protect all of its Security Property and will not
take any action that is reasonably likely to result in the
business of the Group not remaining capable of operating in a
manner that will enable the Borrower to meet the Obligations.
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17.3 Security Value
(a) (Restriction on Encumbrances): No Borrower or Guarantor will
create, permit or suffer to exist any Encumbrance over all or
any of its assets (including the Security Property) except
for:
(i) the Securities;
(ii) liens arising by operation of law in the ordinary
course of day-to-day trading and securing obligations
not more than 90 days old;
(iii) a banker's lien or right of set-off or combination
arising by operation of law or practice over property
or money deposited with a banker in the ordinary
course of the Obligor's ordinary business;
(iv) contractual set off rights in respect of the
Borrower's transactional banking facilities and
arrangements;
(v) arrangements constituted by retention of title (other
than an Adverse Title Retention Arrangement) in
connection with the acquisition of goods provided the
goods are acquired in the ordinary course of the
Obligor's business;
(vi) Encumbrances arising by operation of law in
connection with rights arising in the ordinary and
usual course of its business in favour of an unpaid
seller, the obligations of the purchaser not being
more than 90 days old;
(vii) Encumbrances created by statute in favour of
governmental or semi- governmental authorities or
departments securing the payment of rates or Taxes
except as created because of the failure to duly pay
Taxes; or
(viii) Encumbrances created as part of a Permitted Lease
Transaction.
(b) (Transactions similar to security): No Borrower or Guarantor
will:
(i) sell or otherwise dispose of any of its assets on
terms whereby such asset is or may be leased to or
re-acquired or acquired by any member of the Group
other than for the purposes of giving effect to a
Permitted Lease Transaction; or
(ii) sell or otherwise dispose of any of its receivables
on recourse terms; or
(iii) except for assets acquired in the ordinary course of
business on the normal commercial terms of the
vendor, purchase any asset on terms providing for a
retention of title by the vendor or on conditional
sale terms or on terms having a like substantive
effect to any of the foregoing, provided that where
such assets are fixed assets, the aggregate capital
value of the item or items acquired or supplied under
the same contract (or under a series of related
contracts) will be less than $100,000 or such other
amount as agreed.
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(c) (Adverse Title Retention Arrangements): No Borrower or
Guarantor will enter into or allow to exist any Adverse Title
Retention Arrangement in respect of any assets delivered to it
in the course of its business.
(d) (Disposals): No Borrower or Guarantor will, either in a single
transaction or in a series of transactions whether related or
not and whether voluntarily or involuntarily, sell, transfer,
lease or otherwise dispose of:
(i) any shares in any member of the Group;
(ii) all or any other part of its respective assets or
undertaking, other than:
A. disposals in the ordinary course of business
of the Group;
B. disposals of surplus, obsolete or redundant
plant and equipment, not required for the
efficient operation of its business, at fair
market value;
C. the expenditure of cash in payment for
assets or services acquired at market value
in the course of its business;
D. disposals of assets in exchange for other
assets, in the reasonable opinion of the
person effecting the disposal, comparable or
superior as to type, value or quality;
E. disposals of assets to any member of the
Group provided that the Group Member has
provided to the Security Agent a Security or
such additional Securities as the Majority
Banks reasonably require;
F. disposals of assets for the purposes of re-
placement of those assets;
G. disposals of assets with the prior written
consent of the Agent,
which consent will not be unreasonably with-
held or delayed; or
H. disposals required to give effect to a Per-
mitted Lease Transaction.
(e) (Pari passu ranking): The Borrower and each Guarantor undertakes
that its obligations under this Agreement rank and will at all
times rank at least pari passu in right and priority of payment
and in point of security (save by reason of and to the extent of
its security afforded thereto by the Securities) with all its
other present and future unsecured and unsubordinated
obligations, other than obligations applicable generally to
companies incorporated in its jurisdiction of incorporation which
have priority by operation of law (including, without prejudice
to the generality of the foregoing, in respect of employees'
remuneration, Taxes and like obligations).
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17.4 Liabilities
(a) (Restriction on guarantees): No Borrower or Guarantor will,
without the prior consent in writing of the Facility Agent
(acting at the direction of the Majority Banks), enter into
any bond, guarantee or indemnity in respect of any Financial
Liabilities in favour of any person other than:
(i) pursuant to the Transaction Documents;
(ii) a guarantee given to a bank to facilitate the
operation of bank accounts of members of the Group
maintained with such Bank on a net balance basis; or
(iii) in respect of any Financial Liabilities permitted
under clause 17.4(c).
(b) (Further restriction on guarantees): No Borrower or Guarantor
will, without the prior consent in writing of the Facility
Agent, enter into any bond, guarantee or indemnity in respect
of any obligation except Financial Liabilities in favour of
any person other than in respect of a member of the Group. For
the avoidance of doubt, it is agreed that take or pay or
minimum payment obligations incurred by a Borrower or a
Guarantor are not bonds, guarantees or indemnities to which
this clause 17.4(b) applies.
(c) (Financial Liabilities): No Borrower or Guarantor will create,
incur or be liable for any Financial Liabilities of itself
other than:
(i) under the Transaction Documents; or
(ii) indebtedness under transactional banking facilities
and arrangements;
(iii) indebtedness under hedging arrangements in accordance
with clause 17.12(h); or
(iv) trade or other similar indebtedness incurred in the
ordinary course of business; or
(v) subordinated loans from the shareholders of CTV and
STV or any person approved by the Facility Agent
provided that:
A. such loans are on terms and conditions reasonably
approved by the Facility Agent; and
B. the Security Agent has been granted a limited re-
course mortgage over such loans; and
(vi) cash backed performance bond facilities up to an
aggregate of $1,000,000 or such larger amount agreed
to by the Facility Agent acting on directions from
the Majority Banks; or
(vii) under finance leases in respect of motor vehicles
and office equipment for employees and consultants of
the Group; or
(viii) under the Debentures; or
(ix) any Financial Liability
approved by the Facility Agent or
(x) under a Permitted Lease Transaction,
and ensure that no indebtedness referred to in paragraphs
(v) and (viii) above is repaid or repurchased without the
prior written consent of the Agent or until the Facility has
been repaid and cancelled in full.
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(d) (Options): No Borrower or Guarantor will, without the prior
consent of the Facility Agent, enter into or permit to subsist
any arrangement whereby any person:
(i) has the right (whether or not exercisable
only on a contingency) to require any member
of the Group to purchase or otherwise
acquire any property or any interest in
property; or
(ii) has the right (whether or not exercisable
only on a contingency) to require any member
of the Group to sell or otherwise dispose of
any property or interest in property,
except under the shareholders agreements for CTV and
STV or those companies' constituent documents. For
the absence of doubt, CTV and STV may, without the
prior consent of the Agent, issue options over shares
or debentures in themselves.
(e) (Treasury Transactions): No Borrower or Guarantor will enter into
any interest rate swap, cap, ceiling, collar or floor or any
currency swap, futures, foreign exchange or commodity contract or
option (whether over the counter or exchange traded) or any
similar treasury transaction, other than in accordance with
clause 17.12(h), spot foreign exchange contracts entered into in
the ordinary course of business and transactions entered into for
the hedging of actual or projected exposures arising in the
ordinary course of ordinary trading activities of the Group or to
meet its obligations under this Agreement.
17.5 Use of Funds
(a) (Repayment of shareholders' loans): No Obligor will repay, and
each Obligor will procure that no amount of shareholders' loans
to any Obligor will be repaid prior to any Termination Date
without the prior written consent of the Facility Agent (acting
at the direction of the Majority Banks) except where the
shareholder receiving the repayment is the Borrower or a
Guarantor or where permitted under clause 17.6;
(b) (Loans out): No Borrower or Guarantor will make any loan to any
person save for:
(i) loans made by one member of the Group to another
member of the Group where the recipient of the loan
is the Borrower or a Guarantor;
(ii) deposits made with banks in the ordinary course of
business as part of its transactional banking
facilities and arrangements; and
(iii loans required to give effect to a Permitted Lease
Transaction.
17.6 Dividends and Share Capital
(a) (Restriction on Dividends): CTV and STV undertake not to:
(i) declare, make or pay any dividend, charge, fee or
other distribution (whether in cash or in kind) on or
in respect of its share capital; or
46.
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(ii) make any payment of interest or any similar payment
in respect of the Debentures or any other
subordinated shareholder loans; or
(iii) pay any fees under any management agreements or
technical assistance agreements with any Related Body
Corporate,
without the prior written consent of the Facility Agent,
acting on the instructions of the Majority Banks.
(b) (Share Capital): No Borrower or Guarantor will, without the
prior written consent of the Facility Agent, such consent not
to be unreasonably withheld or delayed:
(i) redeem, repurchase, defease, retire or repay any of
its share capital or any Debentures, or resolve to do
so; or
(ii) issue any share capital to any person unless such
share capital will form part of the Security
Property.
17.7 Intellectual Property Rights
(a) (Registrations): The Borrower and each Guarantor will make
such registrations and pay such fees, registration Taxes and
similar amounts as are necessary to keep its registered
intellectual property rights which are material to its
business in force and to record its interest in the
intellectual property rights.
(b) (Protection of Rights): The Borrower and each Guarantor will
take such steps as are necessary and commercially reasonable
(including, without limitation, the institution of legal
proceedings) to prevent third parties infringing those
intellectual property rights referred to in paragraph (a)
above and (without prejudice to paragraph (a) above) take
such other steps as are reasonably practicabl to maintain
and preserve its interests in those rights.
(c) (No Disposal): No Borrower or Guarantor will either in a
single transaction or in a series of transactions whether
related or not and whether voluntarily or involuntarily, sell,
transfer, lease, license or otherwise dispose of all or any
part of its interest in any of the intellectual property
rights save:
(i) as effected pursuant to any Security; or
(ii) as permitted by the Majority Banks; or
(iii) for any licence arrangements in respect of those
rights entered into with members of the Group for so
long as they remain members of the Group; or
(iv) in the ordinary course of business.
(d) (No Abandonment): No Borrower or Guarantor will permit any
registration of any of the intellectual property rights to be
abandoned, cancelled or lapsed or to be liable to any claim of
abandonment for non-use or otherwise except where such
abandonment, cancellation or lapse would not reasonably be
expected to have a Material Adverse Effect.
47.
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17.8 Insurance
(a) The Borrower and each Guarantor must effect and maintain
insurance in relation to the Security Property with a
reputable, responsible and solvent insurer on terms and in an
amount satisfactory to the Facility Agent.
(b) Each Obligor will comply with any insurance obligations in any
Securities to which it is a party (except that the Borrower
will only be required to obtain business interruption
insurance within 12 months from the date of this Agreement).
17.9 Licences
The Borrower and each Guarantor will, and will ensure that each Obligor
will:
(a) (Renew): on or before the time and in the manner prescribed by
the relevant Statute for each Licence, apply for and procure the
renewal of the Licence and pay or cause to be paid the renewal
fees and other sums required in respect of the Licence or the
renewal of the Licence within the time allowed and in the manner
prescribed by the Statute unless the non-renewal of the Licence
would, having regard to all of the circumstances (including, but
not limited to, the non-renewal of other Licences at any prior
time) and taking into account the cumulative effect of all such
previous events and circumstances, not be reasonably likely to
have an adverse effect on the Obligor's business or financial
condition or on its ability to perform its material obligations
under any of the Transaction Documents;
(b) (Production of the Licence): upon request, produce to the
Facility Agent each Licence and all receipts for payments in
relation to each Licence unless already delivered to the Security
Agent under clause 17.11(f);
(c) (No cancellation): not do, allow or suffer any act, matter or
thing as a result of which any Licence is or may be surrendered,
forfeited, withdrawn, cancelled, refused or rendered void, or
whereby the holder of any Licence is disqualified permanently or
temporarily from receiving or continuing to hold a Licence except
on surrender and renewals of Licences unless such surrender,
forfeiture, withdrawal, cancellation, refusal, rendering void or
disqualification would, having regard to all of the circumstances
(including, but not limited to, the surrender forfeiture,
withdrawal, cancellation, refusal, rendering void or
disqualification of other Licences at any prior time) and taking
into account the cumulative effect of all such previous events
and circumstances, not be reasonably likely to have an adverse
effect on the Obligor's business or financial condition or on its
ability to perform its material obligations under any of the
Transaction Documents;
(d) (No transfer): not surrender or concur in the transfer of any
Licence to any person other than to an Obligor;
48.
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(e) (Comply with Statues): comply with all Statutes and all lawful
requirements of every government authority in relation to the
Licence if failure to comply would reasonably be expected to
result in a forfeiture, termination, cancellation, fine,
non-renewal or suspension of such Licence; and
(f) (Notice): promptly notify the Facility Agent if any relevant
authority issues any material notice in respect of any Licence
or threatens to suspend or cancel any of the Licences or if it
becomes aware of any enquiry by any relevant authority which
could affect any of the Licences.
17.10 Material Contracts
(a) (No Changes): The Borrower and each Guarantor will not without
the prior written consent of the Facility Agent (acting on
instructions of the Majority Banks) which consent will not be
unreasonably withheld:
(i) make (whether formally or by conduct) any material
amendment or modification to any of the Material
Contracts or waive compliance with any material
provision of any of the Material Contracts;
(ii) terminate, repudiate, allow to expire (other than in
accordance with its terms), rescind or revoke any
Material Contract;
(iii) take or fail to take any action which could
reasonably be expected to result in the termination
of any of the Material Contracts; or
(iv) assign or novate its interest in any of the Material
Contracts or consent or permit any other party to do
the same.
(b) (Protection): The Borrower and each Guarantor will:
(i) comply with the material terms of the Material Con-
tracts;
(ii) take all action reasonably available to them to
ensure that the Material Contracts remain in full
force and effect and to enforce their rights under
any of the Material Contracts; and
(iii) provide the Facility Agent with copies of all
material notices served or received under any of the
Material Contracts.
(c) (Access Agreement): The Borrower undertakes to use its best
endeavours to execute the Access Agreement as soon as
practicable after the execution of this Agreement. The
Borrower will provide the Facility Agent with a copy of the
Access Agreement when executed.
(d) (Movie Vision Term Sheet): The Borrower undertakes to use its
best endeavours to procure that the agreement referred to in
paragraph 3 of Schedule 11 of this Agreement is executed by
Optus Vision Pty Limited and Optus Networks Pty Limited as
soon as practicable after the execution of this Agreement. The
Borrower will provide the Facility Agent with a copy of that
agreement when so executed.
49.
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17.11 Security Property
(a) (Good repair): Each Obligor will maintain and protect the
Security Property and keep the same in a good and tenantable
state of repair and in good working order and condition, and will
on being required so to do by the Facility Agent promptly rectify
every material defect in the repair and condition thereof.
(b) (Outgoings): Each Obligor will duly and punctually pay when due
all outgoings including rent and Taxes payable by it in respect
of the Security Property.
(c) (Not to prejudice): No Obligor will do or (to the extent it is
able) permit any act, om ission or thing whereby any part of the
Security Property becomes or could be liable to surrender,
forfeiture or cancellation or becomes prejudiced in any manner or
the value of any Security as a security to the Banks becomes or
could be materially lessened.
(d) (Permit Inspection): Each Obligor will permit the Facility Agent
and any employee, agent or professional adviser of the Facility
Agent, to enter any land or buildings owned or occupied by the
Obligor at all reasonable times, after reasonable notice, to
inspect its condition and to monitor compliance with the
Transaction Documents.
(e) (Protection of Charged Property): Each Obligor will at the
request of the Facility Agent take or defend all legal
proceedings that the Facility Agent (acting reasonably) considers
necessary or desirable for the preservation, protection or
recovery of the Security Property.
(f) (Documents of title and other securities): Each Obligor will
lodge with the Security Agent promptly upon request by the
Security Agent:
(i) all certificates, scrip and other indicia of title or
interest in any shares or securities;
(ii) all negotiable instruments other than cheques;
(iii) all certificates of title to land and all original
property leases;
(iv) all Licences unless delivered under clause 17.9(b);
(v) all other documents of title to the Security Property
immediately on request of the same from the Facility
Agent.
17.12 General undertakings
(a) (Perform Obligations): The Borrower and each Guarantor will
perform, fulfil and observe its Obligations.
(b) (Maintain all consents): The Borrower and each Guarantor will
obtain, renew, maintain and comply with all consents,
licences, approvals and authorisations necessary for the
validity and enforceability of the Transaction Documents and
the performance of its obligations hereunder and thereunder
and the effectiveness of each Security as a security with the
stated priority and it will promptly provide copies thereof to
the Facility Agent when these are obtained or renewed.
50.
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(c) (Change of business): No Borrower or Guarantor will make or
threaten to make any substantial change in the nature of its
respective business as conducted at the date of this Agreement
which would have a Material Adverse Effect or take any action
which would result in the business not remaining capable of
operating in a manner that would not have a Material Adverse
Effect.
(d) (Any action): No member of the Group will take any action that
would result in the Borrower not remaining capable of operating
in a manner that would enable the Borrower to meet all of its
Obligations.
(e) (Mergers): No Borrower or Guarantor will enter into any merger or
consolidation or make any acquisition of any other person or
business except in respect of the assets or shares of a member of
the Group by the Borrower or a Guarantor without the prior
written consent of the Facility Agent (acting at the direction of
the Majority Banks).
(f) (Administration and winding-up orders etc.): No Borrower or
Guarantor will make or join in making any application to any
court for an administration, winding-up, receivership or other
similar order to be made in relation to any member of the Group,
other than in respect of a solvent winding-up or dissolution of a
member of the Group without the prior written consent of the
Facility Agent (acting at the direction of the Majority Banks).
(g) (Arm's-length terms): No Borrower or Guarantor will enter into
any material transaction with any person otherwise than on (or
better than) arm's-length terms and for full market value, and
save for intercompany loans permitted pursuant to clause 17.5(b).
(h) (Hedging): The Borrower will maintain interest and currency
hedging arrangements with the Banks (and/or their affiliates) and
will not enter into any hedging arrangements with a financial
institution which is not a Bank (and/or its affiliate) so long as
the price and other terms of the arrangements offered by the
Banks (or their affiliates, where relevant) are fair having
regard to the Facility and the market at the relevant time. The
Borrower will from time to time consult with the Facility Agent
to agree satisfactory levels of interest and currency hedging to
be entered into by the Borrower. The Borrower must ensure it
maintains interest rate hedging in respect of 50% of all Advances
outstanding at any time. At no time will the Borrower hedge more
than 100% of its actual exposures in any market.
(i) (Constitutional Documents): No Borrower or Guarantor will, save
as required by law, amend or agree to amend its constitution or
other constitutional documents or by-laws of any member of the
Group in any way which would have a Material Adverse Effect.
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(j) (Related Entity Transactions): No Borrower or Guarantor will
knowingly enter into any transaction with any shareholder of
the Borrower or any Related Body Corporate of any shareholder
of the Borrower without the prior written consent of the
Facility Agent, such consent not to be unreasonably withheld,
unless such transaction is entered into on ordinary commercial
terms in the ordinary course of that company's business.
(k) (Bank Accounts): No Borrower or Guarantor will open or
maintain any account with any branch of any bank or other
financial institution providing like services (other than an
account maintained pursuant to the requirements of the
Transaction Documents) unless the opening and maintenance of
such account has been approved by the Facility Agent except
for accounts for transactional banking facilities and
arrangements in the ordinary course of business or in
connection with Financial Indebtedness permitted under clause
17.4(c)(ii), (iii) and (vi).
(l) (Compliance with laws): The Borrower and each Guarantor will
comply in all material respects with all applicable laws,
rules, regulations and orders of any governmental authority,
whether domestic or foreign having jurisdiction over it or any
of its assets.
(m) (Taxes): The Borrower and each Guarantor will pay all material
Taxes due and payable by it within a reasonable time of the
relevant due date (save to the extent that payment of the same
is being contested in good faith and adequate reserves are
being maintained for those Taxes).
(n) Access): Upon reasonable notice being given by the Facility
Agent, the Borrower and each Guarantor will procure that any
one or more representatives of the Facility Agent be allowed
(at the Facility Agent's risk and expense) to have access
during normal business hours to the assets, books and records
of each Obligor and to inspect the same without disruption or
interference to the operation of those assets, books and
records.
(o) (Long Range Plan): The Borrower will not engage in any
business or other activity other than such business or other
activities as are reasonably contemplated in the Long Rang
Plan, or any activity which is related to or connected with
any such business or other activity.
(p) (No Trusts): The Borrower will not become the trustee of a
trust or hold any property subject to or impressed by any
trust;
18. FINANCIAL COVENANTS
18.1 Financial Covenants
The Borrower and each Guarantor will ensure that:
(a) (Senior Debt/EBITDA): for the financial year ending 31
December 2001 and each 12 month period ending on a Quarterly
Date thereafter until 30 September 2002, the ratio of Senior
Debt (as at the Quarterly Date) to EBITDA for the Group for
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the preceding 12 month period must be less than or equal to
5:1 and for the 12 month period ending on 31 December 2002 and
each 12 month period ending on a Quarterly Date thereafter,
must be less than or equal to 4:1;
(b) (Total Debt /EBITDA): for the financial year ending 31
December 2001 and each 12 month period ending on a Quarterly
Date thereafter until 30 September 2002, the ratio of Total
Debt (as at the Quarterly Date) to EBITDA of the Group for the
preceding 12 month period must be less than or equal to 6:1
and for the 12 month period ending on 31 December 2002 and
each 12 month period ending on a Quarterly Date thereafter
must be less than or equal to 5:1;
(c) (EBITDA/Interest Expense): for the financial year ending 31
December 2001 and for each 12 month period ending on a
Quarterly Date thereafter until 30 September 2002, the ratio
of EBITDA of the Group for the preceding 12 month period to
Interest Expense for the preceding 12 month period must not be
less than 2.25:1 and for the 12 month period ending 31
December 2002 and each 12 month period ending on a Quarterly
Date thereafter, must be not less than 3:1;
(d) (Minimum Total Subscribers Level): Total Subscribers must be
greater than or equal to the amount set out below:
(i) at 30 June 1999, 295,000;
(ii) at 30 September 1999, 310,000;
(iii) at 31 December 1999, 325,000;
(iv) at 30 June 2000, 355,000;
(v) at 31 December 2000, 390,000;
(vi) at 30 June 2001, 425,000; and
(vii) at 31 December 2001, 460,000; and
(e) (Total Debt/Total Subscribers): on the date of the first
Utilisation and on each Quarterly Date thereafter until 31
December 2001 the ratio of Total Debt to Total Subscribers
must be less than or equal to A$1000:1.
18.2 Compliance Certificate
The Borrower will deliver a Compliance Certificate to the Facility
Agent within 30 days after the end of each quarter (except for
Compliance Certificates given at the end of the financial year based
on audited financial accounts which must be given promptly but in any
event not later than 120 days from the end of the financial year) and
at each Utilisation Date for a new Advance.
18.3 Stamp Duty Certificate
The Borrower will deliver a Stamp Duty Certificate to the Security Agent
as soon as practicable and in any event not later than:
(a) 120 days after the close of its financial years; and
(b) 90 days after each half of each of its financial years.
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19. DEFAULT AND TERMINATION
19.1 Events of Default
Each of the following events is an Event of Default, whether or not the
cause is beyond the control of the Borrower, the Guarantors or any
other person:
(a) (Failure to pay): any Obligor does not pay within 2 Business
Days of the due date and in the specified manner, any amount
payable by it under any Transaction Document;
(b) (Failure to comply): the Borrower or Guarantor defaults in
fully performing, observing and fulfilling any provision of
any Transaction Document other than a provision requiring the
payment of money as contemplated by clause 19.1(a), provided
that in the case of a default capable of remedy, that default
has not been remedied within 7 days of the occurrence of being
asked by the Facility Agent to remedy the default (or such
longer period agreed by the Facility Agent acting on
instructions from Majority Banks);
(c) (Untrue warranty): any representation, warranty or statement
made, repeated or deemed to be made or repeated in any
Transaction Document or in connection with the Facility or any
accounts or opinion furnished in connection with the
application for the Facility or under this Agreement is proved
to be untrue in any material respect when made, repeated or
deemed to be made repeated or furnished (as the case may be)
and the representation, warranty or statement continues to be
untrue 7 days after the representation, warranty or statement
is identified;
(d) (Breach of undertaking): any Obligor breaches any written
undertaking given at any time to the Banks or any Agent or
fails to comply with any condition imposed by the Banks or any
Agent in agreeing to any matter (including any waiver);
(e) (Event of Default under Transaction Document): any event of
default (howsoever described) occurs under any Transaction
Document;
(f) (Default under other transactions):
(i) any Financial Liability greater than $5,000,000 of
any Obligor becomes, or becomes capable of being
declared, prematurely due and payable as a result of
a default or an event of default howsoever described
thereunder;
(ii) any Financial Liability greater than $5,000,000 of
any Obligor or any sum payable in respect thereof is
not paid when due and payable;
(iii) any Encumbrance over any asset of an Obligor securing
more than $5,000,000 becomes capable of being
enforced as a result of a default or an event of
default howsoever described thereunder;
54.
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(iv) any Obligor defaults in fully performing, observing
and fulfilling any of the terms, covenants and
conditions of any Encumbrance relating to any of its
assets securing more than $5,000,000 or any
Encumbrance relating to any asset of any Obligor
otherwise becomes enforceable;
(v) any Encumbrance securing more than $5,000,000 which
is a floating security over any asset of any Obligor
crystallises into, or otherwise becomes, a fixed or
specific security; or
(vi) any Encumbrance securing more than $5,000,000
relating to a Security Property is varied without the
prior written consent of the Security Agent (acting
on the instructions of the Majority Banks) or comes
to secure an aggregate debt or liability (present or
future, actual, contingent or prospective and on any
account whatsoever) that exceeds the amount
previously agreed to by the Security Agent in
writing;
(g) (Event of Insolvency): any Event of Insolvency occurs in respect
of any Obligor;
(h) (Investigation): an investigation into the affairs or particular
affairs of an Obligor is directed or commenced under the
Corporations Law which would have a Material Adverse Effect;
(i) (Cessation of business): an Obligor ceases, or threatens to
cease, to carry on all or a substantial part of its business or
all or a material part of the Obligor's business is destroyed,
confiscated, appropriated or resumed or suffers loss or material
damage unless insured to the satisfaction of the Facility Agent;
(j) (Void or voidable): any Transaction Document is or becomes or is
claimed by any Obligor to be void, voidable or unenforceable in
whole or in part;
(k) (Illegality): at any time it is unlawful for an Obligor to
perform any of its material obligations under any Transaction
Document;
(l) (Failure to comply with laws): any Obligor fails to duly and
punctually comply with all statutes, material regulations and
other laws binding on it and such failure would have a Material
Adverse Effect;
(m) (Change in control): without the prior written consent of the
Facility Agent, acting on instructions from Majority Banks,
Effective Control of the Borrower, CTV or STV is altered from
that subsisting at the date hereof. For the purpose of this
sub-clause "Effective Control" means:
(i) the ability to appoint a majority of directors to the
Board of Directors of the Borrower, CTV or STV;
(ii) control of more than 49% of the economic interest or
value of the Borrower, CTV or STV is acquired by one
or more parties other than United International
Holdings, Inc., or its Related Bodies Corporate; or
55.
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(iii) control of legal and/or beneficial ownership of more
than 49% of the issued share capital of the Borrower,
CTV or STV excluding any part thereof which carries
no right to participate beyond a specified amount in
the distribution of either profit or capital;
(n) (Change in Shareholding): divestment by UIH Australia/Pacific,
Inc. or any of its related entities so that it or any of its
related entities has less than 25% legal and beneficial
shareholding in XYZ Entertainment Pty Limited, without the prior
written consent of the Facility Agent (acting on instructions
from Majority Banks), which consent will not be unreasonably
withheld or delayed provided that the Borrower demonstrates, to
the satisfaction of the Facility Agent, that the Borrower has
continuing and acceptable access to programming satisfactory to
the Facility Agent;
(o) (Hedging): the Borrower hedges more than 100% of its physical
exposures;
(p) (Reduction in capital): without the prior written consent of the
Facility Agent (acting on instructions from Majority Banks), an
Obligor takes action to reduce its share capital (other than by
the redemption of redeemable preference shares);
(q) (Reserve liability): without the prior written consent of the
Facility Agent (acting on the instructions of the Majority
Banks), any meeting of an Obligor is convened for the purpose of
considering or passing a special resolution under section 188(2)
of the Corporations Law or any such resolution is proposed at any
meeting of an Obligor;
(r) (Material Contracts): without the prior written consent of the
Facility Agent (acting on instructions from Majority Banks) an
event of default howsoever described occurs and is continuing
under any Material Contract or any Obligor fails to comply with
any material term of a Material Contract or any Material Contract
is prematurely terminated or it becomes unlawful for any party to
a Material Contract to perform its obligations and which event of
default or failure to comply or termination or illegality:
(i) remains unremedied 7 days after the Facility Agent has
requested the Borrower to procure that it be remedied;
and
(ii) would be reasonably likely to have a Material Adverse
Effect;
(s) (Loss of Consents):
(i) any authorisation, approval, consent, licence or
permit (including, without limitation, the Licences),
exemption, filing or registration or other
requirement necessary:
A. to enable any Obligor to comply with any of its
material obligations under any of the Transaction
Documents or any of the Material Contracts; or
B. for the conduct of its business;
56.
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is revoked or refused or does not remain in full
force and effect in accordance with its terms once
granted, or is not renewed prior to its expiry or is
adversely modified and that event has a Material
Adverse Effect;
(ii) the authority of any Obligor in the conduct of its
business is wholly or substantially curtained by any
seizure or intervention by or on behalf of any
authority or the ability of the Group to conduct its
business or to determine the amount it will charge
for its services is limited, restricted or constrain-
ed by any government or governmental agency taking
any action or such government or governmental agency
announces its intention to take such action in rela-
tion to any member of the Group or any of its assets
to an extent greater than existing at the date of
this Agreement and such action is reasonably likely
to have a Material Adverse Effect;
(t) (Licences): a breach of any of the Licences occurs and such
breach is not remedied within 30 days or such other period as may
be specified in any notice of breach issued by the relevant
authority unless such breach would, having regard to all of the
circumstances (including, but not limited to, the breach of other
Licences at any prior time) and taking into account the
cumulative effect of all such previous events and circumstances,
not be reasonably likely to have an adverse effect on an
Obligor's business or financial condition or on its ability to
perform its material obligations under any of the Transaction
Documents;
(u) (Material change): any event or series of events whether
related or not occurs which has a Material Adverse Effect.
19.2 Facility Agent's rights upon Event of Default
Subject to clause 19.3, if any Event of Default occurs, at any time
thereafter while such event continues, the Facility Agent may at its
option if so authorised by the Majority Banks and shall upon the
direction of the Majority Banks by written notice to the Borrower:
(a) declare that an Event of Default has occurred; and/or
(b) declare that the Total Commitments and any other obligations
of the Banks or the Agents to the Obligors under the
Transaction Documents shall be cancelled forthwith, whereupon
the same shall be so cancelled and all fees payable in
relation to the Total Commitments shall become immediately due
and payable; and/or
(c) declare that the Advances to the Borrower, together with all
interest accrued on those Advances and all other amounts which
form part of the Obligations (as specified in such notice)
shall thenceforth be repayable on demand being made by the
Facility Agent (and in the event of any such demand those
Advances, such interest and such other amounts shall be
immediately due and payable); and/or
57.
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(d) declare the Advances to the Borrower immediately due and
payable, whereupon they shall become immediately due and
payable together with all interest accrued on those Advances
and all other amounts which form part of the Obligations.
20. GUARANTEE AND INDEMNITY
20.1 Guarantee
Each Guarantor hereby irrevocably and unconditionally guarantees to the
Agents and each Bank or any of them) the due and punctual performance
in full of the Obligations.
20.2 Indemnity
Each Guarantor as a separate, additional and primary liability hereby
irrevocably and unconditionally agrees to indemnify the Agents and each
Bank and at all times hereafter to keep the Agents and each Bank
indemnified against any failure by an Obligor to duly and punctually
perform its Obligations and Intended Obligations.
20.3 Performance of Obligations
If the Borrower or a Guarantor or any other person bound to perform or
pay after the expiration of any applicable grace period any Obligation
or Intended Obligation fails to do so in full on the due date therefor,
each Guarantor shall immediately on demand by either of the Agents or a
Bank perform or pay that Obligation or Intended Obligation.
20.4 Liability as Guarantor and indemnifier
Any reference herein to the obligations or liabilities of a Guarantor
shall be construed as a reference to its obligations or liabilities
whether as a Guarantor or indemnifier hereunder and the use of the
expression "Guarantor" herein in relation to a party shall not be
construed as diminishing that party's obligations hereunder as an
indemnifier. The provisions of this clause 20 preserving the liability
of a party hereto as a Guarantor apply mutatis mutandis to any
liability that arises whether in regard to that party's guarantee or
indemnity hereunder.
20.5 Principal obligation
Each obligation of each Guarantor hereunder constitutes a principal,
and not a secondary or ancillary obligation, to the intent that,
without limiting in any way the operation of any of the other
provisions of this clause 20, any limitation on the liability of a
Guarantor which would otherwise arise by reason of its status as a
Guarantor, co-Guarantor, indemnifier or co-indemnifier is hereby
negatived.
20.6 Absolute liability
The liability of each Guarantor hereunder is absolute and is not
subject to the execution of the Transaction Documents (other than this
Agreement) or of any other document by any person or to the performance
58.
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of any condition precedent or subsequent, including, without limiting
the generality of the foregoing, as between any Obligor and the
Facility Agent, the Banks or any of them or amongst any 2 or more
Obligors but is subject to non-payment or the non-performance of an
Obligation or Intended Obligation by the principal obligor.
20.7 Unconditional liability
The liability of each Guarantor hereunder shall not be affected by any
act, omission, matter or thing that would otherwise operate in law or
in equity to reduce or release a Guarantor from its liability
including, without limiting the generality of the foregoing, any of the
following:
(a) (Event of Default): the occurrence of any Event of Default;
(b) (Distributions): the receipt by any Agent or any Bank of any
payment, dividend or distribution under any Insolvency
Provision in relation to the Borrower or any Guarantor;
(c) (Invalidity etc.): any Transaction Document or any payment or
other act the making or doing of which would otherwise have
formed part of the Obligations, or any transaction or document
which would otherwise have given rise to such a payment or
other act being or becoming or being conceded to be illegal,
invalid, void, voidable, unenforceable or irrecoverable in
whole or in part for any reason whether past, present or
future, including, without limiting the generality of the
foregoing:
(i) any statute, other law or principle of equity;
(ii) any act or omission by any person;
(iii) any legal limitation, disability or incapacity of an
Obligor or any Guarantor;
(iv) any improper exercise of a power or authority in
relation to an Obligor or any Guarantor;
(v) any right of an Agent or a Bank to enforce or recover
such document, payment or other act or to exercise
any remedy or right it has for the enforcement or
recovery of such document, payment or other act being
suspended or postponed by order of any court or
otherwise; or
(vi) any Insolvency Provision;
(d) (New guarantors): the Agents, Banks or any of them accepting
from any person any guarantee, indemnity or contract of
suretyship for the performance of the whole or any part of the
Obligations;
(e) (Time or indulgence): the Agents, Banks or any of them
agreeing with an Obligor or any Guarantor to grant time,
waiver or other indulgence or concession to, or to make any
composition or compromise with an Obligor or any Guarantor;
(f) (Forbearance): the Agents, Banks or any of them forbearing or
neglecting to exercise any remedy or right they have or it has
for the enforcement of any Transaction Document or any other
obligation or liability forming part of the Obligations;
59.
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(g) (Laches etc.): any laches, acquiescence or other act, neglect,
default, omission or mistake by the Agents, Banks or any of them;
(h) (Repudiation): the determination, rescission, repudiation or
termination, or the acceptance of any of the foregoing, by the
Agents, Banks, an Obligor or any Guarantor or any of them of any
Transaction Document or any other obligation or liability forming
part of the Obligations;
(i) (Variation): any variation (whether by way of insertion,
deletion, modification, novation or otherwise) to any Transaction
Document or any other obligation or liability forming part of the
Obligations, whether or not such variation is substantial or
material or imposes an additional liability upon or is onerous on
any Obligor or any Guarantor, including without limiting the
generality of the foregoing, any increase in the limit or
extension of the term for, or the imposition of any condition or
variation in the rate of interest in respect of advances or
financial accommodation to the Borrower;
(j) (Release): the full, partial or conditional release or discharge
(whether before or after any demand has been made on the
Guarantor hereunder) by the Agents, Banks or any of them or by
operation of law, of an Obligor or any Guarantor or any other
person from any Transaction Document or any other obligation or
liability forming part of the Obligations (but without affecting
the validity of any release and discharge of a Guarantor in
accordance with this Agreement);
(k) (Security Property): the release of any property from any
Security or the substitution of any property in place of any
other property now or hereafter the subject of a Security;
(l) (Securities): the Agents, Banks or any of them wasting,
destroying, abandoning, prejudicing or not perfecting,
maintaining, preserving, enforcing or realising or negligently or
not bona fide enforcing or realising any Security;
(m) (Loss of Securities): the failure to obtain any Security or the
loss or impairment of any Security by operation of law or
otherwise, whether or not the same is in breach of an express or
implied condition to obtain or preserve such Security or in
breach of any equitable duty which might otherwise have been
imposed upon the Agents, Banks or any of them;
(n) (Priority of Securities): the Agents, Banks or any of them
agreeing to any order of priorities with respect to any Security
or to any variation of any then previously agreed order of
priority;
(o) (Accounts): the opening or operation of any new account with the
Agents, Banks or any of them by any Obligor or any Guarantor;
60.
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(p) (Change of constitution): any change in membership (whether by
death or retirement of an existing member, admission of a new
member or otherwise), in the place of business or in the name of
any partnership, firm or association in which any Obligor or any
Guarantor is a member;
(q) (Transfer): the transfer or assignment of the benefit of any
Transaction Document or of any other obligation or liability
forming part of the Obligations;
(r) (Disclosure): any failure by the Agents, Banks or any of them to
disclose to the Guarantor any material or unusual fact,
circumstance, event or thing whatsoever known to, or ought to
have been known by, an Agent or any Bank relating to or affecting
any Obligor or any Guarantor at any time prior to or during the
currency of any Transaction Document, whether prejudicial or not
to the rights and liabilities of the Guarantor and whether or not
any Agent or any Bank was under any duty to disclose such fact,
circumstance, event or thing to the Guarantor or an Obligor; or
(s) (Covenant not to take action): any Agent or any Bank entering
into a covenant with an Obligor or any Guarantor not to do all or
any of the following, namely, sue, issue process, sign or execute
judgment, commence proceedings for bankruptcy or liquidation,
participate in any official management, scheme of arrangement or
reconstruction, prove in any bankruptcy or liquidation or do any
other act, matter or thing in respect of the liability of an
Obligor or that Guarantor (but without affecting the validity of
any waiver given in accordance with clause 30.11 of this
Agreement).
20.8 No obligation to gain consent
Nothing herein shall be construed as a requirement that any Guarantor
consent to or be made aware of any event referred to in clause 20.7,
any transaction between the Agents, Banks or any of them and an Obligor
or any one or more Guarantors or any particulars concerning any
obligation or liability that forms part of the Obligations.
20.9 No marshalling
The Agents and the Banks are under no obligation to marshal or
appropriate in favour of any Guarantor or to exercise, apply, transfer
or recover in favour of any Guarantor any Security or any funds or
assets that they or any of them hold or are entitled to receive or have
a claim upon.
20.10 Void or voidable transactions
If there is upheld, conceded or compromised any claim that a
transaction in any way affecting or relating to the Obligations or the
Securities is void, voidable, unenforceable or irrecoverable the
following provisions apply:
61.
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(a) (Restoration of Obligations): if as a result of or in
connection with entering into the transaction the Obligations
have been reduced in any way, then upon such claim being
upheld, conceded or compromised, each Agent and each Bank will
be entitled against each Guarantor to all such rights as it
would have had if the transaction or so much thereof as is
held or conceded to be void or voidable or is foregone on
compromise had not taken place;
(b) (Restoration of Security): if as a result of or in connection
with entering into the transaction, or if as a result of the
transaction being held or conceded to be void or
unenforceable, a Bank's rights under any Security have been
surrendered, cancelled or reduced in any way, then upon such
claim being upheld, conceded or compromised, each Guarantor
will take all steps and sign all such documents as may be
necessary or convenient to restore those rights or equivalent
rights to the Bank; and
(c) (Costs and expenses): the Guarantors will pay to each Agent
and each Bank all costs and expenses (including legal costs
and expenses as between solicitor and own client) incurred by
each Agent and each Bank in or in connection with any
negotiations or proceedings relating to any such claims.
20.11 Insolvency
No Guarantor will lodge any proof of debt or similar claim under any
Insolvency Provision in relation to any Obligor or any Guarantor in
competition with any Agent or any Bank. Each Guarantor irrevocably
authorises the Security Agent to prove as its attorney for all money
which it may be entitled to from an Obligor or any Guarantor and to
retain and to carry to a suspense account and appropriate at the
discretion of the Security Agent (but for the benefit of the Banks) any
amount so received until with the aid thereof each Bank has been paid
100 cents in the dollar in respect of the indebtedness of an Obligor or
each Guarantor as the case may be.
20.12 No set-off, counterclaim, etc.
No Guarantor will seek to reduce or avoid its liability under a
Transaction Document by raising any defence, set-off or counterclaim
available to any Agent or an Obligor or any other Guarantor.
20.13 Restriction on Guarantor's dealings
No Guarantor will, without the Facility Agent's prior written consent
(which the Facility Agent may withhold in its discretion and acting on
the instructions of the Majority Banks):
(a) (No proceedings): institute any proceedings against any other
Obligor;
(b) (No demand): make any demand for, or accept any money in part
or complete satisfaction of, any liability on any account of
any other Obligor other than as permitted under this Agreement
or for a liability arising out of the supply of goods and
services by the Guarantor to that Obligor in the ordinary
course of that Guarantor's ordinary business at a rate and on
terms not exceeding and not more onerous than usually found
for the supply of such goods and services by parties dealing
at arm's length;
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(c) (No enforcement of Securities): enforce any Encumbrance now or
hereafter held by it (either alone or with others) in respect
of any such liability as aforesaid; or
(d) (No set-off): set-off any money owing by the Guarantor against
any liability owing to the Guarantor by any other Obligor or
permit any Obligor to set off any money owing by the Obligor
against any liability owing to that Obligor by the Guarantor.
20.14 Release of Obligor
Notwithstanding any presumption or principle of law to the contrary, an
Agent or a Bank may in relation to any Obligor enter into a covenant
not to sue, issue process, sign judgment and execute or commence
proceedings for the bankruptcy or liquidation of any one or more of
such resultant judgment debtors, participate in any official
management, scheme of arrangement or reconstruction, prove in any
bankruptcy or liquidation and do any other act, matter or thing in
respect of that Obligor's liability without thereby in any way
impairing or reducing the liability of any Guarantor or other Guarantor
(as the case may be) to the other Agents, the other Banks or any of
them under this Agreement.
20.15 Conditions precedent
The Facility Agent may waive, dispense with or accept such evidence as
in its absolute discretion it sees fit in relation to the satisfaction
of any condition precedent contained in any Transaction Document or
otherwise for the grant of any advances or financial accommodation to
or for the account of the Borrower, and the Guarantors' liability
hereunder shall not be affected or in any way impaired by any exercise
by the Facility Agent of that discretion.
20.16 Claim on the Guarantors
(a) An Agent or a Bank shall not make any demand or claim on a
Guarantor under this clause 20 unless an Obligor or a
Guarantor has failed in the due and punctual payment of any of
its Obligations.
(b) Neither an Agent nor a Bank shall be required to make any
claim or demand on an Obligor or on any other Guarantor, or to
enforce any Transaction Document or any other right, power or
remedy against any Obligor, before making any demand or claim
upon any Guarantor under this clause 20.
20.17 Subrogation
No Guarantor will seek the transfer to it of any Security which is
subject to an agreed order of priority in the Security Agent's or any
Bank's hands under any right of subrogation, unless and until it has
entered into a deed under which it undertakes to be bound by the
priority affecting such Security with the other parties to such agreed
order of priority.
63.
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20.18 General waiver by Guarantors
The Guarantors expressly waive all rights inconsistent with the
provisions of this Agreement, including all rights as to contribution,
indemnity or subrogation which they might otherwise be entitled to
claim and enforce until the Obligations have been paid in full.
20.19 Judgment
Any judgment obtained against the Borrower is conclusive as against
each Guarantor.
21. ADDITIONAL GUARANTORS AND SECURITY
21.1 Additional Guarantors
(a) The Borrower and each Guarantor shall procure that any wholly
owned member of the Group which is not a Guarantor shall
become, promptly, but no later than 90 days, after being
required by the Facility Agent on the instructions of the
Majority Banks to become, an Additional Guarantor by entering
into an Accession Agreement, subject to any provision of law
prohibiting that person from becoming an Additional Guarantor.
(b) Where any such prohibition as is referred to above exists, the
Borrower and each Guarantor shall use its reasonable
endeavours lawfully to overcome the prohibition, and the
Facility Agent (acting at the direction of the Majority Banks)
may (but shall not be obliged to) agree with the potential
Additional Guarantor concerned limitations on its liability as
an Additional Guarantor under this Agreement and other
amendments (applying only in relation to that Additional
Guarantor) to this Agreement or to the relevant Accession
Agreement.
(c) On each date that an Accession Agreement is entered into the
Borrower shall procure that each of the documents listed in
paragraphs 1, 3, 4, 5, 9, 10 and 15 of Schedule 4 (as
appropriate) are delivered in respect of the Additional
Guarantor and the Accession Agreement in form and substance
satisfactory to the Facility Agent.
21.2 Security
(a) The Borrower and each Guarantor shall execute and deliver to
the Security Agent such further or additional Securities in
such form and in relation to such of its assets as the
Majority Banks shall reasonably require subject to any
provision of law prohibiting such person from entering into
such Security.
(b) Where any such prohibition as is referred to above exists, the
Borrower and each Guarantor shall use their reasonable
endeavours lawfully to overcome the prohibition, and the
Security Agent may (but shall not be obliged to) agree with
the relevant Obligor limitations on the extent of the security
granted by it.
64.
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(c) The Obligors shall at their own expense execute and do all such
assurances, acts and things as the Security Agent or the Majority
Banks may reasonably require for perfecting or protecting the
security intended to be afforded by the Securities or for
facilitating the realisation in accordance with the Securities of
all or any part of the assets which are subject to the Securities
and the exercise of all powers, authorities and discretions
vested in the Security Agent under the Securities or in any
receiver of all or any part of those assets and in particular
shall execute all transfers, conveyances, assignments and
releases of that property whether to the Security Agent or to its
nominees and give all notices, orders and directions which the
Security Agent may reasonably think expedient for the purpose of
this clause 21.2(c).
(d) The Obligors shall procure that in relation to each further or
additional Security the relevant Borrower or Guarantor shall do
all things necessary duly to perfect in the jurisdiction of its
incorporation and in the jurisdiction wherein the assets which
are the subject of the further or additional Securities are
located, the security intended to be afforded to the Agents and
the Banks under such further or additional Securities and shall
deliver to the Facility Agent such directors and shareholders
resolutions, legal opinions, notices, certificates or documents
of title or other items as the Facility Agent shall reasonably
require.
21.3 Additional Security
Notwithstanding clause 21.2(a), the Borrower and each Guarantor shall:
(a) procure that any person who becomes a wholly owned subsidiary of
an Obligor executes and delivers in a timely manner and does all
things necessary to provide security in form and substance
satisfactory to the Facility Agent over all of its assets and
undertakings; and
(b) ensure that any Security Property relating to the Securities
referred to in clause 21.3(a) shall be free and clear of any
Encumbrances other than Encumbrances permitted under clause
17.3(a) or the Securities.
22. RELEASE OF GUARANTORS AND SECURITY
22.1 Guarantors
Subject to clause 22.3, at the time of completion of any sale or other
disposal to a person or persons outside (and which will remain outside)
the Group of all of the shares in the capital of any Guarantor (or of
all of the shares in any other member of the Group (other than the
Borrower) such that any Guarantor ceases as a result thereof to be a
member of the Group) and in such other circumstances (if any) as all
the Banks may from time to time agree in writing, such Guarantor shall
be released from all past, present and future liabilities (both actual
and contingent) hereunder and under the Securities to which it is a
party, and the security provided over its assets under the Securities
will be released.
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22.2 Assets
Subject to clause 22.3, at the time of completion of any sale or other
disposal to a person or persons outside (and which will remain
outside) the Group of any assets owned by an Obligor over which
security has been created by the Securities to which that Obligor is
party, those assets shall be released from such security.
22.3 Conditions for Release
The release of the guarantees and security referred to in clause 22.1
and 22.2 above shall only occur if:
(a) either:
(i) such disposal will not result directly or indirectly
in any breach of any of the terms of this Agreement;
or
(ii) such disposal is being effected at the request of the
Majority Banks in circumstances where any of the
security created by the Securities has become
enforceable; or
(iii) such disposal is being effected by enforcement of the
Securities; or
(iv) all Banks agree to the release; and
(b) the Net Proceeds arising out of such disposal will be applied
strictly in accordance with the requirements of this
Agreement; and
(c) any assets to be transferred to other members of the Group
before completion of such disposal shall have been so
transferred and (if so required by the Majority Banks)
security over such assets shall have been granted to the
Security Agent to its satisfaction; and
(d) the Security Agent shall have executed such documents
effecting such release as shall be reasonably required to
achieve such release as aforesaid (and the Security Agent
shall execute such documents at the expense of the relevant
Obligor promptly upon (and only upon) it being satisfied that
the conditions in (a), (b) and (c) above are satisfied or have
been waived by all of the Banks).
22.4 Release of Group Members
If any person which is a member of the Group (other than the Borrower)
shall cease to be such a member in consequence of the enforcement of
any of the Securities or in consequence of a disposal of the shares
therein effected at the request of the Majority Banks in circumstances
where any of the security created by the Securities has become
enforceable, any claim which any Obligor may have against such person
or any of its Subsidiaries in or arising out of this Agreement or any
of the Securities (including, without limitation, any claim by way of
subrogation to the rights of the Agents and the Banks against such
person under the Transaction Documents and any claim by way of
contribution or indemnity) shall be released automatically and
immediately upon such person ceasing to be a member of the Group.
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22.5 Restructure of Group
The Facility Agent and Security Agent are hereby authorised to execute
the Deed of Consent and Release in the form of Annexure A and to give
all releases, discharges and consents required in that document without
any further approval from the Banks.
23. INDEMNITY
The Borrower and each Guarantor shall on demand by the Facility Agent
indemnify each Bank against any loss, cost or reasonable out of pocket
expenses which the Bank may sustain or incur as a consequence of:
(a) any sum payable by the Borrower or a Guarantor hereunder not
being paid when due;
(b) the occurrence of any Event of Default or Potential Event of
Default;
(c) an Advance requested in a Utilisation Notice not being
provided for any reason including failure to fulfil any
condition precedent but excluding any default by the Bank
claiming an indemnity pursuant to this clause; or
(d) the Bank receiving payments of principal other than on the
last day of an Interest Period or when due for any reason,
including, without limitation, prepayment in accordance with a
Transaction Document.
Such losses, costs or expenses shall include the amount determined in
good faith by the Bank as being any loss including loss of margin,
cost or expense incurred by reason of the liquidation or re-employment
of deposits or other funds acquired or contracted for by the Bank to
fund or maintain any such Advance or amount.
24. AGENTS
24.1 Appointment
The Facility Agent and the Security Agent are hereby appointed and
authorised to act on behalf of each Bank with power to enter into each
Transaction Document and to exercise such rights, remedies, powers and
discretions as are specifically delegated to them under the Transaction
Documents together with such rights, remedies, powers and discretions
as are reasonably incidental thereto. The Agents do not have any
duties, obligations or liabilities to the Banks or any of them beyond
those expressly stated in this Agreement and the Transaction Documents.
24.2 Relationships
(a) Nothing contained in this Agreement, and no action taken by
the Banks pursuant hereto, shall be deemed to constitute the
Banks a partnership, association, joint venture or other
entity.
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(b) In performing their respective functions and duties under the
Transaction Documents, the Agents shall act solely on behalf
of the Banks and do not assume and shall not be deemed in any
circumstances whatsoever to have assumed any responsibility,
liability or obligation, towards, or relationship of agency or
trust with, or for, the Obligors.
24.3 Communications
Except where this Agreement otherwise expressly provides, all
communications to be made between an Obligor and the Banks or any of
them concerning the Facility shall be made by or through the Facility
Agent.
24.4 Instructions of Majority
Subject to clause 24.5, the Facility Agent must act or refrain from
acting in the exercise of any right or power, or as to any matter not
expressly provided for by this Agreement, in accordance with the
instructions of the Majority Banks and shall be fully protected in so
doing. Any such instructions shall be binding on all the Banks. In the
absence of any such instructions, the Facility Agent may act or refrain
from acting as it sees fit, provided that. 66. it has used reasonable
endeavours to obtain such instructions. In no event, however, shall the
Facility Agent be required to take any action which exposes, or is
likely to expose, it to personal liability unless it is indemnified to
its reasonable satisfaction, or which is contrary to this Agreement or
any law, regulation or directive.
24.5 Amendments
If authorised by the Majority Banks, the Facility Agent or (in the case
of any Security) the Security Agent may (except where any other
authority is required for the same by the express provisions of the
Transaction Documents) grant waivers or consents or (with the agreement
of the Borrower) vary the terms of the Transaction Documents. Any such
waiver, consent or variation so authorised and effected by the relevant
Agent shall be binding on all the Banks and the relevant Agent shall be
under no liability whatsoever in respect of any such waiver, consent or
variation, provided always that, except with the prior written consent
of all the Banks and the Borrower, nothing in this clause shall
authorise:
(a) the extension of any Availability Period; or
(b) any variation of the definition "Majority Banks" in clause 1.1;
or
(c) any extension of the date for, or alteration in the amount or
currency of, or waiver of any payment of principal, interest,
Utilisation Margin, fee, commission or any other amount payable
under any of the Transaction Documents; or
(d) any change to any Bank's Commitment; or
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(e) any variation of clauses 11.6, 12, 26 or this clause 24.5; or
(f) any variation of any provision wherein (before such variation) it
is provided that certain things may not be done without or may be
done with the consent or approval of all the Banks; or
(g) any waiver or consent in relation to, or variation of the
material provisions of, any Security or clause 20 or 21 of this
Agreement; or
(h) (save as otherwise expressly provided for elsewhere in this
Agreement or the relevant Security) any release of the security
provided by any of the Securities over any asset.
24.6 No need for inquiries
No Obligor shall be concerned to inquire as to whether any Agent has
been given any instructions by the Majority Banks or as to the terms of
any instructions so given and may rely on all notices from any Agent
without the need to make further enquiry.
24.7 Delegation
Each Agent may from time to time delegate the performance of its duties
and obligations as Agent. The Banks and each Obligor agree that any
delegate of the duties and obligations of the Agent will be entitled to
the benefit of the provisions of this clause 24 as if it were the Agent
and, without limitation, will not be responsible or liable for any
damage, cost, loss or expense they or any of them may suffer or incur
as a result of or in connection with an act or omission or negligence
of the delegate except to the extent arising as a direct result of the
gross negligence or wilful misconduct of the delegate.
24.8 Agent not bound to Enquire
The Agents are not obliged to ascertain or enquire:
(a) either initially or on a continuing basis, as to the credit or
financial condition or affairs of the Obligors or any other
person; or
(b) as to the performance or observance by the Obligors or any other
person of any of the terms of any Transaction Document; or
(c) whether any Event of Default or Potential Event of Default has
occurred.
24.9 Default
No Agent shall be obliged to make any inquiry as to whether an Obligor
is in breach of, or in default under a Transaction Document or as to
the existence of an Event of Default or Potential Event of Default and
shall not be deemed to have any knowledge of the occurrence of such a
breach, default, Event of Default or Potential Event of Default unless
it has received express written notice thereof from a Bank or an
Obligor, stating that such notice is a "Notice of Default" and
describing the breach, default, Event of Default or Potential Event of
Default. In the event that an Agent receives such a notice, or
otherwise acquires actual notice of an Event of Default or Potential
Event of Default it shall promptly notify the Banks. Subject to its
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being indemnified to its satisfaction, each Agent shall take such
action with respect to an Event of Default as it shall be directed to
take by the Majority Banks. Until an Agent receives such directions it
may (but shall not be obliged) take or refrain from taking such action
as it shall in its absolute discretion deem advisable in the best
interests of the Banks.
24.10 Agents as Banks
With respect to its own rights as a Bank (if any), each Agent shall
have the same rights and powers under each Transaction Document as any
other Bank and may exercise the same as though it were not performing
the duties and functions delegated to it as an Agent and the term
"Banks" shall include the Agents in their individual capacity as a
Bank.
24.11 Agent's dealings
The Agents may, without any liability to account to the Banks or any of
them, accept deposits from, lend money to and generally engage in any
kind of banking or financial, trust or other business with any Obligor
as if they were not Agents and may accept fees and other consideration
from any Obligor for services in connection with any Transaction
Document or otherwise without having to account for the same to the
Banks.
24.12 Notices and reports
Promptly after its receipt thereof, the Facility Agent will provide to
each Bank a copy of each report, notice or other document required
under this document or a Transaction Document to be delivered to the
Facility Agent by an Obligor.
24.13 Not responsible
(a) The Agents shall not be responsible to any Bank for failure of an
Obligor to perform its obligations under a Transaction Document,
an Obligor's financial condition, the completeness or accuracy of
any statements, representations or warranties in a Transaction
Document, the Information Memorandum or any document delivered
under or in connection with a Transaction Document, the valid
execution, effectiveness, adequacy, genuineness, validity,
enforceability or admissibility in evidence of a Transaction
Document or any such other document or the failure of any party
to perform and observe its obligations under a Transaction
Document.
(b) Each Bank acknowledges that it has not relied on any statement,
opinion, forecast or other representation made by any Agent to
induce it to enter into this Agreement or agree to participate in
the Facility whether made in the Information Memorandum or
otherwise and that it has made and (without reliance on any Agent
and based on such documents as it considers appropriate) it will
continue to make its own appraisal of the affairs and financial
condition of each Obligor and its own decisions as to whether or
not to take action under a Transaction Document.
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(c) The Agent will not be obliged on a continuing basis or at a
particular time to provide any Bank with any financial or
other information with respect to an Obligor other than as
provided in clause 24.12.
(d) Without limitation to clause 24.9, the Agent will not be
obliged to keep itself informed as to the performance and
observance by the Obligors of their respective obligations and
responsibilities under this document and the Transaction
Documents.
(e) The Agent shall not be liable for any cost, loss, damage or
expense of whatsoever nature suffered or incurred by a Bank or
any other person except to the extent arising as a direct
result of the gross negligence or wilful misconduct of the
Agent.
24.14 Indemnity
Each Bank shall reimburse each Agent rateably in accordance with
Commitments (to the extent that it is not reimbursed by the Borrower)
on demand, for charges and expenses incurred by it in connection with
the negotiation, preparation, execution, stamping and registration of
the Transaction Documents, in contemplation of, or otherwise in
connection with, the enforcement or preservation of any rights under a
Transaction Document or in carrying out its duties as an Agent under
the Transaction Documents including, in each case, the fees and
expenses of legal and other professional advisers. Each Bank shall
indemnify each Agent rateably in accordance with its Commitments
against all liability, damage, costs, claims and expenses suffered or
incurred or made against an Agent in connection with a Transaction
Document, the performance or purported performance of its duties as
Agent under a Transaction Document or any action taken or omitted to be
taken by an Agent under (or purportedly under) a Transaction Document
except to the extent, however, that such liability, damage, cost, claim
or expense directly results from the Agent's gross negligence or wilful
misconduct.
24.15 Observe laws
Each Agent may refrain from doing anything which would or might in its
opinion either be contrary to any relevant law of any relevant
jurisdiction or any official directive or render it liable to any
person and may do anything which in its opinion is necessary to comply
with any relevant law or official directive.
24.16 Replacement
(a) The Facility Agent (the "retiring Agent") may:
(i) resign at any time by giving not less than 20 Banking
Days' written notice thereof to the Banks and the
Borrower; and
(ii) be removed from office upon not less than 20 Banking
Days' prior written notice signed by or on behalf of
the Majority Banks.
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(b) Where the retiring Agent is also the Security Agent, the removal
referred to in paragraph (a)(ii) above pursuant to this clause
24.16 shall also effect the removal of the Security Agent. The
Borrower and the Banks acknowledge that the giving of a notice of
removal of the retiring Agent pursuant to paragraph (a)(ii) above
shall be deemed to be notice in writing to the Borrower and the
Banks of the intention of the Security Agent to retire as trustee
pursuant to clause 8.2 of the Debenture Stock Trust Deed.
(c) Upon receipt of a notice of resignation from the retiring Agent,
or the giving of a notice of removal of the retiring Agent, the
Majority Banks shall have the right, in consultation with the
Borrower, to appoint a successor Facility Agent. In the case only
of resignation of the retiring Agent, if within 20 Banking Days
after the giving of a notice of resignation, no successor Agent
has been appointed, the retiring Agent may, in consultation with
the Borrower, appoint a successor Facility Agent which shall be a
reputable and experienced financier having an office in Sydney.
(d) The resignation or removal of the retiring Agent and the
appointment of the successor Facility Agent shall both become
effective upon the successor Facility Agent notifying the Banks
and the Borrower of its acceptance of such appointment, and
specifying for the purposes of this Agreement an office in
Sydney. Upon giving such notification, the successor Facility
Agent shall succeed to and be vested with all the rights,
obligations, powers and duties and privileges of the Facility
Agent under the Transaction Documents in place of the retiring
Agent and the retiring Agent shall be discharged from its duties
and obligations under the Transaction Documents.
(e) The provisions of this clause 24 shall continue in effect for the
benefit of a retiring Agent in respect of any actions taken or
omitted to be taken while the retiring Agent was acting as an
Agent.
24.17 No authority
Each Bank acknowledges and agrees that it does not have authority on
behalf of the other Banks to waive any right or remedy of the Banks or
the Agents or to modify or vary, or agree to modify or vary, any
provision of any Transaction Document.
24.18 Security Agent as Trustee
(a) The Security Agent in its capacity as trustee or otherwise shall
not be liable for any failure, omission, or defect in perfecting
the security constituted by the Securities.
(b) The Security Agent in its capacity as trustee or otherwise may
accept without enquiry such title as an Obligor may have to the
property over which security is intended to be created by the
Securities.
(c) Each Bank hereby confirms its approval of the Transaction
Documents and any security created pursuant thereto and hereby
authorises, empowers and directs the Security Agent (by itself or
by such person(s) as it may nominate) to execute and enforce the
same as trustee or as otherwise provided (and whether or not
expressly in the Banks' names) on its behalf.
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24.19 Permitted Lease Transaction
The Banks acknowledge that they have consented in principle to the
implementation of Permitted Lease Transactions. The Facility Agent and
the Security Agent are authorised as agent for the Banks to negotiate,
agree and execute all documents necessary to effect a Permitted Lease
Transaction without further authority from the Banks provided that the
Facility Agent and the Security Agent are satisfied that the
requirements of a Permitted Lease Transaction set out in Schedule 12
are satisfied.
25. SET-OFF
Each Obligor authorises each Bank at any time after an Event of Default
has occurred and is continuing to apply without prior notice any credit
balance (whether or not then due) to which the Obligor is at any time
entitled on any account at any office of the Bank in or towards
satisfaction of any sum then due and unpaid from that Obligor to the
Bank and the Obligors each further authorise each Bank without prior
notice at any time after an Event of Default has occurred and is
continuing to set-off any amount owing (whether present or future,
actual, contingent or prospective and on any account whatsoever) by
that Obligor against any liability (whether present, future, actual,
contingent or prospective) of the Obligor hereunder or on any other
account whatsoever. No Bank shall be obliged to exercise any of its
rights under this clause, which shall be without prejudice and in
addition to any right of set-off, combination of accounts, lien or
other right to which it is at any time otherwise entitled (whether by
operation of law, contract or otherwise). Each Bank shall notify the
Facility Agent and the relevant Obligor forthwith upon its exercise of
a right of set-off involving any Obligor giving full details in
relation thereto and the Facility Agent shall inform the other Banks.
26. PRO RATA SHARING
If at any time the proportion which a Bank ("Overpaid Bank") has
received or recovered by set-off or otherwise in respect of its portion
of any sum due from an Obligor to the Banks under the Transaction
Documents is greater (the amount of the excess being herein referred to
as the "excess amount") than the proportion thereof received or
recovered by the Bank receiving or recovering the smallest or no
proportion thereof, then:
(a) the Overpaid Bank shall promptly notify the Facility Agent;
(b) the Overpaid Bank shall, within 10 Banking Days of such
notification, pay to the Facility Agent an amount equal to the
excess amount;
(c) the Facility Agent shall treat such payment as if it were a
payment by the Obligor on account of the sum owed to the Banks
as aforesaid; and
(d) at the option of the Overpaid Bank:
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(i) subject to clause 26(f), the liability of the Obligor
to the Overpaid Bank shall be increased (or treated
as not having been reduced); or
(ii) the Obligor shall fully indemnify the Overpaid Bank
making such payment for the amount thereof;
provided that:
(e) if a Bank has commenced an action or proceeding in any court to
recover sums owing to it pursuant to this Agreement or a
Transaction Document and as a result thereof, or in connection
therewith, has received an excess amount, the Bank shall not be
required to share any portion of such excess amount with a Bank
which was notified of such legal action or proceeding and which
had the legal right to, but did not, join such action or
proceeding or commence and diligently prosecute a separate action
or proceeding to enforce its rights in the same or another court;
and
(f) if all or a portion of the relevant receipt or payment by or to
an Overpaid Bank is thereafter rescinded or must otherwise be
restored to an Obligor, the Banks shall repay to the Facility
Agent for the account of the Overpaid Bank such amount as shall
be necessary to ensure that (subject to clause 26(e)) all the
Banks share rateably in the amount of the receipt or payment
retained by the Overpaid Bank and the provisions of clause 26(c)
and (d) shall apply only to the retained amount.
27. EXPENSES AND STAMP DUTIES
27.1 Expenses
The Borrower on demand by the Facility Agent will pay to or at the
direction of the Facility Agent all reasonable out of pocket expenses
including but not limited to legal fees, costs and disbursements (on a
solicitor/own client basis) assessed without the necessity of
taxation, incurred or payable by the Facility Agent or the Security
Agent (except that the Borrower will only be liable to pay the legal
fees and disbursements of one firm acting for the Agent and Banks and
is not liable to pay any legal fees, costs and expenses incurred by
any Banks instructing separate legal counsel) in connection with:
(a) the preparation and negotiation of the Transaction Documents
and the Securities and any subsequent consent, agreement,
approval or waiver thereunder or amendment thereto;
(b) the execution of the Transaction Documents and the Securities
and any subsequent consent, agreement, approval or waiver
thereunder or amendment thereto;
(c) the enforcement, attempted enforcement or the preservation of
any rights under the Transaction Documents and the Securities
including, without limitation, any expenses incurred in the
evaluation of any matter of material concern to the Facility
Agent or the Security Agent;
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(d) the obtaining of persons to participate in the Facility as
Banks (including, without limitation, advertising,
accommodation, travelling and out-of-pocket expenses); and
(e) the carrying out by the Agents (or any delegate of the Agents)
of any of their duties under the Transaction Documents.
27.2 Stamp duties
(a) (Payment of all duties): The Borrower must pay all stamp, loan
transaction, registration and similar Taxes, including fines
and penalties, financial institutions duty and debits tax
which may be payable to or required to be paid by any
appropriate authority or determined to be payable in
connection with the execution, delivery, performance or
enforcement of the Transaction Documents or any payment,
receipt or other transaction contemplated by them.
(b) (Indemnity): The Borrower will indemnify and keep indemnified
the Agents and each Bank against any loss or liability
incurred or suffered by it as a result of the delay or failure
by the Borrower to pay such Taxes.
28. ASSIGNMENTS AND CONFIDENTIALITY
28.1 Successors and assigns
This Agreement is binding on and enures to the benefit of each party
hereto and its respective successors and permitted assigns.
28.2 Assignments by the Borrower
The Borrower cannot assign any of its rights under any Transaction
Document without the prior written consent of the Facility Agent acting
with the approval of all the Banks.
28.3 Banks
A Bank may assign all or any of its rights or transfer all or any of
its rights and obligations under the Transaction Documents to another
bank or financial institution at any time if:
(a) it has first consulted with the Borrower regarding the
identity of the new Bank;
(b) any necessary prior authorisation from any relevant
governmental authority or department is obtained;
(c) in the case of an assignment of rights only, the Facility
Agent has received notice of the assignment under which the
assignee irrevocably authorises the assignor to act as the
assignee's agent with full power and authority to exercise the
rights assigned and to receive (and give valid receipts for)
all money payable under the Transaction Documents in respect
of those rights;
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(d) in the case of a transfer of rights and obligations, such
transfer is effected by a substitution in accordance with
clause 28.4;
(e) it receives the prior consent of the Facility Agent, which
consent will not be unreasonably withheld or delayed; and
(f) other than where the relevant Bank is an Agent or Toronto
Dominion Australia Limited, it pays to the Facility Agent a
transfer fee of A$2,000.
28.4 Substitution
(a) If a Bank wishes to transfer all or any of its rights and
obligations under the Transaction Documents to a bank or
financial institution, it and the proposed transferee shall in
Canberra or such other location in Australia agreed by the
Borrower or outside Australia execute and deliver to the
Facility Agent 4 counterparts of the Substitution Certificate.
(b) On receipt of a Substitution Certificate the Facility Agent
shall (if it is satisfied that the substitution complies with
clause 28.3) promptly:
(i) notify the Borrower and each other Bank;
(ii) countersign in Canberra or outside Australia the
counterparts on behalf of all other parties to this
Agreement;
(iii) enter the transfer in a register kept by it (which
shall be conclusive); and
(iv) retain one counterpart and deliver one counterpart
to each of the relevant transferor and transferee
and to the Borrower.
(c) On any such certificate being countersigned by the Facility
Agent the transferor shall be relieved of its obligations to
the extent and from the date specified in such certificate and
the transferee shall be bound by the Transaction Documents to
the extent and from the date stated in the certificate.
(d) Each other party to this Agreement irrevocably authorises the
Facility Agent to sign each such certificate on its behalf and
acknowledges that:
(i) upon such a certificate being signed by the Facility
Agent it shall be deemed for all purposes to have
consented to the transfer of obligations provided for
in the certificate; and
(ii) it will continue to be bound by the provisions of the
Transaction Documents accordingly.
(e) Unless the Facility Agent otherwise agrees, no transfer of a
Bank's obligations may be effected while any Utilisation
Notice is current.
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28.5 Increased Costs and Illegality
If any change in lending office of any Bank or assignment or
substitution of or with respect to all or any part of the rights or
obligations of a Bank under this Agreement pursuant to clause 28.3 or
28.4 is made which results (or would but for this clause result) at the
time thereof in amounts becoming payable under clauses 12.2 or 14.l,
then the assignee or transferee (or, in the case of a change in lending
office, the Bank) shall be entitled to receive such amounts only to the
extent that the assignor or transferor would have been so entitled had
there been no such assignment, transfer or change in lending office.
Nothing in this clause will affect the rights of an assignee or
transferee under clauses 12.2 or 14.1 in relation to amounts which may
become payable after the time of assignment or transfer. No such
assignment or transfer shall be made if the assignee or transferee
would be entitled immediately afterwards to give notice under clause
13.
28.6 Sub-participation
Any Bank shall be entitled freely to enter into any sub-participation
or other arrangement with any third party relating to the Transaction
Documents which does not transfer to that third party any obligation
and/or any legal or equitable interest in any of the rights arising
under this Agreement.
28.7 Stock Certificates
(a) In addition to execution and delivery of the Substitution
Certificate pursuant to clauses 28.3 and 28.4, the proposed
transferee will subscribe for Stock in accordance with the
terms of the Debenture Stock Trust Deed.
(b) The Borrower will issue and register the Stock subscribed for
pursuant to clause 28.7(a) in accordance with the terms of the
Debenture Stock Trust Deed.
(c) Each Bank must consent to the issue of the Stock referred to
in clause 28.7(b), as required by the Debenture Stock Trust
Deed.
(d) If the transferor Bank has transferred all of its rights and
obligations under the Transaction Documents in accordance with
this clause, it must agree to the cancellation of any Stock
held by it. The Borrower must take all steps necessary to
cancel such Stock.
28.8 Related Entities
(a) Notwithstanding clause 28.3(a) and (e), a Bank may assign all
or any of its rights or transfer all or any of its rights and
obligations under the Transaction Documents to a related
entity of equal or better credit standing to that of the Bank
provided that the Bank has given prior written notice of such
transfer to the Borrower. The parties agree that such an
assignment or transfer will be at no cost to the Borrower.
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(b) Notwithstanding clause 28.9, a Bank shall be entitled to disclose
any confidential information or documents to a related entity
provided that the Bank advises such entity of the confidential
nature of the information or documents or that nature is clear
from the circumstances of the disclosure.
28.9 Confidentiality
(a) Subject to clause 28.9(b), no Bank shall disclose any
confidential or unpublished information or documents supplied by
an Obligor in connection with the Transaction Documents which are
specifically indicated by the Obligor to be confidential.
(b) A Bank shall be entitled to disclose any confidential information
or documents:
(i) in any proceeding arising out of or in connection
with any Transaction Document to the extent that such
disclosure is deemed by the Bank necessary to protect
its interests;
(ii) if required to do so under a binding order of any
governmental or semi-governmental authority or
department or any procedure for discovery in any
proceedings;
(iii) if required to do so under any law or any
administrative guideline, directive, request or
policy whether or not having the force of law and, if
not having the force of law, the observance of which
is in accordance with the practice of responsible
bankers or financial institutions;
(iv) otherwise as required or permitted by any Transaction
Document;
(v) to its legal advisers and its consultants as long as
it advises them of the confidential nature of the
information or documents or that nature is clear from
the circumstances of the disclosure;
(vi) to a proposed assignee or transferee or
sub-participant with the prior written consent of the
Borrower which consent shall not unreasonably be
withheld or delayed and will be deemed to have been
given if not refused within 15 Banking Days of a
request therefor;
(vii) relating to its level of exposure to any Obligor
under any Hedging Agreement or on any other account,
to any Agent or any other Bank; or
(viii) with the prior written consent of the Borrower.
(c) This clause 28.9 shall survive the termination of this Agreement.
28.10 Bond Issue or Refinancing
The Banks acknowledge that the Borrower may wish to restructure all or
part of this Facility as an issue of debentures or other form of debt
instrument to be offered to financial institutions. The Banks agree to
consider in good faith any proposal to refinance all or part of this
Facility by the issue of debentures or other debt instruments and to
enter into any necessary documents to regulate the sharing of security
and voting on terms reasonably acceptable to them.
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29. GOVERNING LAW AND JURISDICTION
29.1 Governing law
This Agreement is governed by and construed in accordance with the laws
applying in New South Wales.
29.2 Jurisdiction
(a) (Acceptance of jurisdiction): Each of the Obligors irrevocably
submits to and accepts, generally and unconditionally, the
non-exclusive jurisdiction of the courts and appellate courts
of New South Wales with respect to any legal action or
proceedings which may be brought at any time relating in any
way to any Transaction Document.
(b) (No objection to inconvenient forum): Each of the Obligors
irrevocably waives any objection it may now or in the future
have to the venue of any action or proceedings relating to a
Transaction Document including any objection it may now or in
the future have that any such action or proceeding has been
brought in an inconvenient forum.
30. MISCELLANEOUS
30.1 Certificate of Agent
A certificate in writing signed by an officer of the Facility Agent
certifying the amount payable by an Obligor hereunder or stating any
other act, matter or thing relating to any Transaction Document is
prima facie and binding on each Obligor in the absence of manifest
error on the face of the certificate.
30.2 Notices
Any notice or other communication which must be given, served or made
under or in connection with any Transaction Document:
(a) must be in writing in order to be valid;
(b) is sufficient if executed by the party giving, serving or
making the same or on its behalf by any attorney, director,
secretary, other duly authorised officer or solicitor of such
party;
(c) will be deemed to have been duly given, served or made in
relation to a person if it is delivered or posted by prepaid
post to the address, or sent by facsimile to the number of
that person set out herein (or at such other address or number
as is notified in writing by that person to the other parties
from time to time); and
(d) will be deemed to be given, served or made:
(i) (in the case of prepaid post) on the fifth day after
the date of posting;
79.
<PAGE>
(ii) (in the case of facsimile) on receipt of a
transmission report confirming successful transmis-
sion; and
(iii) (in the case of delivery by hand) on delivery.
30.3 Continuing obligation
Each Transaction Document constitutes a continuing obligation
regardless of any settlement of account, intervening payment, express
or implied revocation or any other matter or thing, until a final
discharge thereof has been given to the Borrower and the Guarantors.
30.4 Settlement conditional
Any settlement or discharge between the Agents, the Banks and the
Borrower and/or the Guarantors is conditional on any security or
payment given or made by the Borrower, any Guarantor or any other
person in relation to the Obligations not being avoided, repaid or
reduced by virtue of any Insolvency Provision. If such security or
payment is so avoided, repaid or reduced, the Agents and the Banks are
entitled to recover the value or amount of such security or payment
avoided, repaid or reduced from the Borrower and the Guarantors
subsequently as if such settlement or discharge had not occurred.
30.5 Indemnities
Each indemnity in this Agreement is a continuing obligation of the
Borrower and each Guarantor (severally), separate and independent from
the other obligations of the Borrower and each Guarantor and survives
termination of this Agreement. It is not necessary for any Agent or
Bank to incur expense or make payment before enforcing a right of
indemnity conferred by this Agreement.
30.6 Further assurance
The Borrower and the Guarantors on demand by the Facility Agent or the
Security Agent and at the entire cost and expense of the Borrower and
the Guarantors will perform all such acts and execute all such
agreements, assurances and other documents and instruments as the
Facility Agent reasonably requires to perfect or improve the rights and
powers afforded, created, or intended to be afforded or created, by any
Transaction Document.
30.7 Attorney
Each Obligor hereby irrevocably appoints:
(a) the Agents and each Bank, severally;
(b) each director and secretary and authorised officer from time
to time of each Agent and each Bank; and
80.
<PAGE>
(c) any duly appointed agent of the Agents and each Bank,
jointly and severally the attorney of the Obligor, in the Obligor's
name and on the Obligor's behalf, at any time from time to time while
an Event of Default subsists and in such manner as the relevant Agent
or the relevant Bank, as the case may be, in its absolute discretion
shall think fit to:
(d) do all acts necessary or proper to further or fully assure any
Transaction Document or any Bill to the Bank; and
(e) do all acts necessary or proper to perfect or improve the
rights and powers afforded or created, or intended to be
afforded or created, by any Transaction Document.
30.8 Severability of provisions
Any provision of any Transaction Document which is illegal, void or
unenforceable will be ineffective to the extent only of such
illegality, voidness or unenforceability without invalidating the
remaining provisions hereof or thereof.
30.9 Remedies cumulative
The rights and remedies conferred by this Agreement on the Agents or
the Banks are cumulative and in addition to all other rights or
remedies available to the Agents or the Banks by law or by virtue of
any Transaction Document.
30.10 Waiver
A failure to exercise or enforce or a delay in exercising or enforcing
or the partial exercise or enforcement of any right, remedy, power or
privilege arising under any Transaction Document by the Agents or the
Banks will not in any way preclude, or operate as a waiver of, any
further exercise or enforcement thereof or the exercise or enforcement
of any other right, remedy, power or privilege thereunder or provided
by law.
30.11 Consents and approvals
Where any act, matter or thing under any Transaction Document depends
on the consent or approval of the Agents or Banks, then unless
expressly provided otherwise therein, that consent or approval may be
given or withheld in the absolute and unfettered discretion of the
Agents or Banks (as the case requires) and may be given subject to such
conditions as the Agents or Banks (as the case requires) thinks fit in
its absolute and unfettered discretion..
30.12 Written waiver, consent and approval
Any waiver, consent or approval given by the Facility Agent under any
Transaction Document will only be effective and only binds the Banks if
it is given in writing, and executed by the Facility Agent or on its
behalf by an officer for the time being of the Facility Agent.
81.
<PAGE>
30.13 Time of essence
Time is of the essence in respect of each Obligor's obligations under
the Transaction Documents.
30.14 Consultants fees
Where the Facility Agent has to make any determination (whether in
respect of an Advance or otherwise), it may employ such consultants or
persons as it thinks fit to assist in making such determination. The
Borrower will reimburse the Facility Agent for all reasonable fees paid
by the Facility Agent to any such consultants or persons upon receipt
of a written demand therefor.
30.15 Moratorium legislation
To the fullest extent permitted by law, the provisions of all statutes
whether existing now or in the future and whether operating directly or
indirectly to lessen or otherwise to vary or affect in favour of any
Obligor any obligation under any Transaction Document, or to delay or
otherwise prevent or prejudicially affect the exercise of any rights or
remedies conferred on an Agent or any Bank under any Transaction
Document, are hereby expressly waived, negatived and excluded.
30.16 Binding on each signatory
Each Transaction Document is binding on each of the signatories
notwithstanding that any one or more of the named parties hereto does
not execute it, that there is any invalidity, forgery or irregularity
touching its execution or that it is or becomes unenforceable, void or
voidable against a named party.
30.17 Counterparts
This Agreement may be executed in a number of counterparts, all of
which taken together will be deemed to constitute one and the same
document.
30.18 Proceeds Account
The Security Agent agrees with each of the Obligors that it will not
exercise its rights under clause 5.2 of the document referred to in
paragraph (a) of the definition of "Original Securities" or clause 3.3
of the documents referred to in paragraphs (b), (c), (d) and (e) of the
definition of "Original Securities" in such a way as to prevent that
party from making a payment which is otherwise permitted by clause
17.5(b)(i) or clause 17.6.
31. NO REPRESENTATION BY OR RELIANCE ON THE BANK OR AGENT
Each party other than each Bank and each Agent acknowledges that:
(a) no Bank and no Agent has any duty to supply that party with
information in relation to or affecting the other or others of
them prior to the date hereof or during the currency of any
Transaction Document;
82.
<PAGE>
(b) it has relied upon that party's own inquiries as to the other
or others of them, the nature and extent of the entire
relationship between them and between them and each Bank and
the Agents whether or not recorded in the Transaction
Documents, and the nature and effect of the Transaction
Documents; and
(c) it has not entered into any Transaction Document in reliance
on or as a result of any representation, promise, statement,
conduct or inducement to that party by or on behalf of any
Bank or any Agent or by or on behalf of any Obligor otherwise
than as embodied in the Transaction Documents or as notified
in writing by that party to the Banks and the Agents prior to
the date hereof.
32. REVIEW
If the Majority Banks reasonably believe that the financial performance
of the Group has departed from the annual budget which comprises part
of the Long Range Plan in a material respect and that such performance
is likely to have a Material Adverse Effect, the Facility Agent acting
on the direction of the Majority Banks may provide the Borrower with a
notice of that fact and as soon as practicable, but no later than 10
Banking Days, after the Borrower receives a notice under this clause,
the Borrower must enter into good faith negotiations with the Facility
Agent regarding possible changes to the business or operations of the
Group or a restructuring or repricing of this Facility.
83.
<PAGE>
SCHEDULE 1
ORIGINAL GUARANTORS
<TABLE>
<CAPTION>
Name Jurisdiction of
Incorporation in
Australia ACN Address
<S> <C> <C> <C>
CTV Pty Limited Queensland 064 416 128 Level 29, 259
George Street,
Sydney, NSW 2000
STV Pty Limited South Australia 065 312 450 Level 29, 259
George Street,
Sydney, NSW 2000
AUSTAR Services Pty
Ltd South Australia 068 521 880 Level 29, 259
George Street,
Sydney, NSW 2000
Selectra Pty Ltd South Australia 065 367 526 Level 29, 259
George Street,
Sydney, NSW 2000
Vinatech Pty Ltd South Australia 065 366 314 Level 29, 259
George Street,
Sydney, NSW 2000
Jacolyn Pty Ltd South Australia 064 744 869 Level 29, 259
George Street,
Sydney, NSW 2000
Minorite Pty Ltd South Australia 068 943 484 Level 29, 259
George Street,
Sydney, NSW 2000
Kidillia Pty Ltd South Australia 068 943 608 Level 29, 259
George Street,
Sydney, NSW 2000
Dovevale Pty Ltd South Australia 068 943 591 Level 29, 259
George Street,
Sydney, NSW 2000
Windytide Pty Ltd South Australia 068 943 546 Level 29, 259
George Street,
Sydney, NSW
84.
<PAGE>
Chippawa Pty Ltd South Australia 068 943 635 Level 29, 259
George Street,
Sydney, NSW 2000
Ilona Investments Pty
Ltd South Australia 068 943 626 Level 29, 259
George Street,
Sydney, NSW 2000
Wollongong
Microwave Pty Limited South Australia 065 146 321 Level 29, 259
George Street,
Sydney, NSW 2000.
</TABLE>
85.
<PAGE>
SCHEDULE 2
BANKS
<TABLE>
<CAPTION>
Tranche 1 Tranche 2 Total
Name & Address Commitment Commitment Commitment
<S> <C> <C> <C>
The Chase Manhattan Bank, $63,750,000 $63,750,000 $127,500,000
ARBN 074 112 011 of Level 35,
AAP Centre, 259 George Street,
Sydney, New South Wales
Toronto Dominion Australia $53,750,000 $53,750,000 $107,500,000
Limited, ACN 004 958 020
of Level 36, 385 Bourke Street,
Melbourne, Victoria
Fax: (03) 9670 3779
Paribas Group Australia Limited, $17,500,000 $17,500,000 $35,000,000
ACN 002 174 843 of Level 11, 3
Spring Street, Sydney NSW
2000
Fax: (02) 9241 5363
ABN AMRO Australia Limited, $17,500,000 $17,500,000 $35,000,000
ACN 000 862 797, ABN AMRO
Bank NV, Australian Branch,
ARBN 079 478 612 jointly and
severally, of Level 23, 255
George Street, Sydney
Fax: (02) 9259 5444
Bankers Trust Australia Limited $12,500,000 $12,500,000 $25,000,000
ACN 003 017 221
Level 15
The Chifley Tower
2 Chifley Square
Sydney NSW 2000
Fax: (02) 9259 9800
Citibank N.A. (Sydney Branch) $17,500,000 $17,500,000 $35,000,000
ARBN 072 814 058
Citibank Centre
1 Margaret Street
Sydney NSW 2000
86.
<PAGE>
Fax: (02) 9262 2520
Credit Suisse First Boston ARBN $17,500,000 $17,500,000 $35,000,000
061 700 712
Level 27
101 Collins Street
Melbourne VIC 3000
Fax: (03) 9653 3444
- ------------------------------------------------------------------------------------------------------------
TOTAL $200,000,000 $200,000,000 $400,000,000
</TABLE>
87.
<PAGE>
SCHEDULE 3
LICENCES
1. All MMDS licences issued under the Radiocommunications Act (Cth) 1992 to a
member of the Group; and
2. All broadcast licences issued under the Broadcasting Services Act (Cth)
1992 to a member of the Group.
88.
<PAGE>
SCHEDULE 4
DOCUMENTARY CONDITIONS PRECEDENT
1. A certified copy of the constitution of each Obligor.
2. A certified copy of a resolution or resolutions of the directors of the
Borrower approving the Facility and authorising:
(a) the execution by the Borrower of this Agreement and of any of
the Original Securities to be given by the Borrower; and
(b) a person or persons to sign Bills, notices, certificates or
other documents in connection with the Facility on behalf of
the Borrower.
3. A certified copy of a resolution or resolutions of the directors each
Original Guarantor approving the giving of the guarantee by that
Guarantor in this Agreement and authorising:
(a) the execution by the Original Guarantor of this Agreement and
of any of the Original Securities to be given by that Original
Guarantor; and
(b) a person or persons to sign Bills, notices, certificates or
other documents in connection with the Facility on behalf of
the Guarantor.
4. Evidence, satisfactory to the Facility Agent, that the powers of
attorney (if any) used to execute any of the Transaction Documents on
behalf of any Obligor have been or will be registered.
5. A certified copy of the signatures of all persons authorised to sign on
behalf of the Borrower and the Original Guarantors.
6. A copy of the Certificate of Registration issued by the Australian
Securities & Investments Commission in relation to each of the Original
Securities.
7. Replies to all requisitions of the Facility Agent and its solicitors
relating to the Facility and the Original Securities.
8. A certified copy or originals of each of the Transaction Documents and
the Material Contracts duly executed and stamped (if required) (other
than the Access Agreements). The parties acknowledge that the agreement
referred to in paragraph 3 of Schedule 11 has not been executed by
Optus Vision Pty Limited or Optus Networks Pty Limited.
9. A certified copy of (and of all applications for) any and all
authorisations, approvals, consents, licences, permits, exemptions and
other requirements (whether governmental requirements or otherwise)
required for each Obligor to carry on its business or to enter into
or perform its obligations under the Transaction Documents.
10. An opinion, addressed to the Facility Agent and the Banks, of the legal
advisers to the Facility Agent and the Banks as to such matters
relating to the Obligors and/or the Transaction Documents as the
Facility Agent may require.
89.
<PAGE>
11. An opinion, addressed to the Facility Agent on behalf of the Banks as
to the enforceability of the Transaction Documents to which UIH
Asia/Pacific Communications Inc., Austar, Inc. is a party against UIH
Asia/Pacific Communications Inc..
12. The Long Range Plan.
13. Evidence, satisfactory to the Agent, that each Bank has subscribed for
and the Borrower has issued each Bank with Stock (as defined in the
Debenture Stock Trust Deed).
14. Evidence that all insurance policies are in existence as required under
this Agreement and any of the Securities and where applicable, that the
Security Agent's interest has been noted thereon and if requested
certified copies of each such insurance policy.
15. Acknowledgements that any notices of any increases in the limits of the
Securities listed in paragraphs (a) and (b) of the definition of
Original Securities have been received.
16. Duly signed registration or filings forms (if any) required to be
completed in relation to the increases referred to in paragraph 15.
17. A certificate in respect of Part 2E of the Corporations Law from the
Borrower and each other member of the Group for the purposes of Part 2E
of the Corporations Law.
For the purposes of this Schedule, "certified" means a copy certified to be such
by a director, secretary or officer of the Borrower.
90.
<PAGE>
SCHEDULE 5
FORMS OF UTILISATION NOTICE
To: Chase Securities Australia Limited
From: AUSTAR Entertainment Pty. Limited Date: [ ]
UTILISATION NOTICE (ADVANCE).
Facility Agreement dated [ ]
Dear Sirs
We hereby give you notice pursuant to clause 4.1 of the above Facility Agreement
that we require an Advance to be made to us under the Facility Agreement, as
follows
(a) Utilisation Date: [ ]
(b) Amount: [ ]
(c) Interest Period: [ ]
(d) Tranche Designation: [ ]
Payment instructions with respect to the proceeds of the Advance are as follows:
[ ]
Terms used in this Utilisation Notice and defined in the Facility Agreement have
the same meaning in this Utilisation Notice as in the Facility Agreement.
We confirm that the requirements of clause 3.4 of the Facility Agreement have
been complied with.
We confirm that no Event of Default or Potential Event of Default has occurred
and is continuing or would result from the borrowing of the proposed Advance. We
also confirm that the representations, warranties and undertakings in clauses 16
(except for clauses 16.2(c), (d), (e) and (f)) and 17 of the Facility Agreement
have been complied with and the statements in those clauses are correct as at
the date of this Utilisation Notice.
Yours faithfully
[Authorised Signatory]
For and on behalf of AUSTAR Entertainment Pty. Limited
91.
<PAGE>
SCHEDULE 6
ACCESSION AGREEMENT
THIS ACCESSION AGREEMENT is dated the [ ] day of , 19 and made BETWEEN [ ] (the
"Additional Guarantor"), AUSTAR Entertainment Pty. Limited (the "Borrower"), [ ]
(each an "Existing Guarantor"), Chase Securities Australia Limited in its
capacity as Facility Agent under the Facility Agreement referred to in Recital
(A) hereof and on behalf of the Banks parties to and defined as such in such
Facility Agreement, and [ ] in its capacity as Security Agent.
WHEREAS:
(A) By and upon and subject to the terms of a facility agreement (the
"Facility Agreement", which term includes any supplements and
amendments thereto which may at any time be made in relation thereto
and also any Substitution Certificates and Accession Agreements) dated
[ ] made between the Borrower and Guarantors as therein defined, the
several banks parties thereto as Banks and Chase Securities Australia
Limited as Facility Agent and Chase Securities Australia Limited as
Security Agent, a revolving working capital facility, an amortising
cash advance facility and an amortising term loan facility were made
available to the Borrower (as defined in the Facility Agreement).
(B) Each of the entities expressed to be party hereto, whether directly or
through signature hereof by the Facility Agent or the Borrower on its
behalf, is a party to the Facility Agreement either by having been an
original party thereto or pursuant to an Accession Agreement or a
Substitution Certificate to which it is party or otherwise.
(C) The Additional Guarantor wishes to become party to the Facility
Agreement as a Guarantor pursuant to the procedure established in
clause 21 of the Facility Agreement by the execution of this Accession
Agreement.
(D) It is the intention of the parties that this Accession Agreement shall
take effect as a deed.
NOW IT IS HEREBY AGREED as follows:
1. Definitions
Terms used herein which are defined in or to which a meaning or
construction is assigned by or in the Facility Agreement shall, unless
otherwise defined herein, have the same meaning and construction herein
as therein.
2. Agreements, Confirmations and Representations
(a) The Additional Guarantor hereby:
(i) confirms that it has received a copy of the Facility
Agreement together with such other documents and
information as it has required in connection herewith
and therewith;
92.
<PAGE>
(ii) agrees to become, with effect from the date of this
Accession Agreement, a Guarantor under the Facility
Agreement, agrees to be bound in that capacity with
effect from such date by the terms of the Facility
Agreement and undertakes accordingly to perform its.
90. obligations as a Guarantor thereunder;
(iii) confirms the accuracy of the information set out
under its name at the end of this Accession
Agreement;
(iv) represents and warrants as an Obligor to the Banks
and the Agents in the terms of clause 16 (other than
paragraphs 16.2(c), (d), (e) and (f)) of the Facility
Agreement by reference to the facts and circumstances
existing at the date hereof; and
(v) confirms that it has not relied on the Banks or the
Agents to assess or inform it as to the legality,
validity, effect or enforceability of the Facility
Agreement or any other document referred to therein
or the accuracy or completeness of any such
information as is referred to in paragraph (i) above
or the creditworthiness, affairs, condition or status
of any of the parties to the Facility Agreement, or
any such other document.
(b) The Borrower, the Existing Guarantor(s), the Agents and the
Banks hereby agree amongst themselves and with the Additional
Guarantor that the Additional Guarantor shall become party to
the Facility Agreement with effect from the date of this
Accession Agreement.
3. Law
This Accession Agreement shall be governed by and construed in
accordance with the laws applying in New South Wales.
IN WITNESS WHEREOF the parties hereto have caused this Accession Agreement to be
duly executed on the date first written above.
SIGNATURES
Additional Guarantor:
[ ]
Borrower:
AUSTAR ENTERTAINMENT PTY. LIMITED
for itself and as agent for and on behalf of the Existing Guarantors
By:
Agent:
CHASE SECURITIES AUSTRALIA LIMITED for itself and as Facility Agent and for and
on behalf of the Security Agent and the Banks.
By:
93.
<PAGE>
SCHEDULE 7
SUBSTITUTION CERTIFICATE
Substitution Certificate made the day of
BY ("Existing Bank");
AND ("New Bank");
AND Chase Securities Australia Limited for itself and as agent for
each party under the Facility Agreement ("Facility Agent").
WHEREAS
A. The Existing Bank and the New Bank presently have the Commitments
specified in Schedule 1 of this Certificate.
B. The New Bank wishes to assume [some/all] of the Existing Bank's
Commitments under the Facility Agreement.
C. After the Substitution Date the Existing Bank and the New Bank will
have the Commitments specified in the Schedule.
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Certificate:
"Borrower" means AUSTAR Entertainment Pty. Limited, ACN 068 104 530.
"Debenture Stock Trust Deed" means the deed so entitled dated 2 April
1997 entered into by (amongst others) the Borrower and the Facility
Agent.
"Facility Agreement" means the agreement dated [ ] between (amongst
others) the Borrower and the Facility Agent together with and as
supplemented by all Accession Agreements and Substitution Certificates.
"Stock" means debenture stock issued pursuant to the Debenture Stock
Trust Deed.
"Substituted Commitments" means the Commitments specified as such in
Schedule 1 of this Certificate.
"Substituted Obligations" means the obligations nd responsibilities
identical to the obligations and responsibilities under the Transaction
Documents of the Existing Bank in relation to the Substituted
Commitments.
"Substituted Portion" means the amount of each outstanding Advance
specified as such in Schedule 2 of this Certificate.
94.
<PAGE>
"Substituted Rights" means rights, remedies and powers identical to the
rights, remedies and powers under the Transaction Documents of the
Existing Bank in relation to the Substituted Commitments and the
Substituted Portion.
"Substitution Date" means the later of the date on which this
Certificate is executed on behalf of the Facility Agent or such later
date as the parties hereto may agree in writing.
"Trust" means the AUSTAR Security Trust constituted by the Debenture
Stock Trust Deed.
1.2 Interpretation
(a) A reference in this Certificate to "identical" obligations and
responsibilities or rights, remedies and powers is a reference
to the character of those obligations and responsibilities,
rights, remedies and powers rather than to the identity of the
person obliged to perform them or entitled to them.
(b) Terms defined or given a special meaning in the Facility
Agreement have the same meaning in this Certificate.
1.3 Transaction Documents
This Certificate is a Transaction Document.
2. REPRESENTATION
The Existing Bank represents and warrants to the New Bank that as at
the date of this Certificate the Existing Bank's present Commitments
under the Facility Agreement are as shown in Schedule 1 and the
Existing Bank's participation in outstanding Advances is as shown in
Schedule 2 of this Certificate.
3. SUBSTITUTED OBLIGATIONS
3.1 Release from Future Obligations
The Existing Bank is released from the Substituted Obligations with
effect on and from the Substitution Date. The Existing Bank shall,
however, remain bound by its obligations and responsibilities under the
Transaction Documents which accrue prior to the Substitution Date save
as provided in clause 5 below.
3.2 Assumption of Obligations
The New Bank undertakes to the Existing Bank and the Agent that it
shall assume the Substituted Obligations on and from the Substitution
Date.
4. SUBSTITUTED RIGHTS
The Existing Bank shall no longer be entitled to the Substituted
Rights or the Substituted Portion and the New Bank shall become
entitled to the Substituted Rights and the Substituted Portion, with
effect on and from the Substitution Date.
95.
<PAGE>
5. EFFECT ON TRANSACTION DOCUMENTS
The Existing Bank, the New Bank and the Facility Agent agree that with
effect on and from the Substitution Date:
(a) the New Bank and each party to each Transaction Document will
assume obligations and responsibilities towards each other,
and have rights, remedies and powers in relation to each
other, determined on the basis that the obligations and
responsibilities of the New Bank are the Substituted
Obligations and the rights, remedies and powers of the New
Bank are the Substituted Rights;
(b) the Existing Bank will be released from its obligations and
responsibilities under each of the Transaction Documents
accruing on and after the Substitution Date to the extent of
the Substituted Obligations and it will cease to be entitled
to exercise any rights, remedies or powers under the
Transaction Documents arising on or after the Substitution
Date in respect of the Substituted Rights; and
(c) the New Bank will be deemed a party to each Transaction
Document to which the Existing Bank is a party as a Bank with
Commitments equal to the Substituted Commitments.
6. NO EFFECT ON ACCRUED RIGHTS AND OBLIGATIONS
Save as expressly provided herein this Certificate shall not affect the
Existing Bank's rights, remedies and powers arising, and obligations
and responsibilities accrued, prior to the Substitution Date.
7. LIQUEFYING BILLS
Nothing contained in this Certificate releases, relieves or otherwise
affects the obligations and responsibilities and the rights, remedies
and powers, of the Existing Bank in respect of Bills drawn under clause
9 of the Facility Agreement. The New Bank will not assume any
obligations or responsibilities, or acquire any rights, remedies or
powers, in respect of such Bills.
8. PAYMENTS
8.1 Consideration
The Existing Bank and the New Bank shall agree separately between
themselves the amounts (if any) payable from one to the other in
relation to the substitution in respect of principal and accrued
interest and fees.
8.2 Facility Agent
On and from the Substitution Date the Facility Agent will make all
payments received by it in respect of the Substituted Commitments,
Substituted Obligations, Substituted Rights and Substituted Portion to
the New Bank.
96.
<PAGE>
9. INDEPENDENT ASSESSMENT
Without limiting clause 6 of this Certificate, the New Bank agrees that
the provisions of clause 24.13 of the Facility Agreement binds it as if
the reference therein to this "document" included this Certificate and
(subject to any agreement to the contrary between the Existing Bank and
New Bank) the reference therein to the "Agent" included the Existing
Bank.
10. ACKNOWLEDGEMENTS
The New Bank acknowledges that it has received a complete and current
copy of each Transaction Document together with such other documents
and information as it has required in connection therewith.
11. GOVERNING LAW
This Certificate is governed by the laws applying in New South Wales.
12. DEBENTURE STOCK
The New Bank acknowledges that it will not be a beneficiary of the Trust unless
Stock has been issued to it pursuant to the Debenture Stock Trust Deed. The New
Bank will be responsible for applying for Stock and the Existing Bank will not
be liable for any failure of the New Bank tobtain the benefit of the Securities.
Schedule 1: Commitments
<TABLE>
<CAPTION>
Tranche 1 Tranche 2 Total
Commitment Commitment Commitment
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Existing Bank's
present Commitments $[ ] $[ ] $[ ]
New Bank's present
Commitments $[ ] $[ ] $[ ]
Substituted
Commitments $[ ] $[ ] $[ ]
Existing Bank's
Commitments after
substitution $[ ] $[ ] $[ ]
New Bank's
Commitments after
substitution $[ ] $[ ] $[ ]
</TABLE>
97.
<PAGE>
Schedule 2: Advances
<TABLE>
<CAPTION>
Total Outstanding Existing Bank's Substituted
Participation Portion
<S> <C> <C> <C>
Tranche 1
Advances $[ ] $[ ] $[ ]
Tranche 2
Advances $[ ] $[ ] $[ ]
</TABLE>
SIGNED as an agreement.
[To be signed by Existing Bank, New Bank and Facility Agent]
98.
<PAGE>
SCHEDULE 8
NOTICE FROM UIH
[LETTERHEAD OF UIH AUSTRALIA/PACIFIC, INC.]
[Date]
The Chase Manhattan Bank
AAP Centre
259 George Street
SYDNEY NSW 2000
Attention Mr Jason Lee
Dear Sir
AUSTAR ENTERTAINMENT PTY LIMITED
We refer to:
(a) the Indenture dated 14 May 1996 between UIH Australia/Pacific, Inc.
("UAP") and American Bank National Association (the "Indenture"); and
(b) the terms and conditions of the syndicated senior term debt facility
arranged by The Chase Manhattan Bank ("Chase") for AUSTAR Entertainment
Pty Limited ("AUSTAR") dated [ ] (the "Senior Debt Terms").
Having reviewed the Senior Debt Terms and consulted with our lawyers we confirm
that the provision of a financing for AUSTAR in accordance with the Senior Debt
Terms will not cause a breach of the Indenture. We confirm that UAP has obtained
the necessary waivers, consents or amendments from UAP senior note holders to
permit the dividend restriction referred to in clause 17.6(a) of the Senior Debt
Terms.
We acknowledge that Chase will rely on this letter in providing finance to
AUSTAR and confirm that this letter may also be disclosed to and relied on by
prospective syndicate banks which participate in the proposed financing for
AUSTAR.
Signed on behalf of UAP by [ ] with the authority of the directors
of UAP.
99.
<PAGE>
SCHEDULE 9
COMPLIANCE CERTIFICATE
TO: Chase Securities Australia Limited (in its capacity as Facility Agent)
ACN 002 888 011
AAP Centre
259 George Street
SYDNEY NSW 2000
FROM: AUSTAR Entertainment Pty. Limited
ACN 068 104 530
Level 13
309 Kent Street
SYDNEY NSW 2000
COMPLIANCE CERTIFICATE
Reference is made to the A$400,000,000 Syndicated Senior Secured Debt Facility
Agreement dated [ ] between (amongst others) AUSTAR Entertainment Pty. Limited
("Company") and Chase Securities Australia Limited in its capacity as Facility
Agent and Security Agent ("Facility Agreement") and all Accession Agreements and
Substitution Certificates entered into in respect of the Facility Agreement.
Words defined in the Facility Agreement have the same meaning in this
Certificate.
This Certificate is given by the Company on behalf of all Obligors.
1. RATIOS
1.1 Senior Debt/EBITDA*
The ratio of Senior Debt to EBITDA for the Group for the period from
[ ] to [ ] was [ ].
1.2 Total Debt/EBITDA*
The ratio of Total Debt to EBITDA for the Group for the period from
[ ] to [ ] was [ ].
1.3 EBITDA/Interest Expense*
The ratio of EBITDA for the Group to Interest Expense for the period
from [ ] to [ ] was [ ].
100.
<PAGE>
1.4 Total Subscribers*
The Total Subscribers as at [ ] was [ ].
1.5 Total Debt/Total Subscribers*
The ratio of Total Debt to Total Subscribers for the Group for the
period from [ ] to [ ] was [ ].
1.6 Equity Contribution*
The amount of the Equity Contribution is [ ] which is [ ]% of the
aggregate of the amount of Tranche 2 Advances outstanding and the
amount requested in the most recent Tranche 2 Utilisation Notice.
2 CONDITIONS PRECEDENT
The conditions precedent listed in clauses 3.4 and 3.5* of the Facility
Agreement have been met.
3. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
The representations, warranties and undertakings in clauses 16 (except
for clauses 16.2(c), (d), (e) and (f)) and 17 of the Facility
Agreement have been complied with and the statements in those clauses
are correct as at the date of this Certificate [except as set out
below:]*.
We, [ ], being [directors of the Company] certify that the contents of this
Certificate are true and correct as at the date of this Certificate.
- ---------------------------------- ------------------------------------
[Name of Director] [Name of Director]
Date:
-----------------------------
* delete if inapplicable.
101.
<PAGE>
SCHEDULE 10
FORM OF STAMP DUTY CERTIFICATE
To: Chase Securities Australia Limited
Re: Syndicated Senior Secured Debt Facility Agreement dated [ ] made
between (amongst others) AUSTAR Entertainment Pty Limited (the
"Borrower") and Chase Securities Australia Limited, as Facility Agent
and Security Agent.
The Security Property is certified to be valued and apportioned as set out below
at [insert date].
<TABLE>
<CAPTION>
Fixed Cash Debtors Property Total Percentage Percentage
Assets of overall of
assets Australian
Assets
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
N.S.W.
- --------------------------------------------------------------------------------------------------
Victoria
- --------------------------------------------------------------------------------------------------
W.A.
- --------------------------------------------------------------------------------------------------
S.A.
- --------------------------------------------------------------------------------------------------
Queensland
- --------------------------------------------------------------------------------------------------
Tasmania
- --------------------------------------------------------------------------------------------------
A.C.T.
- --------------------------------------------------------------------------------------------------
N.T.
- --------------------------------------------------------------------------------------------------
Overseas
- --------------------------------------------------------------------------------------------------
Total 100% 100%
- --------------------------------------------------------------------------------------------------
</TABLE>
There has been an [increase/decrease] in the [value of/proportion of] assets
located in [specify State or overseas].
For and on behalf of the Borrower
- ----------------------------------
Authorised Officer
102.
<PAGE>
SCHEDULE 11
MATERIAL CONTRACTS
1. The agreement entitled "Short Form Agreement" dated 5 December 1997
between Austar Entertainment Pty Limited, ACN 068 105 530 ("Austar"),
Optus Vision Pty Limited, ACN 066 518 821 ("Optus Vision") and Optus
Networks Pty Limited, ACN 008 570 330 ("Optus Networks") (the "Short
Form Agreement");
2. The agreement amending the Short Form Agreement dated 19 May 1998
between Austar, Optus Vision, Optus Networks and UIH Asia/Pacific
Communications Inc. ("UAP");
3. The undated agreement entitled "Term Sheet" between Optus Vision,
Optus Networks, Austar and UAP;
4. The agreement entitled "Foxtel/Austar Term Sheet" dated 2 May 1998
between Foxtel Management Pty Limited, ACN 068 671 938 (as agent for
the partnership between Sky Cable Pty Limited, ACN 069 799 640, and
Telstra Media Pty Limited, ACN 069 279 021) ("Foxtel") and Austar as
amended by an agreement dated 4 March 1999;
5. The PMP Movie Distribution Agreement dated 2 May 1998 between Austar
and Foxtel;
6. The TV1 Distribution Agreement dated 2 May 1998 between Austar and
Foxtel;
7. The letter agreement dated 13 May 1998 between Austar and Premier
Sports Australia Pty Limited on behalf of Sports Investments Australia
Pty Limited (formerly called Liberty Sports Australia Pty Limited),
ACN 065 445 418 ("SIA") and Australis Sports Pty Limited;
8. The letter agreements dated 13 May 1998 between Austar and Foxtel;
9. The agreement entitled "Fox Sports Supply to Austar - Agreement" dated
3 September 1998 between SIA, Austar, CTV Pty Limited, ACN 064 416 128
and STV Pty Limited, ACN 063 312 450;
10. The agreement entitled "Australian Pay Television Rights - SIA to
Austar" dated 3 September between Austar and SIA; and
11. The Access Agreements (when entered into).
103.
<PAGE>
SCHEDULE 12
PERMITTED LEASE TRANSACTION
A Permitted Lease Transaction will be a sale and leaseback transaction having
the following characteristics:
1. The transaction will involve the sale at lower of cost and book value
of customer premises equipment and other microwave and satellite
reception equipment (the "Equipment") by members of the Group to an
unrelated company (the "Vendor").
2. The Vendor will be a special purpose Australian company which will
covenant to have no other assets and carry on no other business other
than the transaction.
3. Members of the Group may advance funds to the Vendor to enable it to
purchase the Equipment provided the amount of such loan shall not
exceed the purchase price of the Equipment.
4. The Vendor will grant a first ranking fixed and floating charge to the
Security Agent over all of its assets including the Equipment to secure
the Obligations on terms acceptable to the Security Agent.
5. The Vendor will enter into a conditional sale agreement or hire
purchase agreement in relation to the Equipment with another entity
(the "Lessor").
6. The Vendor may grant subsequent ranking security over the Equipment.
7. The Lessor will lease the Equipment to an Obligor for a term expiring
at least one year after the final Repayment Date and on terms which
give the Obligor effective control over the Equipment during the term
of the lease.
8. If under any conditional sale agreement or hire purchase agreement
title to the Equipment is transferred from the Vendor to the Lessor
prior to the security granted by the Vendor to the Security Agent being
discharged, the Equipment may only be transferred to the Lessor
expressly subject to the security in favour of the Security Agent.
9. An Obligor may grant an Encumbrance in favour of the Lessor or another
person over a deposit account established with moneys received by an
Obligor as a result of the implementation of the transaction and those
moneys. The Security Agent will hold second ranking security over the
deposit account and the relevant moneys.
10. The net scheduled cash payment obligations under the lease during the
period from lease commencement until the final Repayment Date must not
exceed the cash amounts received by members of the Group as part of the
transaction and must be fully defeased by a security deposit or similar
instrument created from the cash proceeds of the lease transaction.
104.
<PAGE>
11. A priority agreement must be entered into between the Security Agent
and the Lessor and any other party having security over the Equipment
in relation to:
(a) the Equipment, giving first priority to the Security Agent;
and
(b) in relation to the cash deposit, giving first priority to the
Lessor and second priority to the Security Agent. The terms of
the Priority Agreement must be in a form reasonably acceptable
to the Facility Agent.
12. The Borrower must demonstrate to the Facility Agent that the
consequences of the insolvency of the Vendor or the Lessor will not
adversely impact the rights of members of the Group or the Banks.
13. The Borrower must agree to indemnify the Facility Agent and the
Security Agent for all stamp duty liability in relation to the lease
transaction and associated security documents.
105.
<PAGE>
SIGNED as an agreement.
SIGNED for and on behalf of AUSTAR )
ENTERTAINMENT PTY LIMITED, )
ACN 068 104 530 by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of CTV PTY )
LIMITED, ACN 064 416 128 )
by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
Name of Witness in Full)
SIGNED for and on behalf of STV PTY )
LIMITED, ACN 065 312 450 by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
106.
<PAGE>
SIGNED for and on behalf of AUSTAR )
SERVICES PTY LTD, ACN 068 521 880 )
by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of SELECTRA )
PTY LTD, ACN 065 367 526 by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of VINATECH )
PTY LTD, ACN 065 366 314 by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
107.
<PAGE>
SIGNED for and on behalf of JACOLYN )
PTY LTD, ACN 064 744 869 by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of MINORITE )
PTY LTD, ACN 068 943 484 by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of )
KIDILLIA PTY LTD, ACN 068 943 608 )
by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
108.
<PAGE>
SIGNED for and on behalf of )
DOVEVALE PTY LTD, ACN 068 943 )
591 by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of )
WINDYTIDE PTY LTD, ACN 068 943 )
546 by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of CHIPPAWA )
PTY LTD, ACN 068 943 635 by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
109.
<PAGE>
SIGNED for and on behalf of )
ILONA INVESTMENTS PTY LTD, )
ACN 068 943 626 by Robert Birrell ) /S/ Robert Birrell
in the presence of: ) -------------------------------
(Signature)
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of )
WOLLONGONG MICROWAVE PTY )
LIMITED, ACN ) /S/ Robert Birrell
by Robert Birrell ) -------------------------------
(Signature)in the presence of:
/S/ Christopher Robertson
- --------------------------------------
(Signature of Witness)
CHRISTOPHER ROBERTSON
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of CHASE )
SECURITIES AUSTRALIA LIMITED, )
ACN 002 888 011 (in its capacity as Facility)
Agent and Security Agent), by Jason Lee ) /S/ Jason Lee
in the presence of: ) -------------------------------
/S/ Patrick St. John (Signature)
- --------------------------------------
(Signature of Witness)
PATRICK ST. JOHN
- --------------------------------------
(Name of Witness in Full)
110.
<PAGE>
SIGNED for and on behalf of THE )
CHASE MANHATTAN BANK, )
ARBN 074 112 011, by ) /S/ Jason Lee
in the presence of: Jason Lee ) -------------------------------
(Signature)
/S/ Patrick St. John
- --------------------------------------
(Signature of Witness)
PATRICK ST. JOHN
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of TORONTO )
DOMINION AUSTRALIA LIMITED, )
ACN 004 858 020 by in ) /S/ Patrick St. John
the presence of: Patrick St. John ) -------------------------------
(Signature)
/S/ Loisse Burnett
- --------------------------------------
(Signature of Witness)
/S/ LOISSE BURNETT
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of PARIBAS )
GROUP AUSTRALIA LIMITED, ACN )
002 174 843 by Leo Leslie ) /S/ Leo Leslie
in the presence of: ) -------------------------------
(Signature)
/S/ Mark Rigotti
- --------------------------------------
(Signature of Witness)
MARK RIGOTTI
- --------------------------------------
(Name of Witness in Full)
111.
<PAGE>
SIGNED for and on behalf of ABN AMRO )
AUSTRALIA LIMITED, ACN 000 862 )
797 by Peter Block ) /S/ Peter Block
in the presence of: ) -------------------------------
(Signature)
/S/ Jeannine Clark
- --------------------------------------
(Signature of Witness)
JEANNINE CLARK
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of ABN AMRO )
BANK N.V., AUSTRALIAN BRANCH, )
ARBN 079 478 612 by Peter Block ) /S/ Peter Block
in the presence of: ) -------------------------------
(Signature)
/S/ Jeannine Clark
- --------------------------------------
(Signature of Witness)
JEANNINE CLARK
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of BANKERS )
TRUST AUSTRALIA LIMITED, ACN )
003 017 221 by Melvin Woods ) /S/ Melvin Woods
in the presence of: ) -------------------------------
(Signature)
Susing
- --------------------------------------
(Signature of Witness)
- --------------------------------------
(Name of Witness in Full)
112.
<PAGE>
SIGNED for and on behalf of CITIBANK )
N.A. (SYDNEY BRANCH), ARBN 072 ) /S/ Fiona Knox & John
814 058 by Fiona Knox & John Wakefield ) Wakefield
in the presence of: ) -------------------------------
(Signature)
/S/ Loisse Burnett
- --------------------------------------
(Signature of Witness)
LOISSE BURNETT
- --------------------------------------
(Name of Witness in Full)
SIGNED for and on behalf of CREDIT )
SUISSE FIRST BOSTON, ARBN 061 ) /S/ Chris Collings & Gerrard
700 712 by Chris Collings & Gerrard ) Fitzgibbon
Fitzgibbon in the presence of: ) -------------------------------
(Signature)
/S/ Loisse Burnett
- --------------------------------------
(Signature of Witness)
LOISSE BURNETT
- --------------------------------------
(Name of Witness in Full)
The undersigned LC Banks acknowledge that they have reviewed and approved this
document:
SIGNED for and on behalf of THE )
CANADIAN IMPERIAL BANK OF )
COMMERCE, SINGAPORE BRANCH )
by ) -------------------------------
(Signature)in the presence of:
- --------------------------------------
(Signature of Witness)
- --------------------------------------
(Name of Witness in Full)
113.
<PAGE>
SIGNED for and on behalf of )
BANKGESELLSCHAFT BERLIN AG, )
LONDON BRANCH )
by Patrick St. John ) /S/ Patrick St. John
in the presence of: ) -------------------------------
(Signature)
/S/ Loisse Burnett
- --------------------------------------
(Signature of Witness)
LOISSE BURNETT
- --------------------------------------
(Name of Witness in Full)
114.
<PAGE>
ANNEXURE A.
AUSTAR GROUP DEED OF CONSENT AND RELEASE
AUSTAR ENTERTAINMENT PTY LIMITED
ACN 068 104 530
EACH PARTY REFERRED TO IN SCHEDULE 1
and
CHASE SECURITIES AUSTRALIA LIMITED
ACN 002 888 011
FREEHILL
-----------
HOLLINGDALE
-----------
& PAGE
MLC Centre Martin Place Sydney New South Wales 2000 Australia
Telephone (02) 9225 5000 Int + (61 2) 9225 5000
Facsimile (02) 9322 4000 DX 361 Sydney
Reference: CJR:36E
SYDNEY MELBOURNE PERTH CANBERRA BRISBANE SINGAPORE HANOI HO CHI MINH CITY
CORRESPONDENT OFFICE IN JAKARTA
Liability is limited by the Solicitors Scheme under the Professional
Standards Act 1994 (NSW)
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Clause Page
1 DEFINITIONS AND INTERPRETATION 1
1.1 Definitions 1
1.2 Interpretation 3
2 CONDITIONS PRECEDENT 3
3 CONSENT OF FACILITY AGENT 4
3.1 Transfer of Licences 4
3.2 Release of Charges 4
3.3 Release under Transaction Documents 4
3.4 Winding Up 5
3.5 Transfer of Shares and Debentures 5
4 COSTS 6
5 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS 6
5.1 Representations and warranties 6
5.2 Confirmation and repeat of representation and warranties 6
6 GENERAL CONFIRMATIONS AND RATIFICATIONS 6
6.1 The Borrower 6
6.2 The Group Companies 6
6.3 Consent by the Group Companies 7
7 PRESERVATION OF OTHER RIGHTS AND SECURITIES 7
8 MISCELLANEOUS 7
8.1 Governing law 7
8.2 Counterparts 7
SCHEDULE 1 - GROUP COMPANIES 8
<PAGE>
- --------------------------------------------------------------------------------
THIS AUSTAR GROUP DEED OF CONSENT AND RELEASE
is made as a deed on between the following parties:
1. AUSTAR ENTERTAINMENT PTY LIMITED
ACN 068 104 530
of Level 29, 259 George Street, Sydney, New South Wales
(BORROWER)
2. EACH PARTY REFERRED TO IN SCHEDULE 1
(GROUP COMPANIES)
3. CHASE SECURITIES AUSTRALIA LIMITED
ACN 002 888 011
of Level 35, AAP Centre, 259 George Street, Sydney, New South Wales
(FACILITY AGENT)
RECITALS
A. Under the Facility Agreement, the Banks have made
available to the Borrower various facilities on the
terms set out in the Facility Agreement.
B. Under the Facility Agreement, the Group Companies have
guaranteed to the Banks the whole of the Obligations
of the Borrower to the Banks.
C. Under the Securities, the Borrower and the Group
Companies have mortgaged the Group Shares and charged
all other Charged Property (as that term is defined,
respectively, in each Deed of Charge) to the Facility
Agent.
D. The Borrower and the Group Companies propose to restructure the Group.
E. The Borrower and the Group Companies have requested the Facility Agent
to give certain consents and release certain charges, mortgages and
guarantees to enable the first stage of the proposed restructure of
the Group to proceed and the Facility Agent has agreed to this request
on the terms contained in this deed.
THIS DEED WITNESSES
that in consideration of, among other things, the mutual promises contained
in this deed, the parties agree:
- --------------------------------------------------------------------------------
1 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
(a) In this deed and in the Recitals:
ACCESSION AGREEMENT means the Accession Agreement dated 31
December 1998 between each New Group Company, the Borrower and
the Facility Agent.
CHARGED PROPERTY means in relation to Dovevale Pty Limited,
Minorite Pty Limited or a New Group Company, and a Charge, all
property charged or mortgaged by Dovevale Pty Limited, Minorite
page 1
<PAGE>
Pty Limited or by the New Group Company (as the case may be) to
the Facility Agent under the Charge;
CHARGES means the fixed and floating charges and mortgages
granted in favour of the Facility Agent under the Securities;
FACILITY AGREEMENT means the A$400,000,000 Syndicated Senior
Secured Debt Facility Agreement dated on or about the date of
this deed between the Borrower, the Group Companies, the Facility
Agent and others as varied, supplemented and novated from time to
time;
GUARANTEE means, in relation to a New Group Company, Dovevale Pty
Limited and Minorite Pty Limited, the guarantee given by the New
Group Company, Dovevale Pty Limited or Minorite Pty Limited under
clause 20 of the Facility Agreement;
NEW GROUP COMPANY means each of Ilona Investments Pty Limited
(ACN 068 943 626), Chippawa Pty Limited (ACN 068 943 635) and
Wollongong Microwave Pty Limited (ACN 065 146 321);
NEW LICENCES means MDS licences owned by a New Group Company on
the Transfer Date;
REPLACEMENT SECURITY has the meaning given in clause 3.5(a);
RESTRUCTURE DATE means, in relation to any Specified Group
Securities, the date of transfer of those Specified Group
Securities consented to by the Facility Agent under clause 3.5 on
the conditions set out in clause 2;
SECURED MONEY has the meaning given to that term in the Debenture
Stock Trust Deed;
SPECIFIED COMPANIES means each of Selectra Pty Limited, Vinatech
Pty Limited, STV Pty Limited and CTV Pty Limited;
SPECIFIED GROUP SECURITIES means:
(a) in relation to CTV Pty Limited, all of the issued shares or
debentures in CTV Pty Limited held on the Restructure Date
by UIH Austar, Inc or Salstel Media Holdings Pty Limited;
(b) in relation to STV Pty Limited, all of the issued shares or
debentures in STV Pty Limited held on the Restructure Date
by Salstel Media Investments Pty Limited;
(c) in relation to Vinatech Pty Limited, all of the issued
shares in Vinatech Pty Limited held on the Restructure Date
by CTV Pty Limited or Salstel Media Holdings Pty Limited;
and
(d) in relation to Selectra Pty Limited, all of the issued
shares in Selectra Pty Limited held on the Restructure Date
by STV Pty Limited or Salstel Media Investments Pty Limited;
TRANSFER DATE means the date of the transfer of the New Licences
by the New Group Companies consented to by the Facility Agent
under clause 3.1(a) on the condition set out in clause 2, and
which date will not be before 9 July 1999.
page 2
<PAGE>
(b) Subject to clause 1.1(a), unless the context indicates a contrary
intention, all terms defined in the Facility Agreement shall have
the same meaning in this deed.
1.2 INTERPRETATION
The provisions of clause 1.2 of the Facility Agreement shall be
incorporated into this document as if set out herein, with each
reference in it to "this Agreement" being read as a reference to "this
deed".
- --------------------------------------------------------------------------------
2 CONDITIONS PRECEDENT
(a) The consents, releases and discharges contained in this deed are
subject to the conditions precedent that the Facility Agent
receives all of the following in form and substance satisfactory
to the Facility Agent and to its legal advisers:
(1) this document duly executed by the Borrower and each Group
Company;
(2) a certified copy of a resolution of the Board of Directors
of each of the Borrower and each Group Company authorising
the execution of this document;
(3) certified copies of any agreements or other documents
effecting the transfer of the New Licences referred to in
clause 3.1(a); and
(4) a certified copy of the resolution of the Board of Directors
of each New Group Company and each transferee of the New
Licences authorising the execution of documentation
necessary to effect the transfer of the New Licences in
accordance with clause 3.1(b).
(b) The consents releases and discharges referred to in clause 3.5(a)
and 3.5(b) are subject to the following additional conditions
precedent being satisfied to the satisfaction of the Facility
Agent and its legal advisers on or before the applicable
Restructure Date:
(1) the Facility Agent must have received evidence satisfactory
to it that the Specified Group Securities to be transferred
on the Restructure Date will be transferred on the
Restructure Date; and
(2) certified copies of any agreements or other documents
effecting the transfer of the Specified Group Securities
referred to in clause 3.5;
(3) the Replacement Security, if any, duly executed in a form
satisfactory to the Facility Agent; and
(4) a certified copy of the resolution of the Board of Directors
of each transferor and each transferee of the Specified
Group Securities referred to in clause 3.5 authorising the
execution of documentation necessary to effect the transfer
of Specified Group Securities in accordance with clause 3.5
and authorising the execution of any Replacement Security.
page 3
<PAGE>
- --------------------------------------------------------------------------------
3 CONSENT OF FACILITY AGENT
3.1 TRANSFER OF LICENCES
The Facility Agent consents to:
(a) the transfer of the New Licences by each New Group Company to a
member of the Group which, as at the Transfer Date, is a
Guarantor and which has granted a Security; and
(b) each New Group Company doing any act, matter or thing necessary
or desirable in order to effect the transfers referred to in
clauses 3.1(a).
3.2 RELEASE OF CHARGES
The Facility Agent:
(a) agrees to unconditionally and absolutely release the Charged
Property charged and mortgaged by Minorite Pty Limited and
Dovevale Pty Limited from each Charge granted by Minorite Pty
Limited and Dovevale Pty Limited to enable the distribution of
any MDS licences and any other property held by Minorite Pty
Limited or Dovevale Pty Limited to CTV Pty Limited or STV Pty
Limited on the winding up of Minorite Pty Limited and Dovevale
Pty Limited;
(b) agrees that with effect on and from the Transfer Date it
irrevocably, unconditionally and absolutely releases the Charged
Property charged by each New Group Company from each Charge
granted by each New Group Company and that each Charge granted by
each New Group Company on the Transfer Date will be discharged on
the Transfer Date;
(c) undertakes, at the cost of the Borrower, to sign such documents
and do such acts, matters or things as may be reasonably required
by the Borrower to notify the Australian Securities and
Investments Commission of the releases and discharges referred to
in clause 3.3(a) and 3.3(b).
3.3 RELEASE UNDER TRANSACTION DOCUMENTS
(a) Upon the releases under clause 3.2(a) becoming effective, the
Facility Agent irrevocably, unconditionally and absolutely
releases Minorite Pty Limited and Dovevale Pty Limited from all
past, present and future obligations and liabilities (actual,
contingent or otherwise) under and in respect of the Facility
Agreement and the Securities, including without limitation under
and in respect of each Guarantee granted by each of Minorite Pty
Limited and Dovevale Pty Limited.
(b) With effect on and from the Transfer Date, the Facility Agent
irrevocably, unconditionally and absolutely releases each New
Group Company from all past, present and future obligations and
liabilities (actual, contingent or otherwise) under and in
respect of the Facility Agreement and the Securities, including
without limitation under and in respect of each Guarantee granted
by each New Group Company.
page 4
<PAGE>
3.4 WINDING UP
(a) The Facility Agent consents to the winding up of Dovevale Pty
Limited and Minorite Pty Limited.
(b) The Facility Agent consents to the winding up of each New Group
Company, provided that any winding up of a New Group Company
takes place after the Transfer Date.
3.5 TRANSFER OF SHARES AND DEBENTURES
(a) The Facility Agent consents to the transfer of any Specified
Group Securities by the holder of those Specified Group
Securities to an entity ("Transferee") which has, on or before
the Restructure Date, provided security ("Replacement Security")
over the Specified Group Securities to the Facility Agent in form
and substance acceptable to the Facility Agent.
(b) The Facility Agent agrees that, subject to clause 2, on the
Restructure Date in relation to any Specified Group Securities it
will:
(1) irrevocably, unconditionally and absolutely release the
Specified Group Securities from the Securities (other than
the Replacement Security) and will execute such deeds of
release as are reasonably required to effect such release
and will deliver to the Borrower all certificates of title
in respect of the Specified Group Securities held by it to
enable the transfer and the granting of the Replacement
Security to take place; and
(2) at the cost of the Borrower, sign such documents and do such
acts, matters or things as may be reasonably required by the
Borrower to notify the Australian Securities and Investments
Commission of the releases referred to in clause 3.5(b)(1).
(c) A Transferee must be at least one of the following:
(1) a company incorporated or taken to be incorporated under the
Corporations Law; or
(2) a member of the Group; or
(3) a Related Body Corporate of United International Holdings,
Inc; or
(4) an entity approved by the Facility Agent.
(d) The Borrower and each Group Company to which any Specified Group
Securities are transferred in accordance with clause 3.5(a)
hereby acknowledge that, upon the relevant transfer becoming
effective, the Specified Group Securities transferred to it in
accordance with clause 3.5(a) will be subject to the Charges
granted by it.
(e) This clause 3.5 may be relied on by a holder of Specified Group
Securities which is not a party to this deed and shall take
effect as a deed poll made by the Facility Agent in favour of any
such holder.
page 5
<PAGE>
- --------------------------------------------------------------------------------
4 COSTS
The Borrower shall on demand by the Facility Agent pay or reimburse
the Facility Agent for all stamp duty paid or payable in relation to
this deed and for all costs, expenses (including legal costs as
between solicitor and client) and other costs incurred by the Facility
Agent in settling, executing and stamping this deed and enforcing or
attempting to enforce this deed.
- --------------------------------------------------------------------------------
5 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
5.1 REPRESENTATIONS AND WARRANTIES
The Borrower and each Group Company each hereby represents and
warrants to the Facility Agent that:
(a) all information provided by it or on its behalf to the Facility
Agent in or in connection with this deed is true and accurate
(taken as a whole) and is not incomplete or misleading in any
material respect by omitting to state any material fact; and
(b) no Event of Default or Potential Event of Default has occurred
under the Facility Agreement other than those disclosed to the
Facility Agent in writing prior to the date of this document.
5.2 CONFIRMATION AND REPEAT OF REPRESENTATION AND WARRANTIES
Each of the Borrower and each Group Company hereby confirms and
repeats each of the representations and warranties made by it in the
Facility Agreement including but without being limited to clause 16 of
the Facility Agreement (but excluding clauses 16.2(c), (d), (e) and
(f)) and with reference to the facts and circumstances subsisting as
at the date of this deed.
- --------------------------------------------------------------------------------
6 GENERAL CONFIRMATIONS AND RATIFICATIONS
6.1 THE BORROWER
The Borrower hereby unconditionally and irrevocably:
(a) ratifies and confirms to the Facility Agent its continuing
obligations under the Facility Agreement and the Securities to
which it is a party; and
(b) acknowledges and agrees that except as provided in this deed the
provisions of the Facility Agreement and the Securities to which
it is a party shall in all respects apply.
6.2 THE GROUP COMPANIES
Each Group Company hereby unconditionally and irrevocably acknowledges
and agrees that the Facility Agreement and the guarantee and indemnity
contained therein apply mutatis mutandis to all obligations of the
Borrower to the Facility Agent which arise as a result of the
page 6
<PAGE>
maintenance of the Facility to the Borrower and hereby ratifies and
confirms to the Facility Agent its continuing liability to the
Facility Agent and the Security Agent pursuant to the Facility
Agreement and the Securities to which it is a party, subject to this
deed in the case of the New Group Companies, Dovevale Pty Limited and
Minorite Pty Limited.
6.3 CONSENT BY THE GROUP COMPANIES
Each of the Borrower and each Group Company hereby irrevocably and
unconditionally consents to the provisions of this document and to the
releases and discharges contemplated and effected by it.
- --------------------------------------------------------------------------------
7 PRESERVATION OF OTHER RIGHTS AND SECURITIES
Except as specifically provided in this deed, the discharges effected
by this deed will not prejudice:
(a) any other rights powers and privileges of the Facility Agent (or
any Bank) or the personal obligations of the Group Companies
under the Securities as regards the outstanding balance of the
Secured Moneys or the Obligations; or
(b) any Securities other than the Securities granted by the New Group
Companies, Dovevale Pty Limited and Minorite Pty Limited.
- --------------------------------------------------------------------------------
8 MISCELLANEOUS
8.1 GOVERNING LAW
This document is construed in accordance with the laws of the State of
New South Wales and each of the parties hereto submits to the
non-exclusive jurisdiction of the courts and appellate courts of such
State.
8.2 COUNTERPARTS
This document may be executed in any number of counterparts, all of
which is taken together will be deemed to constitute one and the same
document.
page 7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SCHEDULE 1 - GROUP COMPANIES
NAME JURISDICTION OF ACN ADDRESS
INCORPORATION IN
AUSTRALIA
<S> <C> <C> <C>
CTV Pty Limited Queensland 064 416 128 Level 29, 259 George Street
Sydney, NSW 2000
STV Pty Limited South Australia 065 312 450 Level 29, 259 George Street
Sydney, NSW 2000
AUSTAR Services Pty Ltd South Australia 068 521 880 Level 29, 259 George Street
Sydney, NSW 2000
Selectra Pty Ltd South Australia 065 367 526 Level 29, 259 George Street
Sydney, NSW 2000
Vinatech Pty Ltd South Australia 065 366 314 Level 29, 259 George Street
Sydney, NSW 2000
Jacolyn Pty Ltd South Australia 064 744 869 Level 29, 259 George Street
Sydney, NSW 2000
Minorite Pty Ltd South Australia 068 943 484 Level 29, 259 George Street
Sydney, NSW 2000
Kidillia Pty Ltd South Australia 068 943 608 Level 29, 259 George Street
Sydney, NSW 2000
Dovevale Pty Ltd South Australia 068 943 591 Level 29, 259 George Street
Sydney, NSW 2000
Windytide Pty Ltd South Australia 068 943 546 Level 29, 259 George Street
Sydney, NSW 2000
Chippawa Pty Ltd South Australia 068 943 635 Level 29, 259 George Street
Sydney, NSW 2000
Ilona Investments Pty Ltd South Australia 068 943 626 Level 29, 259 George Street
Sydney, NSW 2000
Wollongong Microwave Pty Ltd South Australia 065 146 321 Level 29, 259 George Street
Sydney, NSW 2000
- --------------------------------------------------------------------------------------------------------
page 8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXECUTED AS A DEED:
<S> <C>
AUSTAR ENTERTAINMENT PTY LIMITED
ACN 068 104 530
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED for
CTV PTY LIMITED ACN 064 416 128
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED for
STV PTY LIMITED ACN 065 312 450
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
page 9
<PAGE>
SIGNED SEALED AND DELIVERED for
AUSTAR SERVICES PTY LTD
ACN 068 521 880
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED for
SELECTRA PTY LTD ACN 065 367 526
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED for
VINATECH PTY LTD
ACN 065 366 314
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
page 10
<PAGE>
SIGNED SEALED AND DELIVERED for
JACOLYN PTY LTD
ACN 064 744 869
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED for
MINORITE PTY LTD
ACN 068 943 484
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED for
KIDILLIA PTY LTD
ACN 068 943 068
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
page 11
<PAGE>
SIGNED SEALED AND DELIVERED for
DOVEVALE PTY LTD
ACN 068 943 591
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED for
WINDYTIDE PTY LTD
ACN 068 943 546
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED for
CHIPPAWA PTY LTD
ACN 068 943 635
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
page 12
<PAGE>
SIGNED SEALED AND DELIVERED for
ILONA INVESTMENTS PTY LTD
ACN 068 943 626
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED for
WOLLONGONG MICROWAVE PTY LTD
ACN 065 146 321
by its attorney in the
presence of:
/s/ Christopher Robertson /s/ Robert Birrell
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
CHRISTOPHER ROBERTSON ROBERT BIRRELL
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED for
CHASE SECURITIES AUSTRALIA LIMITED
ACN 002 888 011
by its attorney in the
presence of:
/s/ Patrick St. John /S/ JASON LEE
- ------------------------------------------------ --------------------------------------------------
Witness Attorney
PATRICK ST. JOHN JASON LEE
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
page 13
</TABLE>
Exhibit 12.1
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
For the Years Ended
For the Ten ---------------------------------------------------
Months Ended February 28,
December 31, ----------------------- February 29, February 28,
1998 1998 1997 1996 1995
------------ ----------------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Loss from continuing operations.......................... $(545,532) $(263,441) $(138,825) $(91,311) $(30,614)
Add back: losses from less-than-50% owned persons....... 23,527 18,769 17,879 26,631 4,288
Less: losses from less-than-50%-owned persons
where the registrant has guaranteed debt:
Teleport.............................................. -- -- -- -- (126)
Swedish Cable......................................... -- -- -- -- (65)
--------- --------- --------- -------- --------
(522,005) (244,672) (120,946) (64,680) (26,517)
Fixed charges:
Interest, whether expensed or capitalized, including
amortization of deferred financing costs.............. 163,227 124,288 79,659 36,045 9,328
--------- --------- --------- -------- --------
Adjusted earnings........................................ (358,778) (120,384) (41,287) (28,635) (17,189)
Fixed charges............................................ (163,227) (124,288) (79,659) (36,045) (9,328)
--------- --------- --------- -------- --------
Ratio of earnings........................................ -- -- -- -- --
--------- --------- --------- -------- --------
Amount of coverage deficiency............................ $(522,005) $(244,672) $(120,946) $(64,680) $(26,517)
========= ========= ========= ======== ========
</TABLE>
EXHIBIT 21.1
SUBSIDIARIES AND RESTRICTED AFFILIATES OF THE COMPANY
A. Subsidiaries
Algemene Kabel Exploitatie Maatschappij B.V.
Anfel-Kabelkom Kabelkommunikacios Kft.
Auldana Beach Pty Ltd.
Austar Entertainment Pty Ltd.
Austar Retail Pty Ltd.
Austar Satellite Pty Ltd.
Austar Satellite Ventures Pty Ltd.
Austar Services Pty Ltd.
Belmarken Holding B.V.
Bicatobe Investments B.V.
Binan Investments B.V.
Cable Network Brabant Holding B.V.
Cable Network Holding B.V
Cable Network Zuid-Oost Brabant Holding B.V.
Cable Networks Austria Holding B.V.
Cable Networks Netherlands Holding B.V.
Cable Star S.A.
CAI Almere B.V.
CAI Bemmel B.V.
CAI Buren B.V.
CAI Dodewaard B.V.
CAI Dronten B.V.
CAI Druten B.V.
CAI Elst B.V.
CAI Geldermalsen B.V.
CAI Gendt B.V.
CAI Heteren B.V.
CAI Lelystad B.V.
CAI Lingewaal B.V.
CAI Midden Betuwe B.V.
CAI Neerijnen B.V.
CAI NKM-Nijmegen B.V.
CAI Over Betuwe B.V.
CAI Renkum B.V.
CAI Tiel B.V.
CAI Valburg B.V.
CAI Wageningen B.V.
CAI Wijchen B.V.
Carryton Pty Ltd.
chello broadband A.S
chello broadband B.V
chello broadband GmbH
chello broadband Limited
chello broadband N.V
chello broadband S.A.R.L.
Chippawa Pty Ltd.
Control Cable Ventures SRL
CTV Pty Ltd.
Dovevale Pty Ltd.
Enalur S.A. (Chile)
Enalur S.A. (Uruguay)
Eurosat S.R.L.
Global Kabeltelevizio Kft.
Grovern Pty Ltd.
Hajdu Kabelkom Kabelkommunikacios Kft.
Hungary Holding Co.
Ilona Investments Pty Ltd.
Jacolyn Pty Ltd.
Janco Multicom A/S
Kabelkom-Dunaujvaros Kabelkommunikacios Kft.
Kabelkom Holding Co.
Kabelkom Management Co.
Kabelkom Nyiregyhaza Kabelkommunikacios Kft.
Kabelkom Pecsi Kabeltelevizio Kft.
Kabelkom Szekesfehervar Kabelkommunikacios Kft.
Kabelkom-Szolnok Kabelkommunikacios Kft.
Kabelkom Veszprem Kabelkommunikacios Kft.
Kabel Net Brno A.S.
Kabel Net Holding A.S.
Kabeltel s.r.o.
Kabeltel Budapest Kabeltelevizios Szolgaltato Kft.
Kabeltel-Elektra Kabeltelevizios Szolgaltato Kft.
Kabeltelevisie Eindhoven N.V.
Kabeltel Kabeltelevizio Szolgaltato Kft.
Kabeltel Kanizsa Kabeltelevizios Szolgaltato Kft.
<PAGE>
Kabeltel Sopron Kabeltelevizios Szolgaltato Kft.
Kabel TV Szervezo es Szolgaltato Kft.
Keansburg Pty Ltd.
Kidillia Pty Ltd.
Lebesa Holding BV
Lystervale Pty Ltd.
L.N.C.I. Kabelrendszer Uzemelteto Szolgaltato Kft.
Maxi-Vu Pty Ltd.
Maxinetwerken B.V.
MediaReseaux Marne S.A.
MediaReseaux S.A.
Megasat Gyarto Szolgaltato es Kereskedelmi Kft.
Melita Partnership
Minorite Pty Ltd.
Miskolci Kabel-TV Kft.
Multetel S.A.
Multicanal Holdings SRL
Multicanal Televisao por Cabo, SGPS, Ltda
Newcom S.A.
N.V. TeleKabel
N.V. TeleKabel Beheer
Orloff Pty Ltd.
Palara Vale Pty Ltd.
Paruse B.V.
Plator Holding B.V.
Priority Telecom Netherlands B.V.
Priority Telecom N.V.
Radio Public N.V./S.A.
Saturn Communications Limited
Selasa Holding B.V.
Selectra Pty Ltd.
Sopron Varosi Onallo Kozsolgalati Televizio Kft.
Stipdon Investments B.V.
STV Pty Limited
Tara Television Global Ltd.
Tara Television Limited
Tara Television (UK) Limited
Telekabel-Fernsehnetz Region Baden Betriebs-GmbH
Telekabel-Fernsehnetz Wiener Neustadt Neunkirchen Betriebs-GmbH
Telekabel Graz GmbH
TeleKabel Hungary B.V.
Telekabel Klagenfurt GmbH
Telekabel Omroep Facilitair Bderijf B.V.
Telekabel Wien GmbH
Telestar-Kabelkom Kabelkommunikacios Kft
Teleweb Ltda.
Teleweb S.A.
Tishdoret Achzakot Ltd.
Trnavatel s.r.o.
UAP Australia Programming Pty Ltd.
U.C.T. - Netherlands B.V.
UIH Argentina, Inc.
UIH Asia Investment Co.
UIH Asia, Ltd.
UIH Asia/Pacific, Inc.
UIH Asia/Pacific Communications, Inc.
UIH Austar, Inc.
UIH Austar Transponder, Inc.
UIH Australia Holdings, Inc.
UIH Australia/Pacific Finance, Inc.
UIH Australia/Pacific, Inc.
UIH Brazil, Inc.
UIH Chile, Inc.
UIH Chile Ventures Inc.
UIH China Holdings, Inc.
UIH CUPV Holdings, Inc.
UIH do Brasil Tecnologia Ltda.
UIH ECT Holdings, Inc.
UIH El Salvador, Inc.
UIH Europe, Inc.
UIH GTS, Inc.
UIH Hunan, Inc.
UIH Hungary, Inc.
UIH Iberian Programming, Inc.
UIH Israel, Inc.
UIH Latin America, Inc.
UIH Latin America Programming, Inc.
UIH Management, Inc.
UIH Mexico, Inc.
UIH Mexico Resources, Inc.
UIH Mexico Ventures, Inc.
UIH Middle East, Inc.
UIH New Zealand Holdings, Inc.
<PAGE>
UIH Peru, Inc.
UIH Peru, S.A.
UIH Philippines Holdings, Inc.
UIH Programming, Inc.
UIH Romania, Inc.
UIH Romania Ventures, Inc.
UIH-SFCC II, Inc.
UIH-SFCC Holdings, L.P.
UIH-SFCC L.P.
UIH Taiwan, Inc.
UIH UK, Inc.
UIH Venezuela, Inc.
UIH XYZ Holdings, Inc.
UIHLA Holdings, Inc.
UIHLA Management, Inc.
UIHLA Ventures, Inc.
UII Management
Uniport Communications B.V.
United International Holdings Argentina, S.A.
United International Investments
United International Properties, Inc.
United Pan-Europe Communications N.V.
United TeleKabel Holding N.V.
United Telekabel Holding II B.V.
United Wireless, Inc.
United Wireless Pty Limited
UPC Intermediates B.V.
UPC Programming B.V.
UPC Services Ltd.
UPC Slovakia Holding BV
Vermint Grove Pty Ltd.
Vinatech Pty Ltd.
VTR Cable Express S.A.
VTR Cable Express (Chile) S.A.
VTR Galaxy Chile S.A.
VTR Hipercable, S.A.
VTR Net S.A.
VTR Telefonica S.A.
Windytide Pty Ltd.
Wollongong Microwave Pty Ltd.
Xtek Bay Pty Ltd.
Yanover Pty Ltd.
Zeblas B.V.
Zomerwind Holding B.V.
B. Restricted Affiliates
Cablevision S.A.
Century United Programming Ventures Pty Limited
Cuernamu, S.A. De C.V.
Grupo Telecable de Mexico, S.A. de C.V.
Hunan International Telecommunications Company Limited
Ibercom, Inc.
Iberian Programming Services C.V.
Interactive Television Network, Inc.
Inversiones UIH Latin America Limitada
MCG Management, Inc.
Megacom M Servicios, S.A. de C.V.
Megapo Communicaciones de Mexico S.A. de C.V.
Melita Cable TV plc
Monor Telfon Tarasag Rt.
Multicanal TPS, S.A.
Nidlo B.V.
Red de Television y Servicios Por Cable S.A.
Societe Francaise des Communications et du Cable S.A.
Spanish Program Services, C.V.
Telecable de Chilpancingo, S.A. de C.V.
Telecable de Morelos, S.A. de C.V.
Telecable Mexicano, S.A. de C.V.
Telefenua S.A.
Television Universidad de Talcia S.A.
Tevel Israel International Communications Ltd.
TV Cabo e Comunicacoes de Jundiai, S A
TV Max Constitucion Limitada
TV Show Brasil, S/A
United Family Communications, LLC
Vision por Cable de Oaxaca, S.A. de C.V.
Xtra Music Limited
xyz Entertainment Pty Limited
EXHIBIT 21.2
UNRESTRICTED SUBSIDIARIES OF THE COMPANY
Intercabo Atlantico - Communicacoes por Cabo S.A.
Intercabo Capital - Communicacoes por Cabo S.A.
Intercabo Centro - Televisao por Cabo S.A.
Intercabo Norte - Communicacoes por Cabo S.A.
Intercabo Sul - Communicacoes por Cabo S.A.
Intercabo Televisao por Cabo S.A.
UCI Enterprises, Inc.
UIH AML, Inc.
UIH Brazil SP, Inc.
UIH Communication, Inc.
UIH Spain, Inc.
UIH Turkey, Inc.
UIM Aircraft, Inc.
UPC Kft.
Bragatel-Companhia de Televisao por Cabo de Braga S.A.
Burgos Sistemas di Cable S.A.
Interway Holding BV
Israel Cable Programming Company Ltd.
Kiwi Cable Company Ltd.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports, dated April 30, 1999 on United International Holdings,
Inc. included in this Annual Report on Form 10-K, into previously filed
Registration Statement File Nos. 33-81876, 33-87326, 333-00226, 333-68641 and
333-71963.
ARTHUR ANDERSEN LLP
Denver, Colorado
May 14, 1999
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report, dated April 30, 1999 on United International
Properties, Inc. included in this Annual Report on Form 10-K, into previously
filed Registration Statement File Nos. 33-81876, 33-87326, 333-00226, 333-68641
and 333-71963.
ARTHUR ANDERSEN LLP
Denver, Colorado
May 14, 1999
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report, dated April 30, 1999 on UIH Europe, Inc. included in
this Annual Report on Form 10-K, into previously filed Registration Statement
File Nos. 33-81876, 33-87326, 333-00226, 333-68641 and 333-71963.
ARTHUR ANDERSEN LLP
Denver, Colorado
May 14, 1999
Exhibit 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report, dated March 19, 1999 on United Telekabel Holding N.V.
included in this Annual Report on Form 10-K, into previously filed Registration
Statement File Nos. 33-81876, 33-87326, 333-00226, 333-68641 and 333-71963.
ARTHUR ANDERSEN
Amstelveen, The Netherlands
May 14, 1999
Exhibit 23.5
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the incorporation by reference of
our report, dated March 6, 1998 on the combined financial statements of Tele
Cable de Morelos, S.A. de C.V. and related companies (all of which are
subsidiaries of Megapo Comunicaciones de Mexico, S.A. de C.V.) included in this
Annual Report on Form 10-K, into previously filed Registration Statement File
Nos. 33-81876, 33-87326, 333-00226, 333-68641 and 333-71963.
GALAZ, GOMEZ MORFIN, CHAVERO, YAMAZAKI, S.C.
Acapulco, Mexico
May 11, 1999
Exhibit 24.1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and Valerie L. Cover and/or Michael T. Fries his attorney-in-fact,
with full power of substitution, for him in any and all capacities, to sign the
annual report on Form 10-K for the ten months ended December 31, 1998 of United
International Holdings, Inc. (the "Company"), to be filed with the Securities
and Exchange Commission (the "Commission"), and all amendments thereto, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Commission; granting unto said attorney-in-fact full power
and authority to perform any other act on behalf of the undersigned required to
be done in the premises, whereby ratifying and confirming all that said
attorney-in-fact may lawfully do or cause to be done on behalf of the Company by
virtue hereof.
/s/ Gene W. Schneider
------------------------------------
May 3, 1999 Gene W. Schneider
/s/ Albert M. Carollo
------------------------------------
May 3, 1999 Albert M. Carollo
/s/ John P. Cole, Jr.
------------------------------------
May 3, 1999 John P. Cole, Jr.
/s/ Valerie L. Cover
------------------------------------
May 3, 1999 Valerie L. Cover
/s/ Lawrence F. DeGeorge
------------------------------------
May 3, 1999 Lawrence F. DeGeorge
/s/ Lawrence J. DeGeorge
------------------------------------
May 3, 1999 Lawrence J. DeGeorge
/s/ Michael T. Fries
------------------------------------
May 3, 1999 Michael T. Fries
/s/ Antony P. Ressler
------------------------------------
May 3, 1999 Antony P. Ressler
/s/ John F. Riordan
------------------------------------
May 3, 1999 John F. Riordan
/s/ Curtis W. Rochelle
------------------------------------
May 3, 1999 Curtis W. Rochelle
/s/ Mark L. Schneider
------------------------------------
May 3, 1999 Mark L. Schneider
/s/ Bruce H. Spector
------------------------------------
May 1, 1999 Bruce H. Spector
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITED
INTERNATIONAL HOLDINGS, INC.'S FORM 10-K FOR THE TEN MONTHS ENDED DECEMBER 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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56,286
0
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